EVs by India's startups - Why consumers are not biting their bait.

Just as there are only 3 places on an Olympic podium, 3 brands end up dominating a market with 80% of purchases made by consumers.

But then, just as players are born to play, so are punters born to roll the dice.

So, investors have poured in billions of dollars to fund as many as 59 startups for making 2wlr EVs in India.

I ended my previous article on this subject with a question - Which of these 59 will achieve a ‘podium finish’ in India’s EV Olympics?

This article provides, if not a definitive answer, some clues for those who may want to bet their savings, or their careers, on these start-ups.

Possible reasons for optimism of investors in India’s 59 EV 2-wheeler startups.

1. Current Govt. mandates will push owners of 300+ million IC-engined vehicles currently on India’s roads, to replace them with EVs within a decade.
2. Such a huge market will accommodate, apart from the three who make it to podium in the EV Olympics by grabbing 80% of its share, another 4 or 5 ‘finalists’ to survive on the remaining 20%. So that leaves us with 8-9 players – exactly the number of IC-engined 2-wheeler brands in India today, after 40 years of market growth.
3. M&A specialists will then move in to deal with the rest – who started with a sprint, but realised, as explained later, that creating a winning brand is a marathon.

But what about the investors in the start-ups that fail? Some will read the signs early and exit. The rest, I presume, will validate the “Greater Fool Theory”.

Which brings us to what creates a market in the first place – customers.

Government incentives caused some ‘early adopters” to buy 2-wheeler EVs, but the potential “early majority” will wait and watch.

Few of the investors in India’s EV startups today, would have bet on India in 1983 - 25 years after its independence. Because until then, India’s private car sales used to average 30,000 annually, and 2-wheeler sales another 100,000.

The Indian govt. then allowed Japanese brands to partner Indian brands.

By 1993, India’s annual car sales had climbed to almost 300,000, and 2-wheeler sales to over 1.5 million - despite India’s economy stagnating during this entire decade.

Despite a stagnant economy, the delightfully disruptive UX of Japanese brands caused even India’s poor cyclists to upgrade to motorcycles.

The phenomenal fuel-efficiency and ease-of-use were immediate delights for “Early Adopters” of Japanese brands in India.

But the millions that followed did so for a more fundamental reason revealed by my UX research for a Japanese motorcycle brand in 2004.

Auto mechanics I interviewed said that the utter reliability and durability of Japanese brands had hurt their earnings from repairs and maintenance. But the same qualities had also created a new revenue stream - buying and selling used Japanese cars and bikes – which more than offset their losses.

Reinforcing this “pull” of Japanese manufacturing quality, another UX research I did in 2014 showed that less affluent Indians preferred buying a used Maruti Alto as their first car, instead of a new Tata Nano.

India’s EV startups will have to create a Maruti-scale disruption to survive.

The majority of Indians need a scooter or motorcycle to earn their livelihood – either by commuting to their offices, or to sell their wares in markets.

So their vehicles are not merely “consumer durables”, but capital assets.

So, while high “MTBO” and “MTBF” are key engineering goals for manufacturers of trucks and buses, they have been goals of Japanese brands for any product they conceive - be it an automobile, or a TV, or a high-speed train.

Which is why, despite decades of repeated attempts, even famous US and European automakers, have not been able to shake India’s car and bike buyers addiction with Japanese UX.

And this UX is driven by Japanese culture, where reputation is paramount. This makes quality an ethical value within a Japanese brand. Which is why they sometimes exit a market, instead of compromising their product quality to reduce costs.

Until Indian EVs deliver a superior UX, India’s 2-wheeler buyers will wait for Japanese brands to define what an environment-friendly vehicle SHOULD be.

And Japanese brands like Suzuki, Honda and Toyota, with their experience of India’s car buyers, favor hybrid cars as an ideal solution for the present. And waiting lists for their new hybrid cars is proof that India’s car buyers agree.

Because the state of India’s EV Ecosystem – charging infrastructure, battery and motor know-how etc. - has yet to evolve to a stage where battery EVs become a viable solution to their current needs.

And my guess is that the choices being made by India’s hybrid car buyers today, will also influence India’s 200+ million 2-wheeler owners when they replace their current bikes/scooters.

Especially since India’s Motor-Vehicle rules now limit the use of any vehicle – EV, Hybrid or IC-engined – to 15 years. After which, regardless of how well a vehicle is maintained or used, it has to be scrapped. This increases cost of ownership of a vehicle – another challenge for automakers.

Japanese brands – Burning cash in R&D for a better UX, instead of burning their reputation.

R&D is key for addressing issues about BEVs that Green Activists cannot. E.g.:

1. Power generation is still dependent on fossil fuels, so charging an EV battery is merely shifting emissions elsewhere – out of sight and, therefore, out of mind.
2. How safely can the lithium in scrapped EV batteries be disposed of? Or recycled? What is the cost of recycling?

Which is why Japanese brands, e.g. Toyota, are hedging their bets –by spending billions in R&D to perfect not only their BEV and Hybrid vehicles, but also in Fuel-Cell powered cars as (holistically) “Greener” alternatives to BEVs.

This is the Math of the “Green Tech” Life-Cycle -

And this Math matters more in India, where a vehicle’s lifetime cost is a higher proportion of the income of its buyers, than in Western Europe.

When will India’s potential buyers of EVs, trust its start-ups to have done their GreenTech Math? That depends on…

How much of their investors’ cash are India’s EV startups burning in R&D?

I don’t have data about R&D spends by India’s EV startups. But as a benchmark, here’s what Statista reports as R&D spends by big auto companies in 2021 - ? VW: $16.9B ? Toyota: $8.5B ? Mercedes: $8.3B ? GM: $7.9B ? Ford: $7.6B ? Honda: $6B ?

In comparison, if Tesla’s $2.6 B on R&D seems low, here’s why:

1. Elon Musk had already spent billions in R&D since acquiring Tesla over a decade ago to disrupt the major IC-engined brands ruling the global auto industry, and who were late to the EV party.
2. So the latter spend more on R&D now, to catch up with Tesla.

But R&D is about more than burning cash. Because Leadership matters.

“Product Guys” like Elon Musk extract, to quote an expert, “INSANE amounts of innovation per R&D dollar spent. “

While reviving their brands, I have worked with both types of CEOs – “Product Guys” and “Managerial Guys”.

The difference was that, after our due diligence - UX research, followed by “What If” sessions for strategy formulation - “Product Guy” types were quicker in deciding the “fix” their products needed to create superior value for their consumers. And they also fixed it fast – even if the “fix” was a new product.

“Fast” is a relative term, because while the development cycle for a new IC-engined 2-wheeler ranges from 4 to 5 years, “Product Guy” CEOs managed it in half the time.

But these clients were neither startups, nor were their products EVs. And because their eco-systems already existed, market success followed quickly after the launch of the new products we helped conceive.

But EVs have fewer moving parts, and are easier to make. Which explains why India’s 59 EV startups sprang up so quickly.

But customers for their EVs will not spring up as quickly, until India’s EV ecosystem matches the scale of the current (IC-engine) ecosystem.

Which is why I stated earlier that the race to a podium finish for India’s EV startups is a marathon, not a sprint.

Unless, of course, that start-up is led, not by an “App Guy”, but by a “Product Guy”, who creates an EV with a UX as disruptive as that of Suzuki’s first cars in India, or that of Tesla and BYD EVs today.

Are there ‘Product Guys’ in India’s 59 startups, with 2-wheeled equivalents of a Tesla or BYD that can knock Honda, Hero, TVS off the podium? 

I got some clues in a Youtube video (Link 1, below), by someone who examined EV 2-wheelers already launched by India’s startups. His observations:

1. Many of the EVs were assembled in India from “Knock-down” drivetrains imported from China.
2. Even the external bodywork of some of these EVs is imported from China.

The same strategy was adopted by India’s smartphone ‘brands’, until they lost out to their Chinese suppliers, who started assembling their own smartphones in India, and selling them under their own brand names. And despite “Boycott China” calls, their brands dominate the Indian market today.

And BYD, the Chinese EV brand that is Tesla’s most formidable rival, has already launched its first EV – Atto 3 – in India. And by first making EV batteries (which even Tesla uses), and then Solar Cells, and finally EVs, BYD created its own eco-system in China. And BYD could do so in India as well.

So, in the case of India’s 2-wheeler EV startups, we can only wait to see what disruptions their products and eco-systems are capable of. 

And since I love “What if” sessions for strategy formulation – What if BYD and Tesla launch 2-wheelers in India?

Product Innovation for Investors first, customers later.

Meanwhile, another Youtuber, focused more on innovations that excited investors (e.g. on Shark Tank), has also uploaded a video on India’s EV startups. (Link 2, below).

This 2nd video excites me most – because none of the products I have helped create for any client, made me as rich, or as fast.

I have made podium finishes as a swimmer – but never in a Shark Tank.

But I am a quick learner, so could someone please point me to a coach?

And if the coaching helps me win a gold, I’ll fly you to Bali in my HondaJet Elite 2

If I win a silver, I’ll take you for a drive in my Maybach 6.

If I win a bronze, I’ll take you for a ride on my Ducati Desmosedici.

Youtube Video 1 - https://youtu.be/TQAyzcGP5kQ

Youtube Video 2 https://youtu.be/GYSZNOomPpg