Daybreak - The government is pushing for e-buses. But private bus operators are not hitching a ride

Episode Date: January 20, 2025

A bunch of startups are not entering the booming Indian e-bus ecosystem and becoming overnight successes. Just take the case of EKA mobility. Before 2023, EKA was barely a company. It was more the R&D wing of Pinnacle Industries, which is a major manufacturer of seating and interiors for legacy automakers like Tata Motors and Ashok Leyland. But when the government launched the PM E-Drive subsidy back in September, everything changed for Eka Mobility. The five-year-old startup turned into a full-fledged EV manufacturer. Eka Mobility is one among many beneficiaries of the EV wave here in India. But naturally, it does not come without its challenges. Which is why, despite India’s e-bus ambitions slowly gaining momentum thanks to government funding, the private sector has barely put its foot on the pedal. 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 Raman 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 Sita Ramancahine. 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 managed 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. to 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 Podcast. 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. Hey, daybreak listeners, I'm Rahal, the co-host of this podcast. 2024 was a big year for daybreak. But first and foremost, we kept our promise. Four days a week, we brought you one interesting business story to get your day started. Each episode was short, simple, and most importantly, insightful. We also went ahead. and switched things up.

Once a week, every Friday, we dropped a special original episode. We call these episodes TFEs or the Friday episode. Unlike our usual crisp episodes, our TFEs are usually longer and feature very interesting guests. There are also no constraints on the kind of topics we choose. So we've ended up asking and answering a wide range of questions. From why China is at the forefront of the global EV race to why more and more women are freezing their eggs. there is something for everyone. As we enter 2025, we are only going to push the envelope further.

So keep listening to Daybreak. And while you're here, please could you rate our podcast on your preferred streaming platform? It'll only take a few seconds and it will really help this podcast grow. With that, let's get on with the episode. The Indian government has been pushing for transport electrification for a while now. It wants more vehicles across the country to run on electricity. But its most recent push in that direction, a nearly 11,000 crore-rupee EV subsidy sent a very clear message. You see, it's not cars that will be driving India's electrification process, it will be buses.

And the reason we know that is because a lion's share of those subsidies we just spoke about. 40% to be exact were year-marked for e-buses. Now, that works out to about 8,000 crore rupees in total. And that's money that has never been on the table before. As a result, a bunch of startups are now entering the booming Indian e-bus ecosystem and becoming overnight successes. Just take the case of Eka mobility. Before 2023, Eka was barely a company. It was more the R&D wing of pinnacle industries,

which is a major manufacturer of seating and interiors for legacy automakers like Tata Motors and Ashok Leyland. But when the government launched the PME Drive subsidy back in September, everything changed for ACA Mobility. The 5-year-old startup turned into a full-fledged EV bus manufacturer. The company currently has about 105 buses on the road, with an order book of 1,500 more worth at least 3,000 crore rupees. So clearly, things have been looking up for this company. In fact, it even raised $124 million in funding

and has also struck a partnership with the Dutch bus manufacturer VDL Group. ECA Mobility is one among many beneficiaries of the EV wave here in India. But naturally, it does not come without its challenges. The Ken reporter Nathan Narday spoke to a veteran in the space, Mahesh Babu, the global chief executive of Switch Mobility, which is another e-bus manufacturer. He said that the nature of the game has changed completely. This isn't a B2B or B2C play anymore. It's B2G or business to government.

And startups that manage to win a tender are in it for the long haul. I'm talking more than a decade. Amit Bhatt, the India CEO of the council, which is a non-profit body, echoed Babu sentiment. He also laid out the stats. You see, only 7% of the total buses in the country are public buses. And a mere 0.003% of those, nearly all of the 9,000 e-buses zipping across Indian roads, operate on something called a gross cost contract or GCC. Now, that's essentially a public-private partnership where the state operates these buses and the companies deliver assets and take care of things like the annual maintenance of the vehicles.

As of now, that is where the money is at. So while India's e-bus ambitions are slowly gaining momentum thanks to government funding, the private sector has barely put its foot on the pedal. Because GCCs are complicated. And what has ended up happening is that there are very few operators now that are daring to dream big. than just taking care of the taxpayers' daily commute. Welcome to Daybreak, a business podcast from the Ken. I'm your host Rahil Philippos, and I'll be joining my colleagues Nika Sharma every day of the week

to bring you one business story that is worth understanding and worth your time. Today is Tuesday. Let's go back to the Eka story. Today, Pune-based Eka's buses can be found swishing through the streets of neighboring Maharashtra cities all in the GCC model we just discussed. So, the way it works is that instead of just selling the government some buses, companies like ECA also have to maintain the fleet for them.

And in return, the government or the state transport undertaking or SKU will pay the operator on a per-kilometer basis. It's essentially a pay-per-use model. And according to people in this space, it ends up slashing an operator's cost of a 12-meter e-bus from $97 per kilometer to $43. Now, e-buses don't come cheap. Depending on specifications, it can retail for anywhere between 1 to 2 crore rupees. Now let's compare that to an equivalent diesel bus, which retails for about 15 to 50 lakh,

while a CNG1 would sell for about 28 to 50 lakh rupees. So, in a traditional ownership model, the government or STU would have to pay the full cost up front and take care of maintenance. Compared to that, the GCC model with asset light and paper use design sounds sort of like a win-win, right? Wrong. You see, the biggest issue is that STUs tend to default on their payments. In the past as well, the Ken has written about how these STUs are constantly in the red because of their high operating costs.

Well, in this case, e-bus manufacturers bear the brunt of it. When it comes to government bodies, Babu from Switch Mobility said they usually never default, but delays and payments are pretty common. For context, Switch has been operating e-buses under the GCC model for three years ago. across 15 cities. Now, the issue with that is that GCCs are generally very capital intensive. They drive up operating and maintenance costs for bidders. So delays and defaults can be very painful.

Babu said delays naturally mean a lack of working capital, which makes it harder to get loans and, more importantly, pay drivers. And this isn't just a problem that newbie start-ups have to face. Some of the biggest players in the space, the likes of Tata motors, have had to face driver strikes because of unpaid. salaries. All because of the same GCC model. Naturally, it's even tougher for smaller companies because Tata and Ashok Leland can still figure out how to deal with a situation like this in the short term. Smaller players don't quite have that luxury. And that's not even the biggest

hurdle-start-ups like ACA mobility have to deal with. Stay tuned. While there are a lot more e-buses buzzing around Indian streets today than ever before, a lot of them are now experiencing a fair bit of downtime. Case in point, on March 10th, the Ulhasnagar Municipal Corporation or UMC flagged off its e-buses after a decade-long hiatus. It was a big deal and a major milestone for the UMC. Services were supposed to start the very next day. But weeks later, the shiny new E-Kha mobility e-buses were gathering dust at the depot because there were no charging stations nearby. That was a tiny detail that the UMC didn't quite take care of in its rush to inaugurate its new fleet. Now, when Nathan asked Eka about the company, it said that the operations of the contract are a part of the operator's scope, who is also the owner of the assets.

The company said that charging is not an Eka's scope in the said UMC project. Eka's obligation is limited to manufacture supply and annual maintenance. And in that regard, things were under control. Now, the Ulhas Nagar incident is not a one-off because charging is one of the big missing pieces from India's EVE puzzle. The other issue is that around 93% of India's 2.4 million buses belong to private operators. Think school shuttles or employee service buses. Now, private operators tend to steer clear of e-buses and the GCC model because the total cost of ownership just does not add up.

The crux of the issue lies in how these buses operate. School and employee buses follow a strict route of roughly 25 to 30 kilometres. In fact, Nathan spoke to Bhatt of ICCT to understand the economics of it all. For the total cost of ownership to make sense, the private operators have to sweat the asset. Owing to the limited distances and fixed timings of schools and employee bus services, the asset in its current configuration cannot be sweated out. The sentiment was also echoed by another senior executive of a private e-bus operating firm. But all of this doesn't bother E-QAW mobility.

It recently secured a 250 bus contract with the Nagpur Municipal Corporation. This addition to ECA's order book is more of the same strategy where e-buses are brought on Indian roads through a government push. But at the same time, Eka mobility is also stepping into territory it hasn't charted before, because there have been instances where things have gone really wrong. Case in point, Greaves Retails Foray with Greaves Electric. Now, Greaves is primarily known as a critical component manufacturer. It's partnered with 40 OEMs and 200 distributors.

And after benefiting big time from the government, government's EV subsidy, famed to last year, Greaves Electric was ordered to pay back $1.24 crore rupees for violating subsidy moms. Grieves is also not alone. Many companies in the space have been charged with violations and are staring down the barrel of bankruptcy. Naturally in the process, customers may also end up being stranded. Now, if things go to plan for ACA, it may be a saving grace in India's dream of transport electrification. Daybreak is predict 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 Filippo's and edited by Rajiv Sien.