ET Now: How you are looking at the EV market?
Naveen Munjal: When you talk about the EV sector, you got to first divide different vehicles at different categories in different buckets — two-wheelers, three-wheelers, four-wheelers, public transport and commercial vehicles. All of them are going to take off at different stages of their life cycles.
Now, the low-hanging fruits are actually going to be the two-wheelers for multiple reasons. For one, the infrastructure requirements are very different from other forms of vehicles. There is a lot of parity in terms of the price performance, in terms of the price as against ICE vehicle. The charging infrastructure requirements are different and distances covered are a lot less.
The other factors include government support. These vehicles have a strong tailwind because of the support that we have got in terms of government policy. We have got FAME II, which was enhanced in June. That makes it a very lucrative segment. Besides that, we have also got numerous — 16-odd — state policies.
Right now, a lot of them are manufacturing-led, but some of them are demand-led as well. On top of that, there is the PLI policy. So, there are numerous policies in place which are pushing electrical mobility.
Also, the TCO (Total Cost of Ownership) gap between ICE and Electric was always wide. That has only gotten wider now because of petrol price being where it is.
The way I see it, it is going to explode from here on. This market is going to be a very significant one. Here I am talking more about two-wheelers. This market will be a bare minimum of about 20% odd of the market if things remain the way that they are in the next five years. That means about 4 billion units in the next less than five years.
Now, should policies become even more aggressive, or should there be a mandate for ICE to convert, this number could actually be much much higher.
What could be the demand and potential for e-bikes in a car-aspirational society like India? And what of Ola’s new launch?
It may be a car-aspirational society, but the fact remains that 80% of the vehicles on India’s roads are two-wheelers. So it is a very large two-wheeler market. It’s only going to get bigger. Eventually, customers will settle at a product where they find the best value in terms of the price, performance, durability, charging infrastructure and battery portability, and of course running cost and ease of battery replacement.
Going by the data we have so far, about 50% the dealerships have been opened in Tier-2, 3 and 4 towns. So it is not necessarily only targeted at the metros and Tier-1 towns. Rural is also being targeted by setting up sub-dealers, etc. There is a large proliferation already happening in Tier-3 and 4 towns already.
We are going to have multiple bands. We have a base line which is mostly called comfort speed. Then we have got a second definition which is called the cities peak category — about 45 to 55 km an hour and an about 80-odd kms range. Then you have got the high-speed band where Ola and some others come into the picture.
It is the second band that we are targeting — the commuter segment where the pricing has come down to sub-Rs 60000 across the country. In states where you have got an additional policy, it is down even more to close to Rs 45,000 or even less in some states. So it is now highly affordable, very very durable.
In terms of the running cost it is extremely low, in fact even cheaper than taking a public transport in the metros. It is multiple times cheaper than a ICE vehicle in terms of the TCO, running cost and durability. On top of it all, you are also getting anything from three-year warranties on the batteries to five-year ones on the vehicles.
At the initial stage where the cost arbitrage won’t be much, how much would Electric really appeal to Indians who only believe in sasta, sundar, tikau?
The commuter segment who want sasta aur tikau and a very good performance, they are not buying it necessarily only because of the TCO. They are also buying it because of the convenience. If you do not have charging infrastructure in your apartment block, you can effectively take out the battery, plug it into a wall and charge it the way you charge your computer or your mobile, plug it back into the vehicle and off you go.
If you are a heavy user, we can give you two or three batteries, thereby taking your range up to about 210-odd kms on a single charge.
Actually, the initial purchase price is much lower than that of ICE scooter. In terms of running cost, they are multiple times cheaper. As for convenience, even if you do not have charging infrastructure, there are no distractions — you just charge it at home.
Because there have been range anxiety issues among customers, we have been installing charging infrastructure as well. We have already installed close to about 1,650 charging stations around the country, in locations where you would generally go — markets, grocery stores, etc. Customers may not use these infrastructures too much, but it nevertheless gives them a huge amount of peace of mind and comfort.
Sales go up dramatically in an area where we install charging infrastructure. So it has more to do with range anxiety than actually using it, because they are charging the vehicles at home and do not necessarily need to charge it outside unless it is a top-up charge.
Besides, we also been training road-side mechanics, re-skilling them to handle electric vehicles which they could not earlier. We have already re-skilled about 6,000 of them, and intend to take it up to about 25,000. That is how we are creating a whole ecosystem.
So, it goes beyond just pricing and TCO. Environment is of course a very big factor. Customers are very proud to own an electric vehicle, because they are doing their bit for the environment.
In some products, prices go higher as features are upgraded, like in Apple phones. In some others, prices go lower because of competition, like in storage devices. Which way will your industry go?
It is the same thing. We are following the same Moore’s curve. Lithium ion batteries were about $1200 a kilowatt hour in 2010; now that pricing is close to about $130-140. Battery prices are dropping, in which case either the prices are going to keep on dropping or the prices are going to remain stable and the performance of these vehicles is going to improve dramatically over the next couple of years.
The R&D that is being done is immense. So we are going to see vehicles which are far better than what they are at this point. This range of vehicles is already better than what we had three or five years back. It will only continue to get better.
What are the parallels which we can draw from global markets?
China has over 300 million electric two-wheelers which have been sold in the past 15 years. They sell about over 20-25 million vehicles a year. For electric, they have got a dual approach. They have got a stick where they do not allow you to sell IC engine vehicle in a number of cities, then they give a carrot in terms of the subsidy that they would give a customer for buying an electric vehicle. Then, they have created an infrastructure for the customers to go and charge the vehicle.
Europe is almost a four-million unit market. The US is half-a-million unit market. Japan is a very dense electric bicycle market. Taiwan is an electric scooter market. Vietnam is also converting to electric scooters.
India is actually leapfrogging technology. So we are not going down the traditional route that many other countries took. We are going to leapfrog technologies in terms of the performance of the vehicles. So India stands at a very unique position because of the approach that it is taking.
Right now EVs in India are not meant for long-distance travel because of the lack of infrastructure. How long will it remain that way?
I am talking more about two-wheelers, which in any case are meant for travelling within the city. Owners are happy for what they offer — comfort, low running cost, price, etc., compared to ICE vehicles. We believe this is going to serve the needs of the last-mile traveller in the city.
