Lack of Financing Options The Biggest Drag On faster EV Adoption In India

 Headquartered in Hyderabad, Etrio is a key player in cargo EV OEM sector, committed to leading cargo fleet electrification. Kalyan C Korimerla, Managing Director and Co-Promoter, Etrio, began his career at in Wall Street at Intel Corporation to later assume investment banking roles at JP Morgan in New York. After he moved back to India in 2010, Kalyan started a company called OneEarth Power Ventures, where he developed and managed portfolios of 510 MW and 133 MW power assets. In 2015, he was elected the Vice President of Wind Independent Power Producers Association (WIPPA), which inspired him to launch his own EV venture.

After Indo American Motors recently merged into Etrio, Kalyan joined the latter in the capacity of MD and Co-Promoter. In an interview with Saur Energy International magazine, the leader shares insights about Etrio, the EV sector and EV adoption.

Q. What is Etrio’s current size in terms of employees, clients and fleet size? 

Kalyan C Korimerla: We are a company of around 75 people (employees). Our fleet consists of nearly 500 electric vehicles deployed so far to approximately 30+ clients.

Q. What is the basic business model followed at Etrio? Do your clients lease your trucks or buy them? Or is the whole logistics operation run by you? 

Kalyan C Korimerla MD and Co-Promoter at Etrio

Mr. Kalyan C Korimerla, MD & Co-Promoter, Etrio Automobiles Pvt. Ltd.

Kalyan C Korimerla: Etrio is a leading EV OEM that supplies electric 3-wheeler and 4-wheeler electric vehicles for last-mile delivery and transportation to the e-commerce and logistics players today in our country. We sell our vehicles to a plethora of customers, some of whom are fleet owners and operators. Some of the marquee brands wherein our vehicles have been deployed are Amazon, Flipkart, Delhivery, IKEA, DHL, BigBasket, LetsTransport, Lightning Logistics, Sanveg, among other leading companies. Our primary model of sales is direct B2B and through distributor channels.

Q. How big is the potential market size in B2B logistics for EVs? Where do you expect the industry to be in 2025, by next year?

Kalyan C Korimerla: The overall market for EVs in India is growing at a rapid pace and the adoption of EVs in the B2B logistics space has been gaining momentum since 2021. After gaining experience in deploying 3-wheeler cargo EVs for logistics operations, our customers are now increasing the volume of deployments, thus improving the sales outlook for Etrio. Industry estimates suggest that the market size for 3-wheeler and 4-wheeler EVs in cargo segment is likely to be a $2.1 billion market by 2025.

With this kind of momentum noticed, EV startups and automobile majors are also expected to introduce more and more EV models by next year, with payload capacities ranging from 1 tonne to 5 tonnes. These models would address every use case application in the logistics sector from intercity to intracity logistics. The key enablers for the massive growth of the B2B cargo EV sector by 2025 would be efficient and innovative products, lower Total Cost of Ownership (TCO) of EVs, better EV financing options, and rising fuel costs, among others.

Q. Are things progressing fast enough in the sector, or do we have scope for more? Isn’t the market too crowded with players?

Kalyan C Korimerla: Despite the challenging operating environment during Covid-19 outbreaks that resulted in a temporary disruption of forecast models, the market for cargo electric vehicles has been growing at a pace that has surpassed expectations. However, certain challenges such as increased cost of batteries and commodities, shortage of semiconductor components, increased logistics costs, etc., are still there, which will continue to persist in the short-term. Notwithstanding these challenges, the constant increase in fossil fuel prices and renewed calls for sustainability will primarily drive the growth of EVs. To this end, the Indian Government can help with right policies and initiatives such as EV mandates in terms of procurement of vehicles across key sectors, right GST framework that reverses the inverted GST structure faced by most EV OEMs, enforcing quality standards of vehicles without discouraging innovation by start-ups, extending FAME subsidy and creating a favorable financing environment for EVs.

Q. Do you use your own batteries? Are you also selling batteries to other firms? 

Kalyan C Korimerla: Etrio works with some of the leading battery suppliers of the country to procure batteries. The battery packs that Etrio vehicles use are custom-designed to maximize vehicle performance. As of today, our vehicles have accumulated approximately 4.5 million in-service kms., which enables us to constantly learn by analyzing important data points on the performance of the battery and the vehicle. With such extensive knowledge of vehicle usage data, our technical team members collaborate with battery suppliers to make built-to-suit packs that drive optimal performance of the vehicle.

Q. What is the typical calculation when comparing an EV with a CNG/ICE vehicle for a business? Where does an EV score/fall behind?

Kalyan C Korimerla: In general, the overall Total Cost of Ownership (TCO) of EVs is 1/4th that of a CNG vehicle and 1/3rd that of an ICE Vehicle. Lower TCO has been a major catalyst for the adoption of EVs in B2B segments. In addition to that, lower vehicle maintenance costs, hassle free usage, fatigue-free drive, integrated telematics optimizing the operations, etc. are some of the key enablers that promote large scale EV usage.

However, the biggest area that is limiting the widespread adoption of EVs today is lack of financing options where public sector banks and large financial institutes are apprehensive on financing EVs. Another area of major concern is the lack of charging infrastructure, which is an impediment for overall EV adoption. This is despite the fact that the B2B sector has fixed routes which do not require public charging infrastructure for scaling up.

Q. Are the biggest shifts driven by policy nudges as we have seen in Delhi or ROI considerations? What will work best? 

Kalyan C Korimerla: Some of the existing policies and regulations like FAME 1, FAME 2, PLI, Vehicle Scrappage Policy, vehicle registration fees’ waivers and road tax waiver, etc. are among key contributors towards the shift. That being said, these policies in silos just would not suffice to keep the momentum going on positively, but we rather need to establish an ecosystem that nurtures EV adoption. The way to go is to have EV-usage friendly policies, GST slashing to 5% on the key components for EV OEMs, promoting easier vehicle financing options to EV owners, etc. – all of which would provide the much-needed boost to the large-scale adoption of EVs.

Q. Anything interesting you discovered in India post launch, vis-a-vis your plans and expectations? A surprise perhaps or other insight?

Kalyan C Korimerla: In our journey so far, there have been many interesting experiences that have led to valuable learnings. These learnings have helped us a lot in improving our product offerings and go-to-market strategy that meets our customers’ expectations. One of the most interesting learnings for us has been that the drivers’ expectations are higher when he or she transitions from an IC vehicle to an EV.

While most of the drivers enjoy the fatigue-free driving experience of an EV that is more user-friendly, the drivers today expect more tech-centric features such as a more sophisticated dashboard infotainment screen. The performance of an EV largely depends on the driving patterns and the behaviour of the driver; hence, we, at Etrio have created a comprehensive driver training programme that has resulted in at least 15 to 20% improvement in the performance of our vehicles.

Q. Where does India stand with respect to EV adoption when compared to other international markets that may have driven innovation?  

Kalyan C Korimerla: Foreign markets like US and Europe are way ahead of India in terms of EV adoption. This is primarily due to these countries’ regulatory environment that encourages EV adoption, far-better access to financing, lower interest rates for financing of EVs and their overall openness to embrace and adopt new technologies.

While in India, most of the early EV adoption in the cargo segment is driven primarily by multinational companies such as Amazon, Ikea, Flipkart, DHL, Nestle and leading domestic players such as Delhivery, Bigbasket, Reliance Jiomart and others, yet most of the domestic fleet operators are still on the fence while looking closely at EVs. With increased access to financing, superior total-cost -of-ownership realization and improved support network footprint by EV OEMs, we expect widespread EV adoption in the next few quarters, which in turn will enable us to catch up faster with other countries in terms of EV growth.

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