New Delhi: Engineering company Greaves Cotton is willing to open its doors to a suitable investor to expand its mobility business. “All the investments so far in Ampere Electric Vehicles have been funded by the parent company. However, going forward we are open to having a financial partner to drive our next generation of growth,” Nagesh Basavanhalli, Group CEO, Greaves Cotton Ltd said on Tuesday.
“If the right partner comes along and there is a meeting of the minds, then why not!,” he said while adding that the company’s Tamil Nadu plant in Ranipet will be ready by the end of the current fiscal year. “We will be running and doing production out of the Ranipet plant sooner than we had announced,” he said.
Greaves mobility business comprises Ampere Electric, which caters to both two-wheeler (e-scooters) and three-wheeler (e-rickshaw, e-auto and e-loader) segments. Within e-three wheelers, the company has a presence in e-rickshaws under the ELE brand and e-autos under the MLR brand.
I think the switch to EVs will take place over the next 4-5 years, but it will happen in a way that ICE vehicles will stay here for a whileNagesh Basavanhalli, Group CEO, Greaves Cotton Ltd
Greaves Cotton, which has been known for manufacturing engines and heavy equipment, said it sensed four years ago that disruption was around the corner and EVs were bound to grow. “We had to reinvent ourselves, so we decided to be fuel agnostic. The aim was to provide an uninterrupted journey to customers and keep it going at the right value proposition with an affordable total cost of ownership (TCO),” Basavanhalli said.
“I think the switch to EVs will take place over the next 4-5 years, but it will happen in a way that ICE vehicles will stay here for a while,” he said.
Ashim Sharma, Partner and Group Head at NRI Consulting & Solutions said about the growth of the company that while Greaves already has a vibrant ICE business, its diversification is a right step strategically and synergistically because it is utilising current competencies to get a key position in the EV market and the ICE business will keep funding the larger part of the EV business.
Multi-brand retail store
In September, the company launched its first multi-brand EV retail store ‘AutoEVmart’ in Bengaluru, and said it will set up similar outlets in other cities in a phased manner. Through this EV store which is spread over 8,000 sq ft, the company is bringing everything related to EVs under one roof along with e-vehicles, retrofitted accessories and after- sales electric car experience.
Roy Kurian, COO, Ampere Electric Vehicles, drew an analogy between EVs and mobile phones and said, “We wanted to try the format of selling EVs the same way as mobile phones and this is why we started a multi-brand retail concept. We feel people will shift to this kind of a buying model because they don’t buy vehicles to keep them for ages any longer. Just like a mobile phone, they want to keep it for 2-3 years and move on to a better model.”
While the multi brand retail concept is very common in Europe and other parts of the world, it is comparatively nascent in the Indian automotive industry.
Basavanhalli also stated that EVs are like a gadget on wheels and closer to being a consumer product unlike the traditional ICE vehicles. Today, 40% of its customers are first-time buyers.
However, the company is skeptical about partnering with dealer partners for the multi-retail stores. “EVs are just 3% of the total 2W market, so it would be too early for it right now. We want to understand the Return on Investment (ROI), size of the showrooms and customer response before we ask a dealer to invest,” Roy said.
I think dealers would be more open to opt for the multi brand retail network because it will be a give and take between OEMs and dealers alikeNagesh Basavanhalli, Group CEO, Greaves Cotton Ltd
When asked about selling the rival brand Hero Electric Vehicles’ models, he said that it is open to all and “we are not going to say no to selling any brand.”
However, Basavanhalli highlighted that the multi brand retail stores will be very different from exclusive Ampere dealerships, which are already present in over 400 towns in India.
According to Ashim Sharma, multi-brand retail stores make sense for EVs because many players in the market do not have a sizable footprint.
He highlighted that going forward, there will be two types of business models. First, the incumbents who have a wide spread retail and service network will continue to leverage their strength as a single brand network. Second, the startups or the companies who are venturing into EVs from ICE vehicles will play out the multi-brand retail.
“I think dealers would be more open to opt for the multi brand retail network because it will be a give and take between OEMs and dealers alike,” he added.
Revenue streams
Four years ago, Greaves was a 70% B2B company and almost 70% of its revenue was coming from a single customer, single fuel and single industry- automotive. Eventually, the company diversified its first source of revenue stream i.e. engine business to non-automotive, which contributes to 1/3rd of the total engine volumes today. “In terms of revenue, the engine business will continue to account for up to 40% of total revenue,” Basavanhalli said.
The second source of revenue is its multi brand retail with auto spares and services business. “I think Greaves Retail will see enormous growth and profitability,” he said. The third is the e-mobility business with 2W and 3W manufacturing.
“Today we are a 60% B2C company. This happened with a strategic mantra where we wanted to be in the B2B industry to extract life cycle value and the B2C industry to be closer to being a consumer company,” Basavanhalli said.
Greaves also has two small businesses, namely Greaves Finance and Greaves Technologies.
Basavanhalli said currently the focus is on getting the volumes and ramping up the scale but the company is also working on building EV components. “As for ICE vehicles, we were not manufacturing everything- we used to make some and buy others. Our strategy is going to be the same for EV components, where some parts of the value chain we are going to make in-house and others we are going to buy,” he said.
India as an EV hub
As per Roy Kurian, India is all about rural because that is where the majority of people live. When we talk about the belly of the market we see lower middle class and middle class people occupying the major chunk of two-wheeler sales. But if you look at the consumption pyramid for total e-2W industry, there is a big chunk at the bottom of the pyramid who are not buying as of now. This is not due to the high initial cost but the recurring expense they will have to pay eventually which is bothering them.
“In a couple of years from now, I expect major traction to come from rural areas. There will be an explosion where e-2W cost will go down and rural areas will grab a big chunk of e-2W sales,” he said.
For global competencies, Roy said India will be a hub for e-2W exports. “Most countries will not be able to match the efficiencies that we have in terms of cost and manpower. Yes, it is true that having a cell manufacturing industry in India can cost billions of dollars but sooner or later that will also happen in India.”
Ashim Sharma also is confident about India’s frugal engineering capabilities. “Raw materials will not be a constraint for manufacturing EVs in India for the world. Urban mining is also going to take off in the future,” he added.
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Through such EV stores Greaves Electric Mobility aims to bring everything related to EVs under one roof and provide and sell electric mobility solutions from Ampere Electric as well as other electric 2-wheeler and 3-wheelers brands in the market with clear deliverables – wider choice, convenience and unique experience to customers, the company said.
Ampere said this acquisition reflects its agility and commitment to responding to the emerging needs of its 3W customers for disruptive and cost effective products that enhance daily savings and transform ease of driving with emission-free and noise-free vehicles.
