Large manufacturers are investing in small companies to get a peek into their R&D. Alnoor Peermohamed and Anita Babu report.
India is on the verge of witnessing a revolution in electric mobility and it is predominantly being driven by start-ups. In the fear of losing out, traditional manufacturers have now started to make strategic investments into these young companies to understand this innovation.
Last month, India’s largest two-wheeler manufacturer, Hero MotoCorp, made a Rs 205-crore investment in the Bengaluru-based electric bike start-up Ather Energy. While a large manufacturing set-up and sales network could ideally help Ather sell more bikes, the investment was driven by the headway the start-up has made in R&D.
“Hero MotoCorp was clear that this industry is going to be built by start-ups because it’s not merely technology innovation, it is also business innovation. The way these vehicles are sold will probably change and this requires fresh thinking, talent and culture,” says Tarun Mehta, co-founder and CEO of Ather Energy.
Electric vehicles the world over have stopped being merely zero-emission versions of their gas-guzzling counterparts, and have become the forebearers of the latest connected technologies. As a result, battery-powered vehicles are perceived more as a tech gadget, similar to a smartphone, than a traditional bike or car.
Hero accepts that its old ways of making and selling two-wheelers might not be apt for electric vehicles. It plans to use Ather as a litmus test to see how consumers warm up to electric mobility in the two-wheeler space, similar to what Mahindra & Mahindra did with Reva in the car segment.
Electric luxury car maker Tesla in the US has turned the world of mobility up on its head. The battle is not won yet, but Tesla has disrupted the market enough to put large manufacturers in uncomfortable situations.
Hero’s investment in Ather is like that of Ford investing in Tesla as it looks to not repeat the same mistakes that traditional manufacturers the world over have made. Hero has had its own sister company build cheap electric bikes for years now, but the sheer lack of R&D has stalled its progress.
A growing interest
Hero isn’t the only large manufacturer shoring up on future technologies. Mahindra, the first Indian heavyweight to really give electric mobility a good thought, had acquired a Silicon Valley-based company called GenZe four years ago and launched its first electric scooter in the US earlier this year.
It is now focused on building synergies between GenZe and its Reva team in India. Software know-how and technology are being shared between the two firms in the hope to build faster, more efficient and reliable electric vehicles.
“Most of these traditional players are looking at the next wave of mobility, and while they are doing some bit of innovation in their own backyard, they are also looking at fresh thinking from start-ups. It’s not really for the use of their distribution network or manufacturing facilities, it’s more for the know-how. They don’t want to lose out,” says Abdul Majeed, partner at Price Waterhouse.
India’s unique infrastructure challenges mean it’s hard to set up a dedicated charging infrastructure that would extend the range of electric vehicles. This along with a high sticker price has ensured that the Reva E2O never really caught on with the public, but things can be different for electric bikes.
Motorcycles and scooters are predominantly used for commuting in India, which generally entails short trips to and from work in a city. Eight of out 10 vehicles plying on Indian roads are two-wheelers today, majority of which have small capacity engines making them ideal as city runabouts.
This means people can actually charge their vehicles at home overnight and use them every day. This change in use case for a car versus a bike could mean the difference between success and failure of electric bikes in the country.
Bikes score over cars
While the electric car space is still figuring itself out in India, two-wheelers are increasingly emerging as the ideal candidate for electrification. Traditional manufacturers are in no mood to waste time in acquiring know-how about new technologies to bridge the gap with global manufacturers such as Honda and Yamaha which have been experimenting with such technologies for years now.
When the market is ready, global manufacturers can flood it with several models in no time, but Indian manufacturers still have a long way to go before they can build affordable bikes. Majeed adds that even today Ather and other start-ups such as Tork Motorcycles will hit price points of Rs 1 lakh and above, putting these vehicles out of the reach of most two-wheeler buyers.
For the start-ups, the investments from established manufacturers are needed to sustain their R&D to help bring down the prices of electric vehicles. “We are already developing the manufacturing capabilities. When it comes to selling also, what we’re making is more like a smartphone, it’s full of technology and the experience is not the same. The investments from large companies is for the R&D and they are basically validating that what the start-ups are building is of great value, which is exciting,” says Kapil Shelke, founder and CEO of Pune-based Tork Motorcycles.
While India’s two-wheeler market has a range of products from pure commuters to entry-level performance motorcycles that are quite accessible, electric mobility will initially carve out a niche for itself among tech and environment enthusiasts. The real test, however, will be to see if these vehicles can step out of their niche and enjoy a mass-market appeal.
Image: An Athers Energy-built electric scooter