Last few years saw over two dozen startups trying to make a mark in the e-mobility space, many of them run by fresh engineering graduates. E-mobility was a blank space ripe for disruption. Swiggy and Zomato did something similar when they organized food delivery. Yulu jumped at the opportunity of solving for short distance travel. The EV space is going through a similar phase of overhaul.
These upstarts understood the gap and were putting together a prototype to grow in this high-interest category. In addition to them, almost every large and small manufacturer of auto components and those who have traditionally been making e-rickshaws have either entered or have plans to enter this market. As a result of all this enthusiasm, we now see over 200 brands in the 2W EV space in India, though most have only managed to clock sales of less than 100 units. In Blume’s recently launched EV Primer, we estimated that new 2W EV sales can grow by 24x in the next 8 years.
But let’s start with the basics.
How hard is it to make a 2W EV?
The short answer is that it is not hard at all. As compared to a TVS50 (a moped, one of the simplest ICE vehicles), an electric vehicle is far simpler to make. There are 10x fewer parts to assemble. Apart from making chassis and a few other outsourced components, you don’t need a large scale manufacturing facility to start assembling 2Ws. If one has sourced most parts from third party manufacturers, such as those in China, one can become an OEM simply by importing a container load of kits and assembling them in (well, almost) someone’s backyard.
However, this can be too simplistic an answer. Problems emerge when you break down each step and begin execution. An easy way to understand the roadblocks is if one tries to answer the following questions:
- What is your right to win?
Why should customers buy your (undifferentiated products) and if they do, what can they brag to their friends about? Buyers put a lot of thought into owning a vehicle, and they want to feel that they made a worthy decision. Is there anything in your product that makes a buyer feel special?
- Does your product deliver on user’s expectations?
Indian customers will expect the moon, and you need to meet them halfway. It doesn’t help that Indian conditions are testing, especially for chemical energy storage like a Li-Ion battery. Just these two aspects result in multiple challenges: road (quality), load (carrying capacity), life (of vehicle) and (operating) temperatures. This is also the reason why despite the presence of EVs in the form of e-bikes (<25 km scooters) and e-rickshaws over the last 5-7 years, the market remained small till 2021.
How can you make a vehicle reliable?
There’s only one possible way of making a system reliable – rigorous testing under real and tough circumstances. All the design smarts are great to have, but the real work starts where the rubber hits the road. For example, it is common for Indian users to overload their trucks to 1.5x its capacity. The vehicle cannot topple when running on 30-40km of dug up roads. Every single corner case of a vehicle’s design gets tested daily on Indian roads. These can only stand if every part and sub-system has been designed to stand the worst of conditions.
This is where we face the chicken and egg problem. A young startup is unable to sell because it hasn’t proven its reliability, but it also won’t become reliable unless it sells large quantities of its vehicle. If the startup is somehow able to overcome this challenge, they are faced with a new problem of data.
Even if a startup has stellar engineering skills and has built a unique product ahead of competition, its USP will still be one among a crowd of OEMs selling very similar wares, making it difficult for it to be spotted by a VC.
How does a 2W EV startup raise money?
For a VC, it’s hard to gauge a product’s worth without usage data, and for that to come in, there needs to be enough sales. However, this is not an insurmountable problem. Here’s how you can work around the issue:
Fast Follow Strategy
In this strategy, you must prove your ability to copy an innovator before they become too large. Doing this would reduce the amount of risk you undertook by taking on the challenge while ensuring you have a good shot at success. For example, if one can copy what Ather is doing quickly and cost-effectively, it is possible to copy an “early success” as well. Companies can think of it as a way to build a good product to scale without having to start from scratch.
As we outlined in our EV Primer, it is possible to become the ‘kingmaker’ without becoming an OEM yourself. Making an ODM kit requires the same amount of rigor and sweat as an OEM product, but the former allows you to earn revenue without having to go to the market. The only catch is the need for strong technical capabilities and a careful understanding of user needs.
For more such insights, click here for the detailed EV Primer
Edited by Disha Sharma