Anand Shah, co-founder, Ola Electric and senior VP, Ola Cabs told Mint that the cab aggregator is devising new business models to make electric vehicles viable. One such model involves building a value chain wherein vehicle manufacturer builds and supplies an EV without the battery, which accounts for 40% of the total costs, and letting battery specialists handle the battery ecosystem including swap stations. Shah, who has previously worked with the BMW Group, said that the ride hailing company will need more capital to achieve its target of putting one million EVs on the roads by 2021. Excerpts:
Q: How is Ola Electric planning to achieve its target of bringing one million EVs on roads by 2021?
Being able to deploy a million electric vehicles (EVs) on the roads throws a question, which is how do you get EVs viable enough to get to that scale. So Ola Electric is trying to answer this question, which involves several things.
Firstly, it is about a business model wherein an EV can work. This includes the right price of the vehicle, finance batteries (and the EV without the battery); identify drivers and how this equation will look like. Secondly, you need a charging solution that can create confidence amongst the drivers. A lot of our energy right now is being spent on figuring out how to co-create the infrastructure to keep up with the scale that we intend to deploy.
Thirdly, the EVs need to be TCO (total cost of operations) optimized for their lifetime. TCO is a mix of cost of energy, cost of the battery versus its life, the components of the electric vehicle that may or may not last longer. So we are working on the first two areas while the OEMs are working on the third parameter.
Our current view is that high volume vehicles would be the most apt as EVs for mass adoption. This includes the three- and two-wheelers because they don’t go for very long distances and that also means that we can right size their batteries. This opens up several opportunities such as charging and battery swapping. We need to figure out how to develop charging and swapping solutions and deploy them sufficiently enough to convince the users that it is convenient and reliable. To scale this up, we believe that many more companies will work with us as several are already working with us.
Q) Is Ola, along with its partners including vehicle manufacturers and battery suppliers, working on a business model wherein an EV doesn’t necessarily come with a battery, thus making it affordable, while a dedicated battery vendor takes up the battery ecosystem?
Yes, this is one of our experiments. We are working on how to make an EV ultra-affordable by taking out the battery and if we can deploy the battery ecosystem as a service. This will involve making payment for every battery swap and will have affordable energy costs, and that we do this with reasonable (network) density to inspire confidence in the market.
Q) What is the size of this pilot at the moment and where is it being conducted?
At the moment, the (fleet) size of this pilot is in a few hundreds, and we are conducting these pilots in the national capital region and in Nagpur, where we had conducted our original pilot program. We are looking at the other cities actively and you will hear more announcements on this.
Q) What are the other business models Ola Electric is working upon?
The other ones are relatively conventional as they are based on the charging solutions, which we have conducted previously in Nagpur. We are equally looking at the distributed charging solutions for electric two-wheelers. For example, we have another pilot in Bangalore where we are looking at swapping of affordable batteries. The most unconventional idea that we think has the most imagination in it is figuring out how to make swapping model work. The battery swap model is only for the two- and three-wheelers and not for the four-wheelers.
Q) To achieve its 2021 target, will Ola Electric look at raising many more rounds of funding?
What we are doing right now is we have the resources and we need to meet our next milestones now. But as we increase the scale, we will require more capital. We definitely don’t have the resources we need to get through a million (electric) vehicles. It is a work-in-progress and we will look for capital as we need it and the purposes we need it for.
Q) How do you breakdown this 2021 milestone?
It involves only one sub-milestone, which is to bring 10,000 EVs on Indian roads in FY20. Currently, our efforts are all focused on getting the right business model in place to get to the first milestone.
Q) The first pilot conducted in Nagpur wasn’t successful. How is Ola planning to build upon it?
The purpose of the Nagpur pilot was to learn something that no one had answers to, which was about the operating economics of the EVs. So no one in the market at that time understood anything about the EVs whether they were two- or four-wheelers. That pilot project taught us a lot of factors including what drivers and customers want, whether the products were robust enough to manage the harsh environment, daily charging time, impact of high speed charging and others. So what we learnt from Nagpur, we are doubling down on that.
So from there we have learnt that small vehicles will work and in order to make them work, the battery swap model looks promising. We are continuing to build on the swap model. What we learnt from deploying the electric four-wheelers is that the (running) range we got from the vehicles we had was not sufficient. Therefore, we met with the downtime of few hours, which were required to charge the EVs daily. We are sharing our lessons with whoever wants to learn from us.
Q) Are you working with the vehicle manufacturers on EVs?
If Tata Motors or Mahindra or Hyundai want to build better EV products, we will tell them what we have learnt. We deploy vehicles and if you give us a vehicle and it works the way it is supposed to work with the right costs, we can deploy it. Our commitment is to work with whoever is willing to build vehicles, help put them on the roads and gear up for electric mobility, we are happy to share our lessons with them. It is a long game and it will take 2-3 years more to get to the right answer.
Q) How do you see the Government proposal of mandating cab aggregators to convert 40% of their fleet to EVs by 2026?
To be honest, I think there should be more engagement between the government and the industry or parties which will be involved in this transition. We have shown and we continue to show as we go electric as quickly and as viably as possible. We believe that it is encouraging that the government would like electrification to happen but it is not clear how the government intends to help companies achieve that target. And at the moment if you tell me to convert 2.5% of my fleet into electric, it is not viable. If I have to invest in acquiring land and build charging infrastructure, this is not my responsibility as the fleet provider. I don’t build petrol pumps for my fleet of conventional engine vehicles. The government needs to think about the EV plan collaboratively with the industry on how to make them viable within the given timelines.
Q) Ola Electric is learnt to be building its own battery capabilities and is also keen on setting up its own charging network as scale of EV deployment grows. Is the company taking this direction?
The level of knowledge in India on EV batteries and how they work in this environment is unsatisfactory. One of the learnings from Nagpur is that there is very poor understanding amongst the industry on battery performance in high temperatures, for example. So if we are going to make EV successful in India, we need to have expertise around the domain. We are investing in finding answers to questions that nobody else has an answer to. So we are hiring talent for many areas including materials, design, battery performance, power controls among others. These skills are necessary if you have to be successful.
Q) What expectations do you have from the incoming budget?
Specific to EVs, currently the subsidies under Fame 2 is very limited in its understanding and focus on new business models on electrification. For example, an EV by definition in Fame 2 is a battery-driven vehicle that comes fitted with the battery. So you only get the subsidy if you sell the vehicle with the battery. Now if the battery comes separate from the vehicle, there is no subsidy for both – neither the vehicle nor the battery. I hope that the budget shows a lot more sensitivity to the emerging opportunities and encourage them rather than penalizing them. For example, the battery swapping system is penalized at the moment.