Daybreak - Cab companies gave big EV orders to Tata Motors. Why don't they have more EVs in their fleets then?

Episode Date: May 3, 2024

Even though EV sales just make up a fifth of the Tata Motors’s overall sales, the automobile-maker is still the reigning giant of India's growing EV ecosystem. It is also leading the cab industry’s shift to EVs.Over the next 3 to 5 years, it has promised to sell at least 50, 000 EV four wheelers to cab companies. Based on the deal made over a year ago, half of them are meant for Uber. But it's been over a year since the deal with Uber and only 4000 Tata EVs are up and running in Uber's fleet?Did Tata Motors make a miscaculation? Tune in.Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too? It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

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More than a million people in India have registered to buy electric vehicles or EVs in the last couple of years. And Tata Motors is taking the lead in electrifying the personal transport space here. You knew that. And even though EV sales just make up a fifth of the automobile companies

overall sales, it has the EV monopoly in our country. Now, if you remember some time ago, I told you about how Tata is also naturally leading the cab industry shift to EVs. Tata has promised to sell at least 50,000 EV4 wheelers to cap companies over the next three to five years. And half of them, that is, 25,000 express teas are going to Uber, which makes it one of the largest deals in the green mobility space. ExpressT is Tata's electric sedan that's the go-to choice for cab companies because it has been specifically designed for fleets. It is basically a facelifted TIGOR, which is TATA's most affordable and most popular EV in India. But it's been over a year since the deal with Uber and guess how many of those 25,000 Tata EVs are up and running in its fleet?

Just 4,000. Meanwhile, the other biggest cab aggregator, Ola, seems to be consciously staying away from electrifying its fleet anytime soon. Has Tata Motors made a mistake here? A miscalculation maybe? Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nick Dha Sharma, and I don't chase the news cycle. Instead, thrice a week on Mondays, Wednesdays and Fridays,

I will come to you with one business story that is worth understanding and worth your time. By the way, daybreak episodes also drop on Tuesdays now, featuring my new colleague Rahal Philippos. Today is Friday, the third of May. You see, fleet operators like Uber are very important for EV makers for multiple reasons. Number one, they place large orders, like how Uber made a pact with Tata for 25,000 EVs. And number two, which is crucial for EVMakers, is that they also help in convincing skeptical customers about switching to EVs after they take a ride in these cars.

But a senior industry executive told my colleague, Shashatakundu Chaudhuri, that Tata's usual monthly shipment of around 800 to 1,000 electric cars to cab fleets has dropped to 500 to 600 only. This slowdown in EV adoption, though, is not just an India thing. EV adoption around the world has slowed down because of a whole lot of factors, including the lack of an adequate public infrastructure. But in India, there is more to it. Something changed in March this year.

Remember the fame two or the faster adoption and manufacturing of electric vehicles in India scheme? Well, that came to an end on the 31st of March. For context, it was introduced by the government in 2021 with a budget of 10,000 crore rupees to support the production of more EVs in India. Under this version, companies were able to offer a discount of up to 40% on the cost of locally manufactured vehicles and claim it as a subsidy from the government. But the end of fame is not the only reason for this slowdown. The Kent sources from cab companies told us that Tata is coming up with a new version of

the Express T with a lower battery capacity. This means that there are changes in the company's pipeline which may have slowed down production. So all of these factors combined have delayed the adoption of EVs, especially in cab fleets. But there is one more thing. Actually, it is probably the biggest reason of all. Stay tuned to find out. Maintaining EVs requires time and patience.

Actually, a lot of both. And for a company that runs an entire fleet of them, it is not the best thing. I'll explain. But before that, let me get this out of the way. Despite the fact that EVs are more expensive than your regular ICE or internal combustion engine cars that use fuel, EVs are still more beneficial.

Their total cost of ownership is lower, and they also have fewer moving parts, which means cheaper maintenance. Maintaining a regular car is more expensive because you have to get it serviced after every 10,000 kilometers or so. And that is not the case with EVs. But here is the downside, and it is not something small that can be ignored.

How long does it take you to service your regular car? car. A day? Two days? Three days max? Servicing an EV takes a whole month. Now just to make it clear, I'm not talking about schedule servicing by the company. I'm talking about running repairs. You won't believe there was one case when a fleet operator dropped off their four-wheeler EV at the service center to get a malfunctioning battery changed. You know when they got it back? After three months. I'll tell you why this happens. It is again to do with the EV ecosystem or infrastructure, which is still at a very baby stage in India.

The Ken spoke to Sanjay Krishna, the founder of lithium urban technologies, which is an electric mobility service provider. He told us that EV servicing requires skilled labor and we don't have enough of that here. Even the after-sales market is not that well-developed. And on top of that, if the parts are imported, the suppliers are limited.

To understand what this exactly means for a cab company, let me give you the example of Blue Smart, the fully electric fleet operator that runs only in Bangalore and Delhi. A senior executive from a major cap company told us that in Bangalore, roughly only 70% of Blue Smart's fleet is running. Half of the remaining 30% of Blue Smart's EVs are with their manufacturer service centres for maintenance. Now, if you think about it, these cap company cars are running all the time, right? So obviously, they will have more repair issues. And the most challenging part of

maintenance, which is the reason why it takes so much time is the availability of parts. The senior executive told us how there is no way for the EV manufacturer to gauge how many of their cars will face problems. So they don't know exactly how many batteries or spare parts they should have in stock. So issues like fixing the battery, harness or wiring will take at least about a month. Now, imagine the cab company's situation when their fleet cars are not available for that long. They lose running time, which means money. Plus, batteries for EVs are mostly imported from other countries like South Korea.

Once the order is placed, it takes at least a fortnight for the manufacturer to receive it. And Krishna also pointed out something that is very important to understand about the EV ecosystem in India. The thing with EVs is that everything is controlled by the OEMs or the original equipment manufacturers. And EVE parts are more expensive than regular vehicles. There is not even a market for second-hand units. So how many parts will the manufacturer keep in stock? That was a rhetorical question. Anyway, now you see how all of this directly affects cab companies like Uber, Ola and Blue Smart.

They all have big plans to expand their EVs. fleets, but they can't. Which is why Uber is taking it slow now and OLA has been doing that already. So, how can this be fixed? I will tell you in the next segment. Someone from Uber told us how a change as massive as the transition to EVs from regular cars takes time and a collective push across the value chain. Sheikh Salalodin, the National General Secretary of the Indian Federation of App-Based

transport workers and the founder of state president of Telangana gig and platform workers union told again that EV policy design needs changes. He pointed out how state governments do not even give subsidies only the central government does. He gave the example of EV charging stations. He said it is quite expensive for cab companies to build charging infrastructure. One way to monetize it would be to offer charging services to the general public. But it is hard to to do because their own fleets will be using those chargers all the time. Plus, with the subsidy gone, the cost of EVs has gone up by quite a lot. So why would people switch?

And why would cap companies because they have to buy these EVs in bulk? And as for India's EVE leader, Tata, its retail customers are more important to it than fleets. And that is because it does not want the image of a taxi manufacturer. I spoke about this in a previous episode of daybreak. I will link it to the show notes of this one. So what gap companies need to make the switch to EVs faster right now is affordable pricing. Tata could help with that if it came up with an affordable EV model. Will it though?

Who knows? Maybe it will change its mind if there is a collective focus on building up the EV ecosystem in India. More charging stations, easier and faster maintenance, The government could help with that. For now though, we'll have to wait till the end of the elections to see who wins and what new policy they come up with. That is all for today. Thank you for listening and I will catch you again with a brand new story on Monday.

Daybreak is produced from the newsroom of the Ken India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form. feature stories, newsletters and podcast extras. To subscribe, head to the ken.com and click on the red subscribe button on top of the Ken website. Today's episode was hosted by Snigda Sharma and edited by Rajiv Sien.