After more than 18 years of building an electric car and the frustrations that followed, finally, there is financial and policy backing for Chetan to go all out on solar energy and electric vehicle solutions.
Lavelle Road, Bengaluru, housed the rich and famous for over a century. Although its colonial charm has been lost, it remains a happening place, having transformed into a hub for entrepreneurship and change agents. Tucked away on the third and fourth floor of a contemporary art gallery is the residence of 47-year-old Chetan Maini, the man who founded Reva (now Mahindra Reva). It was here that he dreamed of kick-starting an electric vehicle (EV) revolution in India in 1999. He was only 29 years old then.
Although Chetan sold his company to Mahindra & Mahindra (M&M) for a large sum in May 2010--he realised that only a large group with deep pockets could nurture and sustain a company like Reva which was ahead of its times--it proved to be a right decision as the sale did save the company from slipping into oblivion.
Now, after six years of advising M&M on its electric platforms, Chetan set out to ascertain what was missing in the EV industry that made it unviable.
“I was young and built Reva with very minimum resources. I dreamed big, but did not connect several dots as to why the ecosystem was not taking off,” says Chetan, who is now co-founder and vice chairman of Sun Mobility.
Chetan Maini, vice chairman of Sun Mobility, driving a EV concept car.He got all the answers he was looking for. Every kilowatt hour (kWh) of lithium ion battery costs around $1,000-1,500, and so higher the power of the battery, higher the cost of the car. Reports suggest that battery costs are falling and this year it is expected to be $245 per kWh. If this has happened then Chetan Maini has a real business case to make Sun Mobility go global too. The Reva costs upwards of $10,000. Then, the lack of charging facilities across cities restricted its appeal to only the environmentally conscious. In short, Reva made little sense to Indian consumers, and as a result, only around 7,000 Revas are on the road today.
Even the Tesla retails at over $70,000, thanks to its battery. Eight years ago, Tesla Roadster cost $200,000; its battery was a mind-boggling 85kWh, and could go 500 km on a single charge.
In mid-2015, Chetan decided to take a break and travel across the world for ideas. He met Uday Khemka, Vice Chairman of Sun Group, which had invested more than a $1 billion in renewable energy globally. Uday and Chetan decided to do something in the renewable energy industry but were not sure about the opportunity. They began to ideate further.
The last 20 months saw Chetan unlearn everything and start from scratch. He also spent time with Ashok Jhunjhunwalla, the IIT Madras professor and one of the brains behind India's EV policy. Slowly, he began to get a new perspective. Most EVs in India were fitted with batteries from China, and were just plug-and-play vehicles. There was no IP on the battery management system, and neither was there an ecosystem to support the consumer.
He locked himself up in a gated neighbourhood in Bellandur, a Bengaluru suburb, where he spent long hours studying technical papers and trying to figure out ways to support the electric vehicles ecosystem. The finally zeroed in on the sun, after realising how it could help bring down the cost of EV ownership across the country.
Sources say Chetan finally secured a $100-million fund for this project. But Chetan does not want to disclose the numbers as yet. "All I can say is that this business requires more money than my previous venture," he says.
“Renewable energy is here to stay. More so solar energy, which we have in abundance, and policy is supporting the growth of solar,” says Prof. Ashok of IIT Madras. Sun Mobility was born in April 2017 after months of planning by Chetan and Uday to set up an end-to-end energy solutions company that buys, stores and retails energy.
The opportunity, of course, lies in the fragmentation of the renewable energy industry and the electric vehicle industry. The duo wants to converge solar and EVs to build a business.
According to data gathered from the Union ministry of power, India’s power generation capacity is 2,72,000 MW, of which only five percent comes from solar energy. The government wants to increase solar generation to 1,00,000 MW by 2030, and the cost of this energy is coming down due to subsidies provided by the government and the large investments that are being made in the sector. Around Rs 70,000 crore has been invested in the sector so far. Solar power, which cost Rs 10 per unit just five years ago, has now come down to Rs 4 per unit, and has suddenly become commercially viable.
The National Electric Mission Mobility Plan wants to have more than six million electric vehicles on the road by 2020, but we are a long way off from achieving this number. According to the Society of Indian Automobile Manufacturers (SIAM), only 22,000 electric vehicles are on the road in a six-million-strong vehicle market, and something must be done about it.
No wonder the NITI Aayog stepped in recently and said by 2030 India will only have an electric vehicle fleet on the road. This must answer the question as to why Chetan is so confident this time. He also has the policy backing his vision and all his time spent in Delhi is paying off.
But what's the connection with solar power? The company wants to re-imagine the way batteries are distributed and energy is stored. In a way they are also rethinking the design of the car. In fact, Chetan is in talks with several OEMs to make EVs.
“Every OEM is working on an EV or hybrid strategy and India needs this change because India’s fuel import bill is very high and hurts the economy,” says Amitabh Saran, Founder of Altigreen, a hybrid vehicle tech company.
Currently, India’s import bill is pegged at $150 billion per year and its fluctuations hurt trade.
Sun Mobility, which is an IoT company for consumers and its stations or bunks, will buy power from solar plants and store it in batteries. They will be distributed through a battery network (like your petrol bunk), which will support electric vehicles travelling across the country. Think about it this way; the owner of the electric car or truck can drive anywhere in the country and replace the battery like they refuel petrol or diesel, which means the battery need not be fixed for life in the car. It can be modular, which means it can be fixed when the car's previous battery is running out. This frees up the cost of the battery from the ownership of the car since the battery is no longer loaded into the sale price. Just to illustrate this, the price of the vehicle can fall by 50 percent. But will the cost of the lithium ion battery fall with this opex-based model? Chetan tells us that at least the customer does not have to pay for the battery, and pays for the miles he puts in the car.
Sun Mobility plans to have robots removing the old battery and replacing it with a fresh one at its centres or battery bunks. The old one goes into the electric bunk for recharge and will be fitted onto the next vehicle.
The plan is bold and ambitious and can either be a billion-dollar business or will need a lot of capital to pull off. Chetan knows the risks and even has the backing of his family, including brother Sandeep. Sun Mobility is a JV between Virya Mobility and Sun New Energy Systems, the investment arm of the Sun Group.
“We are already signing PPAs with solar energy suppliers,” he adds. Once the power purchase agreements are done Sun Mobility will start building its network of battery bunks and will help OEMs focus more on their EV strategy.
“This form of business will reduce the cost of the electric vehicle. But the business dynamics need to be figured out,” says Mohandas Pai, MD of Aarin Capital.
Sun Mobility will provide a battery management app, which will tell consumers when they have to go to their nearest bunk to replace the battery. Although the unit economics have not been unveiled yet, it would be interesting to see how Sun Mobility will subsidise the cost of the lithium ion battery and open battery bunks across the country. The business will require at least a decade of patient capital, because it involves changing consumer behaviour. For now, it is based on the only cost that is available, which is Rs 3 to purchase one unit of solar power.
This model will work so long as customers pay less than Rs 3.30 per km, which is closer to the amount they pay per unit of fossil fuel per km. The advantage of driving an EV is that there is no maintenance or investment in moving parts like the engine and total cost of ownership drops considerably.
In the US, there are close to a million EVs on the road, thanks to the EV infrastructure being built by all OEMs like Ford and General Motors. Last year, the total EV sales in the US was 1,59,000 units. In Europe EV infrastructure has been set up in Scandinavian countries like Norway and Sweden. Then there is France, Germany and UK, which dole out subsidies for EVs. The dominant players are Nissan, Ford, Mitsubishi and Tesla. All these cars have batteries prefitted in the car for their lifetime and requires charging stations. If one looks at the EV landscape in India, M&M, Ashok Leyland, Honda and Toyota have some form of EV play. But M&M is the best customer that Sun Mobility can have because they have a serious play in the EV ecosystem.
The unit economics will work out for Sun Mobility when there are 6 million EVs or more on the road by 2030. It will release its first EV station or bunk by 2019, and its business model will go through several iterations. The customer will have to pay every time he replaces the battery. So all the help from policymakers will help the company succeed.
Chetan is currently building his team. The challenges are aplenty because nobody has attempted this so far in India. Only Tesla has created a network of 760 stations globally. Eighteen years after his dream project, Chetan has the backing of not just policy, but also the capital to rev up his passion. Only time will tell if he will succeed.