Tarun Mehta is a busy man. In Delhi for a few days, he has several meetings and media conferences to attend. Yet, the chief executive officer and co-founder of the Indian two-wheeler electric vehicle company Ather Energy took some time off to chat with this author over lunch. We spoke about several issues, including a seemingly controversial one regarding subsidies under the Faster Adoption and Manufacturing of Electric Vehicles, or FAME-II scheme, which supports the electrification of transport in the country. The government is now cracking down on firms they suspect of ‘abusing’ the process. Ather Energy is not caught up in this controversy but has faced some of the fallout regarding the provenance of its chargers.
EV manufactures court controversy
Ather Energy is an Indian start-up success story. The decision to develop an electric scooter from the ground up—well before any market had designed such vehicles—has meant the company has a leg-up on the competition. With the domestic electric two-wheeler industry expected to touch almost a million units in 2023, Ather Energy is ramping up manufacturing. From a current monthly production level of 15,000 units, the company plans to touch the 30,000 units-a-month mark by the end of 2023.
But with talk of the subsidy being removed by FY24 and its dramatic impact on sales, is this scaling up of operations a viable plan? “Did the subsidy help us? Yes, it did. It helped us to not sell our hardware as a loss-leader, and that allowed us to concentrate on developing a better product and experience”, Tarun told me.
As for the subsidy being removed, he mentioned a recent news story that hinted that the subsidy would continue. “But it should not carry on forever,” he stressed. While he did outrightly accuse others of abusing the subsidy system, Tarun mentioned Ather Energy’s engineering strength. “We have 1,350 people in our development team who work on the hardware, software and testing the product. Some other companies only have 50-odd people who are mainly testing the product.”
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Ather Energy defends its practices
One reason the subsidy controversy started was due to the large number of imported components in EVs. Under FAME-II, the government offers subsidy to EV companies on locally manufactured vehicles. But several EV players have allegedly misused this provision by declaring imported parts domestic. To be eligible for subsidies, at least 50 per cent of the value of the scooter has to be indigenous.
EV cells are the most critical part of any electric vehicle, but India lacks any Lithium cell manufacturing capacity. Its heavy dependence on imports, for not just cells but controllers, motors, and even frames, has meant that some two-wheeler EV manufacturers who availed of the subsidy were not really ‘manufacturing’ in India.
“Forget just our software, which I believe is the best two-wheeler electric vehicle software in the world; we have developed our own unique aluminium frame and design and source our own controllers. Yes, the fact that India does not manufacture cells, although battery packs are now made in India, is a concern, but we have no choice but to address that,” clarified Tarun. “By 2030, the two-wheeler EV industry will have demand for between 120-150 Gigawatts of cells, an increase of four-five times the current demand; we have no choice but to establish cell ‘mega factories’ in India,” he further added.
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Problems of a growing market
Ather Energy’s biggest investor is Hero Motocorp, India’s largest two-wheeler manufacturer. Although the companies maintain an arm’s length from each other, Tarun did echo Hero’s chairman Pawan Munjal’s comments from a few months ago, when he said that internal combustion engine products would remain. “I do not agree with the Niti Aayog’s very optimistic prediction that all two-wheelers will be electric by 2027, but I do expect the market to be 10 million units by 2030.” The overall two-wheeler market in India was 15 million units per year mark in FY23, according to data from the Society of Indian Automobile Manufacturers, the industry lobby group Ather Energy has also signed up to be a part of. This number, however, has declined from a peak of over 20 million a few years ago as sales of entry-level commuter motorcycles dried up.
“There will be growth in the overall market, but not so much for commuter motorcycles, even though from a price perspective, no two-wheeler EV can touch the Hero Splendor,” said Tarun. He also explained why the electric two-wheeler segment is primarily scooters rather than motorcycles, “Everybody has their own reasons, and I’ll give you mine, which is that scooters are not only easier to package but also as roads improve, you don’t need the huge wheels of motorcycles.” Tarun also had an answer for user data figures, which show that electric two-wheelers are used more in smaller towns than in bigger cities. He emphasised that in smaller towns, such scooters get shared and are easier for women riders to use.
As the subsidy talk ended, Tarun agreed that financing remains an issue for electric scooters, although it is gradually reducing. “We have tied up with multiple banks and should be tying up with more. But yes, the price differential remains a challenge.” A Honda Activa (the best-selling combustion-engine scooter in India) is around Rs 80-85,000 on the road, whereas any high-power electric two-wheeler is between Rs 1.2-1.5 lakh, highlighting the price issue for Ather and other players in the two-wheeler EV space.
Considering the incredibly low running costs, added Tarun, it is not surprising to see buyers regard EVs as viable alternatives today. “A huge tipping point for the industry was when petrol prices climbed incredibly last year, well in excess of a hundred rupees. Personally, I feel that was a great marketing campaign for electric vehicles.”
With the market evolving, whether Ather Energy will continue to maintain the success it achieved over the past few years remains to be seen. But Tarun is bullish. The company is doubling production thanks to a new factory and has seen several competitors fall by the wayside due to the subsidy brouhaha and product recalls. With combustion two-wheeler biggies like Bajaj, Hero, TVS and Japanese automobile giant Honda still being tentative about the market, the manufacturer could very well be standing on the edge of success. Get it wrong though, and it could be the edge of a precipice.
@kushanmitra is an automotive journalist based in New Delhi. Views are personal.
(Edited by Zoya Bhatti)