By Vandana Gombar, BloombergNEF. This article first appeared on the Bloomberg Terminal.
Lithium Urban Technologies, a provider of electric car fleets to companies in India, offers “up to 40%” savings to clients switching from their conventional fossil-fuel vehicles. A part of this saving is attributable to the use in charging of renewable energy,which is priced much lower than grid power.
“We found a fantastic one-to-one correlation between companies that adopted renewable energy and companies that adopted electric vehicles. Renewables means savings on power and that means an even stronger case for electric mobility. Many of our clients get their power from renewables,” Sanjay Krishnan, co-founder and CEO of the company, said in an interview.
Lithium Urban has a fleet of 1,100 vehicles – mostly made up of electric models from Mahindra & Mahindra – active across 11 cities. Clients include the likes of Google, Unisys, American Express, Accenture, Wipro and Blackrock. It will be expanding its fleet this year, adding new models from Tata Motors, and from Morris Garages, owned by China’s SAIC Motor Corp.
About 500 new vehicles are planned to be added in the current quarter. “We intend to more than double our fleet to 2,500-plusvehicles by January 2021. We will also be introducing buses shortly,” Krishnan said.
The company installs its own chargers to offer a zero-capex service to its clients, and claims to have the largest charging network in India, as well as the highest utilization rate, of 90%, forits chargers. Lithium Urban has investments from the International Finance Corp. and LGT Capital. It runs a “profitable” operation, and intends to raise about $40 million over the next 12 months to finance further expansion.
Lithium Urban has investments from the International Finance Corp. and LGT Capital. It runs a “profitable” operation, and intends to raise about $40 million over the next 12 months to finance further expansion.
Q: Lithium Urban offers “up to 40%” cost savings to companies using its electric mobility service. It must be an easy service to sell?
A: It is not. Traditionally, the transportation business has been very opaque, with cushy relationships between users and service providers. Technology is now being used to provide transparency and not too many people like it, but the savings make a compelling case. These come from three main heads:
1. Lower running cost: I can run my electric fleet at less than 1 rupee per kilometer against 5.50 rupees per kilometer for a diesel vehicle.
2. Higher mileage: If the break-even of an electric vehicle is achieved by running say 200 kilometers a day, I clock 300 kilometers by running the cars in multiple shifts.
3. Higher number of passengers per trip: We carry 2.23 passengers per trip, which is on the higher side, thanks to our smart scheduling and routing algorithm.
The value created is then split between us and the clients. The service involves zero capex for clients. The charging infrastructure is also provided by us at our facility, or at the client site. In fact, we have the largest charging network in India, with 1,500 chargers, of which a fifth are fast-chargers.
Electric vehicles are best used as the baseload of mobility, for meeting minimum assured demand. The peak demand can be met by other vehicles.
Q: A recent news report said that the utilization of chargers by another company aiming to build the largest chargingnetwork in India –Energy Efficiency Services Ltd. –was a mere 6%. What is your network utilization?
A: Our utilization rate of chargers is the highest in the world. Out of 1,440 minutes in a day, our chargers are used for 1,240-1,260 minutes on average,which is almost 90% of the time.
We are now tweaking our model a bit to set up charging hubs for our fleet. The first one is close to completion in Gurugram (erstwhile Gurgaon), and we have another one planned in the city of Pune.
Q: What is a typical sales cycle like?
A:Most clients offer us one pilot site to begin with, to prove our case. And then we tend to expand to other offices in other cities with them. For instance, we started with Wipro Ltd. in Punewith 40 vehicles. On the back of savings they saw, they asked us to go national with them.
Q: Are there clients who are more amenable to electric vehicles?
A: We found a fantastic one-to-one correlation between companies that adopted renewable energy and companies that adopted electric vehicles. If you have bought renewables energy as a company, it means you have made a business case of moving from the current grid. The organization is better equipped to do those kind of contracts. It is an early adopter, and has an organizational culture that is open to new ideas. Secondly, renewables means savings on power and that means an even stronger case for electric mobility. Many of our clients get their power from renewables.
Our first client was Tesco Bangalore, in 2015. It gets almost 100% of its power from a hydro plant in north Karnataka at very competitive rates. As you know, we started in Bengaluru[formerly known as Bangalore] –the capital of a state that has the best open access policies [for direct purchases of renewable energy by corporates].
Q: Your website says that your fleet is 90% powered by renewables?
A: Yes. We have a joint venture with a renewables company –Fourth Partner Energy –so most of our charging is powered by renewables. Many of our clients source renewables: Daimler buys from Renew Power. Adobe buys clean power. VMware has his own captive solar facility. The lower the cost of power, the lower the cost per kilometer for electric vehicles.
Q: You have been in business for about five years. How has your fleet evolved over this period?
A: We started with the Mahindra e2o in 2015. It was a two-door car. Then came the e20Plus–a four-door hatchback. The Verito Sedan has been added in 2018. On the fuel side, when we started the business, the diesel cost was 55 rupees per liter. It is more than 70 rupees today. Clients are saving pot-loads of money.
About 100 vehicles have run more than 200,000 kilometers, and some have done 250,000 kilometers, without needing a battery change so far.
Q: How do you see this fleet of 1,100 cars expanding? What is on the agenda for 2020?
A: We expect to add 500 vehicles in the current quarter. If we look at 2019-2020 (April-March), the elections, and policy changes meant that we did not invoice any car in the April-June quarter, but we added a lot of cars thereafter. We intend to more-than-double our fleet to 2,500-plusvehicles by January 2021. We will be adding 500 electric vehicles from Tata Motors. We are planning a deal with Morris Garages [owned by China’s SAIC Motor Corp.]. It has recently unveiled its premium electric vehicle] for the premium market segment: for the CXO [senior corporate executives such as chief executive officers, chief finance officers,chief technology officers, etc.] inter-city travels, airport transport, etc.
We will also be introducing buses shortly. We plan to haveat least 50 buses by the end of the year. We have recently entered Mumbai via JP Morgan and Jaipur via Nagarro[Software]. We will expand into new cities, and also move outside India.
Q: Lithium Urban is a profitable company?
A: Yes. We have healthy double-digit margins. Our revenue for this financial year has already crossed 1 billion rupees ($14 million). Our key investors are the International Finance Corporation, and LGT Capital, and we had angel investors before them. Some of them continue to hold on to their stake. We are looking to raise more capital –about $40 million –over the next 12 months.
Q: I heard you say earlier that clients are signing on for the electric fleet service because it is cheap, not because it is green. Has that changed somewhat? Are some companies driven by the green credentials of the service?
A: There are a few, like Nagarro, who are driven by sustainability. Changes are imminent though, as the CO2 footprint of the company becomes a part of performance matrix of senior executives. Their first step is usually to buy renewable energy. The second step is to move to electric vehicles.
Q: Your thoughts on self-driving cars or autonomous vehicles?
A: Full autonomy will not happen in India, but we will have safer cars by using technology from these cars. The cost of sensors is falling. Our cars have advanced driver-assistance systems or ADS and two-way cameras already.