Ather's Rs 1 lakh scooter walks into TVS and Bajaj's market

Two by Two

The episode explores Ather Energy's strategic pivot from a premium electric scooter brand to the mass market with its upcoming ₹1 lakh platf

Key takeaways

• Ather Energy achieved its first positive EBITDA of ₹9 crore, though operating losses remain at approximately ₹33 crore.
• The new 'Konark' platform aims to capture the mass market in the ₹1 lakh to ₹1.25 lakh price range.

Main topics

• Ather Energy's market expansion
• Competition with TVS and Bajaj

Notable quotes

Ather is the bronze medalist, is now going for gold.

Conclusion

While Ather faces massive distribution hurdles from legacy players, it

Transcript preview

Speaker 1 (0:02) For about 11 years, Ather Energy sold electric scooters to people who mostly argued about things like software updates. But starting from this week, Ather is going to sell electric scooters to a very different kind of consumer base. Now, here's the thing about Ather. Ather is one of the most interesting and yet one of the most doubted companies in Indian two-wheeler electric vehicles. It took 11 years to sell its first... half million scooters. It watched other companies like Ola Electric raise more money, build bigger factories and go past it on every scorecard that mattered. Ather even cut its own valuation by almost 44 % just to get its IPO out last year. And just this month, all of that has finally culminated in a few things. Just now, in the recent quarter, Aether has posted its first positive EBITDA for the first time in its history. It's not much. It's 9 crore rupees. It still lost around 51 crores in this quarter. But for the first time in 12 years, Aether finally has paid for itself. And what does Aether do when it has got its first operating profit? It has decided to bet on everything. We are recording this on Tuesday and this episode will be aired on Thursday. On Saturday, Ather is going to have its community day and it's going to unveil its new EL platform. This is essentially the platform on which it's going to build a scooter that's aimed at the 1 lakh rupee mass market. It also created a new factory in Aurangabad that is built for around a million units a year. And it's going to aggressively start to push into North India where Ather has barely ever sold anything. Essentially, Ather, the bronze medalist, is now going. for gold. Now look at what's happening around there. TVS is the market leader, has been selling 1 lakh plus scooter for almost a year. Bajaj is number two and it is also not losing money on electric vehicles. Hero has the fastest growing electric scooter in the country and also interestingly owns one third of Ather. And finally, there is a subsidy that propped up every single electric two-wheeler that was sold in India, which came to an end last month. So this is the first month that Indian electric vehicle, at least in the two-wheeler side, the demand has to stand on its own. Now this is about Ather's bet to go for gold. Can Ather do it? Or is Ather already past peak Ather? Speaker 1 (3:11) Now to argue this out, I'm going to get two people and two wonderful guests on this podcast and both of them are returning guests. I'm going to start with the first person. Kunal Khattar is the founder of Advantage, which is a venture fund that is basically spending a decade betting that India's EV transition will be won by startups. It's an early seed VC company that focuses on mobility across the EV ecosystem, auto e-commerce, logistics, and their portfolio includes... companies like Rapido. That's the episode for which Kunal was here last time. Zingbus, Exponent, Moonrider, Chalo, Tyreplex, Parkplus, JAR, Gripinvest, many, many, many more. Welcome to 2x2, Kunal. Speaker 3 (3:53) Thank you so much, Praveen. Thanks for having me again. Speaker 1 (3:56) I think that subscribers really enjoyed you the last time because we talked about Rapido. And it was actually a very prescient episode because we know what's happening with Rapido now over the last few weeks. So I thought that since we're going to talk about Aether's future, I'll get you in. Tell us, Kunal, what do you think? Are we past peak ether? Speaker 3 (4:12) No, no. So let me start by just a couple of quick clarifications. I think one was that you mentioned that subsidy has ended. Actually, it did. There was a sunset on 31st July, but 10th of August, it actually got extended again. So we are back to two and a half thousand rupees of subsidy per kilowatt hours capped at five thousand rupees. So it is 5000 rupees a vehicle for two wheeler. Again, doesn't seem like a lot, but it is what it was before. So it has got extended now from now till March 31st, 2028. But Speaker 1 (4:46) the quantity of Speaker 3 (4:47) the Speaker 1 (4:47) subsidy has reduced, if I'm not wrong. Speaker 3 (4:49) I think Speaker 2 (4:50) it was always capped at 5000 rupees. It was always Speaker 1 (4:51) capped at 5000. Okay, then it's my bad. Is there also an Speaker 2 (4:54) overall, sorry to button, Kunal, is there also an overall cap as the total money that will be spent is also, I think there's a limit. It gets exhausted. Speaker 3 (5:03) It was, yeah. So the earlier the cap was 1772 crores and that's been increased by about a 995 crores. So now the limit is 2767 crores. So that's been increased by a thousand crores as well. So Speaker 1 (5:21) I'm going to fire my research person, which in this case was me. Okay, where I thought about the subsidy, but I found out that the subsidy is still getting extended. Okay, great. So that's one. Speaker 3 (5:29) It came back. So number two, we talked about. Aether has achieved EBITDA profitability. Just want to clarify for the listeners here that 9 crores of that positive EBITDA, actually 43 crores of that has come from treasuries. So actually they're operating, they're still losing 33 crores at an operating level, but it's significantly better than before. So technically their ops are still not profitable. But one of the reasons is that they have a very high fixed cost and they've not been able to satisfy the number of customers that they have, which is why actually Ether surprisingly has actually seen their market share decline over the last six months. So anyways, so listen, we are very bullish on Ether. I think ultimately so is the market. I mean, it has gone through a very long and you know, eventful journey, let me put it. It's the OG of the EV ecosystem. They've been around for, I think, close to 12, 13 years, and they've built an entire stack. And they were talking about electric vehicles when, quite honestly, we didn't, nobody in India really understood what is the need to have electric vehicles. So I think a lot of credit for them to have built a company like that when everything was against them, right? There was no capital. There was no infrastructure. There was no demand and there was no awareness. So category creation in India is extremely hard. It's not for the faint hearted. I mean, we jokingly, we joke amongst ourselves that India is a country which suffers from first mover disadvantage. You've always seen people who actually come number two or number three actually get, have the ability to benefit from what the original person has created, especially if you're creating categories for which. no support exists. So you've got to build the entire stack yourself. But I think there's one thing there. You mentioned that they had to sort of reduce their valuation by almost 44 % to go public, which is understandable. But then you have to see how that share has performed in the last 18 months since they went public. It's Speaker 1 (7:36) been like crazy on a tear. I mean, I know we are not a finance podcast, but I was just looking at the stock price like yesterday. It's 3 Speaker 3 (7:44) .5x, I think, since of the IPO price is one of the few companies actually that's returned almost 60%, 65 % higher outflow. Speaker 2 (7:53) I Speaker 3 (7:53) think we have to give credit for that. And that's because the markets have started recognizing. that the important data point is not necessarily the market share that Aether has. It is recognizes the kind of profit margins that they are generating and the potential and the brand and also their upcoming new new pilot launch. They actually have a waiting list of almost four to five months now for their products, which means that that's the reason why market share has been declining, not because their numbers are declining, because everybody else's numbers are increased. everybody else's numbers increasing. So your numerator is going up and Ether's denominator is flat. So that number keeps declining. So that's number one. And the second very important to understand is Ether is the only EV OEM that does not benefit from PLI. So, Pajaj, Ola, TVS all have that benefit. That PLI benefit itself is approximately 12 to 16 percent different. So, Ola's from day zero from the first unit is starting with a disadvantage of almost 12 to 16 percent. In spite of that, they're generating now almost 25, 30 percent of positive margin at a unit level. So, I think that is a phenomenal ecosystem at work. Speaker 1 (9:14) Fantastic. I'm more interested. We'll get into all of these things. Kunal, you have not answered my question. Now we pass back Ather and we'll come back to that. But the other guest, the voice that you just heard some time back is Narayan Sundaram. Welcome, Narayan. Narayan, of course, is also a returning guest. And the last time that you were here, we were discussing Ola Electric. And that was also the time I think we had said, are we past Ola Electric? Answer, yes. So welcome, Narayan. Narayan, for all of our listeners, if you don't remember, he's an independent strategy and a brand advisor to a wide range of consumer brands. He has a tremendous amount of experience. He's done like marketing, P &L strategy across multiple... multiple companies across multiple geographies. But most recently, he has been the head of marketing at Bajaj Auto. He spent five years there. And so I know that Narayan has some really strong points of view. Welcome, Narayan. Speaker 2 (10:03) Thank you. Thank you, Praveen. Good to be back. I think the last time we were talking about has Ola passed peak and listeners should go back to that. Speaker 2 (10:14) understand the verdict from the panelists and how it's panned out. So I just want to say the reason I Speaker 1 (10:20) got, sorry, I say that the reason I got both of you is because last time when we did, we did this episode on Rapido, Kunal was the one who came in and said Rapido is going to kill it. And when we did the episode on Royal Trek, you're like, I think more or less, I think they're past peak. I don't remember exactly what your point, but I think let's just say that as an episode, we kind of like concluded there. So I thought now that we're discussing Aether, I would get both of you and we can talk about it. But come on, Narayan, tell us, what do you think? Past peak Aether? Speaker 2 (10:42) So a little before I answer that, I think I've seen Ather since the time Bajaj launched Chetak back in 2019. Okay. And those are the days in which, you know, the people who considered an electric vehicle, especially two wheelers were those, you know, classical early adopters, technology enthusiasts, you know, the crowd in Bangalore and things like that. The thing that stood out. to me was that, you know, there was a fair amount of sort of, I would like to use the term passion that all the people who were choosing Aether had about, you know, the product. So it is a very strong product-led story. They built their own, you know, battery pack. Their provenance of the founders was that, you know, they are ex-engineers and they're building from ground up, all of that. And to their credit, I think the product you know, delivered. I mean, everybody was fairly happy with the product. Yes, given that they're a startup, I think service points, etc. were work in progress, right? But there was always very good product feedback. Say, unlike, say, an Ola where the technology was borrowed. I think that sort of distinction was always owned by Ether. And I would possibly say that the one thing about Ether was that it was fairly expensive. They operated at very premium price points. So they didn't address the belly of the market. And I think we're at that point where I would go out on a limb and say that, yes, I think we are still to see the peaks on Ether. So I will make that statement here. Before both of you prove me wrong, I'll take that opportunity. I think they've got a pretty good runway because they've got on two fronts. One is that from a geography point of view, they've got expansion opportunities, whether it is states, whether it is tier two, whether it is tier three. From a product perspective as well, I think with their Aether 450 as well as Ritsa, I think it's called Ritsa. they would possibly be addressing maybe 35 to 40 percent of the market right and the mass scooter priced at whatever 1 to 1.25 lakh is what i think el aims to tackle so that's another big chunk right if now so you've got sort of two or three vectors on which they can they can count on. And maybe all three won't work, but at least one will work. So there is still some Speaker 1 (13:19) growth to come. By the way, I also want to mention, I've talked about the two of you a lot, but I also must mention in full disclosure that we had Tarun on 2x2 as well. In fact, to Tarun's credit, Tarun came on this podcast, like if I'm not wrong, just like a few weeks before the IPO. And I know that at that point in time, there are for all companies, there are all kinds of restrictions and you generally want to be very careful. I don't think it was exactly the silent period, but there was a time where he... was going to happen. And he was still fairly candid on this episode. I'll link the episode on the show notes so our listeners can listen to it. Because that is actually a very interesting episode where he talks about Aether, how they're planning to play this out. But I just want to ask the two of you, if you can sort of like distill how Aether got here. And we will like, before we get to what it's going to do in the future. If you had your thoughts, impressions on how did Aether get to where it is today? And what worked in its favor? I Speaker 3 (14:13) think a couple of things. One is, so let me just answer your question. I think the best days of ethers is still ahead of them. To Narayan's point, brilliant. See, the biggest difference between a challenger or a new age and a legacy OEM is that their ability to build and innovate product technology in software, speed, speed of design, speed of products and all. And if you're building an EV company from the ground up, you build not only a culture, but also the process, which is product first, technology first, software first, right? EVs are IoT devices. They are smartphones on wheels. Traditionally, if you, and I have seen the auto industry very close being associated with, you know, a lot of the OEMs. Traditional OEMs are very good at manufacturing. They're assemblers. Speaker 1 (15:10) 99 Speaker 3 (15:10) % of their parts actually come from outside, third party, tier one, tier two. So their core competency is their ability to manufacture the same product with Six Sigma quality. It's not really speed, agility, technology, innovation. And that's fine because when you're operating at that scale, priority is different. And when you're a challenger and a scrappy little startup, the only thing you have going for you is product technology and innovation. You don't have scale. So if you look at Ether's market share, it's very important to understand and not get lost in the, you know, just in the numbers. Ether's market share, if you look at the number of points of presence that they have is actually significantly more than the market. So companies like You know, Bajaj TV has probably 8,000 to 10,000 dealerships, right? Points of presence. So their ability to distribute. In fact, that's the two biggest strengths that legacy OEMs have. They have a brand and they have distribution, which is the challenge. So if Ether has a 13-14 % market share, it's achieved that number with one-tenth the number of outlets. So therefore, imagine if Ether gets to grow their network 10x to be equal to Bajaj, I'm pretty confident that Ether's market share will continue to expand. So that's number one. And of course, they're entering new categories, new price points, catering to new geographies, etc. So they have the ability to expand in multiple ways. And, you know, each of them will result in larger sales volume and capacity. Their largest problem till now was, if I compare... Ola strategy and Ather strategy. Ola announced a 10 million capacity plant, built a million capacity plant, and then is running it at 25, 30 %