Switch Mobility plots multiple factories to make ebuses, in talks with Maharashtra and UP governments

With a rising order book, electric CV maker says it is on course for a billion-dollar business and plans to have a capex of Rs 6,000 crore in the next 3-5 years to meet demand.

By Shahkar Abidi & Ketan Thakkar calendar 11 Jan 2023 Views icon8002 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp

Buoyed by an increased orderbook of over 2,500 electric buses, Switch Mobility, the electric vehicle arm of Ashok Leyland, plans to set up multiple factories in India. The Chennai-based OEM is currently engaged in talks with the Maharashtra and Uttar Pradesh governments to set up a plant, apart from building vehicles at its factories in Tamil Nadu.

As against setting up a large facility of over 10,000 to 15,000 buses, Switch Mobility is now exploring the possibility of having satellite factories across the country to serve different geographies with smaller capacities.

Mahesh Babu, CEO of Switch Mobility, told Autocar Professional that the company is looking at multiple assets within the group as against having a dedicated factory. Thus, apart from using Ashok Leyland's existing bus and LCV setup, it is exploring new states like Maharashtra, UP and Rajasthan amongst others.

"We have a plant in Bhandara and Switch can produce there. We are looking at UP coming out with an EV policy. Assuming the CESL order will go north going ahead, one plant will not be sufficient. We will need facilities to do bus body and bus assembly somewhere in the North . . . so we will actively look at UP and Rajasthan," he added.

Babu says, in the bus manufacturing business, having multiple bases – each with a 2,000-vehicles-per-annum capacity – is a more prudent model.

Getting future-ready with capex today
To cater to its rising order book for electric buses and CVs, Switch Mobility will need a capex of over Rs 6,000 crore in the business over the next three to five years including its Mobility as a Service Arm – OHM Mobility.

The funds will be used in to develop next-generation buses and e-LCVs and new factories and in OHM Mobility. While Switch Mobility would need about Rs 1,000 crore to develop new products for India and global markets, OHM Mobility will need an infusion of Rs 4,500 crore to Rs 5,000 crore to acquire these buses and operate them for State Transport Undertakings (STUs) on long-lease contracts.

Commenting on the source of funding, Babu says, "Funding the EV business is not a problem in the Group. We have an orderbook of over 2,500 units with CESL and we don’t see any problem in family funding. We are looking at the right partner. We are with a term sheet with an investor and are working on something. In the next three months, we will have somebody as our partner."

After their heady rise in the past few years, valuations of tech companies have started falling and the mood amongst investors has been sombre. However, Babu says the emphasis of the Hinduja Group is not to create high valuation but fair wealth creation for its investors with the right partners to scale globally. "We are heading towards a very healthy billion-dollar business over a period of time with the orderbook in India and overseas. We are finding activities in India, UK and Europe and there is momentum in all three routes. So far, we have raised US$ 1.6 billion, we are working closely to get funds in the next three months," remarked Babu.  

At the back end, the supply chain is well established, claims Switch Mobility. Other than the critical cells, almost everything is made locally. Understandably, Switch is very keen to localise cells once the manufacturing starts locally, catalysed by the government of India's ACC PLI scheme. Switch Mobility is open to sourcing from competitors too in order to help achieve economies of scale in the marketplace.  

With the CESL tender likely to run its course over a two-year period, at present Switch is within its budget albeit if it wins the next few tenders, it would need funds quickly.

Even as procurement of electric buses by government agencies at present continues to drive a significant part of the demand, Babu is of the view that the key would be to allow for private players to squeeze in so as to scale up the demand. Otherwise, the demand may just choke out, once governmental demand dries out.

Another challenge comes in the form of STUs and financing. Most banks and financial institutions remain sceptical of STUs repaying their loans consistently for a over a decade. Ironically, their perceptions seem contrary to the ground reality as government agencies may have delayed the payments but there have hardly been cases of loan defaults as yet.

Meanwhile, as metro rail networks expand throughout India, Switch Mobility management claims it is receiving a number of enquiries for metro rail feeder services in cities. "I strongly believe that the segment should be privatised rather than the states getting involved," added Babu, pointing out that the liberalisation should be based on demand versus supply, rather than the permit system which, in any case, is not currently applicable for electric vehicles.

He stresses that one way to spur demand would be to continue offering government subsidies until the segment reaches a stage wherein at least 10% of total bus sales in India comprise electric vehicles. “Once that happens and (electruc bus) sales reach 10-15% in a particular segment, as has been witnessed globally, then it goes up fast," concluded Babu.

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