Altigreen owns key tech as it looks to scale: IIFL Capital Services

4 Jan 2023 , 11:36 AM

Attractive 50% lower TCO versus ICE will drive higher share for EV 3Ws to ~90% in near future. Also, given that 85% volumes are through B2C, the manufacturer of EV 3Ws is expanding distribution (10 cities should increase to 30 in two years) and focusing on brand building. The company has set up a 55k unit manufacturing capacity in Karnataka; has plans to have multiple assembly units across India and possibly, in SEA as well. It also has plans to expand into LCVs over the medium term.

Thrust on owning the tech all through

Started in 2013 with a vision to minimize carbon emission in road transport, Altigreen has developed its mobility platform with ~93% indigenization (excluding cells, ~63% including cells). The current portfolio of three cargo 3-wheelers is backed by in-house tech for battery manufacturing, battery management system, traction motor as well as transmission system. These are agnostic to cell type (currently based on LFP tech); have been developed post extensive market research on customer needs and in-house R&D, to fine tune the design.

Management believes this would be the key differentiator versus competition from new entrants and incumbents (who so far have been slow). In-house R&D capability would also be key to expanding product portfolio, to varied use cases as well as LCVs in future. Combined with in-house manufacturing at a large central plant (for critical components such as battery, motors, transmission systems) and multiple smaller assembly units, this would lower dependence on third-party manufacturers and improve agility to respond to varied customer needs. 

Started with B2B; scaling up in B2C

Altigreen grew volumes to ~1,000 units (as per media reports) in FY23 all based on B2B sales to companies like Amazon. But management recognizes that 85% of the three wheeler market is based on B2C volumes. Accordingly, it has set up dealerships in 10 locations so far and is targeting to reach ~30 locations over next two years. Management acknowledges that process of distribution expansion and creating brand awareness is not easy but a strong product portfolio and competent leadership team should help. Focus also is on establishing a strong service network given that new technology means that EVs would not be serviceable at local unorganized workshops unlike ICE vehicles.

Management indicated an attractive ~50% TCO saving for EV 3W versus ICE counterparts. Combined with a well-defined use case of ~100km of daily commute and expansion of charging infra, this should drive sharp jump in share of EV sales to over 90% in a short span of 3-5 years in terms of annual sales. Management does not expect installed base to changeover to EV before useful lives of vehicles are over. But overall, majority of installed base of 3W domestically should be EV-based by 2035.

With a focus on providing quicker charging times, the company has partnered with another start-up – Exponent Energy. This company owns technology for fast charging of EVs (100% within 15 mins) by delivering higher current ratings while managing thermal impact on battery packs. This is expected to remove a key hurdle for faster adoption of commercial EVs.

Banking on a strong team to gain head start

Altigreen’s founding team consists of people with expertise across motors, controls, software and finance who have driven strong product development capabilities. The company had hired professionals to grow the manufacturing, distribution, marketing and HR capabilities.

The company had raised Rs3 billion in March 2022 in its Series A funding round from key investors, including Sixth Sense Ventures, Reliance New Energy Ltd (RNEL, wholly owned subsidiary of RIL, also has investment in Exponent Energy), Xponentia Capital, Accurant International US and Momentum Venture Capital Singapore. Company has talked about further target raises of ~Rs10 billion, to fund future expansions.