It doesn’t matter whether or not EV or ICE, Bombay mein visitors mein utna hai time lagta hai, doesn’t matter. The issue is the visitors, the issue isn’t EV or ICE. Would you agree with me, pointless to get into EV or CV or doesn’t matter? Visitors?
Raunak Onkar: Sure, I agree with you. So, visitors undoubtedly doesn’t show you how to in terms of driving round whether or not it’s an EV or SUV or a small automotive. But when we take a look at the sort of options that EVs present, they undoubtedly seem to be a extra compelling case as a result of when you see EVs globally, quite a lot of options are additionally designed for consolation and that are costly to include within the ICE automotive at the very least in our nation as a result of now we have totally different taxation for ICE autos.
However EVs can truly with decrease tax, you’ll be able to truly deliver all of the superior options and luxury can enhance.
I checked out your presentation, sensible presentation. But when someone has to essentially profit from that, deep dive work along with your agency has executed, for an investor is there time to get enthusiastic about this EV migration which is going on? If sure, the place ought to one take a look at, the present gamers, incumbents who will develop into massive, like in banking it’s the present gamers who solely develop into massive or one ought to guess on disruptors who can actually change the best way how this complete EV universe would transfer? As an investor, what ought to one take a look at?
Raunak Onkar: I feel as an investor in India you’ve got barely higher benefit for incumbents and the reason being easy as a result of we would not have the whole worth chain of merchandise that go into an EV which are coming from India.
Issues rely on quite a lot of imports from parts to subsystems to batteries and all the opposite chips and every part, we rely rather a lot on imports whereas within the ICE autos you at the very least have a neighborhood provide chain.
The incumbents, until that point, should steadiness their portfolio between EVs and the ICE autos that’s primary.
The second benefit for incumbents, at the very least in India, is that they have an extended historical past of after gross sales for his or her present autos and that has to translate to the EV as properly.
You can’t assume that simply because the EV has much less transferring components issues can not go flawed. So, quite a lot of instances software program points can come up, situation with the chip set can come up which must be dealt with on the service centre in the identical method and the identical reliability as now we have seen with the ICE autos up to now, that’s one benefit incumbents might need at the moment which a brand new participant is not going to have when it comes to having distribution attain and even the gross sales attain.
And thirdly, because the pricing of the EV, like even Hormazd stated earlier, the pricing of the EV, the delta between taxation is so good that you may truly launch an even bigger automotive, a extra snug car and create that behavior of individuals.
So, when you take a look at a number of the different nations, they’re good examples to see how the ecosystem has come up, however they aren’t going to translate straight into India.
The challenges over many developed nations, additionally they have restrictions on shopping for new automobiles. Even China has, in main cities, some restrictions on shopping for the ICE automotive after which EV turns into a pure choice, so that’s the reason the adoption has been a lot quicker.
There was quite a lot of incentive push, on the identical time, laws push in making folks convert their present fleet to an EV.
So these issues are usually not occurring on the identical charge in India, though now we have our personal, however from the worth chain viewpoint, from the after gross sales viewpoint, and even offering a greater high quality product viewpoint, incumbents in India at the moment have benefit as a result of they’ve the capability.
My subsequent query is maybe only a identify, Tesla. Everyone is speaking about it. Tesla. From final three days, all auto firms are saying Tesla. What is going on if Tesla comes? Will it come? If it comes, they are going to be in a unique vary. Auto shares are down as a result of Tesla is coming.
Raunak Onkar: We should always welcome some totally different sort of competitors as a result of that creates a unique ladder within the buyer’s thoughts to what product they need.
So, earlier than BYD got here into India, the EVs in India had been, after all, utilizing good high quality designs, however after all they weren’t, from a world standpoint, acceptable design. So, for instance, BYD sells properly in China and the identical manner Tesla globally.
If some new designs, some new requirements, and new expectations are constructed into the product, then at the very least clients have a ladder of worth the place they will select whether or not, okay, it’s a low cost automotive you need to purchase, then you definitely go along with the usual.
If you’d like a world commonplace, you need to pay up somewhat bit additional for various sort of options, then you definitely purchase a automotive like Tesla or a BYD who has international requirements.
So, it creates a buyer. Will probably be at a barely larger worth level in comparison with what EVs are typically bought in India at the moment.
And there has at all times been a marketplace for that. So, it’s not needed that simply because a brand new participant comes, it cannibalizes the present market. Once more, the fundamentals of promoting a automotive, once more, in India are very totally different.
We would not have direct-to-customer like how Tesla does in lots of components on the planet, developed markets. However when you have a distribution mannequin, when you have a gross sales mannequin, which is direct-to-customer, additionally it is revolutionary.
We’ll see how that additionally evolves the best way automobiles are bought in India. So, it’s extra promising when it comes to creating a brand new entry, a brand new expectation from a product viewpoint. On the identical time, worth factors are powerful to match the present mid-to-lower vary EVs in India. So, we are going to see the way it performs out.
As a result of now we have been simply chatting concerning the examine that you’ve got executed within the Chinese language EV market and the transition that now we have seen, however again house there are lot many launches deliberate up for 2025, simply the Auto Expo now we have seen that the key focus was within the EV area, be it from the four-wheeler aspect, two-wheelers, and even in terms of the business car aspect, they’re preparing. However the different debate is on the profitability as a result of quite a lot of these firms are nonetheless struggling to be EBITDA impartial on the entrance, a few of them have, however the smaller gamers are undoubtedly dealing with the problem given the capital-intensive nature of the enterprise. Assist us perceive that. How do you learn it into the profitability aspect of ICE versus EVs and the way lengthy may the run be to catch up and match the identical?
Raunak Onkar: The one lesson that I learnt from trying on the Chinese language firms is that we can not examine any market to Chinese language market as a result of they function in a really totally different capability than we do. Secondly, the whole worth chain exists of their nation.
They’ll make batteries, they will make semiconductors, they will make every part throughout the nation. So, they don’t have to rely on the import responsibility buildings or tariff buildings for importing vital know-how, that’s one other attention-grabbing factor that Chinese language have achieved. In our nation, the attention-grabbing half is the market share for EVs is far smaller.
Solely a lakh or so EV will get bought in our nation in comparison with round 40 lakhs automobiles that get bought, new automobiles get bought in our nation.
From that viewpoint, gamers who’re scaling up steadily is essential in order that they won’t spend some huge cash into capex and working expenditure which can not be capable to generate earnings for you instantly.
So, sure, gradual earnings is a function on this case as a result of all you might be doing is at the moment placing up automobiles on the road, placing up options in your autos and merchandise which the market will settle for and also you get suggestions, you will notice how properly they work, you will notice how they will optimise supplies over a time period. They are going to make it possible for, okay, this part was totally imported at one level, now can we indigenize a number of the manufacturing?
Can we do extra meeting right here? Can we do extra manufacturing right here? So, slowly and steadily, the worth chain, similar to now we have seen within the different auto ancillary worth chain for the ICE autos scale in India over the previous a number of many years, the identical manner it’s going to occur within the EV and it’s a gradual course of.
It needn’t be very quick as a result of on one hand the incumbents should handle their profitability for the ICE portfolio as properly and the identical time they should steadiness the capex and revolutionary investments that they should do on the EV aspect.
Sluggish is best. Sluggish is sweet. And also you additionally get time to iterate with totally different manufacturers. The cycle of launches can be a lot quicker while you take a look at EVs and that’s the reason I in contrast it to the smartphone ecosystem the place you had a really quick cycle the place know-how evolution is so quick proper now in EVs, the identical factor was within the early days of smartphone as properly.
We have now to make it possible for now we have the worth chain benefit. We have now some kind of manufacturing which is native and rely much less on imports over an extended time period and that takes time to construct capability.
If one has to, allow us to say, make EV portfolio, simply EV portfolio, by the best way there’s a fund which has obtained an EV portfolio, however allow us to say if someone has to say, okay, that is the subsequent massive wave the place investments could be executed, innovation could be executed, wealth could be created, worth migration will occur, I’m placing every part collectively. So, if you must make an EV fund, what would that fund have, incumbents, challengers, assemblers, battery makers, how would you assemble this fund?
Raunak Onkar: Ideally, all the above. So, I might not have particular firms identify as a result of quite a lot of firms are additionally on the curve of investments. So, you might even see the present firms additionally look fairly totally different within the subsequent 5 years’ time the place a share of income comes from the EV portfolio as properly, however in the end it has to boil right down to the amount of automobiles bought in our nation and manufactured in our nation.
So, so long as that quantity is rising steadily, you will notice that transition occur inside incumbents as properly {that a} share of the portfolio comes from the EV aspect.
Firms would possibly look very totally different five-seven years out after we see at the moment and in addition, now we have to make it possible for the adoption occurs on the charge.
Numerous the issues that Hormazd talked about earlier about taxation, these are very-very legitimate in our nation, the scale of the automobiles are very-very legitimate in our nation.
So, product market match I feel is but to be established in EV and on the infrastructure aspect we additionally have to have charging infrastructure at house in addition to on the road sides.
All these issues are developing. So, it’s going to over a time period develop into higher and extra clear, however all the above, the part makers, the incumbents, the EV solely firms, all of those battery producers, semiconductor firms, all of those ought to be a part of that EV portfolio if you wish to construct.
