Opinion: India's EV Battery Race Is Led By A Newbie Scooter Maker

The dark horse of India's battery race is pulling away from the pack, but can it beat the bookies' favorite?

Ola Electric Mobility Pvt., a Bengaluru-based startup, will get state support to manufacture EV batteries that can store a total of 20 gigawatt-hours of power, the government said on March 24. Reliance Industries Ltd., the country's largest conglomerate, will get subsidies for five gigawatt-hours. The upstart is getting 40 per cent of the total capacity covered by New Delhi's $2.4 billion in battery incentives over five years. The plan is to shave off $33 billion from the country's fuel-import bill.

Paying firms to play has a checkered history in India: Favored companies invariably ask for protectionist cover. But with Brent crude oil at $120 a barrel, this particular gamble has some merit. Consumers are already shelling out too much at the pump because of high domestic taxes on gasoline and diesel. However, cutting the levies will only make the government's pandemic-strained budget creak and groan. Hence, the desperate policy push to EVs.

There's another goal behind giving money to battery makers, something that can't be articulated in a government press release. The idea is to keep the nascent EV adoption as far away from Chinese technology and raw materials as possible so that India's hydrocarbon dependence doesn't metastasize into a different kind of geopolitical liability in the future. "Today 90% of global capacity is in China," Ola Electric founder Bhavish Aggarwal said on Twitter after winning state support. "We will reverse that and make India a global hub for EVs and cell tech."

That's a lot of chutzpah for a startup valued at $5 billion, based on its last $200 million funding round in January. Ola Electric, backed by SoftBank Group Corp. and Tiger Global Management, is tiny compared with Reliance, which is 45-times bigger in public markets. The conglomerate is controlled by Mukesh Ambani, Asia's richest man, who also owns the world's largest oil-refining complex. Last year, he pirouetted to clean energy by announcing plans for everything from solar panels and batteries to green hydrogen and fuel cells. He committed $10 billion, but has already raised the investment target to $76 billion. There's unlikely to be a bigger national champion of India's bold pledge at the COP26 climate summit.

Yet, New Delhi is backing the lesser-known newbie. Aggarwal won incentives for the maximum 20 GWh that any one company was eligible to receive. Reliance also applied for the full quota, but was put on the waitlist for 15 GWh.

Unlike Reliance, which recently bought a U.K. company with patents in sodium-ion cells - cheaper than lithium-ion, and therefore, potentially more attractive to buyers in emerging markets - Ola is yet to drop a hint about its technology. It wants to research and develop its own batteries, and fill the gaps with investments like the one it made recently in Israel's StoreDot, whose silicon-dominant anodes claim to provide rapid charging. To show his commitment to R&D, Aggarwal has roped in Prabhakar Patil, a former chief executive of LG Chem Power Inc., the U.S.-based research arm of the world's No. 2 EV battery maker, to the Ola Electric board.

Like Ambani, Aggarwal too has made a pivot. In 2011, three years after graduating with a computer science degree from the prestigious Indian Institute of Technology, he cofounded Ola Cabs, a ride-hailing app that competes in India with Uber Technologies Inc. But as the pandemic sucked the wind out of transportation services, Aggarwal jumped on to the EV manufacturing bandwagon.

Last year he built - in record time - a "Futurefactory" that would be the world's largest producer of electric scooters at full capacity, run entirely by 10,000 women and 3,000-plus robots. It's had a bumpy start. The first product - the two-wheeler S1 Pro - initially got delayed, and then ran into bad press. "In its hurry to launch a product, Ola Electric hasn't given the battery enough time in the development process to evolve and mature, resulting in breakdowns that are potential safety hazards and could be Ola Electric's undoing," the Morning Context, a news portal, wrote last month based on user feedback.

Still, consumers appear to be keeping their faith. In February, Ola delivered 7,000 scooters, garnering a market share of nearly 9% among high-speed two-wheeler EVs, according to the research arm of Haitong International Securities Group. This month's target is 15,000. Ola even bagged a slice of a separate $3.4 billion pool of incentives that New Delhi has set aside for auto and parts makers.

India is at the cusp of an EV revolution. It won't start in cars but in the scooters and motorbikes that are usually the first vehicles owned by a middle-class family. Electric two-wheelers, which cost roughly $1,400 apiece, will see faster adoption in India than smartphones, according to Goldman Sachs Groups. Inc., whose base-case scenario is for EV penetration in the segment to swell to 38% by 2030 from 2% this year. Still, Indian automakers don't seem terribly interested in cell manufacturing. Indeed, the only established vehicle brand to have qualified for India's battery subsidies is South Korea's Hyundai Motor Co.

Which makes tiny Ola Electric the big exception - and in more ways than one. China's ride-hailing giant Didi Global Inc. has become an unwitting poster child for Beijing's crackdown against the tech industry. Grab Holdings Ltd., Southeast Asia's Uber slayer, has diversified into financial services. Its rival Gojek reduced its reliance on mobility by merging with Indonesian e-commerce platform PT Tokopedia to become GoTo Group. But they all stuck to the consumer-data business - none of them hit the shop-floor to get into EV and battery manufacturing. The path ahead for Aggarwal is guaranteed to be a potholed Indian road, but as long as he can keep private-market investors, consumers and - above all - policymakers hooked to his vision, he can clock the miles.

(Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.)  

Disclaimer: These are the personal opinions of the author.