2017-12-04
How Sun Mobility is working on a network of charging stations for electric vehicles

December 2016. Masayoshi Son, founder and chairman of Japan’s SoftBank, was upbeat. He had just met Prime Minister Narendra Modi to highlight the company’s commitment to India. One of Son’s wishes for Ola, a cab aggregator that SoftBank has invested in since 2014, veered between eccentric and plain impractical. He wanted it to give away a million electric cars — made in India — for free to drivers of Ola cars. “This is a wish and not a commitment,” Son told ET in Delhi.

That same month, commercial vehicles manufacturer Ashok Leyland was more guarded on the electric front. It launched Circuit, an electric bus whose price starts at Rs 1.5 crore, which was test-driven by the Chennai Metropolitan Transport Corporation in six months.

Vinod K Dasari, managing director of Ashok Leyland, told analysts on an earnings call in May 2017 about its electric vehicle (EV) plan. “We are ramping up our electric capabilities and capacities,” he said. “We are very bullish about this.” The company was committing Rs 500 crore for R&D toward Euro 6, BS VI as well as EV.

Its EV strategy, Dasari said, has three paths. One, to leverage its subsidiary Optare’s technologies in Europe. Two, the in-house Circuit development and, three, work with government on a “battery swapping” technology.

Quite naturally, an analyst, Ashish Nigam of Axis Capital, asked: with the “strange” battery swapping plan, will Ashok Leyland’s realisation of profitability per week get compromised? Dasari’s response was axiomatic: “If the value of the vehicle goes up, our gross profits go up because we will still have to make the whole vehicle.” A question lingered: what is the strange battery swapping plan?

To realise the essence of battery swapping, Ashok Leyland has inked a strategic tie-up with Sun Mobility, a startup borne out of a joint venture between Virya Mobility 5.0 in Bengaluru and private equity fund Sun Group’s New Energy Systems. It is the new gig of Chetan Maini, the innovator behind Reva, India’s first electric car venture, owned by Mahindra & Mahindra since 2010.

Between the wishful thinking of Masayoshi Son and the uncertainty in Indian auto about the future of internal combustion engines (ICE) because of the government’s e-awakening in August, Sun Mobility is singularly focusing on the one barrier to commercialising electric mass transport: cost.

Its answer is battery swapping, which can be done in charging stations at scale in India’s large cities. Since a swapping station will immediately exchange depleted batteries with charged batteries, EVs won’t have to wait to get charged. EV driver pays for the depleted energy, which can be measured because batteries are IoT-enabled. It’s pay-as-you-go. In its stations, Sun Mobility plans to undertake the cost of owning, assembling and maintaining lithium-ion batteries. That is, if the policy swings in favour of swapping stations.

In November, Minister for Road Transport and Highways Nitin Gadkari had criticised NITI Aayog’s battery-swapping policy, saying “it is not appropriate for the country because it is a very difficult thing”. The government think tank had stressed on “expanding charging network and the growth of battery swapping stations” for the rapid adoption of e-vehicle in a May 2017 report.

Maini’s hypothesis: “If you separate the battery from an EV, the cost (of making an EV for automakers) can be neutral when compared with a petrol-run vehicle,” he says. “And it could be cheaper because EVs have far fewer moving parts than an ICE.”

In effect, Sun Mobility wants to undertake the battery cost, and leave everything else in the manufacturing of an EV to automakers. The EV customer (ranging from auto-rickshaw drivers, bus service providers, twowheeler riders and later car owners) will pay for the service.

For co-investor Sun Group, which has a dedicated fund for renewable investments, this represents a 10-20 year horizon. “We are committed to investing in everything to do with new energy,” says Uday Khemka, vice-chairman of the Sun Group. “It is inevitable that we invest in mobility to create a profound transformation of the transportation sector.”

Hedging the Risk

Maini has learnt lessons — from the supply and demand standpoints — from the Reva experience. One, the battery cost puts a strain on automakers’ ability to produce EV at scale, especially when demand is nonexistent and uncertain. “Battery was a significant cost of the electric car, and every time the rupee depreciated it became more expensive because batteries are imported,” says a former employee of Mahindra Reva.

He points to a mutual learning for EV innovators and automakers. “If you have to grow an EV business, you have to have a lot of investment and build by aligning with an automaker rather than doing it all alone.” Before M&M bought out Reva Electric Car Company, it had gone alone for 10 years and then inked a very short-lived partnership with General Motors India for electrifying Chevrolet Spark. On the supply side, vehicle OEMs (original equipment manufacturer) want to share the risk.

At the customer’s end, his or her inability to purchase an EV is, again, because of the battery cost. To understand this, imagine if the price of a car included petrol or diesel costs for five years. It would be prohibitive.

Maini’s hypothesis is battery swapping will be a service solution in a scenario where OEMs don’t have to undertake the entire cost of an EV. This could help customers and transport operators find a lower on-road price for the vehicle.

Sun Mobility, which will undertake the cost of developing and assembling batteries for Ashok Leyland’s e-buses, is in talks with other OEMs for the same kind of engagement. Simultaneously, the company is identifying locations and prospective franchises to run the battery-swapping stations. Its first station will be showcased in February 2018.

Each battery-swapping station will charge a price, factoring in the cost of holding lithium-ion batteries and connecting the recharging systems to a power grid

“The idea is to truly address range anxiety,” says Maini, referring to drivers’ worries on whether a battery charge will be sufficient for a ride. Also, an Uber or Ola cab driver cannot stop for an hour to charge the electric car. “They can’t afford to be off the road even for two minutes,” Maini notes. “Refuelling time is vital for them, apart from range anxiety.” In essence, the sharing economy (food and grocery delivery on bikes, cab aggregators, etc) will require battery-swapping stations. In contrast, the route and timings of a bus service are fixed. The bus driver, therefore, is in a better position to plan the daily battery charging.

Furthermore, smaller battery sizes can be affordable and more efficient because their weight is optimal. This will have huge implications for electric buses and taxis.

Sun Mobility is moulding its services and innovations for a range of such use cases. For buses, batteries could be robotically swapped because of the large size of batteries. For smaller vehicles like electric autorickshaws, batteries have a higher proportion of electronics. For this group, the station crew will have to get involved in swapping the battery located below the driver’s seat.

It will be vital for users to track battery usage, enabled by sensors and visible to users on their smartphones. At the backend, Sun Mobility will be working to have tie-ups to buy renewable energy from the grid.

The hardest part is managing a moving stock of batteries. “If a vehicle comes every two minutes, we need a certain capacity,” Maini explains. “If it comes every five minutes, we need a different capacity. But we will still swap it in two minutes. The capacity of a station will depend on its throughput level.”

If such a vision lives up to its complex potential, battery swapping will create a pricing economy of its own, while more EVs take to the road.

Shared Mobility

Globally, experiments like Sun Mobility have proven unviable. In Israel, a startup called Better Place raised $850 million until 2013 to create a network of “battery-switching” stations. The company struggled to execute and is seen as a cautionary tale.

But the industry is continuing to learn. Coup, a Bosch subsidiary, is working closely with Gogoro in Taiwan, which makes electric scooters and is investing in recharge stations. So, what has changed from Better Place to Gogoro, which launched operations in 2015? The maturity of smartphones and the Android/iOS app ecosystem.

This is vital for both Sun Mobility and the EV user, because an app is necessary for tracking the battery-charge utilisation, among other data indicators.

The evolution of the EV industry has striking parallels with the smartphone industry. This is especially pertinent to the supplier base. “Until 2005, everything in a phone was done by the manufacturer internally,” Maini says. “It is only when the manufacturing base got diverse — chips made by one player and battery by another — that we have reached a point where smartphone models are created in three months,” he explains, adding that GPS and apps, which came into the ecosystem, are not owned by any smartphone brand.

Electric vehicles have the potential of spawning such a supply ecosystem. “Powertrain and other electronics will come from somewhere else. And barriers of entry will get lower,” Maini says. For example, the business of recycling lithium ion batteries can have a large potential on its own if the EV industry kicks off.

Maini has been catalysing the discussion at various forums, even as he has mentored and co-promoted ventures in the electric mobility segment like Lithium Urban Technologies and Altigreen. He is on the automotive electronics working group to revise national policy, and has been industry advisor to the National Board for Electric Mobility to formulate the Electric Mobility Mission Plan 2020.

He is alive to the possibilities: “We have different axes. Energy is one. Mobility is another. Then the shared economy culture. Connectivity is improving. Never before have all these factors come together.” This combination allows entrepreneurs to think of new business models for adoption of electric mobility in ways they couldn’t earlier, he adds.

The former employee of Mahindra Reva is not surprised. “Maini was the innovator. He would lead anything to do with new ideas. But he often underestimates the time and effort required.” That’s why Virya Mobility 5.0, Maini’s company, is vital to the battery swapping mission. Its investors are the three Maini brothers, Sandeep and Gautam being the other two.

“Sandeep brings realism to the business, which complements Chetan’s founder audacity. He brings the balance because of his organisational ability — project timelines, and delegation. Gautam is more customer-facing and has an astute understanding of operations,” the ex-employee says. “Everything at Reva was very frugal. We made the best of what was available to us.” With the battery infrastructure play, the Mainis now hope to expand the electric opportunity far beyond Reva. It isn’t just a wish . This is a commitment.

Source- The Economic Times