Diwali just got over, and following the fatal trend of smog in the nation’s capital for the past five years, it is here again.

It is alarming to recognize that India is home to 7 of the top 10 cities globally, notorious for its air pollution levels.

With increasing incomes, more and more people can afford cars, increasing the severity of the already worse air pollution scenario due to fossil fuels.

All this emphasizes the need for greener transportation alternatives.

Despite the bad news, we have several large companies and startups leading the way to clean modes of travel, be it the prominent players like Tata Motors, MG, and Hyundai or the startups like Ola Electric, Ather Energy, Yulu, and Blu Smart, among others.

In today’s episode, we’ve brought Arpit Agarwal, Director at Blume Ventures, to talk about the current scenario of EV startups in India.

During the episode, Arpit talks about the various challenges and opportunities for EVs in India, some of Blume’s portfolio companies, how they contribute to India’s EVs revolution, and much more.

 

Notes –

02:40 – Future of EVs in general

06:01 – Adoption by TCO positive segments

07:25 – 5-year use case of an electric scooter

10:13 – Key challenge in EV market

17:22 – Challenge with charging stations

24:30 – Opportunities for EV in India under various sub-segments

32:53 – Large players engaging with the EV ecosystem

34:12 – Funding & duration of developing an EV from scratch

37:28 – Future of mobility C.A.S.E.

Read the transcript here:

Siddhartha Ahluwalia 00:00

Hi, this is Siddhartha Ahluwalia. Welcome to the 100x Entrepreneur Podcast. Today, I have with me, Arpit Agarwal, Director, Blume Ventures. Arpit has been part of the Blume investment team for more than seven years now. I have known Arpit since his time at T-labs in 2012 2013 where I pitched him my startup Addodoc. Since then, Arpit moved to Blume and again Arpit was kind enough to take us to IC at Blume. Though we couldn’t pass, Arpit has stayed as a good friend over the last 6-7 years. It’s so great to see your journey Arpit and welcome on the podcast.

Arpit Agarwal 00:35

Siddhartha, it has been lovely to see your journey too. I am very happy to call you a friend. When we first met first it was like a founder pitching to an investor, but it has gone beyond it. And I have particularly very high regard for what you have managed to accomplish with this community of 100x Entrepreneur, it is fabulous, it is doing very well. And keep this up, you have been doing a great job educating everyone about various aspects of startups opportunities and Venture Capital. Plus, of course, you have a day job, I’m fully aware of that. It has not been easy, I’m sure and for me, it is a total privilege and a pleasure to be here with you.

Siddhartha Ahluwalia 01:18

Thank you so much. Thank you for being a cheerleader and a supporter of 100x. Today we are going to talk about the electric vehicle market which is one of the most talked about things in industry in consumer today. As you highlighted in offline conversations, the auto industry constitutes around 8% of India’s GDP. And there are right now for everyone who has been affected positively or negatively by it, 2 million electric three wheelers, which are used for transporting a group of four or five, they’re especially seen in metro areas in Delhi, wherever the Metro reaches, right, they’re the most popular means for commuters to you know, either go to a metro station or to come to their home from a metro station. So, they have been here for the last four or five years, right? I would like to start by overall identifying the size of the electric vehicle market in India right and then slicing and dicing into various themes, over to you Arpit.

Arpit Agarwal 02:43

So, the electric vehicle market can be seen as a replacement of the entire auto market in India, To me, everything that is IC engine driven can be electric vehicle barring a few exceptions, you know, there was a time when diesel locomotives are very common, and today diesel locomotives are becoming unusable and being replaced with electric is going to take over everything for a variety of reasons. One is that electric vehicle makes economic sense in many cases. Therefore, it is simply a rational decision to make for most people. In other cases electric vehicle does not have any pollution or at least it move pollution away from cities into faraway locations their thermal power plant-based so that is another positive and on top of everything else, electric vehicles can offer a few features, they are by default connected their software first, they are autonomous driving enabled, they will enable sharing better they are they can be autonomous, better, it is a different paradigm and a much better paradigm from what we have seen, therefore the entire 8% that you mentioned, auto and auto company in the industry in India, 240 odd billion-dollar opportunity can be entirely talked about in an electric manner. Of course, it will take time to build and get there. Today, we don’t have enough solutions. But that to me is the massive opportunity that is out there. And it is very similar to you know, continuing this massive trend of software eating the world. Here’s where we are that software is really going to eat this world as well and very much in India.

Siddhartha Ahluwalia 04:19

And what are the different segments you have to point out where the electric vehicle transformation is happening right now as we speak?

Arpit Agarwal 04:30

One important segment is a segment of commercial vehicles. In commercial vehicles, whether you talk about four-wheeler or three-wheeler or buses, or even the two-wheeler delivery guy, all of those segments are what is called Total Cost of Ownership, TCO positive. What TCO positive gives you that it makes it rational for people to adopt new technology as compared to the old one, which is already positive in other segments because the massive cost of the one of the important things about any vehicle and electric vehicle particularly is its battery, and batteries are about 50-60% of the cost of the vehicle. As the cost of batteries coming down on a per watt hour basis, the cost has been touching almost $100, which is very, very good from a global perspective, once it goes much below that more and more segments will become TCO positive. Therefore, you expect more and more people to start making this rational decision. The only question that remains to be then answered is whether you have a very good quality vehicle available or you have enough charging and swapping infrastructure. And there is a natural user journey that people have gone through on adopting it their social proof there is also you know, to some degree of range anxiety has been put to rest, a lot of maybe policy should support in helping people buy those vehicles financing should be available and a bunch of other things. But the first important thing is TCO positivity. And I’m noticing that in India, we also published an article, TCO has been positive for several segments and that is a place where we’ll start.

Siddhartha Ahluwalia 06:12

Let’s compare TCO ( Total Cost of Ownership) for a petrol bike versus an electric bike for the first 5 to 10 years of their ownership

Arpit Agarwal 06:22

Let’s take a 5-year use case of not a bike because you know not enough bikes exists in the market. Let’s talk about a scooter, let’s say an Activa, Honda Activa scooter someone who’s using active for 25 kilometers on an average, personal use case on a daily basis. This will cost you between 80-90,000 rupees today in some cities in India because these cities make the cost very high, the vehicle will not give you an average of more than let’s say 35 maybe 40 sometimes 45 on a per liter basis. So that’s about 2.5 rupees per kilometer, on top of it, there will be maintenance because you know an IC engine has a lot of moving parts. So, they require maintenance much more than an EV, the maintenance cost is high, the running costs per kilometer are high, fuel cost is high. However, it also has already established resale value. If you take one Honda Active. I’m using Honda active as an example. If you take it to the market, you will find some value out of it right so that value is also established. So, these people can do a which is Capex, B which is per kilometer cost, C which is maintenance, and D which is resale value. And you can come to TCO. If you move this for an electric two-wheeler, for argument’s sake, it is an Ather or Ola two-wheeler, you will notice that for personal use case the TCO is already positive. You may spend slightly more in buying the vehicle but you will recover much more than that in the fuel costs because the per km running cost is much lower. There is hardly any maintenance because there are no moving parts only one motor and a few other components. Everything else is very similar. No oiling, no refueling, no overhauling, no spark plugs, and so on, no carburetors. And even if the resale market is not ready, which is the case at this point of time, you will still make TCO will assume the TCO to be positive. In this particular market, you can do a similar calculation for a three-wheeler cargo, you can do three-wheeler passenger, you can do it for intracity buses, and so on. And the reason why the e-rickshaws are so penetrated in India, you know, almost 2.5 million E-rickshaws exist across India is because someone figured this out very early that this particular form factor works for commuting, you know, taking people from the last mile from Metro Station to their homes, and that is very, and that is taken off in a big way without any government intervention. And thankfully, it has happened and which is where, you know, we got very excited to say okay if this particular market can be served, you know, we can make a very large business, which is that batteries market come and we’ll talk about this in a bit.

Siddhartha Ahluwalia 08:58

And the fuel for an electric two-wheeler, Ather or Ola Electric is you know, electricity from a charging point. So, what’s the per unit per kilometer charge over a long period of time if you have evaluated that?

Arpit Agarwal 09:15

So, imagine Ather carrying about four-to-five-kilowatt hour battery, I think it, I don’t know the exact specification, but let’s say that much. So, charging the five-kilometer battery will be about 25 rupees, because five rupees is km in Delhi for example, and you can then run it for at least 80 kilometers. So, 25 rupees is a go-to run 80 kilometers, this cost is in the range of 30 paisa, that is much different from the 2.5 rupees per kilometer that you will be running a petrol scooter on and that is fabulous. You know think about it you’re gaining 2.2 rupees per kilometer. That’s outstanding. So, that is going to make a lot of difference. The Key challenge, please note Siddhartha, has been that so far in the market, not enough good quality vehicles existed. And the reason, why not enough good quality vehicles existed, is that not enough entrepreneurs applied their minds and build a vehicle from scratch. Almost everyone was trying to play the cheap Chinese mobile strategy where they would import a kit from China and build a vehicle in India. The challenge is that the Indian road conditions and Indian consumer expectations are very different. You know, I always remember this example, when I was growing up. And my mother had a TVS scooty, must be 20 years back. And this scooty took four of us. because we didn’t have a car, four of us on this scooty maybe more than 200 kilograms on the vehicle and it worked you know when short distance but it works. This is outstanding, India and Indian customer expects a lot more from their vehicle. And Indian Road conditions are far worse. If you find the smooth road, that’s an exception. Even in Bangalore, you find so many potholes. So, you know, you can bring something from China, but it will not last Indian conditions, then also there is temperature, China has a much better temperature? And indeed, the electric battery is temperature-sensitive. If you run the battery at 40 degrees, which is the case in most cities in India most time of the year, the batteries will only go to last half as long. So, the costs are not going to work. So, someone has to really solve all of these problems, which is why I think one important reason why you don’t see a lot of vehicles being adopted is of course because the charging swapping infrastructure doesn’t exist. But also, because good quality vehicles were never provided to consumers. I’m particularly very excited about the two-wheelers that Ather and Ola have launched, which seem to be the right vehicles for mass adoption in India. Of course, I’m not taking anything away from you know, a large industry, They are a very, very strong players, there is Hero, there is Okinawa and there are a few others and they have some very good products. I haven’t unfortunately ridden any of them, but they’re very good products, it is just that I feel more excited about Ather and Ola. Also, because they are closer to our world.

Siddhartha Ahluwalia 12:29

And if you have to go back and put a price on each market because as a VC you have to analyze the size of each market, let’s say what would be the size of the battery market right, which is used in three-wheelers. And in a positive case, if all 2.5 million electric three-wheelers, start using the swappable battery, what would it amount to in terms of market size?

Arpit Agarwal 13:05

So, we have a portfolio company called BatterySmart. It’s one of the recent investments. This company allows for the replacement of lead-acid batteries into lithium-ion batteries on a swapping basis. I will tell you why it works for consumers in a bit. But the very important part is that each vehicle will take about two batteries roughly at a time and then you can replace them so 2.5 million rickshaws can eventually take 5 million batteries. And these are small batteries, about two kilograms per kilowatt-hour are smaller. And you can you know, they’re also very light about 10 per kilograms can be lifted by one hand. So, that is a market in just electric rickshaws. If you talk about 2 million, this is an installed base. This is not per year. Per year, I think about between half-1 million e-rickshaws get sold every year. So, that’s a separate market, but I guess installed base, India has more than 20 million two-wheelers being sold every year. And if I simply make 10x of that number on the installed base, we’re talking about 20 crore two-wheelers are uninstalled, each of those can carry one of these batteries. So, the battery market is you know, mind-blowingly large and I’m not still talking about trucks and cars, which are much heavier vehicles. They will require much bigger batteries and therefore, they will require someone to put a lot of cells in them. So, I can’t add these up in two-wheelers and three-wheelers. I would expect the market to be in the range of 300 million batteries, if not more, and then we are not still talking about four-wheelers and buses and load carrying vehicles and so on, which are much larger than these.

Siddhartha Ahluwalia 15:04

so, for example, you invested in Battery smart and they are currently providing swappable batteries for three-wheelers and they are majorly present in Delhi. So, what made you excited about this particular market size right? These 2.5 million to 3 million swappable batteries in 3-wheelers?

Arpit Agarwal 15:28

Everyone thinks that the challenge is to make a vehicle. And you know, engineers like you and me think that making a vehicle is the most exciting thing. So, you know, to be able to, you know, twist something and when the vehicle starts running racing ahead is an exciting thing for most engineers. But I think the key challenge after you’re made a vehicle and a good quality vehicle is also to figure out how will the vehicle get charged or if it requires swapping or not and so on. This is one of the important Goldstar problems of India. Not enough charging swapping exists because not enough vehicles are on the street. There’s not enough demand there’s not enough supply and this becomes a vicious cycle where no one has been able to break it. There have been government mandates where you know ESLs has port charging spots, fast charging spots in many parking lots in Delhi, for example, I’m sure elsewhere also but number one, they’re not being used utilized enough. So, you know, how will ESL make money which is on the government mandate, they put them there. The second very important thing is not enough demand already exists. And if demand exists, the depth of the availability of charges is so low, it is not penetrated enough, right? It is not available where you want them and when you want them. Therefore, there is a need for entrepreneurs like Pulkit and Siddharth, Founders of Battery Smart to say okay, let me not deal with solving the cold start problem. Let me solve the problem which already exists. For example, installed base of E-rickshaw, 2.5 million vehicles, 5 million potential batteries which you can use, it’s a humungous market, they’re currently only at about 13,000 batteries, much larger is going to come right. So, this is going to grow very fast, where the demand exists, if I can make the business work, if I make the transaction work for this one user, then everyone will copy and as a consequence today, they have no cost of acquisition they have 3600 vehicles today on the street and they are having a waiting list of more than 10,000 e-rickshaw owners because everyone has figured this out earlier we used to make 600 rupees now I can make 1400 rupees who doesn’t want to make 1400 rupees, as a consequence battery smart makes money on a per-day per transaction basis. So good, but I also make money as an e-rickshaw owner. Why would I not take it, that is very exciting, and when I found that you know this is like a market waiting for being disrupted. All you need to solve is the Supply and today there are institutions who are willing to also give you supply will then begin to match and Pulkit and Siddharth have the excellent operational capability. They are scaling up like crazy. I’m very excited about that.

Siddhartha Ahluwalia 18:22

And now let’s talk about the electric commercial vehicle market and exactly where Euler Motors is placed in right, what were these institutions, enterprises using before Euler motors for transportation

Arpit Agarwal 18:40

IC engine vehicle, in Delhi CNG, is very popular so people use CNG it’s also cheaper. In most of the cities, people use diesel, diesel three-wheeler cargos, these three-wheeler cargo vehicles have a higher maintenance have a higher running cost. And as a consequence, they become much more expensive to run. the simple argument, you know simple sale for any of the Ecom Xpress or Delhivery or Udaan is that earlier a monthly cost of three-wheeler would be about 35,000 rupees and you cannot bring it below that because you know the driver will have to make money, the owner will have to make money, financing have to pay the EMI etc. But now the only hope that you have to reduce this cost which is roughly about 75 to 120 rupees per last mile delivery is by moving to a new technology called Electric. So, you can reduce $1 down to 75 cents. And that is the only way they’re going to make a lot of money which means which is the reason why and of course they’re smart people so they figured this out and they’re just waiting for a good quality supplier of the vehicle around. Once a good quality supplier vehicle is available, they will simply lap it up. They will get all the vendors to buy those vehicles and put them on their fleet.

Siddhartha Ahluwalia 19:54

How many EULAR motors vehicles are on the street right now?

Arpit Agarwal 19:58

Currently about 250 vehicles on the street. They are yet to launch their L5, but some L5 are running in pilot right now, as we speak the launch is about to happen. So, when the launch has happened, people can actually go to a showroom and buy those vehicles.

Siddhartha Ahluwalia 20:15

And is there also a large waiting list for Euler vehicles?

Arpit Agarwal 20:21

again, this is a market where waiting lists are a norm. So, Euler has written orders of more than 2000 L5 vehicles, which is almost our next entire year supply and we are a small company still right we have not we can make so many vehicles. So, we probably will not be able to service the demand, current demand, and more demand will come. So, yeah, there is a waiting list. they always had a waiting list.

Siddhartha Ahluwalia 20:50

And the third market which you said is that Blume is serving, can you throw more light on that market and which is your portfolio company which is solving it?

Arpit Agarwal 20:59

So, our most recent investment is a company called ElectricPe. ElectricPe is solving the very diametrically opposite problem of charging infrastructure. The reason why charging infrastructure does not exist is very interestingly, as I mentioned, is because not enough demand exists, if demand doesn’t exist, then why will someone install a charger? If there is not a charger? How will people supply so, you know, if you go to a three-wheeler or any electric vehicle dealer, the key challenge they will tell you is that not enough charging points exist, which is why people don’t buy them enough. What one needs to do is if I can reduce the cost of installing and infrastructure to really low, let us say, just for argument’s sake and make it $15. Right, as compared to you know, today, it may cost you as much as a couple of lakh rupees to install a charger, if I can reduce that to so low, then I wouldn’t mind just installing them everywhere. Right, suppose I have $15 worth per charger. And this is the cost of operating a charger. It’s a simple low-cost AC charger, it runs on a mobile app, you can simply scan a QR code it switches on and you can charge and then based on how much time you’ve used, it will give you billing and if I install them everywhere your office, your home, your residential complex your parking lot, if I install 10,000 of them in Bangalore, suddenly at my cost, and I wouldn’t have spent much money only, $150 rupees. If I have done this, then suddenly entire Bangalore will start experiencing the EV revolution because now you buy whatever vehicle you want it charging is available. You know, 10,000 is a lot of charging points for a city like Bangalore. That is the key thesis behind ElectricPe. We were very lucky to find entrepreneurs like Raghav and Avinash, who have come with very strong credentials from Ola and Sun mobility. And I think the next one year is going to be very, very exciting because now the way to solve the cold start problem was two ways. One is either you go to establish demand, or you make the cost of supplies so low, that wouldn’t hurt you. The first one was BatterySmart. The second one is ElectricPe where the cost of supply installing supplies is so low, that you wouldn’t mind putting them up even if the initial utilization may be quite low.

Siddhartha Ahluwalia 23:27

And what’s the traction which ElectricPe would have right now.

Arpit Agarwal 23:32

They are yet to install here. They have some test boxes installed. But in the next one month, they are going to install 2500 boxes across Bangalore

Siddhartha Ahluwalia 23:44

and this is compatible with every electric vehicle?

Arpit Agarwal 23:48

This is compatible with everything because it has a simple three-pin charging point. You know the 16 MB per point. And every vehicle is coming with a charger. So, you can simply put the three-wheeler point there can be some mobile app, and charging starts.

Siddhartha Ahluwalia 24:02

And how much does it cost for a consumer to make the full charge happen at their point?

Arpit Agarwal 24:11

Two units, which is maybe five rupees per unit or 10 rupees per unit, that’s like 10 or 20 rupees.

Siddhartha Ahluwalia 24:17

And it gets charged in 15-20 minutes?

Arpit Agarwal 24:19

It is a slow charger. It will maybe take you two hours in some cases to charge them. But most people wouldn’t mind it because you know they’re in an office or they’re at home. And that is not a problem. Also, please note that these vehicles that have been charged on this network are also don’t have batteries that can take fast charging. The batteries are not made for fast chargers. So why would they go to a fast charger? They will not go to the fast charger that and most people who are sitting at home like I’m sitting I’m talking to you right now. If a vehicle is being charged outside, I wouldn’t mind it.

Siddhartha Ahluwalia 24:59

These are 3 very interesting markets which you have taken, you know, position them as Blume. What are other parallel unexplored areas in EV space, which you think entrepreneurs can still explore and renovate where there are still large opportunities left?

Arpit Agarwal 25:20

Okay. I think that we have only begun. So yeah, three opportunities, three investments made but a lot more remains to be captured. Let me take a step back and give you an overall framework of how to look at the auto market. See, one important activity is to make the vehicle so that’s the OEM world, you know, like Euler and others, Euler wheeler, maybe two-wheeler will be four-wheeler, there’ll be others and older will you know, Bajaj Tata and Mahindra and TVS are a very, very strong company. So why wouldn’t they make an Ather and Ola, all of these other OEM businesses, second, you will need someone to be able to put the energy in them. So, buying a vehicle is one thing, but putting energy is another. So, it could be Sun mobility, it could be BatterySmart, could be their competitors. And there are, you know, five or 10 companies, which have also raised a small amount of funding in India, those will also come in this market and the opportunities to have hundreds of such companies because the Imagine if there are millions of vehicles on the road, millions of charging ports also exist otherwise its won’t work out, so someone has to install all of those. So, energy providers are one, behind the energy providers, grid providers have to work out. So, there’s a massive opportunity for someone to be able to give n-block energy supply to these charging points, right you can now get into a contract and your supply may actually be happening from a wind power station sitting in Satara, Maharashtra and the vehicle will be charged in Bangalore because you know, you have this agreement in this particular case. So, there is a need for someone to broker these two. And there is a need for even the utility, let’s say a BESCOM in Bangalore and other companies in other cities, which will establish the infrastructure where the line will be established to come to this point. Third important thing is, you have to look at who will maintain these. See today, the vehicles that exist are largely mechanical in nature. So, someone can relate, you know, when a screw and something can really open this up and check what is happening or not happening, in electric everything is in software. So, someone has to be able to read the software, someone has to understand what is happening. And maybe software already is giving you the error codes, you simply need to read them out and work this out. So, this is maintenance. It currently doesn’t exist. Fourth is someone who will then once you’re done with the vehicle, you have to really sell the vehicle out. You know, if you go to VV road, if I remember selling my bike on VV Road, many years back 12-13-14 years, years back, somebody has to buy those vehicles, right so that people know that if I buy a particular vehicle, I’m assured of this price, rough price after a certain point of time, when all these things exist, the horizontal layer below them are financing providers. Today, almost 70-80% of vehicles are sold in India, are financed vehicles. Hardly anyone buys them in cash. Right. So, these financing providers have to exist today. Unfortunately, not enough financing options exist. And those that exist are very expensive in nature. So, financing options have to exist. And currently, the larger banks do not yet have a product except for E-rickshaw, which you know, public sector banks have some product, almost everyone else doesn’t have a product for example, if I want to buy Ather or Ola, I don’t know how many financing options exist, I’m sure there are some, but I just don’t know about them, but more need to happen and the cost needs to come down is very important. The fifth very important pillar of everything put together is can someone match demand and supply together? For example, can someone be front end for an ecom express to engage with multiple vendors, which are providing e-rickshaws or E-scooters, or three-wheeler L fives or even four wheelers as they come along and so on. So, there’s a marketplace, market maker that exists, this is a massive opportunity, I don’t think enough of them exist as of today that people like Euler have to sell directly to work directly with the end customer. And then if you put all of these together then there is a massive need for someone to you know, reuse the battery into some other use case. It can then take the scrap value of the metal and take something else. All of that ecosystem has to be put together, this is after the vehicle has been sold before the vehicle has been sold. There is a need for someone to provide the battery, the motor, the electronics, the software, and this is what is called auto components. So, this entire thing is Electric Vehicles market, in my opinion, all each one of these has the potential of generating several unicorns in the next 5 to 10 years. Today, today, we have no companies yet, but I’m sure there will be a lot of companies that are going to be created and scaled up in this segment. I don’t think we have enough, done yet. We just started from a venture capital industry perspective. We have just gotten started.

 

Siddhartha Ahluwalia 30:30

And I think except for the early stage, established venture firms like Blume, late-stage firms are yet to take bets in this market. I think that will propel entrepreneurs for further funds.

Arpit Agarwal 30:44

That is an important piece. We have been working with several funds for Euler motors, and also for other companies, but they are still making up their mind. They don’t understand this market as well. Or at least they are not as clear as I am talking. Again, I am clear, but I don’t know whether this will happen like this. They are not sure if my opinion really is going to stand out like it’s going to matter. But we will see another couple of years how exactly this turns out. But yes, one important thing is that maybe a few established venture capital funds are not interested. But there is a company called Blue smart mobility, which recently raised money from BP, I think that will probably start to happen, where people who are already in the energy market will start to invest in these companies or people who have experienced success. Like for example, an investor of Tesla may be interested in investing into Euler motors. I wish that will happen. But yeah, those kinds of things are about to happen from international markets into India.

 

Siddhartha

Let’s talk about Blume’s very first investment in connectivity and shared mobility space, which is Yulu right. How did that journey has played out? If you can put some data around that and or how’s it going?

Arpit Agarwal

You know, Amit is a special entrepreneur, Amit has been, of course, the founder of InMobi, yes. But I’ve now seen his journey on the sidelines for a long enough time. I think he’s one of the grittiest entrepreneurs that you will find. So, it would have been, you know, because he was available and he wanted to make money from us. We wanted to invest in him. So, there’s no question even if you’re doing something completely different, although this is a much larger and much more interesting opportunity. Today Yulu is everywhere, it is in every town, it is on everyone’s mind. A lot of people depend on Yulu for their living. And I think the journey has proven that it doesn’t matter whether you have raised more money or not. But it definitely matters how persistent you are on your belief how much conviction you have on your thesis and how capable you are and being keep pushing it and building it. Yulu is a product-first company. It has built its miracle product; it has also built a supply. it has become not just a product owner, which is OEM, it also is a shared mobility provider. So, these things put together, you know, make the business much harder to manage. But I think they have executed very well and coming out of the pandemic they are recovering very, very fast. So, I’m very excited about how Yulu pans in and out in the near future.

 

 

Siddhartha Ahluwalia 31:43

And what’s the view of you know, these large OEMs have the billion-dollar enterprises in India, Bajaj, Hero are they also looking to back electric vehicle startup?

Arpit Agarwal 31:57

They are already engaging with the ecosystem. TVS has taken a stake in Ultraviolet. Bajaj has a stake in Yulu, which is our portfolio company also. They’re already engaging with this ecosystem. We know that Mahindra has been in the market looking at some companies, Tata themselves are engaging. Bharat force bought a company called Torque Bike. Hero, for example, has invested in Ather, and so on. So, all of the large guys are already engaging with the ecosystem in a deep manner. It is just that we haven’t yet seen one of these becoming very, very large. And as and when that happens, we know those partnerships are successful.

Siddhartha Ahluwalia 32:57

And because you’re already an investor, with many early-stage companies, which you highlighted, what does it go into making an electric vehicle, right? If an entrepreneur wants to build an electric vehicle for the future, what are the capabilities and the capital he needs today?

Arpit Agarwal 33:17

I tell you what people have taken so far. Again nothing against anyone, Ather energy took about 35 to $50 million to come out with their first scooter. They’re very, very smart people, I’m sure this was money was well spent. And they were also working in an era when no one understood this, everything had to be built from scratch. So, they had to really reinvent a lot of beads are to come this far. However, Euler has gotten there in less than $10 million. Right. So, this is definitely you know, a very big change with Euler successfully launched a vehicle. Second, I think in the future at least in two-wheeler market, you should be able to launch when I say launched defined by generating 100 vehicles sales per month or more, in less than $1.5 million in less than 18 months. So, back in the day, when people used to, you know, work with these Chinese mobile phone podiums, this is what is going to happen here in India as well, where the cost of making it come down. And if you are an entrepreneur who’s trying to make a new vehicle, I would ask you why will I invest in you? The answer should always be I can do it faster and cheaper than what Euler and etc. have done. Only then you will be able to find a lot of people investing in you. It is not an easy thing because if you’re delivering developing a platform from scratch, everything needs work motor, software, BMS, charging, front face, you know the vehicle, have to pass safety standards and so on everything has to be done from scratch, but it is possible in my opinion to do it with the numbers I mentioned.

Siddhartha Ahluwalia 35:08

And there’s a very interesting acronym called CASE can you put more light on it.

Arpit Agarwal 35:15

Well, consulting people and their acronyms! So, CASE stands for connected, A is autonomous, S is shared and E is electric. So, McKinsey has coined this term. Aces or case is the saying. The future is CASE, future of mobility is CASE because it will be electric first, it will be autonomous also be shared and each of those have implications on how the business of auto sector is going to go in the future.

Siddhartha Ahluwalia 35:46

And one more very important thing is that you highlighted earlier is in the electric vehicles the OEM controls the entire experience because right it’s almost like building your own Apple devices with Steve Jobs propelled that it should be done by end to end yourself.

Arpit Agarwal 36:12

In the case of electric vehicles okay, this is interesting and I agree with your assessment that in case I’m a Maruti car customer, I have a Maruti Swift, this Maruti car was built by Maruti sold by a certain dealer for dealer was a third party. I have never seen that dealer you know, after a couple of years and then this car is maintained by a certain mechanic right. So, they said there are three people in the chain. However, in the case of electric because you are going to be able to you want to be able to engage the customer long term, you will establish, for example, Tesla has and Ola intends to establish your own grid of charging infrastructure so that more vehicles can be sold. And then you will also have a stake in the maintenance part because your vehicle only you know, so people don’t have to keep coming to you or the mechanic will have to be trained or certified by, so you are controlling the end to end, not just the sales experience, also charging experience which is every day and then the maintenance experience also and eventually, why won’t you, for example, make a resale marketplace for the same vehicles at some point, all of those things are going to happen. So, I think in electric, the important thing please not Siddhartha because Electric is fundamentally an innovative very different product, it may feel like itself the vehicle, but it is very similar to your thinking about how very large retailer thinks about a future group would not be a very good eCommerce company. Because it requires fundamental reinvention, a different way of thinking, right, I think this is a very important thing to note that electric vehicles may look like but they require a very different mindset to be able to build them to be able to run them. And it is not just software first, it allows a lot of interesting things which can happen on the vehicle. Therefore, you will want to make sure that the customer is engaged with you and end to end and you are delivering a certain application a certain use cases, much better than what IC engine makers can even imagine or even. Yeah, I don’t think they can deliver those experiences.

Siddhartha Ahluwalia 38:26

And what’s it for the company to engage? Is there a repeat cost of customer service that they can incur?

Arpit Agarwal 38:35

just for argument’s sake, if I’m a father of a teenage daughter, right, I could simply pay a small fee to make sure that I know where she’s taking her vehicle. This does not exist in the IC engine world. And I may pay you let’s say 100 rupees every quarter for this kind of service. If I have a younger kid or something, this is just one thing on top of my mind. Secondly, can I have a console that can play music or a console which can show me directions a console which has we can play Android apps console which a lot of interesting smart features which let’s say auto lock, remote locking reward finding all of those things can happen in an electric vehicle by default on top of it, I can talk about you know can I have deep insights about my battery? how good I am driving can the battery management system improve a utilization of battery this is how we have learned my behavior. You know my smartphone today allows for battery optimization basis how I have used it in two days it learns my behavior and optimizes battery in the same manner only because it is only software LED light similarly electric vehicles have batteries and battery management systems can allow this such things do not exist you know how I will utilize the battery will be very different from how you utilize a battery. You might be in a different city you have a different use case. So, can the vehicles automatically smartly make those decisions and then very soon, you will experience a whole bunch of autonomic driven features, which are going to come. it is hard to imagine this happening in two-wheelers but in four-wheeler, it is already very common. And level three autonomy is going to happen. Yes, level five will come very hard in India. But level three is easy relatively, those things are going to happen if you are electric by default vehicle. And these things will require a fundamental reinvention of the business models of OEM and today, you might have noticed, if you look at the balance sheet of a Maruti Suzuki, you will find that 40% of their profit comes not from their vehicle sale, but comes from after-sale service or spare parts. Now, this is going to go away because the vehicle doesn’t require any maintenance in different requiring replacement of parts. So how do you make money? you can’t engage with a dealer whose primary job was not to sell, you don’t make much money in selling the vehicle. But they make money a lot of money when people come back with their cars for maintenance. So, it requires everything will undergo a significant change. And I don’t think people really understand the kind of paradigm that electric is going to throw them in.

Siddhartha Ahluwalia 41:23

Thank you so much. It’s been very insightful talking about the electric vehicle market. we discussed various aspects of the market, sliced and diced. I think very few pieces of content would contain so much detail as this podcast and different points of view also. Thanks again for making this happen.

Arpit Agarwal 41:45

It has been lovely. And thank you for being the curious soul that you’ve always been. And I’m very happy if some people will get benefitted by listening to my views and all-electric vehicle entrepreneurs out there. Make sure you pitch me I’m available on Twitter and also on LinkedIn. So yeah, looking forward.

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