This post is a part of EV Next’s EV Perspectives. EV Next, a division of EAI, is a leading market intelligence & strategic consulting firm for the Indian e-mobility sector.
A couple of months back in Bengaluru, EV Next’s Director Narasimhan Santhanam had the opportunity to host Ashwin Mahesh, co-founder of Lithium Urban, in a panel discussion about EV fleets. That discussion and the answers given by Ashwin made our team understand a lot more – and impressed – about the company’s business model.
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Which was why, when we read a recent news report that spoke positively about the company’s business model, we did a bit more research and analysis of the company. The result? This blog post.
Firstly, a short intro to Lithium Urban. This is one of a clutch of companies that offer what is called mobility as a service. That’s just a nice way of saying “you don’t have to own your vehicle, we will run it for you and you just pay for how much you use it”. That is, they have converted the monetizable unit from a product (a vehicle in this case) into a service (transportation).
Well, we have had a mobility as a service for as long as we can remember – our public buses and trains are indeed nothing but that! The car rentals used by you or your business is a service too. The key difference is that Lithium Urban provides such a service using a fully electric vehicle fleet.
Lithium Urban operates electric vehicle fleets for users (typically corporate clients) with the business model of electric mobility as a service. This to a large extent de-risks EV adoption among the target end user segments, while providing most benefits that come along with the adoption.
Now, how different a value proposition is it for the end user (say a corporate) when a company offers an EV fleet service instead of a fleet service comprising petrol or diesel vehicles? On the face of it, it doesn’t look like a big difference to the end user. But actually, there’s a significant difference, and that’s where the business case for Lithium Urban gets built.
- Low tariffs – Firstly, Lithium Urban can possibly offer significantly lower tariffs for the service. How is this possible if electric vehicles cost more than petrol vehicles? Well, electric vehicles have a higher upfront cost but their lifetime costs (which includes capital costs, running costs, maintenance and repair costs etc.) are significantly lower than those for petrol or diesel vehicles. The main reason is the very low running cost (Re 1/Km for conventional cars vs. Rs 5/Km for electric cars). This implies that higher the capacity utilization of the car (% of time in a day it is in use) the faster the payback period for the car from savings in running costs.
- Green bragging rights – Second, and more important, using Lithium Urban’s electric vehicle fleet can give a corporate (say, Infosys) green bragging rights – and rightfully so, if hundreds of its employees are using green transport (though without having to own the vehicles).
- Eliminates EV ownership risks – Third, by taking the risk of owning and running the vehicles, Lithium Urban also eliminates the risks and uncertainties present in electric vehicle charging (long charging times, scarcity of charging infrastructure) and also concerns about low ranges of electric cars compared to those for conventional. Lithium Urban, by focussing on operating a large fleet of EVs, is in a much better position to invest in a dedicated EV charging infrastructure and also in IT to ensure that their cars get charged on time for the distance they have to travel. Having a large fleet of cars also minimizes the risk of not being to operate one or a few cars because they are getting charged.
If the end users / corporates gain these advantages, Lithium Urban too has a significant business case. As mentioned earlier, by utilizing the car for a large part of every day, they reach the break-even period faster; because corporates get green bragging rights, they might be OK to pay a slightly higher price than otherwise. And by investing in IT and increasing efficiency in every part of its value chain, Lithium Urban could cut operational costs significantly.
All in all, there’s a good chance that these guys are actually making decent profits or very soon will.
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This post is a part of EV Next’s EV Perspectives. EV Next, a division of EAI, is a leading market intelligence & strategic consulting firm for the Indian e-mobility sector.
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