A congruence of factors in India — notably, climate change policies, fuel costs and skyrocketing demand for e-commerce — has set up ideal conditions for startups like all-electric commercial vehicle startup EVage.
The startup, which has already supplied five EV trucks to Amazon India’s Delivery Service Partner and plans to provide “in the thousands” more by the end of the year, according to one investor, has just raised a $28 million seed round, led by new U.S.-based VC RedBlue Capital. EVage will use the funds to complete its production-ready factory outside of Delhi in first quarter of 2022 and scale up production to meet growing demand.
EVage’s flagship vehicle is a one-tonne (2,000 pound) truck that was designed for India’s commercial delivery market using feedback from its partnership with Amazon. The truck is developed on EVage’s industry-ready EV platform that the company says allows it to build multiple different types of high quality vehicle at a far lower cost than other OEMs. The startup plans to manufacture vehicles in “Modular Micro Manufacturing” factories, similar to Arrival’s microfactories, which should have smaller carbon footprints and require less capital to produce vehicles than traditional OEMs.
The upshot: EVage aims to pass those savings onto customers.
Finding a way to make production cheaper is vital for scaling, and the opportunity and demand for scaling EVs in India is massive.
India’s Transport Minister Nitin Gadkari, whom Olaf Sakkers, general partner at RedBlue Capital and future EVage board member, says has had a high-level hand in the announcement of EVage’s deal with Amazon, has set a target for the country to have 30% private cars, 40% buses, 80% two and three-wheelers and 70% commercial vehicles electric by 2030.
A series of incentives like the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles schemes (FAME-I and FAME-II) help by providing subsidies to electric two-wheelers and commercial or transit-related four-wheelers. FAME-II subsidies only apply if OEMs source 50% of components from local manufacturers, which helps boost the supply side, as well.
Two and three-wheelers are already well on their way to that target, particularly so with companies like Ola Electric setting up a massive factory for e-scooters and Hero MotorCorp, one of the country’s largest micro-EV manufacturers, penning a deal with Taiwanese battery swapping company Gogoro to build a battery swapping network in India. Four-wheelers are a bit slower to market, in part because the average commuter isn’t buying electric cars. The path to electric four-wheeler adoption, therefore, is more likely to occur through commercial roads, Sakkers said.
India’s e-commerce market is exploding, especially as global companies increase their presence in the country and the mobile-first nation full of smartphone users gets extra comfortable with easy digital transactions. Amazon has invested $6.5 billion in India since it entered the country in 2013, and Walmart entered the South Asian nation through a $16 billion acquisition of the startup Flipkart. Those companies, alongside national and local delivery companies, are looking to partner with Indian OEMs that can meet the unique demands of an Indian market.
“There are some electric vehicles that work in developed markets like the U.S. and Europe, and you see companies like Rivian selling to logistics fleets for those use cases, but the needs of Indian logistics in an Indian market more broadly is very different,” Sakkers told TechCrunch. “It requires solving different problems, and so we see a pretty big opportunity to create custom-built vehicles for these kinds of use cases.
Sakkers noted that from a pure engineering perspective, for example, EVage’s vehicles don’t have to meet the same standards of the west in terms of being certified to drive at highway speeds, because rarely in India do vehicles go above 40 miles per hour. That means everything from motor requirements to battery size and types of materials you need to build are different, and potentially much cheaper, added Sakkers.
“The total cost of ownership savings for the customers is quite significant,” said Sakkers. “They’re not only doing this for optic reasons, they’re also doing it for pure economic reasons. In India, you can’t operate at certain times of day in cities if you produce a certain amount of emissions, so it also improves your ability to operate a logistics fleet if you’re operating electric vehicles.”
“There aren’t many startups that fit into this mold so thats why we’re putting so much capital into EVage,” said Sakkers. “The demand for this segment of vehicles is half a million per year in India. Scaling production to the hundreds of thousands is going to be a challenge for the company, but also a huge opportunity.”