Featuring Ankit Mittal, Co-founder & CEO, Sheru
Ankit Mittal is the Co-founder and CEO of Sheru. With a passion for sustainable mobility and energy, his academic endeavours involve working on projects such as solar-powered vehicles. In 2019, he founded Sheru along with his two other BITS batchmates. Prior to co-founding Sheru, he worked at Grey Orange Robotics as an Embedded Engineer.
To tune into the recording, please use the available link here: https://on.mentza.com/circles/7977
Please find below a summarized transcript of this interesting conversation:
Ankit, your business helps drive collaborations with pay per use electric mobility. Can you explain what that means to our audience?
When we look at the EV problem statement, there are two problems after buying an EV,
- A higher cost of ownership due to batteries.
- Charging related infrastructure services-the re-fueling experience.
There is very high scope for adding value for the customer here by simplifying this experience and creating an ability for the customer to own the EV at a cheaper price point and at a higher variable cost. This is a function of three things- manufacturing, finance, and the operations. At Sheru, we are driving collaboration between these 3 stakeholders to deliver the end service to the customer on a pay-per-use basis with the help of our software platform. The platform enables operators who are providing the battery swapping services to two- and three-wheeler customers. These EV owners therefore can access batteries on a pay-per-km basis.
The market of electric two- and three-wheelers, which you are targeting, is a very large market in India. Can you help our audience understand how large this market is?
India is primarily a two- and three-wheeler driven market because the average distance per trip in India is very less, approximately 4-6 kms. Today there are approximately 300 million vehicles in India and approx. 250 million of these are two- and three-wheelers.
If we look at the electric vehicles segment, 90% of that consists of e-rickshaws. There are approximately 2 million registered and a further possibility of 3 million unregistered e-rickshaws in India today and the market is still strong at 20% CAGR. Meanwhile, the two-wheelers market has started gaining traction; it has reached a magnitude of approximately 5 lakh units per year with tremendous potential of growth down the line. So, in all it is approximately a USD 2 billion market today in post-sales services and we are expecting it to really blow up in the next 3-4 years.
Can you give us some insight into the geographical coverage of electric three-wheelers?
E-rickshaws primarily started growing out of Delhi NCR region after they were first brought to India for Commonwealth games. Subsequently, they started spreading around Delhi NCR, neighbouring states and later to the Eastern parts of the country. Recently, the growth in this segment has started coming out from the Central and Western parts of the country but South is still catching up. In South, we are seeing a different category coming up, which is higher speed electric three-wheelers fitting more into the use case over there. Close to 70% of the presence within these states is mainly in the Tier-2 and 3 markets. Out there it is not only used for commute related use cases but also for hyper-local deliveries and middle mile deliveries.
What is your view on the quality of EVs currently present in the market, a question that often comes to people’s minds?
For the kind of use cases where these electric three-wheelers are currently deployed, the requirements are not complex but the demand for value engineering and driving the price of the vehicle further down is very high. Most manufacturers in the market today are working towards that.
Having said that, there are ARAI standards which an e-rickshaw manufacturer has to adhere to. There is a requirement for registration, some necessary RTO permits and insurance behind the vehicle. So, the regulations in the category are emerging and everyone is competing to provide a better product at a cheaper price. Of course once the larger OEMs start entering the category, the situation will change faster.
Coming to your offering, how does a rickshaw driver benefit from using your system?
There are two important benefits of battery swapping:
- Reducing charging downtime: E-rickshaw is a complete commercial use case and therefore the expectation of the driver is to reduce the charging related downtime. Battery swapping reduces the charging time needed for the e-rickshaw and the driver is able to run greater number of kilometers in a day, thereby realising approximately 70-80 % increase in their income. It is the most efficient mode of delivering energy to e-rickshaws as far as we have seen in the market so far.
- Battery affordability: Another important benefit of battery swapping is that it makes high cost Li-ion batteries accessible to driver owners. The drivers today are operating with the help of lead acid batteries that they have to charge either at their home or some charging point service provider in their locality and the charging time is close to 12 hours. The prime reason why lead acid batteries are used in e-rickshaws is that the capex is very low and the driver is able to afford these batteries every six months. Li-ion batteries are not accessible because there is no option of subscribing to these batteries or buying them now and paying them later.
The customers that you are seeing are existing e-rickshaw drivers or are you also seeing a shift from petrol and CNG to e-rickshaws because solutions like yours are available?
Absolutely, the electric 3-wheeler category has started growing because a lot of diesel and petrol three-wheeler drivers have now started seeing the value of driving an e-rickshaw. The vehicle ownership has become possible and affordable; so a lot of drivers can now switch to e-rickshaws and own the vehicle by subscribing to the batteries on a pay per-use basis. So, moving to e-rickshaws is not only giving the option of earning more but is also giving the option to the driver to own the vehicle which they primarily do not own in petrol and diesel category.
Can you help our audience understand the logistics behind a battery swapping operation?
Battery swapping is a function of three things:
- Product: The product needs to fit into the mode of operation of the driver, so it should be manually swappable, easy to carry and compatible with most vehicles.
- Distribution Network: Given the battery costs, there is a requirement of creating a distribution network which has a good control over the driver because you are giving access to the driver to a battery which is very expensive. So, in such cases to reduce default, you have to really work through a distribution network which has tight control over the users of battery swapping service.
- Technology: The distribution network has to be enabled with the right technology so that this service can be distributed to the end customer and that is where the software piece comes in and which is what we add as a value to this ecosystem.
Can you explain a little bit about your software system?
The software system brings together various stakeholders and allows them to perform their functions to deliver the end service. For example, the platform will enable investment into the batteries from lease finance companies and other investors by bringing them on the platform. Then there are a lot of functions which need to be managed when batteries are distributed into the network, like whether the end operator operating the swap station is managing the batteries properly, charging them on time, performing the transaction smoothly or not, is the checkout time of the customer seamless or not. All this can be managed end to end via our software.
So that means the end operator and the end distributor in your case is the person delivering the battery service to the rickshaw driver. Can you help us understand who these people are, what is their incentive to start this business, given this is a new kind of business?
Battery swapping is an over the counter function with very high touch point where the driver is coming to your outlet, you have to then give them an asset and take an asset back from them and do some routine tasks along with it. So, we are helping medium to low end retail stores to upgrade their existing retail outlets into swapping centres so that they can unlock this incremental revenue for themselves from the same infrastructure and the same space. This category of SMEs is also really comfortable dealing with the end customer specially in the e-rickshaw space and the commercial two-wheeler space, so they are really happy taking this job up for a good return on their existing investments.
I want to talk a little bit on the battery technology. Most e-rickshaws today run with lead-acid batteries. But what you are offering is swappable lithium-ion batteries. Can you help our audience understand the difference it makes to the driver owner of the e-rickshaw to have this one battery vs the other?
Fundamentally from a product standpoint, there are significant difference in a lead acid battery and a lithium-ion battery in their ability to charge, the time in which they can get completely charged, the types of current that they can support and the acceleration that they can support. Lithium-ion batteries are also very compact, so our batteries for the same power storage, same energy storage in the vehicle, take about 20% of the lead-acid battery’s volume and weight. A lithium-ion battery charges within two hours so a lot of functional challenges that exist with lead acid batteries get eliminated with lithium-ion batteries. Lithium-ion batteries also have a longer battery life ranging from 2-3 years, while with lead acid batteries, the life is 6-8 months. In terms of cost, while lithium-ion battery costs 2.5 times of a lead-acid battery, its life is approximately 6 times.
How does the range of a lead acid battery with one charge compare with the range of a lithium-ion battery with one charge?
In case of a lithium-ion battery made for an e-rickshaw application – you select a range and engineer the battery according to that. In case of e-rickshaws today running with lead acid batteries, the typical range is approximately 70-80 kms in one charge and if we want to make a similar lithium-ion battery, it can also deliver 70-80 kms, but it would be far more compact compared to lead acid battery. While that’s the case, for swapping applications, we use a totally different battery, it has lesser range aligned with the driver behaviour and we also save capex on the battery swapping.
At Caspian debt, we are always interested in exploring collaborations within our portfolio companies. We’ve funded EV manufacturers, EV financing companies etc, do you see any scope of collaboration?
There is a lot of scope for collaboration with the financing companies. There are various points in the entire value chain where finance can unlock a lot of value for the entire ecosystem.
- There is a big dearth of the supply locally and whatever is available also is not getting produced at a level where the production cost of the batteries could be brought down and be further made lucrative for the end customer. Therefore, it would be great to see investments into local manufacturing.
- We also feel that the infrastructure that needs to be developed on the retail network of India also requires some investment into their charging infrastructure or the security deposits of the battery etc. It can also be eased out with the help of a finance partner which really wants to unlock the value that can be generated by providing this service to the ecosystem.
Any final thoughts?
It’s a great time to adopt EVs specially in India as the regulatory environment is very favourable. There are strong tailwinds for companies that are trying to innovate and I believe we are entering into a golden era in terms of climate tech and specially EVs.