What did you make of it all? This is the first interview since you heard someone like Rajiv Bajaj take a dig at the new EV makers saying champions like him eat OATS for breakfast.
It was really nice of him to acknowledge all the good work that Ather has done in building the space. So that was the nice thing to hear. And yes it is about time that all the legacy players take electric seriously. I took that as Bajaj basically saying listen electric is super real and they want to compete and that is amazing. So if there is one point that might be remembered as electric going mainstream, it might just be that.
Are we going to see the traditional automakers riding the EV wave with startups like yours?
There is a common misconception. Electric is not a segment like SUVs and compact SUVs etc, Electric is going to be the entire market. So you can come play the electric market by just being present in a company. Hero has been a terrific investor and a great partner to have but honestly, the only way to play electric is to build electric. There is no replacement to that because 100% of our vehicles are going to be electric in a very short span of time.
How are you cashing in on the EV rage? I understand that you have plans to commission a plant and there are expansion plans under works. How are you planning to grow more than you already have?
This is year three of the industry for us. We grew roughly about 12 times from October last year to October this year. There has been roughly a 20% month-on-month growth. This is the kind of growth that you hear in social media not in auto. We do not see this growth stalling at all. In October, we supplied roughly about half of what the actual demand was. So demand is way higher. There is a long way to go. This growth is going to look pretty steep for a while because EV is no longer a story of a new market and new segment and new customers. EVs are now first and foremost a story of substituting and replacing petrol vehicles with electric and that is like 200 million vehicles on the road which need to go electric this decade.
So we will see some pretty heavy growth for a while. In the last few months, the growth has surprised us. It has come out faster than we anticipated which is why we are going for the second plant. We thought we would need a second plant by early 2023 or so, maybe even mid ‘23. With the current projections, we are out of space completely in maybe four-five months. So we have started on a second plant. Work has already begun and fingers crossed, very soon that capacity also goes live.
With that going live, Ather should become the largest EV company in the country. We are already the largest by revenue and largest by value. We should also become the largest by volume hopefully with the second plant.
Does that mean an IPO is coming sooner than two years?
See IPO is the ultimate thing and honestly any team really hopes to finally build their business, build the company to a point where it can go public. We can really face that scrutiny and stand tall. So that is our ambition and our hope too. The markets are growing faster than we anticipated. Revenue is already looking good. Unit economics is at a good place. So yes we want to get there but it is not happening now.
Right now, there is some other good stuff that is keeping us busy, everything from supply expansion to distribution expansion, new products. So an IPO is in the scope but it is a little too early to announce any plan right now.
I am sure you are grappling with the same issues that the entire industry is facing — component shortage, raw material cost pressures etc. How are you dealing and balancing it all out?
Commodity price increases are a lesser concern for EVs today because costs are falling at a far faster pace than commodity price increases. Electronics is a more broader concern but it is also a short-term concern. It is not a case where any of these semiconductor guys have to go and add additional capacity for just the EV market — 10,000 units, 50,000 units, 100,000 units, a million units is nothing. These guys have capacities exceeding 100 million units for all of these components. So it is more a short-term problem where you have to plan in advance.
One typically has to plan about 30 to 50 weeks in advance what you want to buy. Planning and more preparation is a must. The bigger supply chain focus is on vendors where capacity needs to be enhanced. As a country, we do not have motor capacity, we do not have a charging capacity, we do not have controller capacity, we do not have touch screens, dashboards for automotive. We do not have much capacities for everything — electric vehicles, batteries, cells. Those are the focus areas for us.
The last two, two-and-a-half years, Ather has tried to build a supply chain out for these components because this is a genuine supply builder. Electronics is a more allocation problem and it needs just more planning, everything else genuinely needs capacity creation.
What does Ola expanding the market mean for your company?
More players are announcing products and plans, helping with customer awareness, especially in tier two and tier three markets. Ather’s bigger focus has now become tier two and tier three markets because tier one obviously is always number one for us and we have always been focussed on that, but then more players are launching.
I think tier two awareness for EVs has just skyrocketed. That does not mean it has expanded the market in terms of customer willingness to buy by four-five times. More players have really held customer awareness there. Building EVs is not like BS IV, BS VI. It is not a small technology change. There are a lot of new platforms that need to be built and which is why successful companies have built EV first. It takes a few years to build a platform, stabilise it , and iron out all issues. It takes a while. One cannot rush forward and I am sure everybody who is launching now are committed towards it. They are going to be investing towards it and it just needs a little bit of time.
We just have to respect the engineering a little bit but the good news is everybody who is launching now are going for electric and these are not just PR announcements. That gives me confidence that eventually we will see good products which just need some time.
A new player in the EV market talks about bringing a giga factory to this side of the world, like what Tesla has built. Do you see the opportunity for you to build that kind of capacity?
We have just commissioned the second plant and we have announced increasing our battery capacity to north of one gigawatt hour already. Through the course over the next three years, I expect demand and production to scale up roughly about 10 to 20 times. I believe we are going to be at a place where Ather’s individual requirement will be exceeding 10 gigawatt hour and the industry’s requirement will get about 30 to 50 gigawatt hours pretty quickly.
The scope for scale in the two-wheeler industry is enormous as the entire two-wheeler market goes electric. We are going to need about 120-130 gigawatt hours of lithium-ion cells. We are going to need an annual capacity in the excess of 20 million, possibly 30 million units per year. That kind of build up will happen over the next three-four years. It is going to the level of what typically one hears happening in China — . towns popping up. For electric two-wheelers, it is going to be a change we have never seen before in the Indian auto market.
The ranges that you play in and you are at higher speed and therefore the costlier side of the picture. As the whole fleet mobility space get electrified over a period of time, do you think you are too expensive to play in that? Any plans to reduce the power of the vehicles that you produce so that you can play that as well?
Our strategy is not to build above certain price point. Which is why we launched 125, we went up to 165. You will see us adding more variants which are cheaper than this and may be more expensive than this. Our driving philosophy has been to build well integrated good products like good experiences and our target has to become the quality mentioned on the EV market. That means that you are going to see Ather launching products in multiple categories. So, we are not cutting the mark and saying only about certain cc. In the market, you will see players who will say only above 150 cc, only above 250 cc or 300 cc. We are not cutting the market in that. We think there is incredible demand and there is opportunity to build great products for people who want to do maybe 50 km per hour or people who want to ride at 80 kms per hour and people who might want to touch 120 km per hour. Ather is going to venture into products and portfolios at reach all these segments.
The only guiding play for us is all the products have to be well built and they are going to be high quality experiences. Having said that, as a company, our DNA is wired to understand consumers; we do not understand B2B very well. I do not have business development teams. I do not think we can cut enterprise deals and we do not understand enterprise mindsets. I do not think you will see Ather directly building and laying in the fleet market.