Bengaluru-based electric two-wheeler manufacturer Ather Energy is preparing to face the might of Ola Electric by increasing the capacity of its new plant in Hosur from 110,000 units per year to 500,000 by the end of next year. It will invest Rs 650 crore in the new plant and in the works, it is expected to raise funds from private equity players and investors this year to finance its further expansion.
Ather has Tiger Global and Hero Group as two of its main backers. Drawing up the plans, Tarun Mehta, one of the founders of the two-wheeler company, said, “We are now expanding our reach from 13 cities to 50 by the end of this fiscal year and reach 100 by the end of this fiscal year. FY23. We’re also expanding our own fast-charging infrastructure from 140 to 500 by the end of this year. We will also increase the capacity of the new factory in Hosur to 500,000 per year.
Mehta estimated that the electric scooter market in India will reach five to six million in the next five years.
Ather’s assault follows Ola Electric’s ambitious game of investing 2,400 crore rupees to build a factory to manufacture 10 million two-wheelers per year by 2022.
The company said the first phase with a capacity of two million will be ready by June and the product is expected to be rolled out soon. Put simply, the capacity built by Ola is half the size of the ICE two-wheeler market, estimated at around 20 million per year.
Currently, 100,000 electric two-wheelers are sold each year in the country. Ather also invested over Rs 1,000 crore in developing the scooter in-house through a 300-person R&D center and designed and manufactured the battery in the country (except for the cells, which are imported, everything is made in India).
Ola, meanwhile, bought the scooter technology by acquiring Dutch company Etergo, which was on the verge of bankruptcy.
However, Ola executives claim that the product has been significantly reworked for India and only the design elements have been adopted.
Ather pointed out that the new FAME (Faster Adoption and Manufacturing of Hybrid Electric Vehicles) policy, announced a few weeks ago, has virtually closed the price gap between the ICE and electric scooters by increasing the subsidy on batteries from Rs 5,000 per KwH (it was Rs 10,000 per KwH). As a result, the subsidy on Ather’s scooters, powered by a 3 kWh battery, has increased to Rs 15,000.
Mehta said: “Following another reduction of Rs 15,000 due to increased subsidies, the difference between the price of our 450 Plus scooter and a 125cc ICE powered scooter is now 5,000 to 8. 000 Rs. In Delhi due to local state subsidies it is even lower. And then you save around Rs 2000 on fuel per month. The inflection point has therefore arrived.
But will the prices fall below Rs 1 lakh? After all, most ICE scooters are below Rs 1 lakh. Mehta, however, said consumers would be willing to pay extra for an electric vehicle because of the lower maintenance costs as well as the additional services they can provide (like online software upgrades). However, he doesn’t want to risk guessing what the premium would be.
But he said it was possible for prices to drop below Rs 1 lakh for scooters powered by the 4-KwH battery, which will get high subsidies of Rs 60,000 versus Rs 45,000. Ather uses battery 3- KwH, which powers its scooters.
But building these scooters will require a different architecture and that could also be considered.