Bengaluru-based startup Ola Electric will receive more government subsidies than the much larger Reliance Industries.
The black horse of India’s pin race is retreating from the group, but can it beat the bookies’ favourites?
Ola Electric Mobility Pvt., a Bengaluru-based startup, will receive state support to produce EV batteries that can store a total of 20 gigawatt hours of electricity, the government said on May 24. 3. Reliance Industries Ltd., the country’s largest corporation, will be subsidized for five gigawatt-hours. The startup is getting 40% of the total capacity covered by New Delhi’s $2.4 billion battery offer over 5 years. The plan is to cut $33 billion from the country’s fuel import bill.
Paying companies to play has a clear history in India: Backed companies consistently demand protectionism cover. But with Brent crude at $120 a barrel, this particular gamble has its share. Consumers have objected too much to the pump because of high domestic taxes on gasoline and diesel. However, the tax cuts will only make the government’s pandemic-strained budget hard and whine. As a result, desperate policy has boosted EVs.
There is another goal behind giving money to battery manufacturers, one that could not be made clear in a government press release. The idea is to keep nascent EV adoption as far away from China’s technology and raw materials as possible so that India’s reliance on hydrocarbons doesn’t translate into a different kind of geopolitical responsibility in the future. “Today 90% of global capacity is in China,” Ola Electric founder Bhavish Aggarwal said on Twitter after winning state support. “We will reverse that and make India the global hub for electric vehicles and mobility technology.”
That’s a lot of chutzpah for a $5 billion startup, based on its last $200 million funding round in January. Ola Electric, backed by SoftBank Group Corp. and Tiger Global Management, which is small compared to Reliance, which is 45 times larger in the mass market. The group is controlled by Mukesh Ambani, Asia’s richest man, who also owns the world’s largest oil refining complex. Last year, he started moving towards clean energy by announcing plans for everything from solar panels and batteries to green hydrogen and fuel cells. He pledged $10 billion, but raised his investment target to $76 billion. There could hardly have been a greater national champion in India’s bold pledge at the COP26 climate summit.
However, New Delhi is favoring the lesser known newcomers. Aggarwal won’t offer the maximum 20 GWh any company is eligible for. Reliance also applied for the full quota, but was put on a waiting list with 15 GWh.
Unlike Reliance, the company recently acquired a UK company that holds a patent for a sodium ion battery – cheaper than lithium-ion, and therefore potentially more attractive to buyers in other regions. emerging markets – Ola has yet to make a single hint about its technology. They want to research and develop their own batteries, and fill the gap with investments like the one they recently made at Israel’s StoreDot, which has a claimed silicon-dominant anode. claims to offer fast charging capabilities. To demonstrate its commitment to R&D, Aggarwal invited Prabhakar Patil, former chief executive officer of LG Chem Power Inc., the research arm of the world’s No. 2 EV battery maker based in the US, to the Ola Electric board of directors.
Like Ambani, Aggarwal also had a turning point. In 2011, three years after graduating in computer science from the prestigious Indian Institute of Technology, he co-founded Ola Cabs, a ride-hailing app that competed in India with Uber Technologies Inc. , Aggarwal jumped on the electric vehicle team.
Last year, he built – in record time – “Futurefactory” that will become the world’s largest electric motorcycle manufacturer operating at full capacity, run entirely by 10,000 women and more than 3,000 robots. . It got off to a bumpy start. The first product – the two-wheeler S1 Pro – was initially delayed, and then met with difficulty. “Due to the rush to launch a product, Ola Electric did not provide enough time for the battery during development to grow and mature, resulting in potential safety hazards and possibly damage to the battery life. undo by Ola Electric,” Morning Context, a news portal, wrote last month based on user feedback.
However, consumers seem to keep their faith. According to the research team of Haitong International Securities Group, in February, Ola delivered 7,000 scooters, accounting for nearly 9% market share among high-speed two-wheel electric vehicles. This month’s target is 15,000. Ola even pocketed a portion of the $3.4 billion in private incentives New Delhi gave to auto and parts manufacturers.
India is at the height of the electric vehicle revolution. It won’t start with cars but with scooters and motorbikes that are often 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., has a base case scenario that EV penetration in the segment will grow to 38% in 2030 from 2% this year. However, Indian automakers don’t seem to care much about cell production. Indeed, the only established vehicle brand eligible for India’s battery subsidy is Hyundai Motor Co. Korean.
This makes the diminutive Ola Electric a huge exception – and in many ways. Chinese ride-hailing giant Didi Global Inc. Grab Holdings Ltd., the killer of Uber in Southeast Asia, has diversified into financial services. Its rival Gojek has reduced its reliance on mobility by merging with Indonesian e-commerce platform PT Tokopedia to become GoTo Group. But they’re all stuck in the consumer data business – none of them go to the store to get involved in the production of electric vehicles and batteries. Aggarwal’s road ahead is guaranteed to be a pothole-filled Indian road, but as long as he can keep private market investors, consumers and – above all – key-makers in mind books so close to his line of sight, he could count kilometers.
Andy Mukherjee is a Bloomberg Opinion columnist on financial services and industry companies. He was previously a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.
