Daybreak - Zomato and Zepto are doing for EV battery swapping what the govt isn't

Episode Date: July 4, 2024

For quick delivery apps like Zomato and Zepto that are often questioned for their carbon footprint, switching to electric vehicle or EV fleets is not just a matter of being environmentally conscious, it is also economically more feasible.But here’s the thing. While takes about four hours to charge an electric scooter from zero to full using a slow charger and approximately 15 minutes for a fast charger, battery swapping which literally takes two mins.Which is why delivery company drivers for whom speed means money, battery swapping is a better option than charging. Quick commerce companies have understood this and they’re partnering with these companies. For example, Zomato and Zepto have both partnered with Battery Smart, a Delhi-based network of battery-swapping stations for EVs. Plus, this comes at a great time because these battery swapping companies are attracting a lot of VC money despite the general VC funding crunch lately. And VCs are loving the fact that quick commerce giants are tying up with these battery swapping companies.So, you’d think that that government must be doing everything it can to give battery-swapping service providers support to expand right?Turns out, that is not really the case.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 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. EVOD electric vehicle sector is currently the Indian government's favorite child, and we've been talking about it quite often on daybreak.

But one of the things that we know is that despite being the government's favorite, adoption of EVs in India has actually been quite sluggish. A few weeks ago, my co-host Rahel had spoken about how Indian consumers actually prefer to buy hybrids instead. Now, the skepticism around EVs is mostly related to lack of adequate infrastructure and costs. I'm sure you've heard people around you complain about how we don't have enough charging stations for EVs, for example. Despite all of this, though, for quick delivery apps like Zimato, that are often questioned about their carbon footprint. Switching to EVs is not just a matter of being environmentally conscious.

It's actually come to a point where it is simply economically more feasible. But here's the thing. It takes about four hours to charge an electric scooter from zero to full using a slow charger. And if you use a fast charger, it takes about approximately 15 minutes, which consumes up to two units of electricity. For apps that promise 10-minute deliveries, every second is crucial. And then there is the other option, battery swapping, which literally takes two minutes. So you can understand how for all these delivery company drivers, for whom speed means money,

battery swapping is better than charging. Quick commerce companies have actually understood this, and they are partnering with battery swapping companies. Like Zomato and Zepto have both partnered with battery smart, a Delhi-based network of battery swapping stations for EVs. Plus, this also comes at a great time because these battery swapping companies are attracting a lot of VC money despite the general VC funding crunch lately. And VCs, in turn, are loving the fact that quick commerce giants are tying up with these companies.

Now, after knowing all of this, you would think that the government must be doing everything it can to give battery swapping service providers support to expand, right? Turns out that's not really the case. Welcome to Daybreak, a business podcast from the Ken. I'm your host Nick Dha Sharma and I don't chase the new cycle. Instead, every day of the week, my colleague Rahal Philipos and I will come to you with one business story that is worth understanding and worth your time. Today is Friday, the 4th of July.

Early last year, the Boston Consulting Group had predicted that the organized last mile delivery space will make up for about a quarter of India's total EV sales in the current financial year. My colleague Nathan Nade spoke to Chetan Maini, the co-founder of Sun Mobility, which develops, manufactures and operates battery swapping infrastructure. He told him that battery swapping is significantly more economical than charging for quick commerce companies. Why? Reduce downtime, of course, and also costs.

An employee with Battery Smart told us that even in the case of last mile deliveries through electric three-wheelers, if drivers were to swap the vehicle's batteries instead of charging for a 10-hour ride a day, their average earnings could rise by about 27%. Now, 27% is a lot for someone who depends on a daily earning. Battery Smart, by the way, is a 4-year-old company that offers swappable lithium-ion batteries and operates mostly in North India. And almost 80% of its customers are electric. electric three-wheeler users. So, battery swapping is just perfect for quick commerce companies.

And it is evident. Look at the recent fundraisers by quick commerce companies like that of Zepto that raised more than $600 million last month. Plus, like I mentioned earlier, VCs are actually putting in money into these companies like Battery Smart and Zip Electric. This comes at a time when total VC funding across sectors has dropped about 90% compared to the 2021 highs. But it is a whole different story for battery swapping companies. They have actually attracted VC funding worth over $60 million this year. This is double of the last year's levels. Vasuda Madhwin from Ostarra Advisors,

which is an investment banking firm that focuses on electric mobility and sustainability, told us that this sudden love. for funding for battery swapping companies is connected with the rise of quick commerce companies. But will battery swapping still work beyond quick commerce? Especially when the government has been putting most of its focus on EV charging. Stay tuned to find out. When I say that the government has not really been pushing the battery swapping infrastructure for EVs in India, what it really boils down to is money.

There is the difference in taxation. EVs sold with batteries incur a 5% GSD tax. But those sold without it for battery swapping are taxed at 18%. And that's not it. Buying a separate lithium-ion battery two falls under a steep tax slab, which essentially means that the overall cost of owning an EV with a swappable battery is actually higher. Think of this in the context of how skeptical a potential Indian EV consumer already. years. There is less and less reason for them to actually switch. And on top of all of this,

in 2019, the government allocated $120 million US dollars under the fame to or faster adoption and manufacturing of hybrid and electric vehicle scheme to set up battery charging infrastructure in the country. And this happened even though some of these EV-makers broke the localization conditions of the subsidy. Battery swapping, meanwhile, has got zero-suffing. subsidy support from the government. So while the partnership with quick commerce companies and the VC interest that comes along with it is a relief, it is not really enough. So what should battery swapping companies do to break that mold and make themselves useful

to more industries than just one? They need to form strategic partnerships. More on this in the next segment. To understand what battery swapping companies are doing to make themselves more relevant to multiple sectors, let us take the example of Zip Electric. The Gurgao-based company that was last valued at nearly $300 million, partners with the likes of Sun Mobility, Battery Smart, and the Taiwan-based Gorgorod Global to facilitate battery swapping for its fleet vehicles.

And it's had quite the journey. Three years ago, it went to Shark Tank India and got rejected. This was despite having companies like Amazon, Big Baskets, Swiggy, blink it amongst its customers. Their idea was to create a tech platform and network of e-scooters to help last-mile logistic needs. But CEO Akash Kupta and his wife, Rashi Agarwal, could not impress the shocks with their pitch. Now, cut to 2024. Zip's fleet size has grown by almost 70 times. Not just that, it has been declared as the highest growth company from Asia Pacific by the financial times.

So what changed? After making quite a few pivots, Zip realized it only wanted to be the green delivery partner for last-mile logistic companies. The founder told again that Zip leases all of its fleet of 21,000 EVs to e-commerce and quick-commerce partners. Apart from this, it also provides the companies with a delivery person and a tech platform for them to track the vehicle. Put together the whole exercise helps last-mile logistic companies to save 15 to 20% on their expenses.

But is this enough that these battery swapping companies are left on their own to figure it all out in a country that actually idealises EVs but remains to be sluggish when it comes down to doubling down on EV infrastructure? The answer is no. Daybreak is produced from the newsroom of the Ken, India's first subscribers. Foursing 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 Siyadh.