India’s EV battery race is led by rookie scooter maker

Pay-to-play companies have a checkered history in India: favored companies invariably demand protectionist cover. But with Brent crude at $120 a barrel, this particular bet has merit. Consumers are already spending too much at the pump due to high domestic taxes on petrol and diesel. However, cutting levies will only make the pandemic-stretched government budget creak and groan. Therefore, the desperate policy is pushing for electric vehicles.

There is another purpose behind giving money to battery manufacturers, something that cannot be articulated in a government press release. The idea is to keep the nascent adoption of electric vehicles as far away from Chinese technology and raw materials as possible so that India’s dependence on hydrocarbons does not metastasize into another kind of geopolitical liability in the future. . “Today 90% of the world’s capacity is in China,” Ola Electric founder Bhavish Aggarwal said on Twitter after securing state support. “We will reverse this and make India a global hub for electric vehicles and cellular technology.”

That’s a lot of chutzpah for a startup valued at $5 billion, based on its last $200 million funding round in January. Ola Electric, backed by SoftBank Group Corp. and Tiger Global Management, is tiny compared to Reliance, which is 45 times bigger in the public markets. The conglomerate is controlled by Mukesh Ambani, Asia’s richest man, who also owns the world’s largest oil refining complex. Last year, he made a clean energy pirouette, announcing plans for everything from solar panels and batteries to green hydrogen and fuel cells. It has committed $10 billion, but has already raised the investment target to $76 billion. There is unlikely to be a greater national champion of India’s bold commitment to the COP26 climate summit.

Still, New Delhi backs the lesser-known newbie. Aggarwal won incentives for the maximum 20 GWh a company was eligible for. Reliance also applied for the full quota, but was waitlisted for 15 GWh.

Unlike Reliance, which recently bought a UK company with patents on sodium-ion cells – cheaper than lithium-ion, and therefore potentially more attractive to buyers in emerging markets – Ola has yet to hint on its technology. It wants to research and develop its own batteries and fill in the gaps with investments like the one it recently made in Israel’s StoreDot, whose silicon-dominant anodes claim to provide fast charging. To show its commitment to R&D, Aggarwal has brought Prabhakar Patil, former managing director of LG Chem Power Inc., the U.S. research arm of the world’s second-largest electric vehicle battery maker, to Ola Electric’s board of directors. .

Like Ambani, Aggarwal too made a pivot. In 2011, three years after earning a degree in computer science from the prestigious Indian Institute of Technology, he co-founded Ola Cabs, a ride-hailing app that competes in India with Uber Technologies Inc. But as the pandemic sucked the wind from services transportation industry, Aggarwal has jumped on the electric vehicle manufacturing bandwagon.

Last year, he built – in record time – a “Futurefactory” that would be the world’s largest producer of full-capacity electric scooters, run entirely by 10,000 women and more than 3,000 robots. It had a bumpy start. The first product – the S1 Pro two-wheeler – was first delayed, then got bad press. “In its haste to launch a product, Ola Electric has not given the battery sufficient time in the development process to evolve and mature, resulting in failures that are potential safety hazards and could be the loss from Ola Electric,” the Morning Context, a news portal, wrote last month based on user feedback.

Still, consumers seem to keep their faith. In February, Ola delivered 7,000 scooters, securing a nearly 9 percent market share among high-speed two-wheeled electric vehicles, according to the research arm of Haitong International Securities Group. This month’s target is 15,000. Ola even bagged a slice of a separate $3.4 billion incentive pool that New Delhi has set aside for automakers and the rooms.

India is on the cusp of an electric vehicle revolution. It will not start in cars but in scooters and motorcycles which are usually the first vehicles owned by a middle class family. According to Goldman Sachs Groups, electric two-wheelers, which cost around $1,400 each, will be adopted faster in India than smartphones. Inc., whose base-case scenario is for EV penetration in the segment to grow from 2% this year to 38% by 2030. Still, Indian automakers don’t seem very interested in cell manufacturing. Indeed, the only established vehicle brand to have qualified for India’s battery subsidies is South Korea’s Hyundai Motor Co.

Which makes the tiny Ola Electric the big exception – and in more ways than one. Chinese ride-sharing giant Didi Global Inc. has unwittingly become the poster child for Beijing’s crackdown on the tech industry. Grab Holdings Ltd., the killer of Uber in Southeast Asia, has diversified into financial services. Rival Gojek reduced its dependence on mobility by merging with Indonesian e-commerce platform PT Tokopedia to become GoTo Group. But they all stuck with the consumer data business – none of them hit the floor to get into electric vehicle and battery manufacturing. The path ahead for Aggarwal is guaranteed to be a rutted Indian road, but as long as he can keep private market investors, consumers and – most importantly – policymakers hooked on his vision, he can clock the miles. More from Bloomberg Opinion:

Will sodium be the best lithium in the EV battery race? Andy Mukherjee

Cars are about to get dirtier and more expensive: Anjani Trivedi

Elon Musk has it all wrong about state subsidies: Anjani Trivedi

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services. He was previously a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

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