Why India's OG Electric Scooter Company is Failing? - Ather Energy Case Study

Summary

The Ather 450, launched in 2018, was the world's first scooter with a touchscreen dashboard and Google Maps for navigation, becoming India's fastest accelerating scooter at the time. Founded by IIT Madras graduates Tarun and Swapnil, Ather Energy spent years developing this innovative electric scooter. Despite their groundbreaking start, Ather now trails behind newer competitors like Ola, TVS, and Bajaj. The story delves into Ather's challenges, from production hurdles to marketing missteps, and their ongoing efforts to reclaim market leadership by focusing on quality, software upgrades, and expanding their product range.

Takeaways

• 🚀 Ather 450 was a groundbreaking scooter, being the first in the world with a touchscreen dashboard and Google Maps integration for navigation.
• 🏎 It was the fastest accelerating scooter in India at the time of its launch, even outperforming some petrol scooters.
• 🛠️ Ather Energy's journey began in 2009 at IIT Madras, with founders Tarun and Swapnil aiming to innovate in the energy space.
• 🔋 Their initial idea was to create a fan named 'famp' that utilized thermal energy from oil lamps, but it evolved into a focus on electric vehicles and battery technology.
• 🚗 Ather Energy's founders decided to build an electric scooter that people would want to buy, rather than just selling batteries.
• 💡 The company was inspired by Tesla and aimed to create a high-quality electric scooter that could compete with petrol scooters in both performance and design.
• 🔄 Ather faced significant production challenges due to the innovative designs that local vendors were not equipped to produce at scale.
• 🤝 Hero MotoCorp's investment in Ather was a turning point, providing the necessary funds and industry connections to move towards mass production.
• 📈 Despite being a pioneer, Ather struggled to compete with larger, more established brands that entered the market later with more aggressive marketing strategies.
• 📊 Ather's focus on quality and customer satisfaction has resulted in strong word-of-mouth, but it has not translated into market leadership due to lack of widespread recognition.
• 💼 The company's revenue has been growing, driven by the quality of their products and the introduction of software and technology upgrades as a new revenue stream.

Q & A

What was unique about the Ather 450 when it was first launched?

The Ather 450 was the first scooter in the world to have a touchscreen dashboard and Google Maps for navigation. It was also the fastest accelerating scooter ever produced in India at the time, even faster than some petrol scooters.

How long did it take Ather Energy to develop their initial product?

Ather Energy spent 5 years in development and went through at least 55 prototypes before finalizing their product.

Why did Ather Energy decide to design and manufacture their scooters in India?

The founders of Ather Energy, both engineers from IIT Madras, wanted to build the 'Tesla of Electric Scooters' in India, and believed that completely designing and manufacturing in India was the most audacious and fitting decision.

What challenges did Ather Energy face in the early stages of production?

Ather Energy faced challenges such as finding automobile vendors capable of building parts at the quality and precision they required. The Indian Automotive vendors were not equipped to handle Ather's demanding quality requirements, and they struggled to convince these vendors to change their workflow for a small client like Ather.

How did Hero MotoCorp's investment impact Ather Energy's production capabilities?

Hero MotoCorp's investment of 205 CR rupees in Ather Energy was a game changer, providing the necessary funds for production and strategic support. It allowed Ather to set up a production facility and meet the right people, which helped in getting their functional vehicle to a production-ready state.

What was Ather Energy's initial strategy to overcome financial challenges?

Ather Energy initially took a crowdfunding approach by taking pre-orders for 25 scooters at 85,000 rupees each, using that money to build the scooters. This strategy impressed investors and led to further funding.

Why did Ather Energy decide to limit their production to 20,000 scooters a month despite having a larger capacity?

Ather Energy decided to limit their production to avoid burning money at a pace that would put them out of business sooner. They aimed to manage their finances more effectively and ensure the sustainability of their operations.

How did Ather Energy manage to reduce costs by the start of 2021?

Ather Energy pulled resources from Hero, a company with decades of experience in making two-wheelers, to understand and improve their processes. This helped them make their scooters more efficient and reduce costs below the selling price by the start of 2021.

What was Ather Energy's stance on marketing and how did it affect their sales?

Ather Energy initially focused on product development and quality, believing that this focus would attract customers. However, they later realized that they had messed up in terms of marketing, as many people were not even aware of the Ather brand, which affected their sales negatively.

How does Ather Energy plan to generate revenue in the long term?

Ather Energy believes that long-term revenue for electric vehicles will not come from servicing but from selling software and technology upgrades, accessories, and other gen technology upgrades. They aim to create an entire ecosystem for their customers, similar to Apple.

What is Ather Energy's latest product aimed at the mass market?

Ather Energy's latest product aimed at the mass market is the 'Resa', designed to address the issues customers had with previous models like the Ather 450 and 450x, making it more family-friendly.

Outlines

00:00

🚀 Ather 450: Pioneering Electric Scooters in India

The first paragraph introduces Ather 450, a groundbreaking electric scooter with a touchscreen dashboard and Google Maps integration for navigation. Highlighted as the fastest accelerating scooter in India at the time, it was the result of five years of development and numerous prototypes. The narrative delves into the story of Ather Energy's inception by two IIT Madras engineers, Tarun and Swapnil, who envisioned creating India's 'Tesla' for electric scooters. Despite the lack of a market for electric scooters in India in 2013, they were determined to design and manufacture in India, leading to the launch of Ather 450 in 2018 with little competition. However, the company now faces challenges in staying ahead of market leaders who launched later. The paragraph sets the stage for exploring Ather's journey, challenges, and potential for a comeback.

05:00

🛠️ Overcoming Production Hurdles with Hero MotoCorp's Support

The second paragraph focuses on the production challenges Ather faced in transforming their innovative scooter from a functional prototype to a commercially viable product. The Indian automotive vendors were not equipped to meet Ather's stringent quality requirements, leading to stagnation. The turning point came when Hero MotoCorp invested ₹205 crores, acquiring a significant stake in Ather and providing the necessary support to establish a production facility. This partnership not only infused capital for production but also facilitated connections with key industry figures, enabling Ather to launch the Ather 340 and 450 in 2018. These scooters were equipped with state-of-the-art features, including the first-ever touchscreen dashboard and Google Maps integration, fulfilling Tarun's vision of creating a superior electric scooter that could outperform its petrol counterparts.

10:05

📉 Ather's Struggle with Market Penetration and Competitors' Dominance

This paragraph examines Ather's struggle to penetrate the market despite its innovative product. It contrasts Ather's focus on quality with competitors' aggressive marketing strategies and distribution networks, which have allowed them to dominate the market. Ather's sales figures for FY20 were significantly lower compared to competitors like Ola Electric, which achieved a massive number of bookings within hours of its launch. The paragraph also discusses Ather's initial marketing shortcomings and the realization that quality alone was not sufficient to attract customers. It suggests that Ather's lack of brand recognition and marketing efforts have hindered its growth, despite its superior product quality and customer satisfaction.

15:08

💡 Ather's Future: Focus on Quality, Software, and Ecosystem Expansion

The final paragraph discusses Ather's strategy for the future, emphasizing its commitment to quality and the importance of software and technology in its business model. It outlines Tarun's belief that electric vehicles will generate revenue through software upgrades and technology enhancements rather than traditional servicing. Ather has already seen a portion of its revenue coming from software, and this is expected to increase. The company is also expanding its ecosystem with smart accessories like the Ather Halo helmet, aiming to create a comprehensive customer experience similar to Apple's ecosystem. Ather's latest product, the Resta, addresses the need for a family-friendly electric scooter, and the company remains optimistic about its potential to capture a larger market share.

Keywords

💡Ather 450

Ather 450 is the first electric scooter in the world to feature a touchscreen dashboard and integrated Google Maps for navigation. It was also the fastest accelerating scooter produced in India at the time of its launch. The Ather 450 represents the pinnacle of innovation and technological integration in the electric scooter market, as discussed in the video script, highlighting its significance in Ather Energy's journey.

💡Electric Scooters

Electric scooters are a type of two-wheeled vehicle powered by an electric motor and battery. In the video, electric scooters are the central theme, as they represent the industry that Ather Energy is pioneering in India. The script discusses the evolution of electric scooters from being underpowered and unreliable to becoming a mainstream and competitive market segment.

💡IIT Madras

IIT Madras is one of India's most prestigious engineering and technology institutes. The script mentions two engineers from IIT Madras, Tarun and Swapnil, who founded Ather Energy with the vision of creating the 'Tesla of Electric Scooters' in India, emphasizing the importance of educational background in entrepreneurship.

💡Battery Swapping

Battery swapping is a concept where electric vehicle users can exchange depleted batteries for fully charged ones, rather than waiting for recharging. In the script, Tarun discovered this concept and became convinced that it was key to the success of electric vehicles, leading to the establishment of Ather Energy's focus on electric mobility solutions.

💡Prototypes

A prototype is an early sample or model of a product built to test a concept or process. The video script highlights that Ather Energy spent five years and created at least 55 prototypes before finalizing their electric scooters. This illustrates the iterative and experimental nature of product development in the innovation process.

💡Market Leaders

Market leaders are companies that hold the top position in their respective markets. In the context of the video, Ather finds itself behind market leaders in India's electric scooter category despite being an early entrant. The script discusses the challenges Ather faces in competing with companies that launched their scooters after Ather but have since taken the lead.

💡Crowdfunding

Crowdfunding is the practice of raising funds by collecting small amounts of money from a large number of people, typically via the internet. In the script, Tarun and Swapnil used crowdfunding to take pre-orders for their scooters, which allowed them to generate initial revenue and attract further investment, showcasing an alternative method of startup financing.

💡Hero MotoCorp

Hero MotoCorp is a leading Indian motorcycle and scooter manufacturer. The script mentions Hero MotoCorp's investment in Ather Energy, which not only provided financial support but also strategic advantages, such as access to automotive vendors and expertise in scaling production, underscoring the importance of strategic partnerships in business growth.

💡Quality Assurance

Quality assurance refers to the process of ensuring that products or services meet certain standards of quality. The video script discusses the challenges Ather faced with Indian automotive vendors who were not initially equipped to meet Ather's high-quality requirements, highlighting the importance of quality in product development and customer satisfaction.

💡Marketing

Marketing is the process of promoting and selling products or services. The script points out that despite Ather's focus on product quality, they struggled with marketing their electric scooters effectively, leading to lower brand recognition compared to competitors. This emphasizes the dual importance of both product quality and marketing in business success.

💡Software Upgrades

Software upgrades are updates or enhancements to a software product that can improve its performance or add new features. In the video, Tarun believes that long-term profitability in the electric vehicle industry will come from software and technology upgrades, rather than traditional servicing. The script mentions that Ather already earns a portion of its revenue from software, indicating a shift towards a software-centric business model.

Highlights

Ather 450 was the first scooter with a touchscreen dashboard and Google Maps navigation.

Ather 450 was the fastest accelerating scooter in India at the time, outperforming even petrol scooters.

Ather Energy was founded by two IIT Madras engineers with a vision to create India's Tesla of electric scooters.

The company spent 5 years and went through 55 prototypes to develop the Ather 450.

In 2013, there was no market for electric scooters in India, but Ather Energy saw potential and started their journey.

Ather Energy faced production challenges due to the Indian automotive vendors' inability to meet their quality requirements.

Hero MotoCorp's investment was a game-changer for Ather Energy, providing the necessary funds and strategic support.

Ather Energy had to innovate and reduce costs to stay competitive in the electric scooter market.

Ather Energy's focus on quality and innovation led to a strong reputation, but it also faced challenges in marketing and customer awareness.

Ather Energy's sales were significantly lower compared to competitors like Ola Electric, which had a massive marketing push.

Ather Energy's strategy included building a limited number of scooters per month to manage financial stability.

Ather Energy's revenue has been growing due to their focus on quality and customer satisfaction.

Ather Energy is looking towards software and technology upgrades as a future revenue stream.

Ather Energy's customer base has shown strong word-of-mouth support, despite initial marketing challenges.

Ather Energy's latest product, the Ather 450X, addresses previous customer concerns and targets a wider market.

Ather Energy is building an ecosystem with smart accessories like the Ather Halo helmet, similar to Apple's approach.

Transcripts

This is Ather 450, the first scooter in  the world to have a touchscreen dashboard  

and Google Maps for navigation. It was  also the fastest accelerating scooter  

ever produced in India at the time, faster  than even other petrol scooters. The  

company spent 5 years and at least  55 prototypes before coming to this.

Today, in 2024, electric scooters have  become mainstream, but back in 2013,  

there was no market for these in India. This was  when two engineers from IIT Madras, decided to  

build Tesla of Electric Scooters in India. And the  most audacious decision was to completely design  

and manufacture it in India. It took them 5 years  and millions of dollars to go from this to this.

And when they launched Ather 450 in 2018, the  company had the best product in the market. Also,  

there was almost no competition. But despite all  that, today Ather is way behind the market leaders  

in India’s Electric Scooter Category. And all the  three companies that are ahead of Ather, launched  

their scooters much after Ather did. So what went  wrong with Ather? And can it make a comeback?  

These are the questions, I’ll try to answer in  this episode of Backstage with Millionaires.

the story of Ather Energy began in 2009 at one of  the most prestigious colleges in India IIT Madras  

two of its engineering students Tarun and Swapnil  wanted to do something in the energy space and  

their first product was this fan called 'famp' the idea  here was to use thermal energy from oil lamps and  

convert it into power to run these fans, something  they thought would be beneficial in remote Indian  

villages with inadequate power supply. this idea  never turned into anything meaningful but their  

passion to do something in energy space remained  during their last semester of engineering Tarun  

discovered battery swapping and became came  convinced that electric vehicles are the future  

and for electric vehicles to succeed the charging  infra had to be solved and so Tarun and Swapnil's  

new goal now was to build a battery company the  idea was to manufacture lithium ion batteries and  

sell them to EV owners who wanted to refurbish  their aging electric vehicles for the next 6  

months Swapnil and Tarun conducted extensive market  research they spoke to hundreds of e vowners and  

realized that by and large most of them hated  their EVS. EVS at the time were underpowered  

unreliable and ugly and so why would these  customers who hated their electric vehicles buy  

Ather's expensive batteries at this time Swapnil  came up with a crazy idea instead of batteries why  

not build an electric vehicle that people actually  wanted to buy and then Swapnil suggested they both us  

are passionate about building a brand why were  we even thinking of doing this nameless faceless  

thing we should just build a brand no we should  build the vehicle and that is how the Journey  

of building India's first smart electric scooter  was started now this was in 2013 and there were  

many Brands who were building electric scooters in  India at the time but there were a ton of issues  

firstly most of these companies were importing  electric scooters and their batteries from China  

and the quality was really bad they couldn't go  beyond 30 km/ hour and looked very ugly heck they  

could not even get over a flyover and because of  these reasons customers were not buying them few  

who did, hated them and Ather energy wanted to  change this they were inspired by Tesla and so  

they did not just want to make the best EV  scooter they wanted to make the best scooter  

something that could beat petrol scooters in both  performance and design and for this they could not  

just import it from China they had to build it  themselves here in India Swapnil and Tarun started  

building their first prototype in the robotics  lab of IIT Madras they started by tearing down a yo  

EXL electric scooter to understand its different  components things like the shape of its Chasses  

suspension strength and other basic dimensions  these measurements were then used to build a  

makesi sachche for aether's first prototype  Eevee it took them 4 months to build their  

first prototype and this is how it looked after  completion tarun filmed this small video while  

riding this prototype scooter this was a great  beginning but the team at ather had a long way to  

go they got a 5 lakh rupees Grand from it Madras  which helped them make their second prototype but  

now they needed serious money to build something  that customers would buy their 5 lak rupes Grant  

had exhausted very quickly and VCS were not ready  to invest money into a young EV company and so  

tarun and swapnil took the crowdfunding approach  they decided to take pre-orders for 25 scooters  

at 85,000 rupees each and use that money to then  build the scooters they gave themselves around 6  

months to do this this early Revenue strategy  impressed it Madras aluminous and entrepreneur  

seren V shasan who then decided to invest 25 lakh  rupees into the company this preced money allowed  

aether's team to move into their first office and  also start working on their next prototype in 2016  

ather announced their first electric scooter  s340 and also claimed that they would start  

producing them commercially by the end of the  same year and this is when ather problems with  

production started you see turning a functional  vehicle into a final production vehicle is not  

as easy as it sounds the problem was to build a  final scooter they needed hundreds of automobile  

vendors who could build these parts for them the  parts that ather R&D team had built from scratch  

in a lab these vendors had to build them at scale  tun's team had designed a component that was 1.5  

mm thick and when they went to one of the vendors  to cast this component they said the lowest they  

could go was 2.5 mm they don't do 1.5 mm thick  component casting so basically ather Innovation  

was becoming the reason for their stagnation the  Indian Automotive vendors were not equipped to  

handle ether's demanding quality requirements and  these vendors did not want to change their entire  

workflow for a small client like ather who hadn't  even sold a single scooter and they didn't know  

if people would even buy their electric scooter  it was too much of a risk for them this was when  

hero motop came to save ather see hero wanted to  get on the electric vehicle bandwagon and ather  

they wanted the support from a giant like hero  to get automobile vendors to listen to them and  

so hero invested 205 CR rupees in Aether picking  up more than 25% stake this deal with hero became  

a game changer for Aether not only did they get  enough money for production but they also got a  

strategic partner who could help them set up a  production facility and meet the right people  

people like venkatesh padmanabhan who had turned  the fortunes of Royal Enfield and then helped  

ether to set up their production facility in  bangaluru and also get their functional vehicle  

to production ready vehicle and with everything  in place tarun again came on stage and this time  

launched ather 340 and ather 450 in 2018 these  scooters were what tarun had promised they would  

be they were the state-of-the-art ones they were  the first scooters in the world to come up with a  

touchscreen dashboard and they had Google Maps  to make navigation easy and that was not all  

remember tarun had said he wanted to make better  electric scooters than petrol scooters he did it  

with ather 450 which was the fastest accelerating  scooter in India at the time faster than even  

petrol scooters tarun and his team had made the  impossible possible and all that was left now

a technology provider they had tried a lot  of things but building an electric scooter  

from scratch in India was making them bankrupt and  there was no hope tarun at this point went to his  

investors and told them that they would fix this  pricing issue within a year but he had no idea  

how they would pull it off they com to one of our  one of our shareholders that P Paka promise if he  

don't fix this in one years I will get the makes  of the world to come and run this he then went to  

the top consulting firms and asked for their help  in getting the costs down and they all told them  

one thing we have never seen Automotive costs  drop more than 30% this wasn't enough for ather  

they needed something tangible so the team went to  the drawing board and came up with a plan firstly  

they decided they will make only 20000 scooters  a month even though their Factory was capable of  

producing 2500 scooters a month they did this so  they were not burning money at a pace that would  

put them out of business sooner next they pulled  all the resources they could from hero a company  

that has been making two wheelers for decades and  understood their processes to make ather scooters  

more efficient and by the start of 2021 ather  had managed to bring down the cost lower than  

the price they were selling it to their customers  this was a Hercules task something that tarun has  

often talked about in his interviews for example  this one where he said that building a hardware  

product in India is so hard that no Indian startup  is building electric scooters in India just look  

at Ola a company that had billions of dollars  in funds had to import an electric scooter from  

outside India to start their EV Journey look about  right they had to import an entire product from  

outside right because it's a hard journey to build  everything from scratch in here finally in 2021  

ather was a real company with positive gross  margins and it was around the same time that  

Ola started selling their electric scooters and  while Ather was busy surviving its competitors  

like Okinawa who are importing their scooters from  China were dominating the Indian Market with close  

to 40% market share in fy20 by the time ather had  got its [ __ ] together in 2021 TVs and Bajaj had  

also launched their electric scooter and Ola was  just getting ready for the grand launch despite  

being the first hather was already too late  for the party and if you compare Aether with  

these players TVs and baj had huge distribution  networks that were built over decades then there  

was Ola electric which was spending millions of  dollars on marketing to get customers ather did  

not have much to show yes their product was made  in India and it was apparently better quality but  

this did not help them sell more in whole of fy20  ather sold close to 3,000 scooters compare this to  

Ola electric which got more than 880,000 bookings  within just 12 hours of the launch in fact even if  

you combine ather sales of 4 years from fy19 to 22  it's still way less than ola's pre-booking numbers  

so why is that the problem was despite fixing  their major issues ather was too busy perfecting  

their scooters they thought this focus on quality  was enough to get them the customers but they  

were clearly wrong just look at Ola they've made  the news for a lot of wrong reasons from their  

scooters malfunctioning to them Catching Fire but  this did not make a dent in their growth in fact  

Ola is the number one electric scooter company in  India with a market share of more than 50% take a  

look at this 2019 fors article here tarun said  that ather success will depend on their product  

Dev velopment and their after sales customer  service he never mentioned marketing but then in  

this interview with nikil Kad he goes on to accept  the fact that ather messed up when it comes to  

marketing the biggest problem that we discover  is that people don't even know what is ather  

biggest feedback that I get is that most people  think that if they have heard of ather European

norian even though ather has recently started  putting more money into marketing it's an uphill  

battle now that EV space is aot lot more crowded  than it was back in 2018 when ather was the only  

one but does that mean ather has lost the game  absolutely not so far you have only heard me  

talk about how ather has failed to become a leader  in a category that they created in India but the  

reason I wanted to highlight their Journey was  to show exactly how difficult it is to build a  

hardware technology company out of India and  that's the reason most companies don't do it  

from a pure growth perspective it makes sense  for a company to Simply import the technology  

and start start selling it in India it's a winning  strategy just look at Ola We have seen it play out  

over and over again but I'll be honest I'm a  little biased towards Aether and I want them  

to win not because I have a personal stake in the  company but because aether's win means something  

bigger it means that you can successfully build  a hardware technology startup in India and even  

though ather might be behind giants like Ola TVs  and Bajaj they have built a reputation for Quality  

they have built the Tesla's equivalent of an  electric scooter from India you can see that  

from all these comments from their customers in  fact in the same podcast with nikel very mentioned  

how ather messed up in marketing he also says  that ather one when it comes to Word of Mouth  

so we may not have marketed the product well so  not enough people may buy it today but the ones  

who are buying it have a better word of mouth  for us than many of a competitors that's been  

their growth driver and just look at these numbers  their revenue has been growing significantly since  

fi21 and a lot of this has to do with them making  top quality scooters that customers love to brag  

about now another reason why ather stayed behind  in the race is that they were focused on the  

premium Market when they started their customers  wanted a premium product and that's what they  

were building that was a period when only early  adopters were buying electric scooters and they  

wanted a premium product but now everyone wants  one and their customers have been complaining  

that their scooters are not familyfriendly and  too small for a family and their latest product  

resta is the answer to that they have tried to  fix all the issues people had with ather 450  

and 450x and created resta for the mass market  and finally ather is bullish on software tarun  

believes that over the long term electric vehicles  won't make money from servicing as there aren't a  

lot of paths to repair like a traditional vehicle  be it cars or scooters he thinks that companies  

will have to make money by selling software and  Technology upgrades like batteries and accessories  

I think long-term electric vles will have to make  money on something else you'll have to make money  

on more most likely upgrades they'll have to  make money on accessories they'll have to make  

money on gen technology upgrades once you buy  an electric scooter you can change your battery  

and it will feel like a new scooter next you can  get new software upgrades over the year which can  

improve its performance in fact tun claims that  even today while 85% of their revenues coming  

from selling the scooters the remaining 15% is  coming from selling software upgrades and it's  

only going to increase ather does not charge the  customers separately for the software but that  

price is included in the price of the vehicle  and by software upgrades I mean ather stack which  

basically is the OS of your ather scooter and  controls everything you do on your device on top  

of that they've also introduced smart accessories  like ather Halo helmet just like apple ather wants  

to create an entire ecosystem for its customers  in the end let me know your opinions do you think  

aether's focus on quality can beat Ola Electric's  huge scale also do you personally own an Aether  

and how has been your experience share with us  in the comments and I'll see you in the next one