Daybreak - How do you get people to switch to electric cars? Take the subscription route

Episode Date: November 19, 2024

In many ways, electric vehicles today are where mobile phones were in the early 2000s. It’s December 2002. Mobile phones have entered the market, but the average Indian is still pretty sceptical. Cell phone connections are patchy and more importantly expensive. Devices themselves were unwieldy, limited and again…expensive. Basic services like sending a text, or a voice mail, or call waiting were considered ‘add-on services’ and they needed to be purchased separately. So most people thought it just wasn’t worth the investment. That was until Reliance came in and changed everything. Back then, Mukesh Ambani launched Infocomm. The idea was to make telephone calls in India as cheap as sending a postcard. And it worked. Slowly, as costs started to drop, more and more people saw sense in adopting mobile phones, and eventually abandoning landlines altogether.This episode is by no means a history lesson. But that context was important. Because India is almost exactly where it was back then. Except, the device they are on the fence about is now electric vehicles. And the company in question now is JSW MG Motor. Funnily enough, the solutions that JSW is coming up with are eerily similar to the Reliance strategy back then. It's biggest proposition? A subscription plan for your EV battery.Tune in. Daybreak is now on WhatsApp at [phone]. Text us and tell us what you thought of the episode!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 Ramon Ganesh, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. I'm Snigda, the co-host of Daybreak. Before we begin this episode, I have a confession to make.

You know, sometimes hosting a podcast can feel like you're talking into the void. You see, we constantly. trying to improve your listening experience and make this podcast better. In fact, for those of you who've been listening for a while, you would know that Daybreak underwent quite a makeover this year. We went from three episodes a week to five. And we also introduced a new Friday special episode. We got a whole bunch of really interesting people on the show.

And we even introduced a whole new segment called Daybreak Unwine. But the point of all of this is you, our listener. We want this podcast to be a valuable addition to your day. But for that to happen, we need to actually hear what you think. And the easiest way to do that is to rate this podcast on whatever streaming platform you use, especially on Apple and Spotify. Leave us a comment, share it with your friends and family. It really, really helps us.

And if you have some more feedback for us, you can write to us at podcasts at the ken.com or send us a text on WhatsApp. Our number is 89711, 08379. I'll say that again, 89711-08379. We'll also add it to the show notes of this episode. Thank you in advance, and now on to the episode. In many ways, electric vehicles today are where mobile phones were in the early 2000s. I'm going to explain what I mean in a little bit,

but before that, this episode of daybreak is based on an issue of our very very much. popular newsletter Nutgraff, written by the Ken's chief operating officer Praveen Gopal Krishna. Now, Praveen began his newsletter with a flashback from 2002. And you know what? I'm going to do that too. So stay with me here. It's December 2002. Mobile phones have entered the market, but the average Indian is still pretty skeptical. You see, cell phone connections are patchy and more importantly expensive. And then you have devices which themselves were unwieldy limited and again, expensive. Now, if you're under the age of 25,

this may come as a shock to you, so brace yourselves. But basic services like sending a text or a voicemail or call waiting, you know, when you call someone and it's busy, all of those were considered add-on services and they needed to be purchased separately. So most people thought it just wasn't worth the investment. They were okay with good old-fashioned landline telephones at home. It's not that people thought this was some sort of fact.

By then it was clear that mobile phones were the future, but it just didn't make sense to most people. Again, they were expensive, service was uncertain, and then there were all those add-on costs we just discussed. That was until Reliance came in and changed everything. You see, back then, Mukeshambani launched Infocom. The idea was to make telephone calls in India as cheap as sending a postcard. And it worked.

Slowly, as costs started to drop, more and more people saw sense in adopting mobile phones and eventually abandoning landlines altogether. Life was never the same again. It's actually pretty crazy to think that the same company, Reliance, managed to disrupt mobile telephony in India all over again with Geo. But it was Reliance Infocom's CDMA phone back in the day where the original mobile revolution began. The first time around, though, Reliance managed to pull this off in three very simple ways. Offer a competitive product at a low entry price, make future costs predictable based on usage,

and then throw in a bunch of other stuff for free. Now, you're probably wondering why we are talking about mobile phone adoption so much. This episode is by no means a history lesson. But that context was very important. Because India is almost exactly where it was back then. Except the device they're on the fence about, is now electric vehicles. Funnily enough, the solutions that some of the players are coming up with

are eerily similar to the reliance strategy back then. Welcome to Daybreak, a business podcast from the Ken. I'm your host Rahil Filippos, and I'll be joining my colleagues Nica Sharma every day of the week to bring you one business story that is worth understanding and worth your time. Today is Wednesday, the 20th of November. A couple months ago in September, to be precise, JSWMG Motor launched a new electric vehicle.

It was a crossover SUV called the Windsor. Now on first glance, it probably looked like any other MJSUV. So why were most news publications stouting this launch as revolutionary? Well, it wasn't so much about the car. Instead, it was the aggressive pricing model that the company had put in place for it. It's called the Battery as a Service or Bass pricing model. So customers could purchase the car at a starting price of just under 10 lakh, but they would then pay a battery usage fee of rupees 3.5 per kilometre.

It was like a subscription plan for your EV battery almost. And then there were of course the other bells and whistles, an assured buyback plan, a lifetime battery warranty, as well as free public charging for a whole year. It was a never-seen-before deal, and it indicated one thing and one thing only. MG is not playing around. They had every intention to completely disrupt the electric car market here in India.

In fact, Park Jindal, the director of JSWMG Motor, said as much in an interview around the launch. This is the product that we think can truly take the EV penetration in India to the next level. We are actually not really that focused on just the EV segment. We want this product to compete with ice head on. We want to cannibalize and take market share away from ice. He pointed out how most car sales in India happen in the below 10-lac-rupy segment. So the only way to disrupt the market was to enter that segment, which is why they decided to play in that 9 to 11-lac-ru-rupy sweet spot.

JSW also didn't just stop at pricing. It went ahead and announced a lifetime battery warranty for all Windsor buyers. Plus the buyback scheme at 60% of the car's value, definitely didn't hurt. It also threw in free vehicle maintenance warranty, free roadside assistance and scheduled servicing for three whole years. It was literally the gift that kept on giving. Okay, let's take a moment and break all this down. To get more people to buy EVs, specifically MG EVs, JSW did three things. It created a competitive product at a low entry price. It made future cost predictable and then it threw in a bunch of attractive add-ons.

Do you see where I'm going here? Because it sounds a lot like what Reliance did with Infocom back in the 2000s. But will it work? Stay tuned. One way to assess whether JSW strategy with Windsor will work is to ask whether electric vehicles today are where mobile phones were in the early 2000s, which is also how I started this episode. Like I said earlier, in some ways it is true.

Electric cars are the future and yet, like with mobile phones, adoption has been pretty slow. In fact, this year has been particularly bad. And that's because of the high upfront costs and uncertainty about the tech. Charging infrastructure or the unknown future costs. That's what's deterring people. Which is why people who buy EVs today are technically ones who can afford it, are somewhat tech savvy and want to display it as a status symbol.

All of this was also true back in the 2000s when only a few people had mobile phones. Specifically for India, JSW's bold best. needs to be seen in context. Around the same time it was launched, the Indian government announced the new electric subsidy policy titled PM Electric Drive Revolution in Innovative Vehicle Enhancement or the PME Drive scheme. Quite a mouthful there.

This has an outlay of 10,900 crore rupees over two years. The new policy offers incentives and subsidies for electric scooters, bikes, three-wheelers, buses and trucks. It's essentially a continuation of the previous policy, FAMME 2, but with one notable difference. The policy doesn't mention electric cars. The thing is, this will most certainly slow down the adoption of EVs. In fact, it already has.

In the period after the Fame 2 subsidy came to an end, electric car sales in India dropped by nearly 10%. Simply put, if we want electric cars to go through mass adoption in India, subsidies from the government aren't going to be the way to do it any longer. In his newsletter, PGK said it's likely that the Indian government is secretly hoping that it will encourage companies like JSW to go the reliance way. If manufacturers of electric cars need consumers to adopt them, they'll simply need to try harder and be more innovative with pricing, financing,

marketing and absolutely everything else. This places the risk and uncertainty in the hands of the companies themselves. and not all companies have the capital, the appetite or the willingness to blow thousands of cross to create adoption within consumers. There is, of course, a flip side to all of this. You see, when Reliance stepped up back in 2002, it came in as a disruptive, powerful force that transformed mobile telephony forever in India. It spent a massive amount of money to do this.

But it never quite reaped the benefits. There are many reasons why Reliance couldn't. capitalized on what it created. It bet on the wrong technology and CDMA was a worse option than GSM. It had problems with service quality, plus there was the internal battle that was brewing between Mukesh and Anil Ambani, which of course didn't help. PGK said that perhaps GSW is in a similar place. Although the scale of its ambition is a lot smaller. It's testing out this new electric car scheme for just one model instead of betting the whole house on it. Just like Reliance, it's also a powerful company.

with deep pockets and can afford to persist at losing money to grow the market if it wants to. So, how will this play out? Well, in all likelihood, it could compel other companies to change the way they work, to take risks and to do some strange things to get people to buy, adopt and switch to electric cars. Maybe this is how the revolution begins. 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.

Head to the ken.com and click on the red subscribe button on the top of the website. Today's episode was hosted by Rahil Filippos, produced by me Snikdas Sharma and edited by Rajiv Sien.