Like his counterparts in the two-wheeler ecosystem, Srinivas Kantheti knows only too well that electric mobility is here to stay.
“There are no doubts anymore thanks to subsidies under FAME 2 and those offered by many states. The Centre is clear about pushing EV adoption in a big way and two/three-wheelers will be first to switch over,” says the Co-Founder and Managing Director of Bike Bazaar.
As someone marinated in the two-wheeler space, while first being part of the leadership team at Bajaj Auto and in more recent years as an entrepreneur in two-wheeler finance, Srinivas (as he prefers to be called) believes that the business model of electric two-wheelers is also poised for a sea change.
The obvious advantages to the user is that they can be interconnected, tracked comfortably and “you can do all sorts of things with it” which the traditional internal combustion engine (ICE) bike/scooter does not offer.
The limitation, however, with an electric two-wheeler is the battery. As he puts it, “Imagine buying a vehicle with three years supply of petrol. It just means you are unnecessarily paying for the entire battery upfront whereas that gets divided in an ICE in the period of its lifecycle.” The problem with a battery is that the “best of the manufacturers” are unable to give more than a 900 to 1,000 charging cycle kind of warranty.
According to Srinivas, while people may say that this will last three years under normal riding conditions, this does not hold good for last-mile delivery solutions where riding conditions are tougher. Yet, it is in this very segment that electric two-wheelers need to play a very big role.
“Our personal experience is that the batteries do not last more than 18 months. We have seen that delivery boys, especially those who do food deliveries, ride for about 100-120km per day,” he says. Effectively, this means charging the two-wheeler at least twice every day. In the process, “we have seen their life coming down” from 36 to 18 months and that becomes a serious limitation.
Financing the future
Srinivas is also aware that battery technologies are improving day by day — there are batteries which can last 3,000 cycles of charging but are very expensive while most of them today typically do not go beyond 1,000 charging cycles. This reality needs to be factored especially in the context of the recently launched Niti Aayog campaign, Shoonya, in which the goal is zero emissions from last-mile delivery.
At present, reckons Srinivas, there are nearly two million delivery boys in India who own their own ICE two-wheelers. “Imagine if these have to be replaced by electric options in two years. Our study shows that this two million will become six million in about four years and that is the scale of replacement that is going to happen and only in the delivery function,” he says.
Of course, there will be the normal commuters buying electric two-wheelers but, from the viewpoint of controlling vehicular emissions, it is the delivery segment that is critical for the transition to electric. Who then is going to buy/own these vehicles?
In the normal delivery function of today, explains Srinivas, the Zomatos of the world are asset-light and get people/lead workers to come with their own two-wheelers and cellphones. In a way, these are like independent agents working with them.
“However, if you expect the same people to go out and buy electric two-wheelers — even if they are as cheap as Rs 60,000 thanks to the subsidies — they are not going to do so because they do not trust the EV. . . it is as simple as that,” he adds.
This premise is based on extensive studies Bike Bazaar had done with about 200 riders in two Indian cities where they tried out both slow- and high-speed electric two-wheelers. They loved the experience (especially with the more powerful options) and conceded that these would be substantially more affordable than their ICE counterparts when it came to operating costs.
Yet, these riders were also aware that they would have to pay plenty to replace the battery 18 months later and hence were not comfortable switching over to an electric two-wheeler. “This rider community is not going to buy EVs en masse. And neither will the delivery companies because their business model is asset-light and ultimately there is somebody who will have to buy them,” says Srinivas.
Recognising a white space
Now who could this be? “We feel that a third kind of business will emerge wherein entrepreneurs will buy EVs and either rent/lease them to delivery boys with a battery as a subscription,” he responds. This means that all the risk will be taken off the delivery boys and taken up by this new delivery intermediate instead.
In Srinivas’ view, they may either rent/lease them out to delivery boys or actually go to the delivery companies and say, ‘Look, I will take care of your deliveries and the manpower together’. In such a scenario, even the gig worker business will begin changing and, over time, will move towards employment. Eventually, the last mile delivery business will transit from an ownership to ridership model.
“There will be a huge change and even these intermediary companies need financing because they are not going to put in all the money themselves. That is where we see companies like ours, which understand the EV business, playing a big part going forward,” says an upbeat Srinivas.
His confidence also stems from the fact that Bike Bazaar has EV specialists who know all the key functions in battery management and so on. As he says, it is difficult to start financing EVs without first understanding the technology that goes into them.
At present, the electric two-wheelers used for the delivery business largely comprise models retailed by Hero and Okinawa. Bike Bazaar has also been financing EVs for over three years now and some of these vehicles have completed their lifecycle.
These are essentially bought by grocery companies who have their own delivery boys. “We have financed these vehicles and our study has been based on their inputs,” says Srinivas.
In his view, batteries are “as good as gone” after 18 months and it actually works out cheaper to throw away the vehicle and get a new one rather than replace the battery which will cost nearly Rs 50,000. As he says, “When you buy an EV for the first time, there are huge sops but when you replace the battery, there is zilch on offer.”
Perhaps, subsidies on batteries may also be offered sometime but it is not as if they will last forever simply because even the Centre has limited resources. Right now, there is actually a flourishing black market for batteries because of the shortage caused by Covid in all likelihood.
“We have a few vehicles in need of a battery but you do not get them because the OE prefers to get the scooter out rather than give you a battery,” says Srinivas. It is also evident that more people are queuing up for electric two-wheelers thanks largely to the subsidies.
While that is the main attraction in the non-delivery space, it will do precious little in combating the issue of vehicular emissions. He cites his own example as an owner of an electric Bajaj Chetak which is used for riding short distances barely twice a week.
“So, I am not the guy who is going to get the carbon footprint down in this country. The chap delivering my lunch is going to get this down and all of us need to focus on this segment as part of the Shoonya initiative,” reiterates Srinivas.
Bike Bazaar will also put up a charging station within its Pune office shortly so that delivery boys can swap their vehicles twice a day. The idea is to demonstrate how this model works “in our role as evangelists”. Going forward though, the company is aiming for a bigger play in electric through its franchisee operations across India which are into buying and selling second-hand vehicles.
The same franchisees will possibly add delivery functions over time. It will be a “hyper-local kind of business” where Bike Bazaar will offer support in tracking vehicles, battery swapping at the premises, helping out with EDI (equated daily instalment) that will be paid for rental and the EMI for the bike . . . ”these are the platforms we are developing”.
Bike Bazaar will take care of training, software and own the technology as well as the brand. It will also finance the batteries for the entrepreneur setting up the outlet where swapping stations will improve viability. These outlets will grow from 10 to 30 by the end of this year and at a more rapid pace to touch nearly 200 next year. “We are doing this in a modest way as part of a franchisee model,” says Srinivas.
The fact that some of these outlets are present in places such as Kurukshetra in Haryana, Varanasi and Prayagraj (formerly Allahabad) in Uttar Pradesh reflects the potentially “huge demand” for these vehicles. “We need to go beyond this mindset that Bengaluru is everything and start going to the Begusarais of the world. This is what the Bike Bazaar model is attempting to do,” he adds.
Why servicing matters for EVs
After spending exhaustive time in the financing arena for over three years, the other aspect that Srinivas highlights is that servicing of electric two-wheelers “is highly underestimated” by a lot of people. Surprisingly, these include some manufacturers too who assume that servicing only 20 moving parts is no big deal.
On the contrary, he continues, the Bike Bazaar team has observed that electric two-wheelers also need extensive servicing especially in those areas that are normally taken for granted. For instance, changing the rear tyre of a normal scooter is child’s play but for an electric version, it has a motor attached to it which requires “a good chap to handle this” and not a roadside mechanic.
“When we started WheelsEMI four years ago, we needed service engineers to evaluate second hand vehicles and these people underwent add-on training in EVs. They are now familiar with this technology and servicing is our priority for which we need to understand the battery,” says Srinivas.
The company recently carried out an exercise in Pune where people were invited to swap their old vehicles for new electric two-wheelers. This was part of a value proposition effort where Bike Bazaar would cover the battery throughout its lifecycle and replace it if it were to get damaged. Essentially, the company would charge customers for the battery over 18 months — a typical finance product.
While demand in the overall electric two-wheeler market is outstripping supply, Srinivas is hopeful that planning will get better with new capacities coming up and batteries also moving faster off the shelves. “That is when rubber will hit the roads and we will see actual demand compared to what it is today. It is easy to pay Rs 500 to book a vehicle initially rather than shell out Rs 100,000 and buy an electric two-wheeler,” he says.
Bike Bazaar is out in the market right now raising money and Srinivas tells people that “my model has underestimated the business potential of EVs and we will raise more because I am going to be very big in this space”. It took him and his team three years to come to this conclusion.
“In short, I would say leasing rather than loans, ridership over ownership and battery as a service will become key words in adoption of EVs. The entire lifecycle of an EV can be managed by an entity like ours,” he adds.
Interestingly, retrofitting is an avenue that has caught the eye of Bike Bazaar since this is an activity that also needs financing For instance, says Srinivas, a second-hand Honda Activa costs Rs 45,000 and another Rs 30,000 goes into retrofitting. “Then you need another Rs 40,000 for the battery which then makes retrofitting no economical sense,” he points out.
His teams have noticed that people trust a model like the Activa with a retrofitted electric engine and, hence, if one were to take the battery out of the equation and say “it is a service where you pay as you go” (for the battery), retrofitting becomes very attractive. This kind of vehicle could also have a better resale value and Bike Bazaar plans to carry out a pilot soon.
The company has also done a study with Piaggio Vehicles for its electric three-wheeler passenger and “will not mind experimenting” with the goods carrier option too. What is comforting in this initiative is that Piaggio has proven technology. “We are checking how instalments are paid at the time of swapping batteries everyday. EDIs as well as pay-for-use, in contrast to EMIs, will become popular in these models,” says Srinivas.
The northern region will be the focus for Bike Bazaar over the next couple of years with the east also keeping pace. The west and south will follow in due course. Two-wheelers will continue to be the focus area because “our job is to care for the unbanked and unrepresented customer, someone who needs the vehicle for his daily living and the one who banks do not treat well”.
This feature was first published in Autocar Professional's December 15, 2021 issue.