In a recent interaction with the media, Dheeraj Hinduja, Executive Chairman, Ashok Leyland, proclaimed that Switch Mobility will have a Capex of $150 million to $200 million in two years. Considering that your Capex utilisation is almost 3.2x that of your peers, could you elaborate as to how the enormous Capex can contribute to your growth in the next five years?
Our chairman, Dhiraj Hinduja, has talked about investment in Switch as a global entity. So, the $150-200 million that he mentioned is going to be invested in the UK, Spain, and India collectively. Further, most of the products that we are talking about in India already have sufficient Capex because we are not just going to be in the bus business; we are also going to get into LCV electrification.
We have already announced that we will be working in these two categories, and with the booming electric market in India, particularly in buses, we foresee revisiting and increasing the Capex plan, if needed, two to three years down the line. We have plans to launch our buses in Spain as well as in the European market. We are working in the UK with a new technology to get into Gen-5 buses. Additionally, our Switch e1 buses, which were displayed in Paris, will also be servicing the European market.
Switch Mobility has focused on a rather under-focused sector of Indian mobility—public transportation—and has managed to make a significant impact, too. How easy or difficult was it for your organisation to make a mark in this part of mobility? Can you elaborate on the challenges you’ve faced so far?
Public transport right now, if you look at it, in a country like India is particularly dominated by State Transport Undertaking (STUs) on a city transport level with very few private players. So, the STUs’ scaling up their financial structures and bringing in the new model are the areas that we need to work on. Another challenge we face is financing because, for example, if we have 10,000 buses that have to be capitalised, then it requires an investment of more than Rs 15,000 crore, which will have a pay period of nearly 10 to 12 years.
Since it is a highly capital-intensive sector, we are working with the government to secure priority funding for this sector to enable easy funding and, hence, solve the financing challenge.
On the public transportation front, if you look at it, private transportation takes up about 80 per cent and only 20 per cent of the whole bus market is STUs. Before the pandemic hit, 80,000 buses were at the peak, of which nearly only 30,000 were purchased by the STU and the remaining were private. We have already received an order for about 100 electric buses from the private sector.
The reason is that the private sector is looking at two key areas: one, attaining net zero, and two, achieving sustainability goals. There are major corporations working on achieving this by
incorporating electric buses for employee transportation and more. The second thing we figured out is that some applications, especially intra-city applications, have become economically viable. So, we need to educate the masses and possibly do pilot runs in the city, which will eventually become a very viable and economical model for our public transportation system.
For future ease of doing business, how can these challenges be mitigated effectively?
So, if you look at the government policy today, we already have the FAME policy. However, that is only for STU purchases of buses; private players do not qualify for the subsidies. That is one disadvantage to which private players will have to adapt slowly.
The second is that the government has given PLI and other incentives to promote electric mobility in general. However, there has to be some incentive for private players who plan on entering the business. We need to work in tandem with the government and see what we can do for the private players.
For example, private players could be allowed to charge differently than the regulation currently in place, but this needs to be worked on meticulously. We have been focusing on most of the STU tenders and delivering for corporate and private clients, but we have not explored the other areas, which I believe will happen over the next two-year period.
According to a recent survey, only 18 per cent of BEV manufacturers foresee a profit of over $3000 per vehicle, and more than half are looking at a profit of less than $1000. How can the industry collectively work to reduce BEV costs? Would creating a uniform dedicated production line for BEV be an ideal solution, at least for India?
The cost of electric vehicles, not only in our segment but overall, is a challenge to meet. That’s the reason companies have a subsidy to offset it. However, subsidies cannot go on endlessly, and we need to find a way to strike a balance. The way the industry can work on it is by working on cost reduction. When we talk about cost, it is important to think about how we collaborate, which is pivotal.
Similarly, if competition can differentiate on the product and not on the base technology, I think there is a possibility that we’ll be able to bring the cost down. So, platform sharing, component sharing, and common investment for non-differentiated technologies within the vehicle, etc. are the things that will help.
However, at Switch Mobility, we are thinking a step ahead! We plan on utilising India as our supply base. The country needs to start looking at not just our conception but also how to become a “manufacturing factory” for the world. That’s how our neighbours thought 10–12 years ago and started working hard towards it. So, I think the government needs to work on helping the industry aggregate demand across the world and help it become a global supply chain. They can work on offering incentives for exports and not only for imports or domestic concepts.
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