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Ola Cabs founder Mr.Bhavish Aggarwal after successfully disrupting and then gaining leadership in the ride-hailing market has now set his sights on disrupting the
EV market.
It is setting up huge capacities in a limited market; and against the strongly entrenched competition, despite huge skepticism expressed by many experts.
The present market leader, a domestic two-wheeler company with a global footprint, has dismissed Ola Electric’s plan as simply outrageous and refused further comment on it. Other skeptics suspect that Ola Electric’s investment is to increase the valuation of the Ola Group; whose flagship ride-hailing business has suffered massively due to the Covid 19 Pandemic: its US-based investor Vanguard Group has downgraded Ola Cabs valuation.
However, Mr.Bhavish Aggarwal, founder of Ola, is unfazed and has drawn ambitious plans to disrupt the overwhelmingly ICE (Internal Combustion Engine) dominated two-wheeler industry.
Ola is investing Rs.2400 crore in the first phase, of an electric two-wheeler plant, to churn out 10 million a year by 2022.
2 million e-scooters are expected to be ready for sale by June 2021, in the first phase. While the details of the e-scooter have been kept closely guarded, it is gathered that it will have a very attractive price-value combination. The e-scooter will be exported to Europe and Australia too.
“We understand the scepticism from rivals,” said a member of the Ola Electric leadership team. “But in the past 40 years, one hasn’t seen any significant technological innovation in India in scooters at all — imagine, the carburetor is the norm. Customers are ready for a superior tech-driven product at competitive prices. And we are building scale. The inflection point has come and (the time for) linear organic growth is over.”
Today, Chine sells around 28 million e-two wheelers a year, Europe about 4 million and India is just about 150000; and most of them at speeds less than 25 kmph. There have been concerns that India might lose the EV race.
And the present manufacturers have strongly resisted Niti Aayog’s move to fix 2025 as the deadline when two-wheelers with an engine power of up to 125 ccs had to be electric.
The targets set by Ola are not in sync with the most ambitious estimations.
For example, Mckinsey’s projections for the Indian e-two wheeler market is 4.5-5 million by FY2025 ( 25-30% of total two-wheelers) and 9 million by 2030 (40% of total two-wheelers.) Ola Electric’s capacity by 2022 will be that total e-Two wheeler estimated by 2030.
Today, India is the World’s largest ICE two-wheeler market, annual production of 20 million. Ola Electric is planning to produce half of this 20 million in 2022.
Ola’s plan is based on the confidence that the shift to e-two wheeler will not be gradual but drastic and dramatic in a few years.
Ola’s confidence is not shared by the present numbers, the established players, and the government too.
The 2019 FAME 2 policy has projected about 1 million high-speed e-two wheelers by March 2002. And in 2020, only 25700 high-speed scooters (above 40 kmph) were sold.
So how Ola electric achieve what it plans to do; and that too a tech company with no experience in manufacturing?
The company will be focussing on the urban commuter market; and not the B2B market, driven by e-commerce.
The challenge of e-two wheelers being priced almost double the ICE version needs to be faced first.
This challenge will be met by building up huge economies of scale: building the World’s largest scooter factory in one site. More than 90% of the components will be co-located. There will be 90% of localization of the core parts including battery and motors. And 3000 robots will be used to increase efficiency. It will also invest heavily in building up pan-India charging stations and also a cell plant, to power lithium-ion batteries.
The details of the scooter are kept secret. However, the scooter could have 2 easily removable batteries. It will be priced close to the ICE scooter, making it price competitive.
Rivals are contending that the scooter of Ola Electric is the app scooter built by the Netherlands – based Etergo, which Ola has acquired recently. Ola Electric executives shared that while the design elements have been adopted, the product has been substantially reengineered for India.
Ola’s competitors are not lying low.
Bajaj Auto has launched its e-scooter under the Chetak brand name. It will set up a 0.5 million capacity plant in a year.
And Hero Moto Corp Ltd has and continues to invest substantially in Bengaluru-based Ather Energy, which is building a plant in Tamil Nadu – capacity 110000 per year.
Hero Electric, the present market leader, is investing Rs.6000 crore to multiply its capacity by 4 times, from the present 100000. Prices too have dropped to make them competitive with ICE scooters.
Hero Electric Managing Director Naveen Munjal is not about to lose his dominant share in e-scooters either. “Today, we have a 35 percent share of the e-scooter market. As the market moves from low-speed to commuter scooters, we will surely continue to have 27-28 percent in five years or, say, sell about 0.6 to one million,” he says.
Munjal also does not see any edge that a tech company has. “This is hardcore manufacturing. You can buy the software. It is about building dealer networks, after service, training people who can repair, that is the key.”
Ola Electric wryly points out that even Tesla too is not given much of a chance, in India.
Ola Electric could well be India’s Tesla; in e -Two Wheelers !!