A new playing field for Ather Energy

A new playing field for Ather Energy
Ather 450X  |  Photo Credit: Company photo

On 7 November, news streamed in about electric scooter OEM Ather Energy’s Series D capital infusion. Its first believer Sachin Bansal committed $23 million to the $35 million round, with Hero MotorCorp infusing the remaining $12 million. 

According to Hero MotorCorp’s 2019-20 annual report, it holds 35.1% of Ather Energy. To date, the Bengaluru-headquartered two-wheeler company has raised $167 million. 

But there was one existing investor conspicuous by its absence: Tiger Global Management. It had invested $12 million in Ather back in May 2015, when the two-wheeler manufacturer was expected to blaze a path in the electric mobility (e-mobility) market.


For many tracking India’s e-mobility market, Tiger Global’s absence in the latest funding round came as no surprise because if there is one metric the alternative investments firm is renowned for splitting hairs about, it is scale. In this respect, Ather has been found wanting for a couple of reasons.

One, the number of e-scooters on India’s roads. According to an estimate by investment banking firm Avendus Capital, there are around 150,000 electric two-wheelers in India. Ather falls in the category that is less than 10% of this small market, with emerging competition from Micromax co-founder Rahul Sharma’s Revolt Motors.

While Revolt makes bikes, Ather makes electric scooters. However, both companies’ offerings are priced more than Rs 1.25 lakh per unit. Less than 15,000 such vehicles constitute a niche. And Tiger Global doesn’t back niche.


“For Ather, they have been at the product for five years now,” says an industry observer on the condition of anonymity. “Its product is good, but price isn’t.”

Bear in mind that India has a conventional two-wheeler market that sees 1 million units registered every month—all with internal combustion engines (ICE). In that context, the EV two-wheeler market’s current tally of 150,000 units in India is a drop in the ocean.

Two, the two-wheeler EV market is fast getting crowded, with even strategic investors making their move in the past few years. 


Hero MotorCorp, known for its affordable two-wheelers, first put money in Ather in 2016. And Hero MotorCorp’s competitor in the e-mobility segment is Hero Electric, which leads the affordable two-wheeler market. (Hero MotoCorp cannot use the ‘Hero’ brand name for electric two-wheelers, following a split with Naveen Munjal, promoter and managing director of Hero Electric Vehicles, according to a Mint report.) 

Those heroics aside, Bajaj Auto announced the launch of the electric Chetak scooter at an ex-showroom price of Rs 1 lakh in January 2020. Three years ago, Chennai-headquartered TVS Group backed Ultraviolette Automotive in 2018. And auto components company Bharat Forge too has invested and owns up to 48.86% in Pune-based EV start-up Tork Motors in 2019.

In fact, Coimbatore-headquartered Ampere Vehicles has traversed the longest path in e-mobility, even giving a return to its first backers Ratan Tata and Kris Gopalakrishnan. Founded in 2008 by Hemalatha Annamalai, Ampere Vehicles was acquired last year by Greaves Cotton, an engineering company headquartered in Mumbai. It holds 81.23% of Ampere Vehicles, which claims to have 40,000 users of electric mobility (two-wheelers, e-rickshaws, e-loaders).


According to venture capital investors, Ampere has been rewarded for executing on a pricing strategy that is conducive for India’s buyers and use cases (electric cycles, electric loaders, and affordable two wheelers). In this competitive backdrop, Ather Energy has to discover scale on the heels of technology decisions that may serve it well in the long run as an indigenous product.

“None of the current OEMs has a disruptive GTM (go to market)- and pricing-strategy to go to mass market,” says an investor, on the condition of anonymity. “Only then, can an OEM win—not with the best R&D product.”

The Ather Way


Ather Energy has built a reputation for being contrarian. For one, while most electric two-wheelers are factoring in a replaceable battery in their vehicle assembly, Ather has not. This decision, requiring the buyer to charge the integrated battery in an Ather scooter every day and monitor usage, is crucial.

“If you have an integrated battery, unless you’ve figured out a way to charge your vehicle, that itself is a challenge,” says Koushik Bhattacharyya, director and head (industrials), Avendus Capital. To Ather’s credit, the overall product is more indigenised, he adds. In comparison, the affordable electric two-wheelers have a higher degree of imported content (at least 60%), leading to a healthy price. Hero Electric wants to move to 80% localisation by 2022. Ather has a head start there.

For now, the Rs 1.35 lakh onwards price-point has placed a barrier for Ather because of that long-term decision. Experts say if it cracks the overall technology proposition for a higher price point, it may be able to apply that R&D downstream for newer kinds of models to go mass market. But that’s a huge if.


“At some later point though, users may feel the need to replace batteries, for which we are currently estimating costs,” wrote Nishant Prasad, lead (batteries) for the Ather model 450X, in a blog post dated 9 July 2018. Ather, he added, is sensitive to scenarios like lithium-ion cell prices ‘x’ years from now (steadily falling and slated to continue doing so), options of buying back degraded batteries for use in less stressful second-life applications (semi-retirement-like), and putting more intelligence to extend battery lifespans. “(But) it can be safely assumed that the need for replacement is quite a distance away,” he asserted in the blog post. 

To that end, Ather’s decision on battery and pricing implications are correlated. As competitors bring in replaceable batteries, the retail price of electric two-wheelers will turn out to be affordable. That’s because battery becomes a service -- not a part of the electric two-wheeler’s cost. 

Currently, Ather doesn’t look pretty even on ‘total cost of ownership’ (TCO is lifetime cost of a product). In a comparison made by Avendus in its July 2020 report, titled ‘Electric vehicles charging towards a bright future’: the Ather 450x TCO works out about 20% higher than its conventional (internal combustion engine) counterpart Honda Activa BS VI.

On the distribution front too, Ather appears to have lagged competition. It is present in Bengaluru and Chennai only. Its pricing counterpart Revolt Motors, in comparison, has retail outlets in Delhi, Pune, Ahmedabad, Chennai and Hyderabad. Ather pioneered the omni-channel network, relying on online enquiries and also choosing to own its retail outlets.

“We will continue with the omni-channel model that will focus on education and experience,” Ravneet Phokela, chief business officer, Ather Energy, told TechCircle last week. “We will replicate the same experience across every new city. (We own) all the learnings in terms of how to handle consumers, what they look for, how we sell. We try not to be pushy salesmen, and we want to ensure that there is a certain quality of experience. We want to experience all these learnings,” he explained. 

While a large part of ICE two-wheeler revenues come from spares and service, the beauty of EVs is that they do not need as much maintenance of spares and service, Phokela says. Consequently, Ather promises service in a 7- or 8-month cycle. “What we want to optimise for is a great experience for consumers that they don’t need to go  time and again for repairs and service, spending money,” he adds. 

But this means a lower revenue opportunity from service for dealerships. “There are other avenues we are looking at,” Phokela says. “One is the margins that we provide on the sale of the vehicles which is higher than the market benchmark. We have subscription plans for connectivity and service. We incentivise dealers to sell those plans and there is a margin opportunity.”

A bulk of the new funding round will now be for outward, consumer-facing frontend investments. Ather wants to be in 15 more markets by March 2021. “When we unveiled Ather 450X in January, customers had the option of pre-booking it online,” Phokela says. “Since it was not limited to geography, we saw pre-orders coming from all over the country.” Ather wants to be in about 60 cities by March 2022, he adds. Up next is Delhi-NCR and Mumbai. “We will also look for multiple dealer partnerships in some of the other locations like Pune and Ahmedabad.” Expect the Ather brand flashing on TV and OTT apps too. “There will be investments in sales, channels, marketing and creating service centres–that is where the focus is,” Phokela says.

Rise of the platforms

However, the Covid-19 crisis may have brought a new set of options for investors in the electric mobility segment. Until now, venture capital investors were only wary of the capital costs of backing an original equipment manufacturer like Ather or Revolt. And the numbers of electric users isn’t inspiring either.

“The number of investors willing to stick their neck out and sign a $40-million cheque investment in EV is very few,” says Bhattacharyya of Avendus Capital. “While businesses are seeing growth, most of them are not at a scale where private equity or growth investors are comfortable.”

Before the pandemic, a whole set of two-wheeler fleet platforms like Bounce, Vogo and Rapido had raised capital. While cab-sharing platforms like Uber and Ola have been hit, investors are beginning to see the two-wheeler platforms in a new light, as they don’t carry the cost of assembling or manufacturing electric vehicles. These ventures are sitting on capital and, admittedly, an old fleet of two-wheelers.

Bounce is expected to transition its fleet of two-wheelers to electric, which includes trials with Ather and Ampere vehicles. “The business model and (EV) technology need to solve for the product running revenue-producing kilometres,” asserts T C Meenakshisundaram, managing partner of Chiratae Ventures, which has backed Bounce and Oye! Rickshaw. He is alluding to e-rickshaw drivers saving time by having e-vehicles with replaceable batteries. “If Uber or Ola was once more affordable than taking an auto-rickshaw, to that extent, public transport could move to two-wheelers for users preferring that to personal mobility (EV two-wheelers),” he explains.

Similarly, EV two-wheeler adoption is even likely in the logistics space for large delivery companies like Swiggy and Flipkart, Meenakshisundaram says. “The average two-wheeler traverses less than 100 km on a single day,” he explains, adding that the only exception is delivery boys. “But traffic doesn’t allow even them to do much (distance).”

This has implications for electric two-wheelers, from a battery usage point of view. E-bikes with better battery range will score over those needing to be charged more frequently.

For growth investors like Tiger Global, such new options will emerge, though there is currently a stigma attached to shared mobility because of the pandemic. “A significant driver of electric two-wheelers will be the personal mobility market, but a bulk of the eventual owners of two-wheeler mobility solutions will move to shared platforms first,” says Karan Sharma, co-head of Avendus Capital’s digital and technology vertical.

In other words, people likely to buy an electric two-wheeler are likely to first experience the new products on shared two-wheeler platforms. Ather has to scale up faster and more reliable than these two-wheeler platforms to be of interest to future investors. There will be two quarters of pain though for the platforms, Sharma says, referring to the impact of the pandemic.

For Ather, now more than ever, time is money.