Driving the change: Ashok Leyland charts a global electric vehicle path

Plans to expand business to Europe, Africa, Southeast Asia, West Asia and Japan; draws roadmap to come up with end-to-end zero carbon mobility

This month, two third-generation members of the Hinduja family — cousins Dheeraj Hinduja and Shom Ashok Hinduja — joined hands to take forward Ashok Leyland’s ambitious journey on electric vehicles (EVs).

Shom, son of Ashok Hinduja (the youngest of four brothers), was inducted into the board of the Chennai-based commercial vehicles (CV) major headed by Dheeraj, son of Gopichand Hinduja (Ashok Hinduja’s brother). Shom is also in charge of the group’s renewable business. By roping in his Hinduja Renewables, Ashok Leyland is trying to ensure the availability of solar power for its EVs in the long run and, thereby, becoming an end-to-end zero carbon mobility provider.

Along with this, the board also cleared the transfer of Ashok Leyland’s EV business to its step-down subsidiary, Switch Mobility Automotive (Switch), for Rs 240 crore on a slump-sale basis. Through this, Switch — a combined entity of Ashok Leyland's electric CV operations and the former bus manufacturer Optare of the UK — will act as a separate OEM (original equipment manufacturer) focusing on buses and commercial vehicles in the EV space.

Switch EVs marked their presence at the COP26 summit in Glasgow as a feeder for delegates, showcasing the double-decker EV buses. Switch is also scouting for strategic and financial investors to raise funds for expansion.

All this points to the business house’s global game plan under the Switch brand, headquartered in London. The Indian flagship company first evinced an interest in the EV space in 2013 by acquiring British busmaker Optare Plc. The company already has expertise in the arena, having supplied over 400 vehicles in India. What may be advantageous for the company is the fact that the sector is still in its nascent stage.

Based on government data, EVs operational in the medium and heavy passenger vehicle category have increased from 124 in 2018 to 1,356 now. The number of electric vehicles registered for transport of cargo has increased from 6,246 in 2018 to 27,645 in 2021. The government is also set to come up with over 6,200 EV buses in 65 cities in the near term, which in itself is considered to be around Rs 8,000 crore of business for players in the segment. On Tuesday, Switch had announced that it will be supplying and operating around 300 (12-metre electric buses) for the Bengaluru Metropolitan Transport Corporation.

“There is huge potential for OEMs in terms of public transport as EVs will become mainstream in the next three to five years. Here is a win-win situation for state transport utilities and OEMs. The operating cost of EVs is very low. If you run for long years, capital investment will get paid off,” said Mahesh Babu, chief executive officer, India and COO, Switch Mobility. The per km cost of EV buses is Rs 48-50 against Rs 70-90 for compressed natural gas and Rs 100 for diesel, according to industry experts.

Babu said this global game plan will start with an aggressive foray into the Europe market through Spain and later expand to other parts of Europe, Asia, Africa, Southeast Asia (except China), West Asia and Japan. In addition to a manufacturing facility in Leeds, it is exploring opportunities for manufacturing in Europe.

Switch will also be launching its first electric light commercial vehicle (e-LCV) within the next 12 months. When in full swing, Switch wants to make use of the dealership network and service touch points of Ashok Leyland. In addition, a subsidiary of Switch called Ohm Global Mobility is also on track in the eMaaS (e-mobility as a service) space, and will look at the operational side, including maintenance, installation of charging points at depots and other on-ground work.

But the India ride may be bumpy. “In Mumbai and Delhi, buses are already going electric. In that sense, Ashok Leyland is already a little late in India compared to its competitors like Tata Motors, Olectra and JBM Auto,” said a Mumbai-based analyst, on condition of anonymity, adding, “In the UK, they are better placed because of Optare. In India, they have won very few orders compared to others. They are playing a global game.”

In fact, market shares for second quarter of FY22 are not that encouraging for the company: JBM Auto accounts for 50 per cent, Tata Motors 35 per cent, and Olectra, with just 7 per cent, trails Haryana-based PMI at 8 per cent, according to data available with JMK Research, a consultancy firm that focuses on renewables, EVs, and battery storage. “This is because of bulk orders and on an annual basis, we have better numbers,” Babu added.   

To cope with this, the company is planning to invest $150-200 million in the EV space in the next few years. Gopal Mahadevan, whole-time director and chief financial officer of Ashok Leyland, said last week that Switch is in talks with multiple players for strategic and financial investors. This comes close on the heels of Tata Motors closing a deal to raise Rs 7,500 crore from TPG Rise Climate and Abu Dhabi’s ADQ for 11-15 per cent stake in its EV subsidiary, which is considered as the first major fundraising by an Indian carmaker in EV space.

In July end, US-based drivetrain-maker Dana had picked up 1 per cent stake in Switch for $18 million. “This is minuscule compared to the Tata Motors stake sale. The real value of Switch can be assessed once they rope in partners for a larger stake of 10-15 per cent,” the analyst from Mumbai said. “In India, they may be on slow pace, but it is ultimately a global race.”