Mr Tarun Mehta, Co-Founder & CEO, Ather Energy, in conversation with Mr V Shankar, Founder CAMS & Director, ACSYS Investments Pvt Ltd.
Ather Energy was formed in 2009 as an energy company by Swapnil Jain and me. Back then, in the second year of IIT, we were building combustion engines. In the final year, we made a presentation on electric vehicles. A friend of mine suggested the idea of swappable battery pack. I latched on to the idea. Post-graduation in 2012, we read about batteries and the concept of electric car fascinated us. Six months into a job, Swapnil and I realised that we had a lot of spare time. Both of us went to IIT and met Professors Krishna Kumar and Sandipan, and discussed the idea of building battery packs. They asked us to leave our jobs and come back to IIT. We did that. We did some tinkering in the IIT laboratory.
Till 2015, we had the idea of going for swappable batteries which would minimize charging time, but when we took the idea to customers everything collapsed. They were not ready to pay for the swappable battery pack as it increased their initial cost. Also, they were not comfortable with pulling out a 7kg battery from the rack and replacing it every now and then. Also, we realised that there were no good electric vehicles in the market. In a rush to launch EVs, companies came up with some terrible products. So we decided to build electric vehicles instead of batteries.
Building a new platform needs care and love. We built this product by 2018 but we rolled out only 200 to 250 scooters a month. We opened only one ‘Experience Centre’ in Banglore, next to our office. We took the feedback from customers to production and over a period of two years, we fixed around 5000 bugs in our system—both hardware and software. A team of about 300 people were in R&D just trying to fix these bugs. By the time we opened the plant in Hosur, our overall quality had improved by 15 times over the launch date. Product cost had come down by about 60% and we turned profitable. With all that happening, we decided to ramp up production and supplies. In the initial days, we wanted to sell only to customers who were ready for the EV experience.
Indigenization and overall eco-system of ancillaries
Initially, indigenization was less. Then we indigenized all the traditional auto components including the motor and controllers. The process began in early 2019, thanks to some government requirements and our own initiatives, and it went on till the start of the pandemic. For Lithium Ion Cells, there are still no manufacturers in India.
For the rest, we created suppliers of components for which there were no existing suppliers. Today, there are many suppliers who are our partners and some of them had not manufactured parts for EV or even automotives. They began with Ather as their only client and have grown with us. In the 80s, Maruti created an ecosystem of high quality suppliers. Today, the EV market can do that.
Competing with China
Our traditional two wheeler automotive suppliers are up there with the best in the world. We found that moving production to India has led to cheaper costs compared to China. It is not a blanket answer, though. China becomes cheaper if there is complete automation. The moment labour comes in, India works out cheaper. The concern for our local supply chain is our lack of ability to respond to the new technologies with agility and in new product development. China and many countries are ahead of us in this sphere and that is our biggest threat.
On Competition from existing ICE Players and Highly Funded Companies
No single company can meet the genuine demand over the next decade. We want to stay out of competition by excelling in things that others can’t compete with. We were clear on this from the beginning. We focus on acceleration instead of top speed and stuff like touch screen and Google maps in the dashboard on scooter. Once we start manufacturing 20 to 30,000 units a month, we can start to compete with others on traditional metrics.
No single company can meet the genuine demand over the next decade. We want to stay out of competition by excelling in things that others can’t compete with. We were clear on this from the beginning.
Can the grid keep pace with the EV charging requirement? Is enormous investment required?
Zero investment is required on the grid. India is a power surplus country. In renewable energy, India has seen enormous success over the last few years. We’ve beaten targets. It is our team’s opinion that all the renewable energy capacity that the country will add in the next eight to ten years will likely be in excess. Solar may kill thermal power generation in a big way in the next 10 years.
There is a common misconception about the energy consumption by an electric scooter. If you drive 25 kilometers a day and 600 km a month, your scooter will consume between 20 to 30 units of electricity. It is like adding a 50 watt lamp in your house. That’s it. You don’t see people rushing to increase the grid capacity if people add a few more lights in their houses. We did some maths for Delhi for a hypothetical situation where every vehicle – two-wheelers, three wheelers, cars, buses and trucks in the city were to magically become electric overnight. The total energy consumption will go up by 25%. So the journey of going electric will require zero additional capacity.
The EV market is being held back only by supplies. There are still not many good options for people to buy. Most folks trying to sell in the B2B market are selling products with mismatch in specifications and quality expectations. But the minute this gets bridged, the market will completely open up
Only when people buy electric cars, they may need more than a 15 ampere charging point in their parking lot. It will cost Rs 10,000 per house.
On Government’s frame 2 subsidies for EVs as they scale up
We know that subsidies cannot continue beyond a few years. We are in a steroid-induced EV environment right now and this is required because the market needs to grow that inorganically now. It cannot be sustained beyond a certain amount of time. The phasing out of subsidies will also coincide with additional taxation on petrol and petroleum products. In the long term, owning a petrol or diesel vehicle will become quite expensive.
An entry level scooter today costs between 80,000 and 1,00,000 rupees. A good 125cc scooter costs between 95,000 and 1,20,000 rupees. I believe the average prices will go up by about 30% through this decade; while on the other hand, EVs will become cheaper thus narrowing the gap between the two. The reason we did not start competing on price is because we believe that early adopters of new technologies need something to brag about. That means we don’t want to cut corners.
If your battery and motor is going to cost 1 lakh rupees, there’s no point in saving 2000 rupees on leather and tyres. We might as well spend 10,000 rupees extra and give people a more premium experience where they can brag about the product. So knowing the customer is important.
Even today, most of the buyers are early adopters. Mass market adoption will kick in some time by end of next year, a best case scenario. We are still two years away from that and we need subsidies to bridge the gap. We are still selling to the top 15 to 20% of the market. We need scales of about 2 to 2.5 lakh units per annum to compete with the big guys.
Today, nobody’s there yet. I think we’ll get there in a year’s time. In fact, in a period of three to five years, you will not find me supporting the subsidies. It will not be good for the country.
On Rivian IPO and B2B Fleet Market
The fleet interest is massively picking up over the last six to nine months and it makes enormous business sense. The cost of leasing out a good electric scooter, including the cost of using a charging or a swapping infrastructure, is lower than the cost of running a petrol vehicle even if somebody gives you the vehicle for free. The EV market is being held back only by supplies. There are still not many good options for people to buy.
Most folks trying to sell in the B2B market are selling products with mismatch in specifications and quality expectations. But the minute this gets bridged, the market will completely open up. It is just waiting to happen. However, let me also add that the Rivian IPO is terribly priced. It is just like a jackpot. The total B2B opportunity in India is possibly about 5 million vehicles while the consumer opportunities are already 200 million vehicles and is likely to hit 400 million vehicles in the next decade. Also, in B2B markets, the margins are poor. It is a good short-term opportunity and a good company should capture that.
The challenge of charging time
Our vehicles can be charged up to 80% in 45 minutes. We have tested for about 20-25 minutes for 80% charging and they seem to be working quite fine, which means very soon, if you stop for 15 minutes charging, you will have 60 km of range. The technology is very much there and it’s quite affordable. We will be able to bring down the charging time to 15 minutes for 80% charge in two years and most vehicles will have a range of between 120 and 180 km per charge. So I don’t think charging time is going to be a big worry.
Will EVs shift the pollution from the cities to the power stations or is there a net reduction effect?
There is a big net reduction. We did this maths several years back and it is only getting better since then. Today, if you drive an Ather 450X which is the most powerful scooter produced in India, using the average Indian grid which has roughly 60 to 70% thermal generation, you can still reduce your emissions by about half compared to driving a petrol vehicle which operates at less than 25% efficiency. For an electric vehicle with an electric battery, motor, motor controller and charger combo, the full system efficiency is roughly about 80%. Even if you account for some transmission losses, an EV with 80% efficiency is much better than petrol vehicles with 20% efficiency. Yes, the pollution is moved somewhere else. But the net reduction in pollution is by 50%. Also, with our energy becoming cleaner, with a lot of renewable capacity upgrades, in almost every conceivable situation, you will be better off using an electric vehicle.
Is lithium-ion, a sustainable technology? Or is there a new battery technology which is around the corner? If lithium ion is the technology, are we as a country shifting from oil dependency to lithium dependency—which puts us in an equally and strategically weak position?
Lithium-ion will be a good solution for the next 5 to 7 years. You are bound to have new technology after that. With the world going too fast, it is quite unlikely that you will get stuck with this technology beyond this decade. But at this stage, it is difficult to predict the new technology. The second aspect is, lithium-ion is only 2% of a battery pack which also consists of Aluminum, Nickel, Cobalt and many other materials. Ultimately, there will be some dependency on something. For instance, we depend on Taiwan for electronics. If Taiwan is not friendly, we will have issues. No country is going to be fully Atmanirbhar. Though it is a nice slogan, we will have some dependency on global markets, but the good news is that lithium for which we don’t have great reserves, is just 2% of the battery pack.
On electric four wheelers drawing heavy current (30 to 40 amperes) during the initial phase of every recharge—Is there a better way?
You are correct. Electric cars are different than electric scooters. The overall energy consumption, though, won’t change dramatically. The initial charging requirement could be a little complicated for individual house owners. I think, new solutions will emerge because everybody will want to sell more.
One possible solution is that you can create battery banks like capacitor banks that hold a lot of power. The other option is smarter charging that understands the overall house requirements.
On the responsibilities of running a much larger company—Is it no more fun?
Now is the real fun part, because the business is scaling up and giving us some leverage finally. All the engineering work, the design work and all operations that we put in, in the early years is giving us some leverage. It will allow us access to more capital and more resources to build the kind of world that we envisioned. We have a desire to build an enduring organization and Ather is our sandbox of setting that out. Ather need not be a one-product company. Cracking out good products will become the DNA of the organization. If we can crack new products here in India, I think, we will unlock something truly massive. So for us, this is an amazing opportunity to bring in a product development culture in India.
How should the SMEs of auto hubs prepare for an EV driven future?
The EV transformation opportunity is as large as the Internet. Most people have not understood how massive this transformation is going to fundamentally rewrite the DNA’s of complete cities like Chennai, the entire state of Haryana or Maharashtra. The EV market is going to be roughly 300 to 350 billion dollar OEM opportunity in India alone. If you factor in all the ancillaries, this is going to be the largest sector in the country by far.
The biggest risk for suppliers and ancillaries is that we are very good in just producing more of the same thing again and again. But that’s no longer going to be relevant in the new world. The products are going to keep changing just like our mobile phones. The car market is already seeing this change. Two wheelers have been reasonably siloed till now but that will change with EVs. You must have a DNA of new product introduction. If all you do is just running a plant, your business is under serious threat.
On hobbies and interests outside of work
I play board games and video games. The video game makers have best understood the human psychology and our emotions. I think the kind of worlds that they’ve been able to build are downright fantastic!