India’s electric three-wheeler boom has been as unorganised as it has been rapid. But a few established automakers are looking to be part of this revolution in the Indian three-wheeler market, dominated currently by many small, unorganised players. These attempts, however, have so far come in the form of small pilot projects in various cities and haven’t taken off in a significant way as the market still favouring upstarts and small manufacturing units. Mahindra & Mahindra has often called the electrification of three-wheelers a ‘low-hanging fruit’ and is currently the only market player in the li-ion autorickshaw space, and also manufactures lead-acid battery-run three-wheelers. CNBC-TV18’s Alisha Sachdev caught up with Pawan Goenka, MD and CEO, Mahindra & Mahindra to understand how the company is navigating this electric road.
I want to talk to you about M&M’s SmartE initiative (a Delhi-based last-mile e-mobility service). This was a fleet of 1000 vehicles that were launched. Some Treos (Li-ion e-rikshaws) are currently part of this fleet, but how many more three-wheelers from M&M do we see forming part of this fleet and are you looking to expand this initiative because so far these three-wheelers have been very unorganized. How do you plan to tap into that market?
Amongst the various segments, the segment that is most ready in terms of commercial viability for electrification is the three-wheeler segment. In Treo, our internal calculations show the owner-operator could make Rs 2,000-3,000 more per month in terms of savings than they could in ICE or CNG/LPG type of engine. Therefore, we’re ready in terms of commercial viability, now the question is a pick-up in demand. Fortunately, there are many small initiatives happening throughout the country. SmartE is happening in Delhi, on a somewhat bigger scale than many others. We would probably be announcing few more tie-ups in a couple of weeks, three weeks in diff cities in India and when the FAME-II came for a while we had to get into re-registration because the old registration wasn’t valid and some new rules were defined… so we lost a month-month and a half in that process and then now we’re restarting.
The interest in three-wheelers is very high and right now among the traditional players, I think M&M is the only player which has launched Li-ion autos. There are some Li-ion rickshaws by another player but autos only by one. There are many unorganised players, new players which have come into this. Every week or ten days I see an announcement of a new player jumping into it. So it’s a new game that’s there. The number of three-wheelers that gets sold in India is 50,000 a month (ICE engines). That’s a very large number. Right now we’ve sold a sum total of 1000, and we’re doing 300-400 a month now. We have the capacity for a thousand a month, we can easily go up to two-thousand a month and we can with some lead time go to any number that’s required.
So we’re ready for the explosion and we’re participating in it not just by selling vehicles. We also have lead-acid three-wheelers.
That’s an interesting space because there are lots of unorganised players in India manufacturing entirely from scratch in India in the lead-acid category…
The FAME-II scheme doesn’t apply to lead-acid because the government isn’t encouraging those three-wheelers for the right reasons because their battery doesn’t last long and so on. Even though we’re selling about 800 of those three-wheelers, the e-Alfas… and to the best of my knowledge, we have the highest volume in that segment and the highest volume in the li-ion segment because there’s no other player in it from the organized sector.
But the 50,000 figure is a very big volume. The government of India at one point talked about becoming 100 percent electric by 2023, right now they’ve backed out from it. My view is to let it take its natural course.
Does that impact M&M’s strategy towards EVs in any way? No, it doesn’t. If we get to a volume of about 2,000 a month, it starts paying off in terms of making commercial return for Mahindra for all the investment we’ve done. But if the vol requirement from M&M becomes 5,000, 10,000, 20,000, we’ll be prepared, it isn’t a problem. But isn’t it being viewed as a dampener? in any sense that the government is going back on its (earlier proposals)? In some sense, 2023 was a very aggressive timeline and what I’ve been saying is that ICE engines and electric vehicles have to co-exist for a while. So let it take its natural course instead of forcing it because what the government has done is incentivize in a very big way the electric three-wheeler by taking the GST rate down to 5 percent, by FAME-II scheme where 65-70,000 of incentive comes in by removing registration tax, removing permits. There’s a lot of things that have been done to make it happen.
I’m sure we will see a big exponential growth happening in the li-ion electric three-wheeler. The problems today are basically two: Still many RTOs ARE not registering Li-ion three-wheelers because the rules are not clear. They’re asking for this, asking for that. The second concern is that the financiers are somewhat hesitant to finance an electric-three wheeler. Because it’s an unknown entity, they don’t know what life will be Etc. Therefore the interest rate for li-ion three-wheelers is almost 5-6 percentage points higher than it is for ICE engines. If these two things get corrected, I think the growth will be much faster.
We for the last two months have been the first movers… it has some advantages and some disadvantages. We’re the ones who are trying to clear all these roads by impressing upon the RTOs to register three-wheelers and we have many projects waiting to take off the moment we’re able to register our three-wheelers.
Lead-acid three-wheelers came at a time when li-ion three-wheelers weren’t available. And they came when in very inexpensive and in my view unsafe kits imported from outside and govt clearly didn’t support it because they knew that isn’t the future they want. Hence it’s a transient product. Once the li-ion three-wheelers establish itself and we know for a fact that it will cost more to buy, but in terms of payback, it will be higher payback than lead-acid. When li-ion is grounded fully, the lead-acid will slowly disappear.
What do you think are the challenges for organised players in the lead-acid category?