Ola Electric Mobility, set up two years ago to run a pilot electric taxi program for its parent ride-hailing firm Ola Cabs, has new investors and a new business plan: it wants to offer rides on electric two-wheelers and three-wheelers.
“In our view, they are the low hanging fruit,” Anand Shah, senior vice president at Ola Cabs and co-founder of Ola Electric said in an interview.
A proposal to make all three-wheelers in India electric by 2023, and all two-wheelers by 2025 is currently being debated by policy makers, but is opposed by current manufacturers of the petrol-diesel versions of these vehicles.
Besides bike-taxis, shared electric two-wheelers are a business option, as is the use of these for e-commerce deliveries. The high upfront costs of electrification of a vehicle can partly be managed by a swapping-batteries model, where the user only pays for the charge used.
“We are looking at a combination of things: swappable batteries and how you build that as a service and deliver that. The electric two-wheeler, on the commercial side, hasn’t been done before. If you add these things together, it is a fairly unique proposition,” Shah said.
Ola Electric has raised about 4 billion rupees [$58 million] so far from some of the early investors in Ola Cabs, such as Tiger Global Management LLC and Matrix Partners India, and more recently from high net worth individuals like Arun Sarin, the former CEO of Vodafone Group PLC, and Ratan Tata, the chairman-emeritus of the Tata Group. “We are no longer in the fund-raising mode. We are in delivery mode,” said Shah.
Ola intends to “directly put a million vehicles on the road by 2021, including two-wheelers and three-wheelers.”
The SoftBank Group Corp. backs Ola Cabs, and has also invested in its rival, Uber Technologies Inc.
Q: Ola Electric recently got an investment from Arun Sarin, the former CEO of Vodafone Group, who has also joined the board. Ratan Tata has invested in your venture. How big is the board now, and is the fund-raising completed?
A: We have several key veterans on our board now. Ratan Tata is not on the board though he is an important investor. The fund-raising is mostly done, with 4 billion rupees [$58 million] in till now. We have the resources to do the next set of things we are trying to do to get the business model right. We are being backed by Ola, and by early investors in Ola, such as Tiger Global and Matrix India. We are no longer in the fund-raising mode. We are in delivery mode.
Q: What is Ola Electric’s near-term, and long-term plan?
A: About two years ago, Ola [ANI Technologies Pvt. Ltd.] decided that it wanted to experiment with electric mobility. If there was a way for Ola to make cleaner kilometers viable, we would like to see that happen.
Ola Electric was set up to make the Nagpur pilot [with electric three-wheelers, e-cabs, charging and swapping infrastructure] possible. We spent over a year or so understanding what was working, and not working, in making electric cabs viable at scale. About a year ago we doubled down on that and decided that we are well placed to be an early mover in bringing electric vehicles on the road, in India at least. We decided to put more resources to electrification.
Our plan is to figure out how to make electric mobility viable in the immediate term, and in the long term; how do we make sure that we can trigger electric vehicle growth in all markets we work in globally, whether it is two-wheelers, three-wheelers or four-wheelers. We certainly think that the world is moving towards electric vehicles quickly, and it is important for us as a business, as well as an opportunity, to be prepared for that shift.
Q: After the Nagpur pilot, Ola Electric has decided that its initial focus will be on two-wheelers and three-wheelers, and in the Indian market. Correct?
A: Yes. Two- and three-wheelers are present in very large numbers already, and it is easier to address range anxiety in this segment. The battery is the most expensive piece of the electric vehicle. People put in a large expensive battery to deal with a once-in-a-hundred-days case of going long distance in the case of cars. In the case of three- and two-wheeled vehicles, typically, people don’t drive long distances, so there is no need for larger batteries. This makes the economics more viable.
Further, the owners of three-wheelers particularly are people who care about cost of ownership. Every three-wheeler is a commercial vehicle. If you are using that vehicle as an instrument of commerce, you try to improve its utilization. An electric vehicle can be cheaper to operate, on a per-kilometer basis, especially on the two- and three-wheeler format, than petrol by far.
We think the two- and three-wheelers segments are growing. In our view, they are the low hanging fruit. There is also the controversial, but telling government policy indication that by 2023, all three-wheelers will be electric, and all two-wheelers by 2025.
Q: I thought three-wheelers for passengers may become obsolete, given that one is exposed to the elements, and one could get an air-conditioned ride in a cab for the same price?
A: Three-wheelers are regulated in terms of numbers. When Mumbai deregulated licensing of three-wheelers, their numbers doubled. Where they are not regulated, three-wheelers are a dominant form of last- and first-mile transport. I don’t think they will become obsolete. It is a high growth opportunity.
Q: How many pilot programs are you running currently?
A: There is one in the capital region, where we are swapping batteries for three-wheelers, and in Bangalore for testing two-wheelers in a sharing format with Vogo (two-wheeler rental startup), a company in which we have invested. We have a handful of others in the pipeline where we are working with public and private shareholders to make them possible.
There are a lot of moving parts in electrification, as you know, and there is a policy component that is not insignificant. There are federal-level polices and state policies. One of the big challenges of electric mobility globally is that people are making products but nobody wants them. There is a product fit question, and a whole bunch of business model questions, around infrastructure, costs of operations and maintenance costs, as well as questions around the trajectory of costs. Our current goal is figuring out how to make the business model work. How do you charge or swap batteries? What time of the day is electricity available? Is it costly? Do drivers like it? That is where we are.
Q: Will you be rolling out in some select states to begin with, or all-India?
A: Every city and state in India is working on an EV [electric vehicle] policy. In our view, the opportunity will become a pan-India opportunity in a year or two. Whoever is willing to move quickly now, we are willing to partner with. Going electric is a cooperative effort. We cannot do it alone. We need public sector support and private sector partners. Where the opportunity exists, we are interested in executing. In Nagpur and Delhi National Capital Region, we are already active. Bangalore is our home, and we are working on it, and anywhere else we feel there is sufficient opportunity, and sufficient momentum among stakeholders.
Q: What are your policy prescriptions for increased electrification?
A: The exposure level of policy makers to the opportunity needs to be expanded. We are looking very heavily at swappable batteries, which means that you would buy a vehicle that doesn’t have a battery. You would come and get a battery and only pay for what you use. It is a sharing economy of batteries, or battery as a service. Policy does not acknowledge this as a possibility. An electric vehicle, under the policy, has to come with a battery. If a battery is being used by a vehicle that wasn’t sold with the vehicle, is there a subsidy for that? This question hasn’t been answered by policy. This is a massive unlock for this country: a high dominance of small format vehicles where a swappable battery gets viable.
We are still learning, as are the policy makers, what the opportunity looks like. Our imagination needs to expand on how to make electric vehicles viable. India could be a global innovator.
Q: You are also looking at electric bike-taxis with swappable batteries?
A: We are looking at two-wheelers in many different ways: e-commerce delivery, scooter sharing, bike taxis. We are also looking at electric three-wheelers, both as e-ricks and auto-ricks. E-ricks run at very low speeds (under 25 kilometers per hour), and are mostly found in the periphery towns of Delhi and across north India. There aren’t any electric versions yet of the auto rickshaw in the markets.
So we are looking at a combination of things: swappable batteries and how you build that as a service and deliver that. The electric two-wheeler, on the commercial side, hasn’t been done before. If you add these things together, it is a fairly unique proposition.
Q: What is the plan for electric four-wheeled cabs?
A: We are also doing that, both at Ola Electric and at the parent company. We already have electric cars and we are looking to expand them in partnership with companies that make them.
Q: There was a plan to offer customized e-cabs from Hyundai and Kia. What is the progress on that?
A: That is not an Ola Electric initiative, instead it is part of Ola’s core business. We have deployed many of the electric products available in the market, and are eagerly looking forward to better electric cars as manufacturers bring them to market and the technology matures globally. We expect [to see] a number of new models that are appropriate for our use cases in the next couple of years.
Q: There is a target of 1 million EVs on the road by 2021. Is that the number of Ola EVs you are aiming for on the road, or is that a generic target for India?
A: We intend to directly put a million vehicles on the road by 2021, including two-wheelers and three-wheelers.