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Dissecting Ola’s audacious electric dreams

Ola founder Bhavish Aggarwal wants to export millions of electric scooters from India, but the company still lacks a viable, market-ready product. (Photo: Bloomberg)Premium
Ola founder Bhavish Aggarwal wants to export millions of electric scooters from India, but the company still lacks a viable, market-ready product. (Photo: Bloomberg)

  • In a dramatic pivot, Ola Electric wants to become India’s Tesla. Well, the company has its work cut out
  • Given the long-term potential of the EV market, Aggarwal’s reputation as an entrepreneur and the lack of established EV rivals, Ola Electric is likely to soon close another round of funding

When petrol prices hit 100 last month, opposition politicians immediately criticized the Union government for passing on the price increase in international crude to Indians. West Bengal chief minister Mamata Banerjee even rode pillion on an electric scooter in a symbolic protest against the rise in fuel prices.

This seemed like the perfect moment for electric vehicle (EV) makers to push people to junk their polluting vehicles in exchange for energy-efficient and green products. “It could’ve been similar to what demonetisation was for Paytm," an industry executive said.

But it wasn’t—there have been no major marketing campaigns, no surge in consumer uptake, just a few half-hearted posts on the Twitter handles of EV makers. For all the hype around how EVs will replace fuel-dependent vehicles, the industry has underwhelmed, comprising less than 0.5% of vehicle sales in India.

No company captures the hype—and the failure to deliver on its promise so far—than Ola Electric Mobility, the EV business of Bhavish Aggarwal’s ride booking firm Ola (ANI Technologies Pvt. Ltd).

Ola Electric became one of the fastest startups to achieve unicorn status, which refers to startups valued at $1 billion or more, in July 2019, when it received $250 million from SoftBank, Tiger Global and others at a valuation of $1 billion. Its funding round drew scepticism as the company lacked a business model, had no expertise in manufacturing, and worse, hadn’t even launched a functional product at scale then.

More than 18 months later, Ola Electric is still struggling to cobble up a viable product. Mint learns that the company has abandoned plans to expand its battery-as-a-service business, which was its mainstay until the middle of last year. Ola Electric is now focusing all its efforts on manufacturing an electric two wheeler that it hopes will outsell legacy scooters by Hero, Bajaj and Honda over the coming years.

In December 2020, Ola Electric announced that it will invest $327 million over time to set up the “world’s largest scooter manufacturing facility" in Tamil Nadu. Earlier this month, the company said that the factory will have an annual production capacity of 2 million EVs by June that will increase to 10 million in 2022. It will supply vehicles to customers in India and international markets including Europe, UK and Latin America.

Tricky path ahead

Despite these ambitious plans, the company has shown few signs that it can succeed. For a firm that has raised more than $300 million, Ola Electric has already gone through several pivots. It has lost two of its co-founders and most of the senior executives it hired over the years. Even in the two-wheeler business, the company has delayed its launch at least twice to the second half of the year, four people familiar with the matter said. The company may struggle to meet this deadline too, one of the people said.

On present showing, Ola Electric’s valuation looks unsustainable, even as Ola’s core business of online ride bookings has been hammered during the pandemic. At many companies, such poor performance would prompt calls by investors to hold the founders accountable and demand improvement. But Aggarwal has established such a firm hold over Ola Electric by controlling a majority of shareholding and voting rights that investors can do little to implement any changes. Not that they’ve shown any desire to do so.

Given the indisputable long-term potential of the EV market, Aggarwal’s reputation as an accomplished entrepreneur and the lack of established EV rivals, Ola Electric is likely to soon close another round of funding, the four people quoted above said. Over the past year, Aggarwal has taken direct charge of the firm’s operations and the large reserves of capital will allow him to double down on his dream to make Ola Electric the dominant vehicle maker in the country.

Ola did not respond to an email from Mint seeking comment.

Multiple pivots

Ola Electric was started in 2017 primarily to make four-wheeler electric vehicles that would replace the parent company’s petrol-and-diesel fleet of cabs over time. Ola Electric’s pilot in 2017 aimed to build “an electric mobility ecosystem at scale, including charging infrastructure and a range of vehicle fleet viz. electric cabs, e-rickshaws, electric auto-rickshaws and electric buses".

But the project failed to take off as drivers returned vehicles because of high costs and an unviable charging infrastructure. “The biggest lesson (from Nagpur) was that (electric) four-wheelers are not yet ready. It is going to take a couple of years for the math on four-wheelers to work," Anand Shah, co-founder of Ola Electric Mobility, told PTI in a May 2019 interview.

Shah resigned from his position a few months later after falling out of favour with Aggarwal. After his exit, Ankit Jain, another Ola Electric co-founder, ran the firm and shifted its focus to designing lithium-ion batteries. These batteries were to be offered on a pay-as-you-use model to three wheelers in north India, which has a large fleet of electric autos that use lead acid batteries. The company’s plan was to have rickshaws swap batteries at Ola charging stations and wean them off lead-acid batteries.

Alongside, Ola Electric was working on designing its own electric three-wheeler and two-wheeler vehicles. In April 2018, the company said it would have 1 million EVs on its platform by 2021 as part of its “Mission Electric". It wanted to use driving patterns, efficient transportation routes and other useful data from the core cab business to plan its EV expansion, including installations of battery charging stations.

Not only has the company almost completely failed to achieve its 1 million target, it paused attempts to expand the battery swapping business last year after Aggarwal took direct charge of Ola Electric. It has also put the three-wheeler project on hold for now.

Aggarwal’s decision to focus on the EV business was prompted by the spread of the pandemic and the attendant nationwide lockdown, which led to a collapse of Ola’s ride booking business. In May 2020, Ola fired more than a third of its employees to conserve cash. But Ola Electric kept hiring, and Aggarwal shifted some of his favoured colleagues from Ola’s other units to the EV business.

After pausing the battery swapping and three wheeler businesses, Aggarwal decided to throw all of Ola Electric’s resources towards making two-wheelers. A few months after Aggarwal took over at Ola Electric and made drastic changes in the company’s strategy, its co-founder Jain quit the firm. Jain had backed the battery swapping project, the people cited above said.

“The battery swapping business was progressing nicely, but we were unable to launch beyond NCR because of lack of capital. Investments in the battery swapping and the three wheeler businesses were not being cleared before. After Bhavish took over, he made it clear that he didn’t have much faith in these businesses. This obviously didn’t go down well with Ankit (Jain) because he had led the battery project," an Ola executive said, on condition of anonymity.

Last summer, Ola Electric bought Netherlands-based Etergo BV, a maker of electric scooters, for an undisclosed amount. Aggarwal said then that “with electric, digitally connected capabilities, two-wheelers will further emerge as the most preferred urban mobility paradigm around the world." As much as Etergo’s scooters, a major draw for Ola in the acquisition was the former’s high-density batteries, which deliver a longer range than what Ola had been able to squeeze out of its own batteries.

Alongside the two-wheeler project, Ola is also trying to revive its electric four-wheeler business, the people said.

“There’s a team doing research and putting together presentations on how Ola can launch e-four wheelers. But this project hasn’t moved too much—the two-wheeler is the main focus right now. Bhavish has been insistent that the two-wheeler space is the biggest opportunity in EVs. It’s the last throw of the dice. If this doesn’t work out Ola would have run out of pivots," one of the people said.

To get around the lack of charging infrastructure for EVs around India, Ola is likely to enable home charging for its proposed e-scooter. The company may use Etergo’s powerful batteries in its scooters that can be recharged through portable chargers, the people cited above said. It plans to build a network of charging stations later to allay concerns about long-distance travel.

So-so competition

In the electric two-wheeler space, Ola faces competition from established manufacturers Hero, Bajaj and Mahindra as well as EV startups Ather Energy, Okinawa Autotech and Ampere Vehicles. According to Autocar Professional, Hero Electric, Okinawa, Ampere and Ather were the top four electric two-wheeler sellers in India last year. The four together sold just a little over 21,000 units. In FY20, some 17.4 million fuel-dependent two wheelers were sold in India.

Given the absence of an established market and the puny sales of existing e-scooters, it is clear that Ola Electric will not be held back by competition. In addition, while the uptake of EVs has been extremely poor so far in India, demand is picking up, led by the commercial market. Last month, e-commerce firms Amazon India and Flipkart said they will source tens of thousands of EVs from Mahindra, Hero and others in their logistics fleet over the next decade.

“EV sales will boom when the cost of owning an EV is lower than the cost of fuel vehicles," said Som Kapoor, partner, automotive, EY. “For that to happen, batteries need to be cheaper and charging infrastructure needs to be more widely available. Right now, the EV space is in a bit of chicken-and-egg situation where vehicle manufacturers are wondering if the vehicle should come first or the infrastructure. My sense is that the tipping point for EVs will come at different points in time depending on the sectors like three wheelers, trucks, two wheelers and four wheelers."

Delivery firms like Swiggy, Zomato and BigBasket are also expected to significantly increase usage of EVs over the coming years. And most industry executives believe that the EV business will witness a boom at some point in the next two to three years driven by battery innovations, an expansion of EV infrastructure and friendly policies, all of which should help make EVs cheaper.

“EV sales will boom when the cost of owning an EV is lower than the cost of fuel vehicles," said Som Kapoor, partner, automotive, EY. “For that to happen, batteries need to be cheaper and charging infrastructure needs to be more widely available. Right now, the EV space is in a bit of chicken-and-egg situation where vehicle makers are wondering if the vehicle should come first or the infrastructure. My sense is that the tipping point for EVs will come at different points in time depending on the sectors like three-wheelers, trucks, two-wheelers and four-wheelers."

Despite the expected expansion in the EVs, Ola Electric has plenty of internal problems, starting with management. Over the years, apart from two of its co-founders, the company has lost many senior leaders, including some it had hired from established vehicle manufacturers.

Mint learns that two of the senior-most leaders remaining in its technology and operations teams are leaving the firm. The EV space is also unlike the cab hailing or other digital businesses that Ola has entered. It requires manufacturing expertise, massive investment in fixed assets and setting up complex supply chains, none of which is close to what Ola has done so far.

What would be red flags at most companies, however, is par for the course for Ola. The pattern at Ola Electric—pivots or dramatic product changes, a revolving door of senior executives, micro-management by Aggarwal—was seen earlier at Ola’s other units. And yet, Aggarwal has succeeded in continually finding new backers. In 2019, he even persuaded two of Ola’s largest investors, SoftBank and Tiger Global, with whom he had clashed in the past, to pour large amounts of cash into Ola Electric without having designed a successful EV product.

To be sure, as EV sales are almost certain to multiply over the coming years, the market is there for the taking. The rewards will be considerable as the winners in EV could become the new auto giants of the future. That’s why for now everything else—a high turnover of senior executives, multiple pivots, investor concerns, bad press—is irrelevant for Aggarwal, who has unshakeable faith in his own ability to deliver.

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