How Lithium and Zoomcar are defining electric fleet economics

Sunny Sen Anand Murali September 3, 2018 11 min

Greg Moran still remembers the audacious decision: in 2013, a year after he co-founded Zoomcar, he decided to buy an electric car with the idea to lease it out to customers. Electric vehicles were far and few in between even in the US and China. India was not even on the radar of electric mobility. But, shared mobility was becoming mainstream – Uber in the US and Didi Chuxing in China – and more people were ordering rides on apps.

Zoomcar was one of the early movers into this area in India hoping that fewer people would buy cars and some of them would rent vehicles to drive themselves. Because of their low cost of maintenance, Moran thought that EVs would become an instant hit. He wanted to be an early mover as the shared-electric mobility world in India shapes up.

It was an experiment, said Moran, a financial analyst by training and early in his professional life. “We were the first company to launch EVs as a service in India.”

He was already in talks with car, SUVs and tractor maker Mahindra to supply EVs. It was the only company investing and making EVs in India. (Tata Motors, which today is betting on electric variants of its car models, too, joined the fray in 2017.)

In 2016, EVs became a mainstream topic of discussion among carmakers, industry lobbies and the government as the Narendra Modi government strongly pitched for EVs. In March 2016, Piyush Goyal, then the minister of power, had said that by 2030 India could be a 100% EV nation. He even talked about zero down payments for EVs and special subsidies.

If things would have gone the way it was initially decided India would be well on its way to being among the world’s largest EV nations. Indians buy three million cars, 15 million bikes and scooters, and some 800,000 buses and trucks a year. Compare that to the EV population in the country: India had less than half a million EVs in 2016 including two-wheelers, e-rickshaws, electric cars and buses. Most of these run on lead-acid batteries, which are fast getting antiquated.

But things changed in 2018, when the government decided to do a volte-face on the targets. An in-the-works EV policy was scrapped and the government left it to the market to adopt the environment-friendly vehicles.

The writing was clear on the wall and Moran decided not to depend on the government. “We didn’t even look at what the government does. It is very early from the public sector standpoint,” he told FactorDaily.

Alongside stands Mahindra determined to build an EV industry in India. “We are working with partners to deploy electric vehicles and build electric fleets according to their requirements. Today a lot of our focus is also on developing born-electric vehicles, platforms that are electric from conception,” said Sirish Batch, head of advanced technology at Mahindra Electric.

Today, Zoomcar already has over 300 EVs – all Mahindra’s E2o hatchbacks – on the road and has plans to add another 700 units to its EV fleet. It offers the EVs on Rs 9,999 rent a month with an initial security deposit of Rs 2,000. “If you look at electric mobility, it is 80% cheaper from a running cost standpoint if you take in discounts,” Moran said.

But Zoomcar isn’t the only company. Uber’s domestic cab-hailing rival Ola and Bengaluru-based Lithium Urban Technologies, which provides electric fleets to companies, are also betting their future on EVs.

Greg Moran, Co-founder & CEO of Zoomcar
Greg Moran, Co-founder & CEO of Zoomcar

While Zoomcar focuses business-to-consumer on individuals, Lithium provides fleets only to companies. It counts Wipro, Tesco, VMware, among others in its clientele. Ola has done a pilot in Nagpur and plans to build a pan-India EV presence.

“What we are seeing right now are early adopters of the technology. As the space matures you will begin to see the bigger players coming into the space,” said V. Ravichandar, chairman of Feedback Consulting, a business advisory firm headquartered in Bengaluru.

For big corporates

Lithium decided to focus on the employee transportation segment because that is where it was sustainable to use a 100% EV fleet. According to Lithium’s co-founder Ashwin Mahesh, the employee transportation segment is one which the challenges associated with EVs are more or less sorted today already.

Mahesh, an urban development expert and a former NASA scientist, lists four defining features of the future of mobility: shared, connected, clean, and modular. But the problems currently with EVs are of range anxiety (and the resultant unpredictability of routes), finance, charging infrastructure and power availability. “Most of these problems are sorted in the employee transportation segment and, therefore, the thing that you are saying will be possible in 20-25 years is practically doable today,” he says.

Lithium’s journey started when Mahesh met Sanjay Krishnan, a former senior director at Honeywell India, in 2014. They discussed sustainability and met Chetan Maini who was then with Mahindra. Maini was the founder and managing director of Reva Electric Car Co., makers of India’s first and world’s most affordable electric car. Reva was acquired by Mahindra in 2010 and Maini continued as the chief strategy officer of the Reva (now, Mahindra Electric), and was planning the next generation electric vehicles. (Maini now runs Sun Mobility, makers of swappable lithium-ion batteries, and is also a director and co-promoter of Lithium.)

Krishnan, Mahesh, and Maini had multiple meetings discussing business models that were feasible and could scale, and one thing the trio realised was that EVs could play a major role in organised public mobility in India if routes were preset which would offer visibility of battery usage and each EV turned in a higher utilisation. The conclusion: what better than office campuses? It was time for trials.

Lithium Urban Technologies' founders Sanjay Krishnan and Ashwin Mahesh,
Lithium Urban Technologies’ founders Sanjay Krishnan and Ashwin Mahesh,

Mahesh and Krishnan took a couple of vehicles from Reva and started trials with Wipro. For the first few weeks, they had just one routine: follow the software services major’s employee transport vehicles.

The first lesson learnt was that an EV runs out of charge. So, the Lithium team put a fast charger on a truck and the truck followed the EV. “From time to time, we used to charge the car whenever the transport vehicle used to stop,” said Mahesh.

With the initial research and teething troubles sorted, Krishnan and Mahesh started looking for clients. British retailer Tesco became Lithium’s first customer. Today, Lithium has 15 clients. Its fleet size is about 500 EVs strong and spread over Bengaluru, Hyderabad, and the National Capital Region with over 100 charging stations to power up this fleet. A service launch in Pune is planned soon.

Each EV in the Lithium’s fleet runs round-the-clock with an average run of 250 km per vehicle an operational day and the fleet clocks about 2.5 to 3 million kilometres every month, according to Krishnan. Since Lithium’s clients work on a 24/7 basis, the vehicles do the same. Lithium also ensures that there is enough charging space in the premise of each client to ensure the vehicles are charged.

Shorn of its zero-pollution and other environmental benefits, the USP of the EV is simple: low operational cost. Both Lithium and Zoomcar have been leveraging this in their operations. “In an electric vehicle, as distance grows, the cost does not grow. The unit cost of running the electric vehicle is so low, it is around 1/7th or 1/9th of the cost of running a diesel vehicle. So effectively it is zero,” said Mahesh.

But the initial purchase cost means that an EV needs to be used more to cover costs. Assuming an EV comes at double the price of a diesel-run vehicle, it needs to run 160 to 165 km a day before you hit breakeven. If the initial cost is 3x, the EV needs to clock “270 km per operational day before you will hit that crossover point,” explained Mahesh. For a 4x variant, nearly 400 km a day will do the trick.

Lithium schedules rides on its fleet in such a way that an EV runs maximum each day with two drivers splitting duties into 12-hour shifts. The EV stops only for charging, waiting for passengers and traffic.

The company wants to take its fleet to 1,000 EVs by the end of the financial year, says Krishnan.

Sweating the asset

“We didn’t buy the car to park it, we bought the car to run it… In any operation which is capital and labour intensive, the driver cost is a significant part of the operations, you must sweat the capital and not the guy,” Mahesh said.

Somewhere deep in Mahesh’s observation lies Zoomcar’s business model. The company offers its EVs on a long term rental programme, at least for six months to up to two years. Even Zoomcar doesn’t pay the price of the car upfront – it takes the car on lease and rents it out.

Just giving the car on rent (at Rs 9,999 a month) wouldn’t work for Moran. He would make no more than Rs 1.2 lakh, which would take him more than nine years to recover the cost, forget making profits. And, the average life of an EV in a metropolitan city? Five years.

Zoomcar takes care of the charging infrastructure at the customer’s residence. They erect a slow charging station, which takes about seven hours to fully charge the car that would run anything between 100-130 km depending on the way the driver drives and traffic.

What gives, then? Once a customer has taken an EV on rent, Zoomcar expects him or her to lease it out further for a few hours when the car is not in use. The customer – let’s call him or her the primary customer – can list the car for at least a day on the Zoomcar platform for this.

The primary customer rents it out for Rs 45 an hour for 5 km with every additional kilometre charged at Rs 9 each. Zoomcar keeps 25% of that money and gives the rest to the primary customer. Weekend rates are higher at up to Rs 95 an hour.

Such rented cars, typically, run an average of 50 to 60 km a day. “You have to rent out for a minimum of 24 hours. So the listings are either weekday prominent or weekend prominent. On an average, the customers are listing for 15-16 days a month,” said Rajesh Bysani, chief product officer of Zoomcar. “People are biased on using on weekends and renting out on weekdays.”

The secondary customer can unlock the car using a mobile phone and has to pick it up and deliver it back to the same spot. And what about battery charge and range anxiety? “We track the battery usage very closely, and alert the customer when he reaches 30% of the charge (remaining)… you can book for 8 to 12 hours,” said Bysani.

Between 60% and 70% of Zoomcar’s primary customers are sharing their rented EVs. As a result, the company’s break even on a car happens by the third year. “Global utilisation levels are 45%. We are seeing a 75% utilisation,” Bysani said.

This is reflective of the reluctance among consumers to make upfront purchases. Typically, people who are 25 to 35 years old and are salaried are the ones who rent an EV, Moran added.

A few who are slightly older, too, are attracted by the economics. E.g.: Kolkata stockbroker and wealth manager Sandeep Ginodia, who has a Zoomcar EV on a two-year rent contract. “At just Rs. 10,000 there is no other expense. Zoomcar takes care of the maintenance, servicing, and there is no fuel cost,” he said, adding he clocks about 60 km every day. “If I had bought a car, even with a diesel version it would cost be Rs 375 of fuel every day – that’s Rs 1,36,000 of expense every year.”

Zoomcar keeps a close watch on the cars with real-time diagnostic data spanning more than 50 parameters. With a visibility on wear and tear of the EV, the company can maintain and manage the life of the vehicle better. It also reduces breakdowns we have a better visibility on wear and tear.

But, isn’t Zoomcar worried about Ola, which unlike in the case of Lithium, is more B2C and will target the end customer? Moran went back to the basics of the EV fleet business. Ola and Uber need fast charging to stay on top of the game, he said. “Our model doesn’t rely on fast charging. Our average run time is 50 to 60 km, while for an Ola or Uber is 150 to 200 km.”

Still, Ravichandar, the Bengaluru consultant, warned of a big change in the days ahead. “The move to electric is not going to be incremental, it’s going to be transformative,” he said. “Suddenly one day you are going to see significantly more electric (vehicles) as some of these things happen more in jumpstarts rather than gradually.” That’s when the fleet economics that Lithium and Zoomcar have learnt will be put to the real test.


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