Ather Energy’s real marketing pitch is to be an ‘un-auto’ company, says COO Venki Padmanabhan

Anand Murali July 11, 2017 16 min

 

For auto industry insiders, Venkatesh Padmanabhan is a familiar name. An automaking veteran, Venki, as he is known among friends and colleagues, has spent time with General Motors, Cadillac, Daimler Chrysler, and Royal Enfield. It took industry circles by surprise when the announcement came that he had been roped in as COO of Ather Energy, an electric two-wheeler company that ranks among the most valuable manufacturing startups in India.

Ather said Padmanabhan, the former CEO of Royal Enfield, is tasked with the supply chain, quality, manufacturing, and service delivery — the core of operations of an automaker. “His network and his experience in the industry is a valuable asset for a young company,” Ather CEO Tarun Mehta had said then.

Ather was founded in 2013 by Indian Institute of Technology (IIT), Madras, alumni Tarun Mehta and Swapnil Jain and incubated in the IIT-Madras Research Park. The company’s first smart scooter, the S340, unveiled in February 2016, was supposed to be launched towards the end of last year. Before the launch, Ather had raised nearly $15 million from investors including Tiger Global and Flipkart founders Sachin Bansal and Binny Bansal. In October 2016, Ather raised around Rs 205 crore in a fresh funding round from Hero MotoCorp, India’s biggest two-wheeler maker. The S340 is yet to hit the Indian roads.

In an interview with FactorDaily, the first since he took on his new role, Padmanabhan details Ather’s strategy, production plans and challenges. Edited excerpts:

Q: What’s the plan you have in mind for Ather?

A: Just get it out as fast as possible. Get it in customers’ hands as fast as possible. It’s that simple. As of course it’s not trivial. I mean, it’s not about giving one scooter; it’s about giving the right scooter, the right quality, the right value; and then be ready to give it any volume that the customer asks for.

Q: What is going to be your first step?  

A: I’ve been here for about a month. (Ather) came to me and said here’s one or two really critical supplier choices — that needs to get ironed out. So, I went and ironed it out.

Q: So supply chain will be one of the first thing you will focuss on?

A: I’d say, one of the useful things I can do for them is call my old buddies and say, “Remember the favour you owe me from Enfield? Come, come, come!” No, seriously I mean, nobody has questions about what the product is. Nobody has questions about what it’s trying to change. People are just like, “Just give it!”.

And, honestly in some sense I’m happy to be in this role, where I think I can help which is just you know — design frozen, supplier selected, parts in, factory up, make scooters, give it in everybody’s hands, just discover all the possible bugs that will happen, and fix them all. So that when we give it in people’s hands, it’s something that people can enjoy reasonably. I mean it’s never perfect but at least they should be able to sort of not deal with the niggly stuff that irritates people.

That’s simply what we are trying to get done and in the shortest possible time because I think with a startup in particular — and for me this is the first startup ever — there’s some very interesting new forces at play. For one; there’s no revenue. So, the first part is that I don’t have revenue and in my role as a COO, I’m also spending boatloads of money, you know — like investments with suppliers for tooling, building the plant…

So, I’d say the really uncomfortable part is knowing that I don’t have revenue. Knowing that there’s finite investment and that I gotta spend it as little but enough to get the job done and then leave enough money for additional development work.

Q: Typically, Ather as a company won’t be able to rely on these regular supply chain that is the traditional two-wheeler; it has totally new subsystems and everything is new…

A: What I’m finding is exactly the opposite. This is sort of a good ongoing discussion. Electric, smart — agreed. But it’s also a scooter. It’s also on Indian roads. So, when you look at the overall scooter, my opinion is, only 25% that’s new. And even the new stuff when you look at the battery, you look at the dashboard and all that; when you break it down into subsystems and components that’s also not new. So that’s one piece.

Electric, smart — agreed. But it’s also a scooter. It’s also on Indian roads. So, when you look at the overall scooter, my opinion is, only 25% that’s new  

The second thing: if you accept that a large proportion of all the parts can be sold from traditional two-wheeler suppliers, that’s one piece. Which is kind of good news. But, the bad news is, you go to the traditional suppliers and you say, “I don’t have any revenue. I can’t tell you what volume we are going to make and we’d like you to make a lot of risky investments on our behalf in the hope that this is going to sell like gangbusters and you’re gonna make money.” So, the real challenge is to go to the regular supply base… Right now, I think our role — me, the leadership team — is to do the sales pitch to the suppliers. Of course, we’ll eventually do the marketing pitch to our customers to buy smart electric scooters etc (but right now it is the suppliers).

Ather_electric_scooter
The real challenge is to do the sales pitch to suppliers, says COO Venki Padmanabhan

What’s really encouraging in the last month is that, just like it happened with the customers where we think we’d have to teach them what smart is, what electric is and before you’re done, having the whole hoard of them are saying, “Ya, ya, we know all that. Give it to us!” Almost identically, the same thing is happening with suppliers.

Last week, I was at a $15 billion bearing supplier, a global bearing supplier. And I’m out there to pitch them. In the traditional two-wheeler world, bearings are very tricky — customers cry about it, OEMs don’t solve it, and it’s a pain. For us, not only do I want to not have those problems, I also have issues of friction, frictional losses, battery, and all that. So, for me, bearings are even more important than the traditional one. So, my challenge is I gotta get absolutely the bearings that I want and then, I gotta go find a supplier who has them.  Both problems solved.

Then, I have to convince him that he should honestly invest in us. Because, any supplier I go to now and ask him to make parts for me — they have to take big risks and invest in us. I mean, in some sense, if there’s a big Hero (MotoCorp) for us,  each of my 10-12 suppliers they’re all going to be little Heros for us. They have to believe in us. They will take some risks. Honestly, I think the ones (suppliers) that will really work for us are the ones who believe in this future.

When people experience the un-auto, you’ve been there, you’ll go talk about it to anybody. You’ll go talk to a tree and say, “Can you believe this, the guy came to my house and fixed my scooter!”  

And of course the commercial case I keep making to them, this is sort of my byline, I just say very simply, “You look at what our Government is doing, you look at what Niti Aayog is doing, you look at the specific problems that our country has — fuel import, emissions and all that stuff. Electric is our future. Country has said 2030 will be all electric. 17 millions two-wheelers now; 30 million two-wheelers in 2025. So, 2025, there’s going to be 30 million electric vehicles, electric scooters in India; electric two-wheelers in India, by mandate. We are the first guys doing it. You want in?”

Many of them, I’m finding out, they’re like, “Ya, ya, ya bring it on.”

So, your original question, you’re not going to traditional suppliers. We’re really looking for suppliers who are excited about the electric space. Who are basically a bit like Heros. Interested, willing to invest in this space, in the knowledge that the early bird gets the worm. So far, last month, I was pleasantly surprised: supplier milne mein problem nahi hain. Investment karne walon ka bhi problem nahi hain. (There is no problem in meeting a supplier, There is no dearth of suppliers who will invest, either.)

What’s shaping up is that there’s about 11-12 subsystems in the scooter. If I can get a horseman for everyone one of them, we’re set. There’s a lot of good choices; around the world.

The other thing that’s really odd about this scooter from first impressions, it’s like a two-wheeler, but if you look at the electronics in it, it has nearly the same or more electronics than many four-wheelers. So, if you actually look at the technology, the electronics in it, I have a much wider canvas than even traditionally you would go for. I’m going to all the four-wheeler suppliers also. So, the pallette of selection is good.

So, my anxiety and bias says, jitna jaldi ho sakein, get all the bhoots out, kill them, and get out a really really competent automobile first. And on top of that, a smart electric is always there. Basically, in under a year, this has to happen  

I’m also surprised because I’ve not been following electric for the longest time — my wife’s the release engineer of the original EV. So 25 years ago, the EV1 (a General Motors electric vehicle launched between 1996 and 1999 that was one of the first of its kind) used to come to our house. There’s always this growing scepticism about look what happened to EV1 — we believed in it, we got disappointed, so we stepped back and said somebody else will. But, now I’m here. Energy and density in battery is just physics and chemistry that needed 20-25 years to get to where it is now. Today, when I look into it, I find that it’s tantalisingly closer than what it was. This mythical $100$ a kilowatt-hour (cost), we guys are pushing $180-$200, Tesla’s pushing $130-$140, and they say, every year it’s a 10-15% reduction. If it’s there, then the ICE (internal combustion engine) is over.

(Editor’s note: Manufacturers can extend the range of electric vehicles simply by installing larger battery packs, but this adds significant cost to the priciest component in the EV. The price of the Lithium-based battery packs used in EVs is falling at a rate faster than predicted. Experts forecast that it could drop below the $100 per kilowatt-hour mark by 2020. This, in turn, can significantly reduce the cost of EVs.)

There used to be a time when we were growing up… where was air-conditioning? My dad getting a radio in the car was a big deal, right? But now it’s ubiquitous, why because the original introduction price and the current price just does that. So there’s no reason to believe that won’t happen to these (Ather) components. Originally, when I came in, I thought, it’d be like really really exotic. There’s nothing in our components that’s exotic. Perhaps the cells. But cells are also now, between the three big guys — it’s a commodity.

So, it’s nice to be in play.

Q: What do you see as the biggest challenge in that case, going forward to go to production?

A: Like they say in hindi ‘Bahut jaldi bhooton se parichay karna hain.’ As quickly as possible, find all the ghosts. We need to be a bunch of Ghostbusters. Fill the scooter, run it to the ground, find anything and everything that can go wrong with it. And like a shampoo ad, rinse-repeat. Between now and summer of next year, get it done, get all the bugs out. I know that there will still be something that will eventually get found, but they will never be basically dissatisfied.

The guy might say, “I would have preferred this, or I would have preferred that.” But then, it is a scooter, it is going to go on the road. It has to fundamentally satisfy people on the lower-end Maslow needs — acceleration, lights should work, side stand shouldn’t cause the scooter to topple over, charging should happen painlessly. If we don’t fix that, and we leave niggly things in the basic scooter, then nobody will give us the credit for the cool stuff. So, my anxiety and bias says, jitna jaldi ho sakein, get all the bhoots out, kill them, and get out a really really competent automobile first. And on top of that, a smart electric is always there. Basically, in under a year, this has to happen.

Q: So by end of next year, you expect to go into production…

A: The startup’s launch curves are a little more finite than an established OEM. Especially, for an established OEM, if you are doing electric, this will be like a pimple on the proverbial whatever. Chale to thik hai, nahi chale to bhi thik hain. (Fine, if it runs; fine, if it doesn’t, too.)

We can’t pay rent if we don’t sell. I’m sure that’s true of every startup. In a way, it’s good, because then you put everything you’ve got on the table and you play for broke.

Q: Since you are going for distribution and selling the bike, you plan to go online for sales like Tesla?

A: Fundamentally, catching up from Ravneet, Tarun and Swapnil, what they are saying is, to be an un-auto company. So, if the auto guys have big dealerships, we’re not doing it. If the auto guys make money selling spare parts, we’re not doing it. So in some sense it’s quite clear, what we should do; going off what the traditionals do. This morning, in Fortune, there was a tweet about luxury retailers having a huge problem getting people into shops — because there’s online — but then for the higher price stuff you want touch and feel. Then, they have to invest in real estate.

No dealership, no making money off of spares, no taking a day off to go and get your product repaired. I’m very excited about it. I used to run ops in one of my old companies. And service was always this sort of tentacle that would be out there and I knew we were getting a serious drubbing from customers, but I didn’t have direct influence on it.

If the auto guys have big dealerships, we’re not doing it. If the auto guys make money selling spare parts, we’re not doing it. So in some sense it’s quite clear, what we should do; going off what the traditionals do  

Thanks to Tarun and Swapnil, I got service delivery. Ravneet’s (Ravneet Singh Phokela, CBO of Ather) word will be the face to the customer. But then, whatever he promises, he is going to turn around and say, Venki we make an SLA, cough up! Deliver it exactly like we promised. And it’s nice because then I do ops, I have parts, I have access to suppliers, I do commercial stuff… I think I can make sure that whatever promises the CRM guy makes happens… Jo bola woh hona chahiye. (What is promised should happen.) And if it happens enough number of times — that’s the real marketing pitch — when people experience the un-auto, you’ve been there, you’ll go talk about it to anybody. You’ll go talk to a tree and say, “Can you believe this, the guy came to my house and fixed my scooter!” or “Can you believe this, he left me a replacement scooter. He told me he was going to bring it back the next day. And he brought it back. How’s that possible!” In that sense I’m very excited about our company.

Q: But isn’t service where the money lies in the auto business?

A: Fundamentally in auto, the fact that they make money on spares is like a total conflict of interest between the OEM and the customers. He will charge you crazy, then you have to wait for it. I can hear it in your voice, you sort of accept it. Cause you are committed to get it done right. Is that a sustainable relationship? I don’t think so.

If they’re saying we are going to build the scooter from the ground scratch-up, let’s build everything else from the ground scratch-up; so that the customer has a fundamentally different relationship  

I think that relationship is ripe for reinvention. And whoever reinvents it, completely differentiates themselves. I think, what’s sort of really neat with the way Tarun and Swapnil have assembled this team, with non-auto thinking — and obviously Hero (Hero MotoCorp) sees the value of that — it’s not just about smart and electric. It’s about doing automobiles, differently. So, if they’re saying we are going to build the scooter from the ground scratch-up, let’s build everything else from the ground scratch-up; so that the customer has a fundamentally different relationship. The thing that is exciting to me is—I could only work in conventional auto companies, there weren’t guys like this around, who even want to do things differently.

Q: You went from automobiles to defence tech, mining and now back to next gen automobile.

A: Can’t keep a job. (Smiles) I’m very thankful to Tarun and Swapnil for giving me employment. I hope I am useful to them.

Q: What do you think about EV market projection for the next couple of years?

A: I’ve looked at the data, I’ve seen how the numbers go — 15,000-20,000 units. The trouble is that, especially in the two-wheeler space, what people think of and know of as electric two-wheelers is one thing. And these guys (at Ather) found out that one thing is disappointing. So you can predict the market from that disappointing thing which people have done. Usually, that’s where the conversation is, ki kaise penetration hoga (how will you penetrate the market?) assuming the electric two-wheeler is going to be the same. You could say, ‘Hey look at China, they also have change a battery in a year, charge for eight hours, top speed of 25-30; still, look how big that market is.’ The discussion can be ‘Boss, if it can happen in China, what is that market going to do?’

But, that’s not what we are doing. We’re basically saying, we’ll give you a competent equivalent to ICE two-wheeler that is also electric, that is also smart, and we’ll treat you special. So, for that I don’t know how you predict a market. Frankly, this is the part that drives me nuts.

 


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