With a frugal strategy and focus on CVs and tractors, this Tamil Nadu-based company is quietly revolutionising the electric mobility sector, targeting the less glamorous but potentially more lucrative segments of India's rapidly evolving EV market.
04 Oct 2024 | 464 Views | By Shahkar Abidi
While the electric vehicle spotlight shines brightly on household names like Tata Motors and Ola, with their sleek cars and zippy scooters stealing the media limelight, a quiet revolution is brewing in the south of India. Far from the glitz of consumer-facing EVs, TI Clean Mobility, a little-known company nestled ...
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While the electric vehicle spotlight shines brightly on household names like Tata Motors and Ola, with their sleek cars and zippy scooters stealing the media limelight, a quiet revolution is brewing in the south of India. Far from the glitz of consumer-facing EVs, TI Clean Mobility, a little-known company nestled in Tamil Nadu, is plotting a takeover of a decidedly unglamorous yet potentially lucrative segment of the market.
Kalyan Kumar Paul, the Managing Director of this Murugappa Group offshoot, isn't chasing the limelight. Instead, he's laser-focused on the practical world of commercial vehicles (CV), tractors, and last-mile delivery solutions. It's a strategy that might not turn heads at cocktail parties, but it's one that could reshape India's EV landscape from the ground up.
In an industry where burning cash seems to be the norm, Paul is playing a different game altogether. With a war chest of Rs 700-750 crore for FY25, TI Clean Mobility is embracing a level of fiscal prudence that's as rare as finding a unicorn in Chennai's bustling streets. "Frugality" isn't just a buzzword for Paul — it's the cornerstone of a strategy designed to outlast the EV gold rush and build a sustainable, profitable business in a sector where both qualities are in short supply.
TI Clean Mobility’s flagship brand is Montra Electric and is primarily used for its electric three-wheelers. Launched in 2022, these vehicles are now plying the roads of peninsular India. In South India, its market share currently stands at around 33%. On a pan-India level, the company's market share is around 7%.
At a time when EV competitors are splashing cash on everything from marketing blitzes to R&D extravaganzas, TI Clean Mobility is focused on building a solid foundation. New plants are springing up across the country, a strategic chessboard where each move is calculated.
"After this fiscal year, we will be in a position to operate like a normal business. We are spending the money that we have got very carefully and not splurging," Paul told Autocar Professional in a free-wheeling interview. He puts a premium on being able to generate a profit and free cash flow, even while scaling up, to avoid the pitfalls that have ensnared many of its peers.
In the dynamic and capital-intensive electric vehicle (EV) industry, generating a profit and free cash flow is essential for long-term sustainability and growth. A profitable company demonstrates the ability to generate revenue in excess of costs, a crucial factor for attracting investors and securing future funding. Profitability directly impacts a company's valuation, with investors willing to pay a premium for businesses that consistently generate profits. Furthermore, a robust balance sheet enables investment in research and development (R&D), market expansion, and resilience during economic downturns, thus gaining a competitive edge.
Paul's strategic choice makes sense, considering that quite a handful of startups in India, flush with investor money, have failed to take off. Even globally, there have been instances such as those involving players like Coda Automotive and later Fisker, which had planned to enter India, where companies could not scale up despite initial exuberance and deep investments.
A Turn-Around Man
There’s a reason for the caution. Paul, a veteran of the corporate world, has seen the wreckage left by unchecked growth. He's turned around a couple of struggling businesses before, including TI Cycles of India — a subsidiary of the parent company, a feat that requires a deep understanding of numbers. Starting his career over thirty years ago as a professional service representative, Paul has navigated diverse roles across various sectors with companies like Standard Pharmaceuticals, Shaw Wallace, Ceat, and J K Tyre. His goal is to build TI Clean Mobility into a company that can not only survive but thrive, even in the face of economic headwinds.
Paul is bullish on the future. He sees the firm's recent investments as strategic bets on growth. "If you look at our track record, we started with the three-wheeler plant, followed by the tractor plant. Next, we built the heavy commercial vehicle plant, and now we're working on the small commercial vehicle plant. A significant portion of our investment has gone into capital expenditures (capex). Additionally, we have invested in product development, research, and the necessary tooling to get these vehicles off the ground," he adds.
The market, Paul suggests, is ripe for disruption. As per Bain & Company, India's electric vehicle (EV) market is at an inflection point. EVs accounted for about 5% of the total vehicle sales and are set to grow multifold in the years to come. "We will have to move larger volumes in turn to justify the investments and also to do the conversion," penetration of at least 10% year-on-year. "So I don't think the volume part, per se, is the concern. The volume ramp up in direct proportion may happen," he adds.
Getting the Basics Correct
Unrestrained by the weight of a legacy automotive business, TI Clean Mobility is aiming big. It is not just the Flipkarts and Amazons of the world delivering goods in last-mile vans that have caught its eye: TI Clean Mobility is aiming for the big league — medium and heavy-duty trucks, even tractors. Paul's projections, based on early conversations with potential customers, are nothing short of audacious: a five- to six-fold increase in the company’s would be considered a significant success, he adds.
The scale of the company’s ambition is striking. For TI Clean Mobility — through its subsidiary TIVOLT Electric Vehicles Private Limited — is focusing on the 3.5-tonne, 1.75-ton, and rapidly growing 2.2-tonne segments — essentially the whole market.
The company's plant is nearing completion, with trial production on the horizon. Homologation for its 3.5-ton e-SCV is underway, and beta vehicles are being put through their paces. The goal was a soft launch of their first product in the category this August, followed by a full-scale assault a bit later during the year. A couple of other products are likely to get launched thereafter in "quick succession," according to Paul. Building out a dealer network, securing financing, and establishing charging infrastructure are all
part of the plan. By the end of FY25, the company aims to have products catering to 50% of the CV segment.
The importance of the SCV segment for TI Clean Mobility should be seen in the context of its market size, which according to industry estimates, roughly stands at around 5 lakh units a year — over 60% of the total CV market by volume. Moreover, it has grown at 10-12% CAGR, powering the success of the likes of Tata ACE. TI Clean Mobility, on its part, is looking at creating a hefty capacity of around 3,50,000 vehicles/year. While the company isn't sharing specific targets, they're aiming for a double-digit market share.
So what gives them the confidence in the SCV segment, particularly at a time when the segment itself has been going through a rough patch? For instance, SCV sales fell 4% in FY24 to 5.14 lakh units, dragging overall CV growth to just 1%, as per an ICRA report released in April this year. With a strong foothold in the three-wheeler market, Paul is confident. With plans to launch the Montra Electric Cargo in FY25 and later enter the E-rickshaw segment, TI Clean Mobility is looking for deeper market penetration in the three wheeler segment. "Get the basics right — product, design, comfort, customer experience, and dealership network — and the rest will follow," Paul says.
Even as TI Clean Mobility remains months from rolling out its SCVs, it has not shied away from increasing its stakes in IPLTech Electric, an electric truck manufacturing company. The heavy commercial vehicle (HCV) market, with three lakh units of sales annually, is the target. Paul has his eyes on point-to-point giants like steel, cement, ports, and mining. A specialised haulage product with a range of 300-400 kilometres is in the works. But first, he must conquer shorter distances — one hundred and fifty to two hundred kilometres. This will involve a range of vehicles, from haulers and tractor-trailers to medium-sized workhorses capable of carrying nearly thirty tonnes. The ultimate goal is a six-hundred-kilometre range, a feat that will require a robust charging infrastructure, currently under development.
It’s a long road ahead, but TI Clean Mobility seems determined to pave the way. According to Paul, around three-four products in the heavy-duty segment are expected to be launched in the next few quarters. "By the end of this year, we will straddle at least 50-60% of the market with our product lines," Paul explained, adding that they will include a 55T tractor-trailer (6x4), followed by a haulage and others.
Breaking the status quo of tractor industry
While the electric SCV and, to a lesser extent, HCV segments remain ripe for EV takeover, TI Clean Mobility has also set its sight on electric tractors. Its significance can be seen from the fact that for decades, the tractor industry has been a paragon of predictability. Sales have inched forward with the regularity of a glacier, their progress imperceptible against the vast expanse of global agriculture. Diesel powered behemoths have reigned supreme, their dominance as unquestioned as the sun’s rise. Yet, a quiet revolution is under way.
At the heart of this shift is the electric tractor. It’s a concept that, on paper, seems almost counterintuitive. How can a battery-powered machine replace the hulking diesel engine that has powered agriculture for generations? Yet, as Paul and his team have discovered, the electric tractor is not merely feasible; it's a compelling proposition. It offers substantial cost savings, potentially between 25% to 40%, depending on usage.
The company’s flagship model, a 27hp model currently undergoing final testing, represents the first salvo in what promises to be a protracted battle for making a dent into conventional tractors. It is expected to be launched in December this year. Targeting roughly 30% of the market, this initial offering is merely a beachhead. Subsequent models, packing a more potent punch of 40-45 horsepower, will broaden the company's reach. But the ambitions extend far beyond the farm. The industrial sector, with its growing emphasis on cost-cutting and environmental sustainability, presents a vast, untapped market. "It took almost two years working on it and figuring it out, understanding the usage psyche and segmental pieces," says Paul.
The diesel tractor, with its high-speed and low-torque configuration, is fundamentally inefficient. Electric motors, conversely, deliver maximum torque at low speeds, resulting in significantly reduced energy consumption. It's a matter of simple physics, but the implications are profound. Not only do electric tractors consume less energy, but they also complete tasks faster, a critical advantage during the hectic harvest season. An EV tractor can cover an acre of land in significantly less time — up to 30-40% faster — than a diesel tractor, Paul added, highlighting its more prominent usage in areas such as horticulture farms such as vineyards and pomegranates.
Beyond efficiency, there’s the matter of operator comfort. The diesel tractor, with its vibration and noise, is a gruelling workplace. Electric tractors offer a quieter smoother ride. It's a small detail, perhaps, but in a sector where labour is scarce and turnover is high, it could make a difference Of course, challenges remain. Battery technology, while improving rapidly, still limits operating range. Charging infrastructure is another hurdle. But Paul and his team are undeterred. They see these obstacles as temporary setbacks, not insurmountable barriers, and are working on them with various stakeholders, including startups.
The company's initial focus will be on Gujarat, Maharashtra, Karnataka and Tamil Nadu — four states that represent a significant portion of India's agricultural and industrial production. A state-of-the-art manufacturing facility is under construction in Chennai, poised to meet the anticipated surge in demand.
This feature was first published in Autocar Professional's October 1, 2024 issue