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Mint: Lithium Urban Tech paves the way for EV revolution in India’s cab market

December 29, 2016

Bengaluru: “Tomorrow’s transportation, today” sounds like an audacious claim coming from any cab company in India, let alone a start-up.

But here’s why Lithium Urban Technologies could be excused for using that as its tagline: India got its first electric vehicle in 2001, and 14 years later, Lithium gave the country its first electric cab service.

“I don’t think it was confidence. It was just gumption,” said Lithium Urban Technologies (P) Ltd co-founder Sanjay Krishnan, when asked what motivated him to start the service at a time when India lacked the infrastructure for it.

The odds were stacked against the company, named after lithium-ion rechargeable batteries that power everything from cell phones to electric cars.

For starters, there was a general lack of awareness about electric cars in India, which is home to four of the 20 most polluted cities in the world.

More importantly, electric cars need charging stations with uninterrupted power—a tough ask in Asia’s No. 3 economy, known for power shortages.

“When we started, there was none of that,” said the former operations chief of Comfort India, who started Lithium along with urban development expert and Nasa scientist Ashwin Mahesh.

The lack of enough charging stations and the impracticality of starting out with a large electric car fleet made them focus on catering to corporate clients rather than becoming the next Uber or Ola.

“Access and availability are key for B2C (business-to-consumer), which without a fairly large fleet size, you can’t provide. Then, you have got to put this infrastructure all across the city, right? So, who’s going to pay for it? How are you going to provision power for it? It’s like solving the world hunger problem,” Krishnan said.

Catering to corporate customers would solve many hurdles at once.

The lack of enough charging stations and the impracticality of starting out with a large electric car fleet made them focus on catering to corporate clients rather than becoming the next Uber or Ola

For starters, Lithium could count on them to set up charging stations on their campuses rather than doing that itself.

“Who has power, where is world-class infrastructure already there, where are schedules made in advance? If all of these three things have to be met, then it’s corporate employee transport,” he said in an interview at Lithium’s Bengaluru office, where colourful, chequered mattresses double as bench cushions.

LEAP OF FAITH

The plan worked, and soon it signed up British retailer Tesco Plc’s Bengaluru arm as its first customer.

Others such as Unisys Corp., Accenture Plc, Adobe Systems Inc. and VMware Inc. soon followed suit.

“We saw the partnership with Lithium as another way to reduce our carbon footprint while transporting our employees,” said a spokesman for VMware, Lithium’s biggest customer.

But Lithium’s appeal goes beyond being an environment-friendly business.

“We didn’t want people to buy it because it was green, because that means the audience would always be limited,” Krishnan said.

The offices of Lithium Urban Technology.

From training its drivers in defensive driving to equipping its cars with GPS that drivers cannot meddle with, from offering unlimited mileage to relying on smart technology to manage its fleet, Lithium added a whole bunch of features to boost its appeal.

“The overall experience has been positive from our colleagues and moreover, features like Lithium’s ‘Assurance Stack’ that ensures safety of our colleagues, transparency of operations and productivity of the fleet, vehicle tracking 24×7 both at Tesco’s transport operations centre and at Lithium’s 24×7 Network Operating Centre (NOC) really adds to the overall experience,” said Glen Attewell, chief executive of Tesco Bengaluru, which uses 33 Lithium cabs.

Lithium’s electric cars also have lower running costs versus its traditional counterparts, Attewell pointed out.

But is that enough for an electric cab service to succeed in India?

The answer is not black and white.

INDIA AND ELECTRIC VEHICLES

“Currently, there are a lot of perception issues in Indian customer minds towards electrical vehicles, especially cost and safety,” said Abdul Majeed, partner and national auto practice leader at PwC in India.

While the concept makes complete sense in many Indian cities struggling to deal with motor vehicle emissions, it is yet to take off in a big way in cities outside Bengaluru, which is “India’s Silicon Valley”, Majeed pointed out.

Alternative fuel vehicle (including electrical vehicle) sales volume globally is just 3% and is expected to go up to 12% by 2021, according to PwC.

While the EV concept makes complete sense in many Indian cities struggling to deal with motor vehicle emissions, it is yet to take off in a big way in cities outside Bengaluru

“Lithium’s journey so far has not taken off in a big way because of many challenges such as cost, battery life, safety (possibility of battery explosions), infrastructure for battery charging and public perception,” Majeed said, underlining the need for better backing from the government too. “If these issues are addressed holistically, one could expect growth in future.”

While the Indian government wants to have 6 million electric and hybrid vehicles on the roads by 2020 under the National Electric Mobility Mission Plan 2020, electric vehicles have not had many takers in the country.

An Accenture research report released in December pegged China and the US as the best countries for the electric vehicle sector. It termed Brazil, India and Russia as “hesitators” due to the small market size and an expected low growth rate.

“Lithium’s journey so far has not taken off in a big way because of many challenges such as cost, battery life, safety, infra for battery charging and public perception”- Abdul Majeed, partner and national auto practice leader at PwC

“These markets are characterized by a lack of public charging infrastructure and low fuel prices, which have been constantly low in the respective markets, independent of current low oil prices. This combination makes EVs economically unattractive,” Accenture said, urging original equipment manufacturers (OEMs) to not yet make significant investments, but to regularly re-evaluate the opportunities here.

ANGELS TO THE RESCUE

But Lithium’s backers, including its angel investors such as Robin Chase and Narayan Ramachandran, are far more optimistic.

What Ramachandran, chairman of InKlude Labs, really likes about Lithium are the people involved, the brand concept and the very attractive business scope that it represents.

“I think the envelope gets pushed by firms that innovate (with) new business concepts and Lithium is one such firm,” said Ramachandran, who was the former country head of Morgan Stanley India.

While electric vehicle transportation is in its early stages across the globe, for the first time, battery prices have been dropping (about a 60% drop in the past five years) and the rapid decline is likely to continue, he said.

Lithium Urban Technologies, which has raised $1.3 million of equity and $1.3 million of debt, is looking to raise $6-7 million to fuel its expansion plans.

Lithium Urban Technologies, which has raised $1.3 million of equity and $1.3 million of debt, is looking to raise $6-7 million to fuel its expansion plans.

With over 200 Mahindra e2o cars on the road now and several hundred in the pipeline, Lithium is already the single largest buyer of electric vehicles in India.

Ramachandran expects Lithium to do bigger things in the future.

“Lithium will pilot important business use case adjacencies in electric freight, two-wheeler and buses and possibly even using hybrid vehicles,” he said.

“I think the envelope gets pushed by firms that innovate (with) new business concepts and Lithium is one such firm”- Narayan Ramachandran, chairman of investor Inkude Labs

Contrary to initial expectations, the difficulty has been more with financing structures that make business sense versus operations, he said, adding that “it would be great to see more manufacturers and financiers in the EV segment”.

It looks like SoftBank Group chairman Masayoshi Son read Ramachandran’s mind. Earlier this month, he said that Ola, in which SoftBank is an investor, may introduce a fleet of one million electric cars—a move that could end up being a shot in the arm for the country’s electric mobility sector. He is optimistic about the sector’s prospects and plans to look at investment opportunities in it.

Chase, who is the co-founder of the US-based car-sharing business Zipcar, is also happy with her investment in Lithium. She measures the start-up’s progress by the number of people it has transported and the number of vehicles it can economically support with those trips.

“They have had rapid growth since they were founded—growth that is due to satisfaction of those who are paying for the service. I look forward to their continued expansion,” Chase said. “The future for cities will be shared electric mobility.”

The decision to be part of Lithium was far simpler for others such as Babu Reddy, 39, who started as a driver at Lithium in June 2015 and is now a supervisor.

“This is different actually. Nobody gives their drivers training and coaching classes (like how Lithium does before assigning them to various clients)”- Babu Reddy, driver with Lithium Urban Tech

Reddy has high praise for his employer and recommends Lithium to any driver looking for a new job, highlighting a better quality of life versus his peers at Ola or Uber due to shorter work shifts and weekly off.

The general ease in driving electric cars and the monthly incentives are other pluses, he said, adding that it is also a great starting place for drivers. “This is different actually. Nobody gives their drivers training and coaching classes (like how Lithium does before assigning them to various clients),” Reddy said. “It will be very nice.”

Lithium also supports higher education of some of their drivers’ children who score well in Class X, Krishnan said.

SO, WHAT’S NEXT?

The future of urban public transportation will be driven by four key tenets: clean, distributed, shared and connected, according to Krishnan.

Keeping that in mind, he wants Lithium to eventually engage across the electric mobility value chain.

In the near term, he wants Lithium, which currently has 255 electric vehicles under contract, to expand to more cities beyond Bengaluru and New Delhi.

He plans to collaborate with more OEMs to introduce different new form factors (vehicles) for freight, mass transit and consumer transport by April 2017, and wants the company to expand its fleet to 6,000 vehicles in four years.

To do all that and more, the company, which has raised $1.3 million of equity and $1.3 million of debt, is looking to raise $6-7 million.

In addition to Ramachandran and Chase, Lithium counts KPIT promoters’ group, Kewal Nohria, Cognizant’s Lakshmi Narayanan, H.V. (Prasad) Subramaniam and Subrata Ghosh as its angel investors.

Krishnan wants the Lithium Urban Tech to expand its fleet to 6,000 vehicles in four years

Krishnan said the company, which has managed to break even already, has annual revenue run rate of $4 million. He expects a revenue run-rate of $6.5 million by March 2017 and revenue of $100 million in four years.

NEXT BIG WAVE

Even Chetan Maini, the founder of Mahindra Reva Electric Vehicle Co. Ltd and the man who gave India its first electric car 15 years back, has high hopes for Lithium.

“When I started Reva, it was way ahead of its time. What is happening today is a host of factors coming together” such as better technology, awareness of electric cars and a more favourable policy stance from global lawmakers, he said.

“What is happening today is a host of factors coming together… The long-term vision is to move into several different product platforms. This is going to be the next big wave”- Chetan Maini, founder of Mahindra Reva EV, on urban public transportation powered by electric cars

“The long-term vision is to move into several different product platforms,” said Maini, who is a co-promoter, board member and investor of Lithium.

While Lithium is currently focused on corporate transport in India, Maini expects a future where it could dabble in other mobility areas such as goods transport and “first-mile/last-mile” delivery, and think beyond India.

“This is going to be the next big wave,” Maini said, referring to urban public transportation powered by EVs

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