'EVs Wont Need Sops Once Market Share Surges'

The government is encouraging adoption of EVs with subsidies, allocating ₹2,908 crore as EV subsidies for FY23, three-and-a-half times the FY22 allocation of ₹800 crore.

“Today, the EV two-wheeler penetration is 4-5%. I think once it is in double digits, the industry shouldn’t need subsidies," said Aggarwal, co-founder of Ola Electric, which has taken an early lead in the electric scooter space.

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At the pace at which the EV market is growing, and if e-scooter makers led by Ola maintain their growth, it will take a mere six months, or a maximum of a year, to reach double digits.

Aggarwal has a penchant to get under the skin of his rivals, and also confound critics with claims that seem incredulous at first; but for now, Ola Electric Mobility seems to be charging ahead in terms of market share in the electric scooter segment. The company sold 16,306 vehicles in November, compared with 15,250 in October and 9,432 and 3,351 in September and August, respectively.

For sure, these are early days, and the two-wheeler industry incumbents who have had a measured approach to EVs may turn more aggressive. “It’s not as if I’m very popular in the industry," Aggarwal quipped, when asked whether his statements will make him more unpopular. “You haven’t known me for the last 10 years of my journey as an entrepreneur. I wouldn’t say things just to be popular. I’ll say things that I believe in, and sometimes they might sound contrarian."

“Whenever we have said something with conviction, they’ve always ended up being true. We have a track record in that and we always back ourselves to achieve what we want to achieve," Aggarwal said.

In recent weeks, he has claimed the two-wheeler industry will go fully electric by 2025.

“I know it’s a sensational claim, but if you look at what has happened in the last one year, before we launched it was a very slow-moving belt. In the last one year,in the segment that we sell- the premium scooter segment—EV penetration has gone from 25% to 90%. We have about 50% market share of the overall premium scooter segment. Not just the EV, with just one product. Over the next 12 months you’ll see us with multiple products across premium and mass market—scooter and motorcycle," he added.

That, in other words, would mean a huge cost for the government if subsidies continue, but Aggarwal says government subsidies may no longer be needed by the industry, as the industry benefits from economies of scale and indigenous components. “The industry will be ready to live without subsidies. I will be ready at least, I don’t know about others. Once EV adoption in two-wheelers goes beyond let’s say a certain percentage (double digits) then yes, absolutely."

For EV makers, India’s Faster Adoption and Manufacturing of EVs (FAME) subsidies have been a lifeline, giving subsidies worth 12-15% of the vehicle’s value. So much so that government agencies are keeping a tight vigil on wrongful claims made by manufacturers, alleged to have imported components and assembled in India, and claim subsidies.

So, is there a secret sauce to how Aggarwal will manage without subsidies?

“We are not an assembler of components. We make our own core technology. We make software, electronics, motors, battery packs, vehicle chassis. It’s more a vertical integrated technology," he explains.

“In this EV revolution, the company that is going to control the technology is going to win the game because it’s just not the incremental game anymore. It’s a technological disruption. You need to control the technology. The next step of vertical integration is to make the cell ourselves."

For this, Ola Electric plans to develop and manufacture its own lithium batteries and later branch out to making cars. “We are the leaders in India in that technology. We will be the largest lithium-ion manufacturing country. We will be the first and largest. We will have our manufacturing ready by the end of next year which will be the largest in scale. That’s the second largest initiative we are taking. The third one is cars. Our cars will be in the market by 2024," he added.

When a customer buys an EV, the subsidy is deducted from the final retail price to incentivize the customer to switch from a fuel-burning vehicle to an electric one. Hence, the FAME II scheme, which has a corpus of ₹10,000 crore, is a huge incentive for the potential customer to go for a battery-powered vehicle.

What makes him confident he can pull it off?

“I remember, back then, everybody was asking, will Ola be able to deliver so soon, whether we will be able to build the factory? There was no Futurefactory then. But it happened, and happened in a big way. If you see the EV market from 1-1/2 years ago from June of last year, all of India’s two-wheeler EV market was 4,000 units. Last month, the segment recorded about 80,000 units. That’s 20X growth. We have taken a very huge share of that market, and we’ve actually helped create that market in a big way," Aggarwal said.

Many people who were sceptical earlier are beginning to change their minds.

“A strong outreach to potential customers via its experience centres and a series of software updates which has sorted out teething problems is working well for Ola," said Hormazd Sorabjee, editor of AutoCar India. “The positive sales trend can continue as the product starts proving itself over a long ownership period," said Sorabjee.

Aggarwal began his entrepreneurial journey with his ride-sharing business Ola, which seems to chugging alongside rival and global ride share giant Uber. But, in a move that raised many eyebrows, in May of 2020, Aggarwal acquired an Amsterdam-based electric scooter company called Etergo, along with its single fully electric scooter called AppScooter.

Ola is on pole position in the electric scooter segment for a few months. “Right now, we have two scooters in the market. We have announced our mass market scooter S1 Air which will be selling from March-April onwards and motorcycles will also be launched by next year. Across the product category and prices, we’ll have all our products in the next 12 months," Aggarwal said.

“That will spur the market into much more EV adoption," he hoped.

Many individuals tracking the start-up industry have felt Aggarwal was over-reaching himself by shifting focus from his ride-sharing business, into an arena that had heavy-weight incumbents such as Hero MotoCorp, Honda Motorcycles, Bajaj Auto and TVS Motor. He had an advantage though, which his industry peers lacked—Aggarwal is not answerable to picky shareholders every quarter, and had the luxury to spend as his private equity investors had a slightly longer-term outlook.

According Tracxn, Ola Electric has raised a total funding of $866 million over eight rounds. The latest round was a Series C on 22 January, 2022 for $200 million. It has enlisted investors such as Softbank, Tiger Global, Matrix Partners and individual investors like Ratan Tata and Arun Sarin.

“Our goal is to build a world-class global scale EV company out of India. Like I said, I believe it’s India’s destiny to lead the world in EV technology."

Aggarwal’s statements may sound as bombast to many, but in the last couple of months, the tailwind seems to be firmly behind Ola. But his ambition is once again speeding away from the business at hand, some would say. This time, he’s flirting with electric cars, even before the winner in the two-wheelers is apparent.

“We have to build the right product portfolio - first with the two-wheelers and then the small, mid-size cars, etc. our product focus starts from $1,000 to $50,000. One and a half years ago, we announced our scooter, our first product. When we announced it, people felt that this can’t be done. Back then, I had claimed that by the end of 2025, India will be completely electric in two-wheelers, and I still stand by that statement."

Sorabjee, is not so sure, whether Aggarwal can replicate his early success in electric scooters to electric cars, “Cars are a different ball game. Much more competition in cars and a more complex business which needs deep-rooted expertise. Legacy players leading the EV car race in India is proof of this," he said.

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