Policies like FAME-II have laid the right ambition

Indian EV two-wheeler startup, Ather Energy, is growing and gaining wider attention as the company takes a robust marketing approach. With 500 full-time employees, and additional 450 people involved in operations, manufacturing, assembling and quality assurance, the company is set to expand its workforce in 2021. Ather Energy Co-founder and CEO Tarun Mehta gets candid with Buzz Buzz on the business losses, recovery, FAME-II policies and what Tesla's entry means to the EV industry in India

I think it increases the awareness about electric vehicles even more in the minds of consumers, and bring forth a positive approach from the government as well as for the sector. It should drive more supply of raw materials in India because more global suppliers would be keen on investing in India with Tesla's entry

The cost structure is getting better and the subsidy structure helps bridge the gap. In the long-term, there is an opportunity for the government to invest in cell manufacturers, which can reduce the cost by up to 30 per cent

The latest talk of the town is Tesla's entry in India. What kind of changes do you anticipate with this new arrival? What does it mean for the Indian EV companies and domestic manufacturers?

I think it increases the awareness about electric vehicles even more in the minds of consumers, and bring forth a positive approach from the government as well as for the sector. It should drive more supply of raw materials in India because more global suppliers would be keen on investing in India with Tesla's entry. It's a great move.

So, what does it mean for domestic players and manufacturers?

It won't make much of a difference immediately because of a couple of reasons. Hypothetically, if I am building an electric car in India, Tesla has a different price point altogether and quite a different position in the market. For Tesla to locally start the production in India is a longer journey. It gives time for local manufacturers to understand what kind of interest that segment (four-wheeler EV) has, given that Tesla will demonstrate a lot of initial pre-orders. So, I don't think it will have any immediate change for local players. Secondly, I believe that it will bring in more talent in the market if Tesla decides to open an R&D centre in India. It will attract more such talent (in the sector) and more people will make a move to companies working in the electric vehicles space.

Most industries are still picking up the pieces, post last year's unprecedented events. Yet Ather has taken a very different approach ... installation of charging points, new manufacturing plant in Hosur! What is the driving factor behind such a strategy?

We are at an interesting point. Till early 2020, we were in a pilot stage. And, we were running an assembly line, manufacturing and supply chain (in Bengaluru). However, it is in 2018-19 that we wanted to artificially limit the volume because we are still learning from the market. With the launch of 450X in early 2020, we had drawn up a plan to sort of press the pedal and start opening more series because that's the technique that makes more sense for us commercially.

We shifted to our new plant in Hosur during the pandemic, and started opening more series since last November. We have expanded our reach from two cities to 16, and are planning to add four to five cities during February-March.

What has been the production capacity after opening the Hosur plant?

Hosur plant has just gone live a few weeks ago and it should have an installed capacity of 8,000 units per month, in the second half of this year.

What was your revenue generation in 2020 as compared to 2019? What kind of revenue growth do you anticipate in the coming years?

We do not share sales numbers. I can't comment on that.

You also faced losses of Rs 220 crore in FY 20. Have you mapped out any recovery strategy for this debacle?

We have been investing a lot in R&D, operations and capacity creation. We have so far raised Rs 2,000 crore, of which close to Rs 800 crore has already been invested in product development and capacity creation. In the initial two years of our sales, we have limited our volumes to make sure that we are able to stabilise the process. And in that phase, we were losing money on a year-end basis. So, we did face losses. But now the company has come to a very different place. We have positive cost margins, which are growing. We are effectively inching closer to positive cost margins. The losses that you see will narrow down in the second half of this year. Losses at an early stage are inevitable given that we have been investing of late.

India, arguably, has the largest two-wheeler market in India. But EVs, especially two-wheelers, still comprise a very minute fraction. What can be done to achieve the target set by the govt under FAME-II scheme?

I don't think there is any push required. The current sets of policies are fantastic as compared to a few years ago. I think for the first time in the electric vehicle industry, the policies have laid the right ambition. Policies before this were reactionary short-term policies that incentivised only short-term sales. EVs have been in India since 2007, but I would argue that until 2018-19 we've had not great products and have damaged the overall customers' perception about electric vehicles.

Customers are happy to purchase a two-wheeler with 125-cc or higher capacity, with a performance of 90 km/hour, but the moment customers come to EV, they see option of 25 km/hour or maximum 50 km/hour which are so obviously not designed for India. They are built with components imported from China, and these products have no battery warranty or support. All the subsidies and policies historically supported such kind of products and dealers. With FAME-II, there was obviously a demand for incentives. In the past, there were no incentives to build vehicles in India. FAME-II created an incentive-linked subsidy to produce better quality vehicles in India. Vehicle speed and battery size became a requirement. The result is that companies like Ather, Bajaj and TVS now have well-designed products with local supply chain that can easily compete with a petrol vehicle. The market is going gaga over Tesla because of the well-designed product, which is what the market has always needed. So, all that the government needs to do is to come up with policies like these that incentivise the sector for the long-term.

Although EV vehicles are gaining popularity with each passing year, high battery cost means higher price for EV vehicles. What can be done to make EVs more affordable in India?

The cost structure is getting better and the subsidy structure helps bridge the gap. In the long-term, there is an opportunity for the government to invest in cell manufacturers, which can reduce the cost by up to 30 per cent.

In the last funding series, you received $11.21 million from Hero MotoCorp in Series-C funding, and then an additional $53 million from Sachin Bansal in Series-D. What are your plans with these seed investments? Any new fundraising plans?

We have been lucky to have strong investors like Hero MotoCorp and Sachin Bansal for the last five years. They have backed us since the initial stage. We may look at raising additional funding later this year.