Worldwide, roads are increasingly seeing the presence of electric vehicles (EV) and India is expected to take 30% of the EV market worldwide. However, these tailwinds are attracting many players to the EV ecosystem, from suppliers to customers, to make EVs a reality on the road. In order to ease the challenges that these stakeholders could face in coming together, Digital Public Infrastructure could have a key role to play and could help:
• Reduce frictions
• Enable greater customer experience
• Drive better adoption for electrical vehicles in India, especially when it comes to the charging experience.
To learn more about India’s burgeoning EV market and understand whether the promise of DPI can enable the EV market to solve some of its current challenges, in this episode of Decoding Impact, Rathish Balakrishnan is joined by Akhil Jayaprakash, co-founder at Pulse Energy, and Arun Vinayak, co-founder at Exponent Energy. Through this discussion Akhil and Arun share their expertise to help us understand who the key stakeholders are in the EV market, what is the user experience when it comes to EV today in India, and what unification using DPI could look like in the EV market.
Explore some of our SKI products related to this topic:
• Decoding the Economics of MSMEs and why they should leverage Digital Public Infrastructure ft. Neelkanth Mishra
• Decoding Account Aggregators with Shalini Gupta
• Decoding India’s DPI Learnings for the Global South with Prof. S Rajagopalan
• Decoding Digital Public Goods & Digital Public Infrastructure with Dr. Pramod Varma
Episode Transcript
Episode Transcript
[00:00:11] Rathish: There are actually very few people today who are able to really imagine what a blended finance instrument can actually unlock.
[00:00:18] Ramraj: I found myself increasingly drawn to the idea of how can we leverage financial markets and financial technologies. I used to wonder what does it take to make contributing to the less privileged, a national movement.
[00:00:32] Rathish: Sometimes when we look at social programs, we look at what has to be done.We don’t really break down who does and who pays in a nuanced way.
[00:00:41] Ramraj: What blended finance really tries to do is say that, hey, we know that there are risks. Let us see whether a philanthropy or a charity or somebody else can come in and cover up some of the risks.
[00:00:51] Rathish: If there is one structure that can hold different pockets and bottles of money and say, listen, I blend it in a different way. The transaction costs become lesser. I think even in the philanthropy landscape, thanks to companies coming in, this rupee for rupee thinking, which is that, “Hey, listen, it is going to be limited capital. How do we make it work?” is growing.
[00:01:09] Ramraj: There is the investing bucket and there is the philanthropy bucket. In philanthropic bucket, you give away your money. In investing bucket, you make money. What we are talking about here is something in the middle where we are saying, Hey, you know what?
We can make some money, but we can also create a lot of social impact. Now, this is a new paradigm.
[00:01:27] Rathish: Welcome to Decoding Impact from Sattva Knowledge Institute, where we speak to a wide range of experts on population scale challenges to see what does it truly take to solve these problems at scale.
[00:01:37] Rathish: There is a lot of noise about what we need to do to achieve the sustainable development goals. And one of the chief constraints in achieving them is the capital that we need to make it happen. All the studies by NITI Aayog and other organisations highlight a vast and growing gap in the amount of financing we actually need to solve this challenge.
And it’s very clear that unless we can attract a wide range of sources of capital, including commercial capital and public capital, we will not have a standing chance in achieving the sustainable development goals. One of the critical solutions for achieving that is blended finance. And there have been multiple experiments in how we can blend public philanthropic and commercial capital to solve population scale challenges.
However, there are still a lot of questions on what really is blended finance. What does it take to solve a problem using blended finance? Where is it applicable? Where is it not? And most importantly, what is required to be done for us to be able to scale the application of blended finance today? To answer all of these questions, we have someone who’s been part of the impact investing and the blended finance journey in India over the last four years.
Ramraj Pai joins us today. He has been a president at CRISIL, the CEO of Impact Investors Council, and has had a chance to interact with a wide range of stakeholders on impact investing and blended finance.
[00:03:02] Rathish: Ramraj, thank you so much for joining us today. We’ve been talking about blended finance as part of the focus on today’s episode. But before I get into blended finance, I wanted to speak to you. Tell us about your journey and what got you here to this focus on blended finance in your own career trajectory.
[00:03:19] Ramraj: So thanks, thanks Rathish. I really appreciate you giving me this time to come and share some of my thoughts on some of these topics like Blended Finance. So essentially I’ve been a career financial markets and credit markets person. So I worked with CRISIL, which as most people would know is India’s leading rating agency.
So I used to be part of the credit markets team there. I worked on a variety of businesses at CRISIL for close to 24 years. Also had the opportunity towards the end of my stint there to work on setting up the CSR foundation and you know in fact took what you may want one may want to call a sabbatical for two years to set up the CSR foundation We did a lot of work in the Northeast around building a cadre of self-employed financial literacy workers that kind of peaked my interest in this whole social sector space and I found myself increasingly drawn to the idea of how can we leverage financial markets and financial technologies.
To really create impact at scale. So my work at CRISIL Foundation for the last four years before I left showcased to me that while there are a lot of people who have a great sense of the on-ground business realities, what are the challenges of setting up something and, making it work, there was very little awareness or knowledge around how is it that financial markets can be in some fashion, co-opted, not in every situation, but is there a middle ground where we can actually leverage financing more effectively.
And so it is with that kind of a broader sort of thought that I left CRISIL sometime in 2019 and I joined as the CEO of the India Impact Investors Council. So the IIC is really a not-for-profit industry body set up by a bunch of impact investors.
Essentially it was set up by a bunch of social impact investors whose whole idea was how can we bring more capital to social impact in the country.
And I felt that given my past background having worked on the capital market side and with investors, this could be the best way that I could immerse myself in the social sector.
[00:05:42] Ramraj: Rather than get on to the execution side of it, where people have spent careers, understanding education, understanding health, understanding different sectors. I will not be able to really bring very significant value or I’ll also have to spend 20 years.
I am no brilliant person that I can learn all of that in two years. So I decided that I wanted to work in a space where my past experience will help me to add value in the manner that I can create maximum impact with my past background and experience. And that’s how I joined as the CEO of the India Impact Investors Council.
So I was with them for about four years and I’m a bit of a career break now for the last few months thinking through what it is that I need to do next, but clearly the whole space of using financial engineering to maximize impact is something which is very close to my heart. So I continue to remain deeply engaged informally with a variety of market players and stakeholders. To see where is it that I can make my best contribution.
[00:06:51] Rathish: Before we go into blended finance, more a personal question you’ve seen impact on the outside. Then you saw impact from the CRISIL foundation work. And then as part of IIC, you look back at what you’ve learned and your own assessment of the impact space today. What are a couple of reflections that stay with you?
That probably you saw it differently from the outside and now you see it differently. Now that you’ve had the six odd years of experience working in this space.
[00:07:17] Ramraj: I think my biggest sort of reflection or observation is that for a sector which is so large and so critical for advancing social equity in the country. I think there is a far greater need for institutionalised representation and engagement with stakeholders. And that’s something which I see very little of in this space.
Whether it is the not-for-profit social sector, the for-profit social sector, or otherwise. Look at any other sector you can take in this country. You can take steel, you can take chemicals, you can take any sector. In whatever way and fashion they have organised themselves in a manner, that they are presenting themselves, their problems, their challenges, more importantly, their contributions to the larger stakeholders and figuring out how to create an environment where everyone’s interests are aligned and, we make progress as a society and as a country. I feel in this space, I’ve seen very little of that. And it has always sort of, you know, I’ve always thought about why is it that this sector, which has been around in this country for so long, we don’t have more institutional arrangements. Talking to the government, engaging with the government and working with them and figuring out how is it that we can create much larger social sector organisations. Even if we do a, I had read an article a few years back, which benchmarked India’s largest social sector organisations with the U.S.’s largest social sector organisations. And we are a fraction of that size.
And it always, I used to wonder why, obviously, you have all the purchasing power parity and, all of those issues, but what is it that, it takes for us to create larger organisations which are creating larger impact, just like we have banks and we have NBFCs, we have steel companies, why would we not have very large social sector organisations where the collective interest and motivation of society to make a difference is harnessed in a much more powerful and strategic manner.
It’s happening. I think people are making huge contributions, but what does it take to make this a national movement is really, you know, if I have to leave in my own mind, one thought contributing to the less privileged should be as much a part or a national movement as much as anything else is.
Whether it’s Skill India, some fantastic initiatives from the government. I think making a contribution to the less privileged, yes, we could say that, all of us pay income tax and so on and so forth. But I think there is a deep embedded desire in a lot of people. And I’ve seen that in my own work at CRISIL foundation when we actually created a volunteering program, we had volunteering hit rates of 50%. That means on an employee base of 5,000, we used to have 2500 – 3000 people participate in volunteering, which is self-initiated, not the regular, “let’s clean the beach tomorrow” kind of thing.
These are projects that people set up themselves and run it over the weekend with funding provided by CRISIL foundation. And we saw that there is that deep desire. What you need are the right kind of pipes through which this desire can be harnessed. So I thought that’s one thought which I always feel is, as a country, we should be able to do more of.
[00:10:48] Rathish: One of my favorite anecdotes, building on this, is that there is actually an online Rummy Players Association club, which is just online gaming companies that allow for rummy to have an industry association. We employ more people than the railways. We don’t have an association that can represent our interests.
And I think another point that speaks to it, and I want to bring it up today in our conversation as well, Ramraj is that every other large business and industry today has infrastructure that they have built that will benefit everybody else to do better. Here in the social sector, there is very limited infrastructure.
So it’s everybody working and solving the same problems vertically, rather than sort of solving for it horizontally.
[00:11:30] Ramraj: I think we have a lot of value as leaders that we are doing good social service. But I think we have to raise the bar to say that we are doing good only when we have impacted people at scale.
Because I meet a lot of entrepreneurs and I sense sometimes that they feel that they’re doing great work, but I think the difference between, I think our aspiration has to be here in terms of what is it that we believe is doing good; which is not to in any way belittle someone who’s doing work in their own local society or local community, but no, but what are the new tools? What are the new things that we need to move it up here rather than operate it here.
[00:12:14] Rathish: I think it’s a good point and also why, partly why blended finance is important because one of the reasons I feel we need blended finance in some senses of the capital constraint that we have in solving problems has to be solved. But before we get into that, first blended finance for dummies, how would you explain it to someone so that it is very clear what that is?
[00:12:33] Ramraj: If you really look at society or we look at our country, there’s a base of people who are well off, maybe taxpaying, they have incomes and so on and so forth. And there is another category of people at the other end who are really in dire straits. They need support even in terms of food and other basic things, right? These are the two ends of the market, if I may use that word, but the reality is there is a large base of people in the middle.
Neither are they well off enough that they can completely do things on their own. Neither are they, really living completely hand to mouth. Now, because these people are somewhere in the middle, many times it It becomes difficult for commercial investors to understand how to engage with this market. Can we give them loans? Can we, give them some kind of credit support? Can we do anything for them, which will enable this community to also move upward. So there are some risks because obviously these people are neither here nor there. Now because there are risks, many times the banks or financial institutions or other people do not want to engage or do not want to participate in supporting some of these because obviously they have their own fiduciary duties. What blended finance really tries to do is say that, hey, we know that there are risks. Let us see whether a philanthropy or a charity or somebody else can come in and cover up some of the risks. So let’s say, there is 100 rupees of funding that is going to be made available to these people.
Maybe the risk could be 15%, 20%, whatever it is, 80% will be good, 20% could be bad, we don’t know today, could be bad. That’s a broad range. So what could end up happening is, that a charity or a philanthropy says, Hey, you know what I will put up this 20 rupees. So we give out 100 rupees, 20 rupees comes from the charity or the philanthropy 80 rupees could come from a bank or a financial institution. And that 100 rupees is lent out. When the money comes back, when people repay, they possibly all of them won’t repay. Whatever money comes, you first pay out the 80 rupees to the larger commercial investor. And only after he’s fully paid out the, whatever is the residual.
So let’s say you collect 92 rupees, 80 will go first. The first 80 goes to the larger commercial investor and the 12 rupees then goes to the, goes back to the philanthropy or the charity or whoever else it is. Now, what have you achieved in this? What has the philanthropy or the charity achieved? He has now given 20 rupees, but he has created loans worth 100 rupees, right?
So if you really look at it, the impact is 100, but your rupee investment is 20. impact is 4 rupees or 5 rupees depending on how you define it for every rupee or dollar that you have invested. This is as far as the charity goes. This is the first thing. Second is, this bunch of people who nobody knew what the risk was, now that risk has been manifested.
They have become part of the formal financial system. Banks and financial institutions understand the space better. Therefore, next time they’ll say, oh, now we understand this risk a little bit more. We are more willing to lend to these guys. So now you have created a completely new segment. What have you done?
You have blended some form of credit support from philanthropies and grant providers with commercial financing. And in this process, instead of giving away 20 rupees, which would have gone as grants to these people, you have now brought them into the financial system. You have enabled them to raise money of almost hundred rupees.
And therefore, you have created an ecosystem which is virtuous. And this is very important, Rathish, because let’s understand, we are a capital starved country. You don’t have enough money, particularly for the people who are at the margins of potential income viability. So what this does is it really enables you to use your capital more efficiently.
And it’s always my kind of exhortation to charities and philanthropies is not to look at absolute impact, not to look at I impacted 1 million people, but to ask the question that for every rupee that I put in, how much absolute impact, how much impact did I create? So can we change the conversation from absolute impact to impact per rupee? And that is essentially what blended finance tries to do is really blend some capital, which is taking very high risk with some other capital, which is taking some risk. But at this point is little apprehensive. So how do you mix these two together? How do you bring these two together is really what blended finance is all about.
You can put in a lot of bells and whistles to this, but in essence, this is what blended finance is trying to achieve. I’ve given you an example in financial inclusion. I can think about the same thing for health. We can say primary health centers, we don’t know whether they are viable or not. There could be all kinds of problems, demand issues, supply issue.
Every sector will have some risk. Okay. Can somebody in the initial days handhold the sector, handhold an initiative, take that little bit of risk? And in the process attract financial investors who also want to do good, but possibly today their credit filters or their investment filters don’t allow them an entry into this space.
That is really what blended finance is trying to achieve. We’ve had a long history of blended finance in this country. These are, if you look at priority sector lending by Indian banks, it is in some fashion, if you really think about it is one of the largest scaled up versions of blended finance.
Every bank has to lend a certain amount to farmers. Every bank has to lend certain amount to this thing. These are some ways in which blended finance could typically open. So that’s a kind of a sort of, if I may say a blended finance for dummies. This is something that anybody can use, but let’s keep it in mind, Rathish, that in every situation, blended finance may not work.
[00:18:47] Rathish: Absolutely. I want to break you know what you said into three parts that I picked up Ramraj, I want to check with you, whether my understanding is correct. In the example you gave, I think three preconditions were necessary, right? One is the commercial investor who put in the money, the commercial entity that put in the money, is gonna get the money back at a predictable period of time. It’s not like a perpetual, you know, not available at 25 years later, there is a period of time they’re willing to let go of capital so that they get it back. So that predictability within a certain time period is important. Second is the fact that there is a certain probability of risk, which should not be a perpetual risk in some form, which is that once you discover the risk, you can measure it, build your model, et cetera. And that is, I think, important because in some sense of philanthropy capital’s role is catalytic, not perpetual.
And I think that’s an important aspect in some sense that you highlighted which I think is very critical. And in some sense, the third part of it is that the role that the philanthropy plays should be measured in terms of the total capital unlocked. Rather than their contribution, which I think is useful. Are these some necessary parameters to keep in mind?
[00:19:56] Ramraj: I also think there is a fourth point, which is very, it’s a very subtle nuance, but I think it’s very important for a lot of people to understand that access to finance in itself is a huge social good. Even if a small trader can access finance at 21%, Okay. Earlier, he was not able to access it. It is a better social good than him doing a business of say 5, now he can do a business of 50, even if he’s paying a relatively higher price, it is still worth. Most people don’t see access to finance or access to capital in itself as a social good. Okay. Because please understand that when you start a new segment or a new asset class where you’re doing work, obviously, there’s the risks that manifest over a period of time.
Really what happens is a lot of these smaller people, smaller businesses, smaller enterprises, go and raise money at 40%, 50%, 60%, 100%, 200%. You have the vegetable vendors who will take a hundred rupees at the beginning of the day, and at the end of the day, they give back a hundred, 510 rupees.
If you look at it, 10 rupees a day, I don’t know, some 3500% or some such number. So access to capital for a sector is very critical. So when philanthropies and other people look at it, it’s very important to recognize that creating access to capital for a certain segment is important. Immediately an aspiration that they should get money at 8% may not be, it may not be in the right space or, you know, they should get money at 5% because I’m providing catalytic capital.
There are costs of acquiring the client. There are costs of servicing the client. Okay. Many times the client you need to go to his store. Maybe to his thela or to his place and collect the money. There are many other costs which could be involved. So I think access to capital is a huge social good.
In fact, if you ask me one of the most under-recognized social goods that we have in this country is access to capital. A small truck operator, a small person driving a Tata Ace of one ton, if you are giving him access to capital, earlier he was borrowing it from the local money lender, you have created huge social good. And we are somewhere in our systems, I don’t see enough recognition or enough value being accorded. To the fact that a certain kind of transaction or a certain kind of business created that access and brought them into the formal financial system. So I think that’s the only other nuance that I’d like to add.
[00:22:20] Rathish: And I think I want to build on what you just said, which is access to capital in two ways. One is where the access to capital is the intervention, which is that, Hey, listen, I enable access. Two is, I think building on the healthcare point that you were making in sometimes when we look at social programs, we look at what has to be done.
We don’t really break down who does and who pays in a nuanced way like, you know, you want to do provide healthcare training and I always assume that philanthropy is the only way to fund it. You step back and say, who else is willing to pay for this? There is an opportunity to think about an access to finance for that intervention that we default philanthropy almost always.
And there is an opportunity to bring in a commercial interest to that play as well with a certain level of measurable risk.
[00:23:04] Ramraj: And I must tell you that from the commercial investor side today, given the visible pressures on demonstrating sustainability that a lot of banks, financial institutions and other people have; they are actively looking out for such opportunities. In fact, several of the large banks today have their own sustainability team.
They are not very large yet, but I think there is a market. It’s a question about figuring out how to engage and make those transactions work for both the bank as well as for the philanthropy and for the beneficiaries. Blending, you can think, Rathish, at any level, yeah, you can blend on a transaction level, you can blend at an enterprise level also.
Let’s say you have a you have a vehicle, Let’s say you think of a green climate bank, okay, a green bank, then the green bank’s job is to figure out what is the best value for its money in the marketplace. What all can it do? There is no use of us going and putting more money against another solar power.
There is already State Bank of India and ICICI supporting solar power. What this green bank should be doing is getting into areas where no one wants to put money because it is too risky and that is where you need blending. Where is the battery-swapping technology coming? Where are those kind of infrastructure for battery swapping getting built?
Where are those organisations getting funding? Why is MOEFCC not thinking about setting up a green climate fund, which will support all of these gaps in the infrastructure that is getting built. That’s really where blending can be catalyzed at a very different. Then everyone in this fund is thinking about this problem.
How do I solve for this problem using whatever form of finance that I need is available to me. So I’m not stuck here. I will give only equity. I will give only debt. Why? Whichever problem is there, you solve it with that form of financing.
[00:24:57] Rathish: And as you’re talking, I’m just realising that the transaction cost, when the person holding the different types of capital are different people becomes too high because then you have to align them, et cetera. But here, if there is one structure that can hold different pockets and bottles of money and say, listen, I blend it in a different way.
The transaction costs become lesser because one of my biggest challenges that I see in the space today is that the transaction cost is too high.
I want to go back to something you mentioned earlier, Ramraj, which is not all of it is blended finance. And there are places where blended finance may not work and you like, give one example. Do you want to talk a little bit about that? Like where is blended finance not relevant?
[00:25:33] Ramraj Let’s say you are going into you very poor districts. Maybe there is very little income. There are very little employment opportunities. There is very little potential for the customer to pay anything. Let’s look at adaptation in the climate side. A lot of the adaptation work that will come, some of it can be private sector viability could be there, but a large part of adaptation could be something which you are doing for the larger, you know, you’re, you’re trying to make your society a lot more resilient.
You’re trying to make them adapt to the change that is coming. Some of these spaces may not necessarily be open to just looking at it from the lens of economic viability. There may not be an economic viability in setting up schools or setting up a small primary health center in, in places where there is no economic capacity to pay whatsoever.
Those situations, blended finance may not work. And I think the whole idea is not that, this shouldn’t be a nail in a search of a hammer. But we have to be strategic in terms of figuring out where are those places where there is a capacity to pay and potentially if they see value of willingness to pay.
Okay. Because let’s face it. A lot of people who are working, maybe lower middle class also have their own pride. They have their own professional this thing, they are earning themselves. We have to give them the opportunity. To avail of a product or a service in a manner that maintains their dignity and it’s just that we have to design a product or service. It may not be possible for everybody.
Okay, for example, I remember still during the peak of the pandemic, there were a lot of schemes which came up to support Zomato and Swiggy and other, these sort of gig economy workers, as you may call it. Some of those schemes are very much viable, because these are all people who are hardworking, regular folks, they just doing their regular delivery, but no one had maybe lent to these guys.
So no one knew. At the peak of the pandemic, will these guys pay back? How will they because anyway, there’s not too much delivery happening. All of those apprehensions were there. But these are segments where there is economic value running through the work that they are doing. So there is a potential for them to pay, but possibly it’s a segment that nobody has you know, worked with or supported them in any fashion.
So in the peak of the pandemic, not really something that the risk department of a bank or an organisation would be very keen to look at. That is where catalytic capital, that is where blended finance can come and say, okay, hey, I’ll provide you a 30% cover or a 30% support or a 20% support or whatever it is, but after two, three cycles, people will realise, hey, this is how this particular bunch of people operate.
These are the red flags. So let’s say somebody’s been a driver for two years, three years, his ratings are good. All of this is good. Maybe he’s a great credit risk, but the market didn’t know about it. But now he’s become a decent guy who could borrow money at a reasonable rate, may not be at 6 percent or 8%, but still he has now become part of the formal financial system. So that’s really the way we need to about think about this whole thing.
[00:28:42] Rathish: I’m thinking there are three factors we should keep in mind. One is who is the person we are looking to support. Now, there are people who are extremely poor who may not have the economic ability to pay. And if that’s whom you’re targeting maybe there is no opportunity for us to lend in some sense, right?
Because that will go against the grain of what we want to do. So who we work with is one part. Second part of it is the, what we work on. For example, I’m thinking public goods somebody wants to conserve a lake. If there’s nobody who’s going to come in and say, listen, I’m going to pay for the lake, but it has to be done because it’s a public good.
So maybe there are public goods that if you’re building in some sense, there is probably not an economic opportunity there for you to be able to lend. And the third one, which is really where you’re offering something to a person of where the value is not very obvious to the person by start, like if there is no willingness to pay for it today, hopefully when they see the value of it over a period of time, they may be able to play, but in the initial phase, maybe there is an opportunity to only provide it as a grant to sort of switch to a point where they might then say, hey, I see the value of it.
I’m willing to pay, but I’m willing to pay a certain cost. And then you sort of grade them to a point where they at some point are able to pay market price or the market is able to play at the right price but when the value is not acknowledged, maybe again, blended finance may not be the right approach.
Will these three things be a right thing to say?
[00:30:00] Ramraj: Blended finance is a very, very, very, very large word. All I’m saying is there is a social good that you are doing. I am incentivising you in some fashion and encouraging you to try and do more of that social good and trying to create a market for this whole. So you can do it in health, you can do it, you can do it in a whole host of sectors.
Financial inclusion typically has been a sector where it has been a lot more successful, but now people are trying this out in a variety of other sectors. Like I said, health. We are trying to do this in a lot of the, supporting innovation through technical assistance grants and so on and so forth.
Sometime the theory of change of a particular thing may not be very, very clear. How is this going to manifest? You could actually there provide a TA grant and enable people to run through that entire mechanism, see how it’s going to work. No one knows how it’s going to work. Maybe it’ll go towards London or it’s gonna go through Tokyo, or maybe we are going to end up in Ethiopia or we are going to go somewhere else.
We don’t know that. All of that could get supported through some of these kind of things. So in fact, as I’m saying, Rathish, that you will be, I’m sure seeing examples from your past experience that people have done this. It’s just that we didn’t call it blended finance. Okay. So blended finance is a larger word where you’re trying to in some way blend philanthropy with commercial finance.
[00:31:14] Rathish: I want to summarise that so one roughly as you were talking, I was saying there’s India A, B, C.
India A is people with whom there is no need for philanthropy to even play a role. People like us who can pay for what we want. India C are people who are today living at the same level of income, a sub-Saharan Africa. There is a need for a lot of public capital to come in to deliver value for them.
But there is an India B, which today needs access to a wide range of resources that can help them create value for themselves and for their communities and families. And the scale is large enough for philanthropy to not be able to solve that problem. And we need commercial capital. And these types of needs typically have the following characteristics.
One, it will actually result in an economic transaction, which will give back the money in a certain acceptable timeframe. Two, there is an inherent risk and unknown probability there, which will dissuade a commercial entity to jump on head on. Three is that if provided a catalytic role, philanthropy can support it for a short term so that there doesn’t have to be a perpetual support to make this happen.
In all of these cases, blended finance will be an opportunity for us to solve the problem. And as you rightly highlighted access to finance as a public as an intervention that creates value is important to consider. We also spoke a little bit about what will not be in the ambit of blended finance.
One is what we talked about India C. People who may not be able to have the ability to pay for them to try and do blended finance is not going to be worked. Two, it is going to be areas where there is a public good and the public good is something that is delivering value for a lot of people and hence needs a certain type of capital.
And three is where the the perceived value of it in some sense is shot. And hence it’s not seen by the person who is receiving the value. So may not be willing to pay. And hence Blended Finance may not be helpful. I think a lot of examples that you gave today is actually valuable, but for me, there’s a wealth of information around how we can break it down.
And for me, ties to the second part of what I want to talk about, which is really the point you made, which is there is money available, there is money required, and there is an interim problem of imagination. Of being able to find the right ways to unlock that money that we have to solve for.
[00:33:32] Ramraj: I think that’s a good summary. I just want to add two quick points on this. One is when you looked at the India ABC and that classification, We just have to ensure that our small and medium enterprises is a very important element. So that has to be added. That is one element because helping them have multiplier effects in a variety of ways, one. Second, supporting innovation. So for example, On the climate side there is one challenge or there is one issue, which is around the climate transition from all your fossil fuels to that, which is the larger institutional mechanism that the government is working on. But there are a lot of problems where there is a need for innovation finance. Now, who is going to make that available?
Now as the philanthropy, I can use the money in the manner that I imagine is the best value. Okay. Again that’s a space. So for example, now you’re trying to create an entire ecosystem, which is a lot more sustainable than the fossil fuel based ecosystem, right?
The infrastructure for it doesn’t exist. Let’s take the waste management and circularity issue. What infrastructure do you have? You have a huge infrastructure for your fossil fuel based businesses. Everything is available. Think of petrol pump, everything is available for you to access it easily and consume it, right?
But when you think of a circularity or a waste management ecosystem, the infrastructure just doesn’t exist. Collecting the waste or anything else, it just doesn’t exist. Now, these are problems and these are situations from a climate perspective, which also will lend themselves outside of this framework that you provided.
So one would be the innovation part. And the second would be the challenges on climate where creating that infrastructure could have significant combinations of public private partnership.
[00:35:33] Rathish: Absolutely.
[00:35:34] Ramraj: Both of them will be add ons to the framework that you created in terms of supporting a variety of these organisations and enterprises. We don’t have that infrastructure for some of the other challenges, whether it is waste management, whether it is circularity, whether it is water regeneration, none of the pipes for those have been built and those are again, spaces, where blended finance, where philanthropy, they can reimagine their role, and while they need to continue to do the work on way, you know, education and health and all of the other things, the infrastructure for this is again, a very, very, very important space that has to be seen in the ambit of this whole blended finance.
[00:36:12] Rathish: So I want to come back to the imagination point Ramraj, and I’m going to try my best out of my memory to capture all of the various examples that you gave. one is the lending example, which is here is a target person.
We want to give a financial loan to a credit product to risk of returns is unclear. So finance can blend it and make it easier. That’s one. I love the example of emissions that you gave, which is where the financial transaction does not benefit or acknowledge the good behavior. As you reduce the money, which is as I put the outcome focus into it, I can actually reduce your interest rates.
So I can finance can come into blend and saying, hey, if you’re doing good behavior, I can find a way to reduce your interest rates or do things that which goes beyond the actual financial transaction to account for the social and ecological benefits that can come in as well. That’s a second example that I can see.
And we talked about a similar example where schools can be provided lower, you know, lower interest rate loans if they show better learning outcomes, for example. The third is the technical grant example. There is a need for patient capital on innovation that will need to be provided for an innovation to become market ready.
And that could be an example where the technical assistance example that you gave, maybe a loan at a very low interest or a grant that can actually enable them to run when they are not market ready. That could be the third example that we can take in some form. The fourth one, which you mentioned, which is interesting for me, I didn’t think of it before, is infrastructure building work.
Which is, what is the infrastructure that we need to build for a wide range of things to actually happen? You gave the example of climate and, recently I’ve been working in the space of water vulnerability. Where if you’re able to create the right infrastructure for water vulnerability, a ton of other people can actually work on it.
So gives us a very interesting way to look at where finance can be blended. So there are lending product related ones. There are outcome based sort of discounts and saying as a word that can be relevant. There are models of making innovation accessible through technical grants. There is infrastructure building work.
And finally for me was the idea of working capital, which is I am providing you working capital for you to be able to validate and work through a certain lean phase. Hopefully because after a certain period of time, the market model will stabilise, right? Broad five categories. One, your feedback on whether these are five valid categories, and is there a sixth or seventh one that is missing?
[00:38:42] Ramraj: Yeah. I think that’s a broadly valid. I just like to focus just one more piece, which is on the innovation side. We need to keep doing better work on building on what exists, but if we have to genuinely over a period of time, believe that we need to create our own sort of IPs and our own sense of intellectual solutions, which are unique to us.
We need to be able to support various kinds of innovation, whether it is biotechnology, whether it is deep tech, whether it is a lot of new areas that are coming on, who is going to support it. Government will be there, but can philanthropies, can other people also come into it? There may not be a role immediately for commercial investors.
Maybe VCs can come in later, but how can we create or how can we make more funding available for innovation? In some fashion for the sake of innovation in itself, because that is an important harbinger for what we want to be as a society.
[00:39:41] Rathish: I want to dig deeper a little bit there, Ramraj. Before you brought up innovation, my own understanding has been that even globally, a lot of the work that innovation covers is funded by federal capital. Government spends money on innovation because there is really to go back to the principles that we laid out.
The economic value is not going to be seen for a very long time, at least as a part of the life cycle where innovation should be ideally be just purely grant funded. Where exactly do you see the value for blended finance and innovation?
[00:40:11] Ramraj: My worry would be that if you don’t support some of the kind of ideas that people have. If you had a, if 100 people could innovate, okay, maybe only 10, 20 of them will have the mental resilience to go ahead without support. And then out of those 10, 20 of them, maybe five of them will become VC worthy and move ahead from there. If instead of supporting 20 people, we had the wherewithal of supporting a hundred people. Okay, that whole filter and that base would become so much larger that you would have a lot many more unique, specific, innovative ideas or innovative solutions coming together. So my whole idea is how do I increase that sort of, if I may say that pipe for new and innovative ideas.
Right now it is coming despite the lack of funding, not because of the availability of funding.
[00:41:05] Rathish: Yeah, I agree with the funding question. I’m only wondering whether it is actually blended finance.
[00:41:10] Ramraj: You can think of a special purpose vehicle, which will do both innovation, grant support, and then over a period of time, provide venture capital at some level. So it can be a combination within the same vehicle, the vehicle can innovate and also have a VC fund sitting on top of it.
[00:41:26] Rathish: Correct.
[00:41:27] Ramraj: So that’s the kind of, that’s the nature of something that I’m thinking about. So let’s think of a, I’m not again, a specialist say, but let’s think of a specialized biotechnology fund, which will do everything and anything. It will do grant support. It will do venture capital funding. It will provide debt financing.
It can provide all kinds of solutions. So if you’re a biotechnology guy, this is where you need to come…is the way I’m looking at it. You can also have third party biotechnology fund and so on and so forth or other people coming through. The amount of funding available to even accelerators incubator from a CSR side, it’s one of, it’s it’s right at the bottom, somewhere at the bottom in that bottom three, again, somewhere my thoughts come from that.
That out of maybe, I don’t know, crores we spend on CSR, the funding that is available to this accelerators incubators is quite low. You can check that data. I am reasonably sure of my numbers.
[00:42:20] Rathish: And I want to step back now largely to a much broader question here, Ramraj, which is really like you said earlier, there is money and there is willingness from institutions to fund this. The need is of course huge. What is today’s stifling the flow from supply to demand in some form. And my own assessment and please correct me if I’m wrong is what I call the lack of imagination.
There are actually very few people today who are able to really imagine where a blended finance instrument can actually unlock because the people who understand the problem, understand the capital and understand that longterm play. You are actually a very few people. Would that be a fair thing to say?
[00:42:59] Ramraj: Yeah. So there are, there is a, it’s a complex hydra headed kind of problem. First of all, we for long years in India have built the entire institutional infrastructure to support regular grant making and execution. And we have done it with a decent degree of support. So whether it is an education, health, the regular projects give grants.
This is something if I’m meeting the CEO in an elevator and he asks you what is happening, what are you doing? I can very simply in half a minute, between the 0th floor and maybe 7th floor or 8th floor, I will be able to in one minute explain exactly what we are doing.
CEO is there. I am also happy. Everyone is happy. Moment you get into blended finance, it’s a complex you know, it’s, it doesn’t lend itself very conveniently for an elevator pitch. Okay. To me, it may sound like a very basic or a very crude thing, but effectively your ability to explain it in a very simple way, it doesn’t, it’s not very easy and very simple and easy to explain.
Okay. It’s far easier for us to say we did x things to 1 million people in x, you know, in, in Bihar or Rajasthan or Tamil Nadu or whatever else it is. It’s a simple model. So blended finance in itself, If I may say, has in itself inherently a certain degree of complexity, because we are trying to change the paradigm in which we are thinking about impact.
We are saying that was for every rupee I put, I created so much of impact rather than saying I helped 1 million people. I had 1 million people. Did you use 100 crores or 500 crores or 10, 000 crores? Where is the relationship between what money you put in and what impact you created? It doesn’t exist. And so changing this paradigm really is where the problem is.
If investors start thinking, if grant providers start thinking like this, and if the not-for-profits and the executing organisations start thinking like this problem can move ahead but really all our institutional mechanisms right from the education that we make available in the social sector, let’s go and look at the syllabus of education.
How much of exposure is there on the financing side? There is an inherent idea, grant will be there, then we will execute and create this kind of solution. But thinking about how that procedure happens, how can we use that? So we do not have the pipes, we do not have that infrastructure through which some of this is made available.
Centrally the issue is at some level, there has to be greater imagination as you have rightly said, and the board has to think about, how is it that we are creating something very radically different. The funding which is available, whether it is philanthropy or CSR, we have to think about it as innovation capital for development. It is not capital for development. The paradigm today that exists is it is capital for development. No, this is money given by the shareholders or by the trustees of the philanthropy or the charity.
This money is given. If you can think about it as innovating for development, then we will solve a lot of these problems because then my idea is not that, okay, what is this money? How can I help people know? How can I create new pathways, new methods, new ways of maximizing the impact because that is the fiduciary duty of the head of CSR.
That is the fiduciary duty of the head of the philanthropy to think, how can I maximize this? How can I create something that 10 years later, somebody will say, yes, this organisation created this new thing. I think that is a paradigm which needs a strategic shift from the chairman or from the board to say, was use this money for innovation.
Because the amount of capital that a philanthropy or a CSR will have is very small. So you will not be able to create absolute change on impact, but if you use it for innovation and we aggregate it across, you can do a lot more,
[00:46:48] Rathish: Absolutely. Absolutely. And I think that many times we forget how the philanthropy capital is such a small percentage of the total amount of money we need to solve social problems. And hence being catalytic is going to be very mandatory.
[00:47:03] Rathish:
But you talked about pipes and infrastructure, Ramraj.
And maybe I want to break it down because, you know, usually we follow this system thinking approach where we say mindset is step one. Rules and structures that we have to create is step two. Incentives we are creating is step three. And then there is capacity, capability that we have to establish.
I think the first thing that you talked about is mindset. Do you have a mindset thinking of philanthropy as catalytic and innovation for development rather than development capital, which is very, very important. If I had to break it down, break down the infrastructure point and the piping the plumbing that you talked about, what are some of the critical aspects that you think we have to build?
[00:47:38] Ramraj: so the infrastructure is needed at every level. You asked me one of a very tough question, I must say, because fundamentally the change of mindset itself, it takes a bit, because I knew at CRISIL that we had a very, very enlightened you know, sort of CSR subcommittee of the board. People who’ve been deeply engaged in the social sector for a very long time and also deeply engaged with the financial market.
So it’s a very rare combination. But even there I think there are a variety of pulls and pressures, there is obviously the reporting that you have to do. You have to ensure that the monies are spent, you are not in violation and all of those kinds of things. So I think getting the pipes and the infrastructure in place will happen only if there is that change in mindset because after that, then you have to think of a variety of things you have to think about, from the education that is being made available because today the people who are passing out of our leading social, sector education organisations are the ones who are going to become the heads of these organisations in 20 years time.
So if that imagination is not catalyzed at their college level, they are going to be carrying the same idea. In no way am I trying to say that the regular stuff that we do is not important. It is valuable and important. In a country like ours, where there’s a shortage of capital, we have to think about squeezing development capital for every rupee for what it is worth.
So I think we need a paradigm shift there, one. Second is we also need a far greater celebration of these innovations in the social sector. We don’t see enough of that. In general, in popular media, you know, we don’t see celebration of social enterprises. I think there is a cultural shift that needs to happen.
Today, you have an entire page in every newspaper which says XYZ got ABC funding, so and so got DYF funding. How is it that we can create more oomph, if I may use that word, around social sector support, social sector finance, difference that people are creating, new ideas that people are coming up with?
I think we see some of that happening with, stuff that we see on Shark Tank and, the local, the version and so on and so forth, but I think we need to create a kind of shift in the way society as a whole thinks about creating social impact, which is not that we went and helped two kids on the road.
Important, valuable. Good way to begin. But if you can create something a little more innovative, you will be able to create. Maybe you may be impact 100, 000 or 1 million people. We’ve normalised being an entrepreneur in India, 30, 40 years back, being an entrepreneur is you didn’t get any job.
So you became an entrepreneur today. You have normalised and made that aspirational. How do I make social impact? How do I make innovation in social impact? How do I celebrate that and make that a lot more aspirational that it is today? How do I create a hundred more Jaipur Rugs, a Fab India? How do I celebrate?
Some of those kind of organisations at a level, which is a lot more than what it is today.
[00:50:44] Rathish: And I fully agree. I think even in the systems thinking thing, we say that if mindset doesn’t shift, nothing else is going to shift, but I also want to make it tangible, Ramraj, because there is today, in my opinion a few tailwinds that are important, right? There are actually professionals from industry who are coming in who understand a certain level of finance to the social sector.
So there is a transition that is happening. I think even in the philanthropy landscape, thanks to companies coming in, This rupee for rupee thinking, which is that, “Hey, listen, it is going to be limited capital. How do we make it work?” is growing. Third, there is actually now that constraint of the fact that this is only catalytic becoming more understandable for people.
They’re like, “Okay, this is the amount of money I have. My ambition is this much.” So there are tailwinds. So even if I have to tell the early adopters that, Hey, listen, this is where you can start and demonstrate value, that zero to one journey. I’m wondering how can we get that started and how can, let’s say today CEOs listening to this podcast or funders listening to this podcast, if they say, listen, I want to do this in my organization, where do they begin?
[00:51:42] Ramraj: one is that increasingly we are seeing a variety of specialized blended finance consulting organisations or organisations trying to become blended finance investment banks. I think starting off working with some of them, for example, a bunch of social impact investors have set up the blended finance company.
There are other organisations like Intellicap and a bunch of other people, Sattva themselves, and a whole host of other organisations who can consult and who can help these people on that particular journey. So that is one part of what I would think. I think re ideating the philanthropy framework is something that I would think that the founders of these philanthropies should be working with a structured approach with institutions and organisations that specialise in blended finance is one part of what they should do. I think the other thing which is needed is somewhere for the government to become a lot more active because there are a variety of frictions and challenges and potential, I may say gray areas
in terms of what is allowed and not allowed as per regulation, what is it that can be done? Because what we are talking about here is the confluence of for profit and not-for-profit. And in general the paradigm in India as from a legal and regulatory perspective has been, we have two buckets.
There is the investing bucket and there is the philanthropy bucket. In philanthropic bucket, you give away your money. In investing bucket, you make money. These are the two buckets in which traditional regulation is operated. What we are talking about here is something in the middle where we are saying, Hey, you know what?
We can make some money, but we can also create a lot of social impact. Now, this is a new paradigm. So most rules and regulation, whether it is the Charities Act, whether it is the Social Venture Fund Act or some of the other regulations that exist don’t necessarily talk to this kind of a new paradigm, not because of a design, it’s a it’s basically something that hasn’t existed.
And that is something that we will, I think somewhere need to work on creating structures, work with the government in figuring out how is it that we can engage them in some of these endeavors. The government themselves coming in, say as an anchor investor in some of these will give a huge boost because the moment it happens like that, from that fashion, that some arm of the government is participating in this, it brings a certain degree of legitimacy.
And, there’s a lot more institutional and regulatory support that comes in once something like that happens. So I would say the two sides of the equation are, as I described, that it will be good for philanthropies and CSRs to reimagine their own role in this space. And second is somewhere, if we can exhort the government whether it is through Niti Aayog or some of the other organisations to create a somewhat more facilitative environment for blended finance, I think a lot, many more people will be interested because I think there is a genuine intention to do this, but time and again, we will, come across issues from a tax side, maybe from a GST side, maybe from a many, some of the other challenges which come up in terms of what charities can do and cannot do.
That people just stay back and say, okay let’s not get into anything which can put a black mark on, our regulatory compliances. I think it’s something that we can work with the government and explain to them, particularly now, because we have these initiatives on the climate side, which are coming up.
The need for climate capital is so huge. So I think there’s a huge value for the government to think about something centrally where they initiate this kind of a blended finance platform loosely put which can actually harness the intentions as well as the capital from a wide variety of players, both from India as well as internationally.
[00:55:44] Rathish: I want to summarise some of the points you made, Ramraj. One, as you rightly highlighted, is the mindset, which is what is the definition of success for me as a philanthropist should shift from my capital created impact to my capital created impact per rupee.
And I’m seeing my capital as catalyst for impact or innovation for impact rather than capital for direct development itself. Second part of it is like you said, the supply of talent that is coming in, be it academic institutions that are working on impact. How do we embed this thinking right from there to say, if you’re in a factory today, if you are in a college degree, if you are in academic programs, can you think about this aspect of work, which is impact per rupee rather than impact as part of the way you’re thinking.
Third is how do we create a healthy intermediary ecosystem? And some of them are already emerging. The blended finance company being one. Sattva, the Convergence Foundation. There are a couple of them. So how do we look at all of these players becoming more robust and how do more organisations engage with us?
That’s the third part. I think the fourth part that you talked about is also to make sure that these systems, the government systems, not only talk about the for-profit models and the nonprofit models, but create facilitative structures for the blended finance models as well. Because a lot of times the fear of being on the wrong side is actually higher than the actual risk of being on the wrong side.
And for something that companies do as part of 2% of their net profits, they don’t want to take the hassle of saying, is there a risk that I will be called out by an auditor for doing this, et cetera. So even just creating that facilitative environment, guidelines, notes and support, et cetera, will be very helpful.
I think putting all of these parts of the plumbing and infrastructure that we talked about, I think is critical.
Anything that we might have missed.
[00:57:25] Ramraj: Yeah. So the challenge Rathish is really that every organisation is living their day to day life. you have your day to day work and your business and everything. You need an organisation. You need an umbrella body for sustainable finance or social finance in this country, which will represent the interests of the community as well as a larger variety of players, which is whose job it is to create these engagements, to work with the NITI Aayog, to work with the government, to figure out how are they thinking about it and figure out how is it that we can, in a more structured way, not on an episodic basis.
A lot of people whose hearts are in the right place are doing this work, but it is episodic. When they go do something and then some other business pressure picks up and then they’re off. How do I make this a structural intervention where I’m partnering with the government? And I’m partnering with the NITI Aayog, where I’m partnering with the line ministries, figuring out what is it that they want to do, figuring out where is it that blended finance can help, figuring out, what structures will be something that could be viable.
You’re setting up the sustainable finance working group of the ministry of finance. How is it that we can partner with them? This has to be part of a larger goal of creating a sustainable finance ecosystem a development finance ecosystem. And I think There needs to be a kind of a broader intervention, which works on this, on a regular basis, not one off. And this has to traverse the continuum of not-for-profit social impact, that whole continuum. It’s a complex mix and but we need to engage with this mix.
[00:59:04] Rathish: I cannot agree more with you on the bigger tent approach, Ramraj. I think unless we bring that unified view, I think it will always be a niche problem to solve by a niche set of people.
And I don’t think it will go, it’s going to get that pull because we have to merge some of these words. But I think one of the critical challenges there is regulations. People don’t even know what they don’t know. So if you can give us a quick view of what are some of the regulatory hurdles there, that will be useful to understand.
[00:59:28] Ramraj: you want an organisation which is able to receive various forms of financing, okay? What can be the forms of financing?
It can be grant money, it can be debt or loans, and it can be equity. So that institution should be able to access equity, debt and grants, and it should be able to dispense equity, debt or grants, depending on the mandate. So let’s take an example of what we used about this whole space of say biotechnology. There could be certain spaces where only grants can, will be given because those are very new areas.
In certain other areas, some of those companies have advanced, they have reached a level where possibly they can take equity in a venture capital. So this entity can therefore give potentially equity for these kinds of companies. So that’s on the asset side. In terms of its financing, there may be a bunch of philanthropists who say, yes, this is a specialised philanthropist, a biotechnology accelerator. We think it’s very important or a waste management circularity accelerator. We want to give grants to this particular. Someone else may say, Hey, I have this money. This is the money that I use to support growth level enterprises in biotechnology, I will make equity available.
So there could be a bunch of investors who have a variety of interests, and there can be a bunch of investment options with a variety of opportunities. What this vehicle needs to do is to be able to mix and match these for maximum. The problem that we have is that this is a very, if I may say a radically a different idea because in a traditional vehicle, you take grant, you give grant.
You take equity in a venture capital fund, you give equity in a venture capital. That’s the typical model. But what we are trying to say is we want to mix and match. We want to blend. There can be different models, different. Let’s say I create a healthcare blended finance fund. In some situations, I may want to give grant.
In some situations, I may want to give debt because these organisations can scale. It’s a steady business. I can give debt. In some situations, I may want to give equity. And on the investor side, there can be a bunch of people who want to do different things. So how do I combine this right now, the regulation may not allow, say this vehicle, can it take money from an international foundation?
It may not have today, is this FCRA approved? Does it need an FCRA one? Can it take equity in this fashion and not give equity, but give something else? So effectively the regulation, the regulatory challenge really Rathish is in the fact that we look at, if I lend to an enterprise and I get a return, any kind of a return, it is seen as not being of social impact. You are a social enterprise, you are helping low income kids and maybe, running a school and if you are generating some return somewhere, there is a feeling that there is a, this is not a socially, I mean, it is socially impactful, but making money from this is somewhere seen as being commercial. And I think the paradigm that needs to be shifted from a regulatory perspective is as follows, and which is what you will talk about briefly on the social stock exchange, which is trying to give a very rigorous definition of a social enterprise. A definition in terms of what areas it will operate in, what are the conditionalities under which it will be defined, the audit standards, the regulatory, self regulatory organisation for social enterprises.
And the SEBI has created an entire ecosystem for building up the social enterprises. Now, what we need to do is to use this social enterprise definition as a pivot and provide a lot of support to funding the social enterprises. They could be funded through grants, they could be funded through equity, they could be funded through debt.
Now, if you are able to give some concessions or some benefits in terms of, if I give money to a social enterprise and they give it back to me with say 8% interest, and if I can see that as a social good and not be seen as a commercial transaction, that is something that can help. Right now, those
pipes or those structures are not yet very defined and that is what maybe a social stock exchange can play a huge role because the definition of a social enterprise, the entire bells and whistles around their audit, their control, their management, all of that is being put in place. And I think this is the first if I may say, larger government-supported and mandated framework for social finance in India. And I think it, it needs that we are able to build on it in a lot more of a structural way in terms of ensuring that we’ve got, we’ve got this whole little highway being built.
How do I build the side roads such that we don’t have the last mile issues that, you know, you build this fantastic Metro, but to get to that, you don’t have autos or you don’t have, you know, peripheral kind of.
The real challenge is this that mixing up these things does not necessarily lend itself to the traditional models of how, not just India, globally, we think about taxation, we think about income, we think about impact.
[01:04:36] Rathish: As you were speaking about this , I was thinking of what type of capital is required for making an innovation happen. And I see four stages.
And I want to paint this back to you because this is a topic that’s of huge interest for Sattva. I personally know of four you know, stages. There is a pure research stage. Which is where you’re actually saying, is there a new substance, a new technology, et cetera.
There is a second where a research becomes an early innovation that is lab tested. Third is, it becomes from a lab tested model to a community tested model. Fourth is where it can actually achieve unit economics to actually be viable in the market. In my mind, the public spending can, is really option one and two.
The level one and two, largely is where public funding or maybe huge philanthropic capital can play a role. Level four is where markets should ideally pay for it. A VC picks it up, et cetera. But the level three really where it goes from being lab ready to community ready is really where today a massive funding gap exists because market is not ready to pick it up yet.
Federal funding says, listen my mandate is over. And I feel the blended finance opportunity could really be there at level three to say, can we measure that risk, make a possible instrument that can make it work. I don’t know if that makes sense.
[01:05:48] Ramraj: Yeah. It does. In fact, I would say that even in level one and two, if there is a large scale, say a government initiative. To support one or two funds, there may be a fund of funds which supports one or two or three or four maybe biotechnology funds, which are exclusively focused more on just that, just the core innovation at the R and D level itself.
And, you know, the whole cycle may be between one, two, and three. I think there will be people who will be interested. Right now, you are not getting sort of market intermediaries or other people interested, primarily because there are not one or two heavy hands who are putting bigger money on the table.
And if government, you know, maybe uh, the BIRAC or, you know, the, the ministry behind brings that together in some fashion, you will see the emergence of some of these kinds of organisations and with government and maybe one, two, three large philanthropy sitting on top, and that provides the core kind of a capital for some of these things to be done. Already work is happening.
All I’m saying is there is opportunity there also in one, two, as well as three.
[01:06:54] Rathish: We are at the end of our conversation Ramraj.
But what I want to talk about in the last section is really way forward. What are some of the things that we absolutely should do? To make this happen. And I want to summarise some things we’ve already talked about so that you can build on it. One aspect of it is this entire mindset change that we require at the funder side, which I think we, and there is an organisation that needs to drive that.
And we have to push that at an ecosystem level. Second part that you talked about is this setting up of a bigger tent where different stakeholders can come together and cut across grants, for profits, blended finance, so that it doesn’t become a niche problem, but a central problem. The third point you highlighted is that there is a remarkable opportunity with the social stock exchange coming in for us to define what a social enterprise is, what is an definition of impact, how do we create models and products for delivering finance, etc.
And the fourth is hopefully find the regulatory environment that can help us. truly build blended institutions in some form institutions that have the ability to blend diverse forms of capital and lend diverse forms of capital. I think all these are really broad agendas and ambitious ones, but I want to still come back and say, are there other things that we need to do, especially now that domestic philanthropy is supposed to grow within India and start a lot more work in solving for impact around much.
[01:08:16] Ramraj: So my thought on this Rathish is that the three, four things that we spoke about are the key building blocks. The major building block to me is and I’ll answer this question. To me, domestic philanthropy is money which is there, which is available. You have to take an investment banking approach to the problem.
Or maybe let’s talk about a family office. They will do public listed equity. They will do debt. They will do some AIFs. They will do venture capital and they will do some philanthropy. How does this market operate?
There is a whole bunch of investment bank. There’s a whole bunch of other people, mutual fund, all of these guys go to them with a deal. Who is going to them with social sector deal flow, social sector deal flow, which is not just saying that, okay, this is the number of, we want to have this sort of engagement in this district in Tamil Nadu or this district in Bihar. Who is taking social finance, blended finance deal flow?
It’s very sporadic. It’s very anemic. Okay. And there are a variety of reasons why it’s anemic. We spoke about it. Building the pipes in the social stock exchange is one way we can solve for it. Because if using the social stock exchange, we are able to clarify on a lot of the regulatory kind of issues. We can motivate a lot more regular other than obviously the Sattvas and the, blended finance company and others.
We can motivate a lot many more people to get into and get interested in some of these areas. Then what will happen is domestic philanthropy will see more deal flow. If they see more deal flow, there will be more understanding, more learning, more exposure, more knowledge, and over a period of time, more consummation of transactions.
Eventually, without having regular deal flow, domestic philanthropy or any philanthropy for that matter is not going to move. In any sector, you have to, you have to show them more deals. Okay, here it is. If one deal is coming in six months, I am sure, there could be some problem or this issue, that issue.
But if you are able to show them transaction, which have a higher degree of regulatory blessing plus regular frequency of transactions come to the table, you will definitely see domestic philanthropy and other people getting far more interested. You know, they have their own reasons why they are not participating today.
Okay. But I think clarifying on the regulatory side, using the social stock exchange as the platform from where we are building. Okay. The point is, everything is bespoke. The moment everything is bespoke, then every analysis, every evaluation is bespoke. And the moment every evaluation is bespoke, your timelines are long.
Your, the whole chain is much, much more complex. How do I simplify it? I, we need commoditisation of social finance moving from bespoke, uniquely design structures. How can I commoditise it? How can I dumb it down? How can I simplify it? How can I tell a CEO in a lift, in an elevator, in 15 seconds, what is exactly happening?
So what we really need to do is use the social stock exchange platform for commoditisation, for standardisation, for, it just needs to be as simple as someone saying, I went to this district and I did 5,000 cataract operations. It’s a commoditised thing, there is nothing much that has to be in terms of a huge value addition.
Okay. So impact measurement, everything gets then much, much, much more commoditised. The moment it is commoditised, more money will come, easier flows, easier understanding, everything will fall in place. So I think working on helping commoditise transactions on the social stock exchange has to be a very big agenda.
So that will need a lot of work that has to be done with SEBI, with other players, with Ministry of Finance and others to see if there are any problems and how to fix some of those issues that we will have to undertake.
[01:12:14] Rathish: Absolutely. Domestic philanthropy is still not still new philanthropy money, you know, the behavior, how to give have not ossified to a point where people can’t change it. It is now that we are starting to think, and if you can establish a new behavior now, it’s a lot easier for us to then be able to drive it to scale as that numbers continues to grow.
And like you said, the social stock exchange is an opportunity. The number of intermediaries are few, but can grow and the India giving stories only starting in my opinion. So I think mining this as a de facto approach. And creating the deal flow in some sense, where every week we are evaluating something I think is going to be very important.
[01:12:56] Rathish: I think these are very, very good points. Ramraj, it’s a pleasure to talk to you because you’ve seen this problem hands-on with a wide range of people. We started with a very broad definition of what is blended finance, got into the weeds around what it is not, what are some of the challenges today, what are the building blocks to make this happen and why now was probably a great time to make this happen.
Given some of the things that are going on. Thank you so much for your time. We’ve covered a lot of ground. It was a great conversation.
[01:13:21] Ramraj: Thank you. Thank you, Rathish. Pleasure to be here and all the very best. I think this is a great initiative, the Sattva Knowledge Institute, and I look forward to staying engaged. Thank you so much.
[01:13:32] Rathish: Thank you for listening to Decoding Impact, a Sattva Knowledge Institute production. If you liked my conversation with Ramraj, do head out to Sattva Knowledge Institute’s website, where we have a lot more content on blended finance and capital for impact in general.
If you liked the conversation do check out the season one and season two of Sattva Knowledge Institute on YouTube, Spotify, or wherever else you consume a podcast from.
Thank you for joining us today. I hope to catch you again in a fortnight for another episode of Decoding Impact.
Episode Transcript
[00:00:11]Rathish: It’s fair to say that it is a technology and it is an approach, a paradigm that is here to stay.
[00:00:16]Rathish: The benefits of EV, not just for the environment, but from a driving experience, from the vehicle design is very, very clear.
[00:00:21]Arun: We want to get all of India to go electric. Energy needs to be fast. It also needs to be affordable. And that’s the focus for us at Exponent.
[00:00:26]Akhil: Protocol is what governs the whole thing. Protocol says, “Hey, if you want to move energy from here to here, use this.” But protocol is not going to say, “Oh, you know what, this particular network has not done its job. Let’s penalise them.”
[00:00:37]Akhil: We can talk about all the good hardware, good interoperability stuff. At the end of the day, customers are going to value that when I click that button, has it actually started charging?
[00:00:45]Rathish: The endgame really is that, as a user of an EV, I have an app that tells me where is my next possible compatible charging points today.
[00:00:54]Rathish: I will get the data of, “Is this charging infrastructure reliable? Is this charging infrastructure accessible?” And also the time it takes for me to charge my vehicle at that charging infrastructure. Based on this, I take the call to say, “Hey, this is probably the one that I will go to.”
[00:01:08]Rathish: The charging provider has the incentive to then provide the fastest charging infrastructure and the easiest possible time, with the most seamless experience… which inherently means that they’re going to choose the charging players and the battery providers who actually can give them the fastest charging infrastructure.
[00:01:23]Rathish: So incentive gets aligned across the board.
[00:01:25]Arun: My worldview in the future is… energy is going to be everywhere. You will not go to energy. Energy will come to you.
[00:01:30] Welcome to Decoding Impact. I’m your host, Rathish Balakrishnan, where we take population scale challenges and go beyond simplistic solutions to discover what it takes to truly solve these problems at scale.
[00:01:43] The one observable compelling trend in mobility on our roads today is the emergence of electrical vehicles. Worldwide, there is a growing adoption of electrical vehicles. India is expected to take 30% of the EV markets worldwide and the CAGR numbers estimating the growth of the EV market are anywhere between 45% to 60%. However, there are a lot of players and a lot of stakeholders involved in making electrical vehicles happen and running on the ground. There is fundamentally an opportunity for digital public infrastructure to reduce the frictions and enable greater customer experience and thus driving better adoption for electrical vehicles in India, especially when it comes to the charging experience.
[00:02:31] Rathish: Does this truly hold value from a digital public infrastructure point of view? Can we actually achieve population scale adoption of electrical vehicles? And what is the role of emerging start-ups in this space to solve these challenges? To answer these questions and more, we have two entrepreneurs who are working in the forefront of the energy space, especially in the charging space for electrical vehicles in India today.
[00:02:54] Rathish: In today’s episode, I have two entrepreneurs who are actually solving the problem for India on charging. We have Arun Vinayak, who is the co-founder of Exponent Energy, a full stack energy company. And they have actually built the fastest charging batteries in the world today — 15 minutes. We also have Akhil Jayaprakash, who is the co-founder of Pulse Energy, who’s building the Razorpay for EV charging, which actually then goes beyond the battery and builds a software infrastructure that helps us simplify the charging experience.
[00:03:25]Rathish: Akhil and Arun, thank you so much for joining us today. It’s a pleasure to have two entrepreneurs who are actually solving problems, talk about where we are going with this EV landscape. I have a ton of questions to ask you. But before we go, maybe if each of you could just introduce yourself and cover two things. One, your journey so far. What has got you to this particular work that you’re doing and also briefly about the organisation and what you do as well.
[00:03:49]Akhil: Yep. I’ll go first on this one. I’ve been in the EV space about seven years now. Started off in Boston working as a product manager. I was one of the initial folks who built the underlying protocol that powers charging stations today. So, OCPP runs on top of WebSockets. That is where my entry into EV charging and how EV infra works. So I got to work with, you know, folks from Tesla and Chargepoint; understood what that looks like in the European model and the US model. I shifted back in 2019 to India and decided, “Hey, there is a problem with payments and interoperability in Europe and the US. Let’s target that and solve for that in India.”
[00:04:27]Akhil: It’s a first-mover advantage. Anyone who’s going to enter that space just cracks it. So we’ve been at it since then where people used to say, it’s too early for you guys to even think about this because first, infra needs to be there to have this problem. But since 2020, I partnered with the other co-founder, Devang. He was working in a solar company. He was building a full stack there. So partnered with him. So it was… I was a product person. He was a tech person. We started building this out together. Pulse Energy really started off as a B2C business. From there it evolved into a B2B because B2B is where public charging is being utilised the most in India.
[00:05:02]Akhil: So it just naturally made sense for us to pivot to B2B, focus on it, sharpen our tech stack with that particular vertical and then eventually progress into B2C. But the core of the problem is very simple, which is, there’s going to be ‘n’ beneficiaries of charging infra because charging infra setup has been de-licensed. There is, as an individual owner of an EV, as scale hits, there is going to be a problem of interoperability. It’s a given. Whether it’s a connector interoperability, it’s a software interoperability. We, as a company, want to focus on that software interoperability. Because — and the elevator pitch that I typically have is — the act of charging an EV is 10 times more complex than just fuelling a vehicle, right? And today I have data that says 5 out of 10 times charging doesn’t start when that user clicks on that button that says start charging, right? Like, it fails. It could be different reasons. But we, as a software provider, want to solve for that and solve for the payments part of it. So that’s what Pulse Energy does. So yeah I’ll stop at that. Over to you.
[00:06:04]Arun: Hello everyone, I’m Arun. I’m from Bangalore. I love mobility. Built my first car when I was 16. Since then it’s been a chase of all things mobility through college, through formula student racing. Then eventually ended up being a founding partner at Ather. And I was the Head of Product for Ather. We started Ather in 2013. It wasn’t very popular to be building EVs back then. But we really thought EVs are the future. We were hugely inspired by Tesla and everything that was happening there. Of course, in India, there was this two-wheeler market that just hadn’t been disrupted for a while.
[00:06:36]Arun: So, while electric was one angle of innovation, just building a better product was the other angle of innovation for us. And that was, in some sense, phase one to prove to the world that EVs are better, they’re faster, they’re sexier, they’re better, you should move. Along that way, realised by 2019, 2018, 2019, 2020, I think India believed in EVs. Everyone’s going electric, everyone wants to go electric. That’s when we realised fundamentally the tech platform and the energy ecosystem was missing. Cause enough OEMs (Original Equipment Manufacturers) now want to build good quality vehicles across categories. And in some sense, I think that sort of inspired me to start Exponent. Ather, we started top down, premium market for two-wheelers. But at Exponent, we’re now looking at how we can enable all of India to go electric.
[00:07:17]Arun: And we think the drive side technology is already better. Luckily we’re saying it’s really charging that’s really holding back adoption. And I think from time of charging, cost of battery, cost of charging, reliability of charging, 30% of the time your charging doesn’t work. Forget how fast it’s taking. It’s just the systems don’t understand each other. So thought this is ridiculous. We need to make energy simple. Like energy is so complicated for EVs that you buy an EV and you’re doing all this complicated math. It’s great for early geeks buying vehicles who want to geek out on this, but we want to get all of India to go electric, which means energy needs to be just simple.
[00:07:52]Arun: Energy needs to be fast. It also needs to be affordable. And that’s the focus for us at Exponent. We’ve got the world’s fastest charging tech, 15-minute full charge, 0 to 100%. And we do that through a combination of our battery technology and charging networks. We have something called the E-pack, which is the battery pack that sits inside the vehicle.
[00:08:07]Arun: And we have our own proprietary E-pump network. We can go and charge them in 15 minutes and keep going. So yeah, that’s what we do. We launched three-wheelers. We were only in Bangalore last year, launching in a few more cities this year, in three-wheeler cargo, three-wheeler passenger and soon buses.
[00:08:21]Rathish: Excellent. So just to set it up for both of you, so Akhil, software engineer, building software, focusing on interfaces, not on the dirty nuts and bolts of what has to happen. Auto enthusiast, Arun…
[00:08:35]Arun: I’m the dirty nuts and bolts guy.
[00:08:36]Rathish: You’re doing the dirty work in some form. You’re actually making batteries getting charged and so on, right?
[00:08:42]Rathish: You know, there are times where you realise that you’re in the middle of a very, very large shift. Tectonically, right? And all the numbers tell us that EV is probably there right now, not just in India, globally, I think, right? Like the CAGR numbers that I have, like, you know, 60%, 45% growth, et cetera.
[00:09:00]Rathish: Ownership numbers are massively increasing, but you’re right that the concerns for a regular customer today in buying EV are still very real. Like I had to buy a car and I really thought multiple times, do I really need an EV? And even a car salesman tells you that maybe you need to consider this sort of thing.
[00:09:15]Rathish: So we really made the shift in even the buyers and the sellers being convinced on EV. But before we get into some of the details — and a lot of the listeners are probably new to EV as a space. They know the buzz around it, but they might not know the market, right? So maybe if between the two of you — and Arun, maybe you can take the lead on this question.
[00:09:35]Rathish: Who are the key players in the EV market today? If you sort of paint the picture on the EV market. So there are the Athers of the world. I understand, but you know, there are guys who are making the battery, but who else is there?
[00:09:47]Arun: Well, okay, you can divide the product ecosystem in a few ways. I think one is just the conventional way that a two-wheeler is a commercial vehicle. Is it passenger cars? I think that’s one way to segment it. There’s also a way to look at it — are they vertically integrated players versus horizontal players?
[00:10:04]Arun: So you have companies like Ather or Tesla that sort of build the entire stack. And then you also have companies that in a more traditional sense, by technology, integrate and sell. So that’s like a traditional OEM model. And then you have technology providers and part providers, right? Could be from a motor to a wheel to a battery.
[00:10:21]Rathish: Hmm.
[00:10:22]Arun: And then with EV, I think you have this new or horizontal, which is energy, right? Since, petroleum in the IC engine world, petroleum is just this industry that’s operated on the ground, right? You bought your vehicle. You can go anywhere and fill petrol. So it was a fairly decoupled ecosystem.
[00:10:41]Arun: Wasn’t really a point of decision-making when you bought a vehicle. Today, which energy ecosystem do you belong to is a large decision point while you buy the vehicle. Are you buying a slow-charging vehicle? Are you buying a vehicle on swap network? Are you buying a rapid-charging vehicle, a new point of contention. It’s an opportunity. It’s a problem. Both ways. And of course I think there are all types of models that are changing. I think as the world is going electric, the concept of dealerships and service networks are changing right today, right? The incentive on servers, the revenue on servers, which means dealership sustainability. So you’re seeing all of these models change how the dealership works. Manufacturing is fundamentally changing. Manufacturing was a mode in IC engine vehicles, it’s not anymore in EV.
[00:11:22]Arun: So I think you’re starting to see a lot more plays similar to a cell phone or a laptop industry where you have brand-agnostic dealers, right? Brand-agnostic manufacturers, technology, horizontal providers… and you have OEMs that focus on integration and brand building. So I think that’s the sort of evolution that we’re starting to see.
[00:11:41]Rathish: I want to ask one question to you, Arun, before I go to Akhil. Hmm. You said Ather is a vertically integrated stack. Now what all does a vertically integrated stack actually comprise?
[00:11:52]Arun: Well, as far as your imagination can go, but I think it’s starting from… one way to look at it is the battery, the technology, the vehicle integration, the motor technology, the other layer of integration, of course, the charging network. Running an open network, are you running on your own network, all the way down to vertical integration on stuff like demand, dealerships, service networks, et cetera. And of course, manufacturing is on the other end of this integration. So you can pick and choose, you can outsource manufacturing, but still be a fully vertically integrated company. That’s what an Apple does, for example, right? So I think if you are building your own tech in the EV space, building your own tech, building your own network, I’m building your own distribution, I think that makes you fairly vertically integrated.
[00:12:32]Rathish: Yeah. And I think this is an important question for today’s discussion, which is why I thought it was important to double click on it. But what do you want to add, Akhil, to that view? Give us a market view of who are the players and what all is happening today.
[00:12:43]Akhil: I’ll start with the consumer, right? So typically, anyone who’s going to buy a vehicle, you can classify into two buckets. One is personal use and commercial, right? So personal use is your, “Hey, I’m going to use this, once a while when I step out of home” or “I’m using it for my daily commute to work.”
[00:13:02]Akhil: The other one is commercial, is, “Hey, I’m going to ride this thing like max you know, to how much of a mileage, that juice, that this vehicle can provide. I’m going to do that on a daily basis because that’s where my livelihood is.” And the selection criteria between these two consumers differ. And what I see predominantly in the market today is more commercial because that’s the people who are buying that.
[00:13:25]Akhil: For them, it’s longer range or, as like the Exponent pitch, which is, “Can I get my charging is done as quickly as possible and then do as many kilometres as possible in a daily basis?”. So that’s one selection criteria. And within that, you will find a spectrum of OEMs who will offer those solutions.
[00:13:43]Akhil: So it’ll range from folks like Log9 and then, OSM and all these guys, and then go into battery charging specific companies like Exponent. And others. On the personal segment, I see the same spectrum, which is the Athers versus someone like a Greaves or an Ampere, right?
[00:14:00]Akhil: So that’s the spectrum that I see. Same thing applies in different verticals, like three-wheelers, four-wheelers. That’s the way. I have not researched much on buses, so I don’t want to comment on that. But I think where I see as a consumer, as a personal consumer, and since you said you had apprehensions of buying a vehicle, right?
[00:14:20]Akhil: Very interesting story that I had when I was doing the B2B sell. I used to go to the car dealerships, act as if I want to buy an EV and just quiz the sales guy on how much he knew about the car. Zero, right? He’s like,”Hey, this is a car. Here’s a pamphlet. Read it. Like you can read, go ahead and read.” I’m like, hang on. I want to know, how is this charging going to be set up? You have two chargers here. How do I use it? What happens if something goes wrong? Who do I call? Has zero idea. And this was 20… somewhere between 2020 and 2021. During COVID, when a little bit liberal, went out, wanted to get a vehicle.
[00:14:56]Akhil: And even today, I think that dealerships, that tribal knowledge doesn’t exist. And I think that carries on from the vehicle knowledge, to the charging knowledge, to the servicing knowledge. Like most of the commercial folks that I speak to today, or even end-user, even if it’s you and I, we all… one of the things that I’ll have in mind is, “Hey, if I buy this vehicle, if something goes wrong, who’s going to help me out? How quickly can I get help?” And that’s the key question.
[00:15:25]Akhil: I think OEMs or EV companies like all of us have to start thinking about how do we bridge that? And my take on this is, a vertical stack company might not be able to solve for that at scale. Like a billion-plus population, you know, country. I don’t think we can solve it at that scale by just one vendor scaling it up.
[00:15:43]Akhil: I think it’ll be multiple parties coming together, building a unified answer for this. So I’ll pause there. So that’s my take.
[00:15:51]Rathish: Yeah. So leading us to the next side, but let me summarise what I’m hearing, so you guys can correct me if I’m wrong. So there are the guys who make the vehicle. So you’re making an Ather two-wheeler, you’re making a three-wheeler, you’re making buses. And by the way, India’s buses are getting electrified faster than we can imagine, right? And that’s massive, it’s one part. Then there are the guys who are making the batteries themselves, right? Which is a battery as a layer of work. Then there is a charging infrastructure. Be it charging, can be charging, swapping, all of that related aspects.
[00:16:23]Rathish: Then there is a selling infrastructure, retail dealership to sell the car, vehicles, et cetera. Then there is a servicing infrastructure, which is really where you’re looking at people fixing the cars and vehicles, et cetera. But then there are also software players like yourselves that are somehow building interfaces that can abstract some of these differences, help discovery, all of that.
[00:16:43]Rathish: And finally, there are users. Users can be businesses. Users can be commercial service providers. So when I say businesses, I mean, people who have a fleet, for example. Then there are commercial service providers like cabs, et cetera and then there are personal users. Will that be a good summary? Is there anyone I’m missing that is very important in this picture?
[00:17:04]Arun: Bang on. I mean, maybe just manufacturing system.
[00:17:07]Rathish: Yeah that’s the other thing that we look at. So another question I had before we get into the details is, sometimes when we approach a new world with the mental model of the old world. Like we have a car as a car, we assume that an EV car is the same as the regular car, ICE car, same thing with charging we say filling petrol stations is going to be how battery stations are going to look like.
[00:17:31]Rathish: And I know that fundamentally there are some big differences, right? Like I’ll share some that I know. A car or a vehicle in general is infinitely a simpler infrastructure when it’s EV based and ICE based. Number of moving parts. And this is my understanding, correct me if I’m wrong. Two is, electricity is everywhere. So it’s not the same as setting up a petrol bunk to mean, to set up a battery, a charging station.
These are some things that I keep in mind. But tell me, are there such fundamental differences and how you think about the ownership and the usage experience of an EV compared to commercial vehicles, current ICE vehicles?
[00:18:08]Arun: Absolutely. Right. I think bang on, like stuck on the most important differences. EVs are better in every regard and in a good way. But they’re fairly similar, right? So you might have automatic versus gear or whatever. But at the end of the day, it’s fairly simple. The consumer mental model is a similar problem right? It’s everything that’s got to do with getting energy to your vehicle and that’s where the model is fundamentally different, right? So if you look at petroleum… the energy is a fully upstream on-ground problem, right? Extraction, refinement, distribution. A transaction is simple, right? And distribution is also slightly hard. Setting up a petrol station is fairly expensive and fairly complicated. And a complicated bit with ICE in vehicles was the powertrain. Like how do you take that petrol and deliver power? I personally started my career with engines and I still love them, right? From an engine point of view, they’re beautiful, right? They’re very complex creatures. So OEMs focus on powertrains on the way and energy companies focus on the ground, and fairly decoupled ecosystems. And from a consumer model point of view, when you bought a Tata car, you didn’t care about where you’re going to fuel it. That was not even a decision point, right? You said I bought a Tata car for the specifications, for the brand, for the price points, the residual value, yada, yada, yada, right?
[00:19:26]Arun: So that’s then the purchase criteria on one side being very different and also the entire ecosystem challenges being entirely different. Fast forward to EVs, suddenly there’s, like you said, this distribution is solid as it is energy everywhere. There’s energy in my wall, right? How do I take energy from a wall to the vehicle? That transaction is fundamentally broken. And now from this can with liquid, you now have a battery, which is suddenly engineering-wise, more complex, more sensitive, it’s a sensitive creature. And on the other end, you have the charger. And how a charger and how a battery interacts is… fundamentally… that’s the hard bit in this industry. Everything from charge time, battery life, reliability, to the software interaction protocols. That’s where the challenge is at. So it’s that middle layer, the transaction layer that everything is broken at. And I think… My worldview in the future is energy is going to be everywhere. You will not go to energy. Energy will come to you, right?
[00:20:21]Arun: Bangalore has 400 petrol stations. You’re not going to have 400 charging stations, you’re going to have 40,000 charging stations. All different brands of different networks. And you will, while choosing a vehicle, you’ll say, “Okay, I want a Tata car”, but you’ll also say, “Hey, which network do I want to be part of?”
[00:20:34]Arun: There’ll be cross compatibility for sure, but you will subscribe. There’ll be a tribe. You’ll say, “Oh, I really like this”, right? And it’s like smartphones, right? When you went from feature phones, you bought a Nokia for Nokia. That’s all you cared about. But when you’re on the smartphone, you now make a device position and an OS position.
[00:20:50]Arun: You say, “Oh, I believe in Android, or I believe in Microsoft” if you ever did. And you say, “Oh, I want whatever device you want on top of that” right? Similarly with laptops, you say, “I want Intel i5 or i7, or I want an AP because you’ve truly brought into that drive, into that performance because those things impact your ownership experience.
[00:21:09]Arun: Similarly EV, your energy network impacts your ownership experience. We bought a vehicle, but it’s charging every day. Twice a day, maybe. So the last part of your ownership experience will now be determined by the energy partner. So I think that’s going to be a two-by-two decision matrix for you to make,when you choose a vehicle.
[00:21:29]Rathish: Excellent. I mean, as you were speaking, and Akhil, I want to get your thought as well. And as you were speaking, Arun, I realised, The cars look the same. The driving looks, feels very similar. Your steering wheel… you have the regular paraphernalia. The fundamental place where the user experience is different, and it struck me only when you’re speaking about it, is actually where I charge.
[00:21:49]Rathish: Because everything else, it’s pretty much like I go to the showroom, I buy the car, I look at the car, I sit in the car, people sit in the back, I drive the car, etc. It’s really only this. And I’d love to, again, as you laid it, the rest of the talk, just focus on the charging process. Because as you rightly said, if we crack that, pretty much at the same road, same car, same steering wheel type of a conversation, right? Akhil, do you see it the same way or do you see it differently in terms of the difference between ICE versus this. You know Arun was saying that, listen, everything is the same. It’s really the charging experience that’s different. Do you think the mental model is otherwise the same? Do you see differently?
[00:22:22]Akhil: No it’s the same. I think. So again, my head works in that B2C, B2B format. B2C, I like, and this is where I, sometimes when I go into four-wheeler space, I often have this hesitation where 80%, 90% of your charging is going to happen at home. You’re just going to have your vehicle going to figure that out.
[00:22:41]Akhil: You will pay that money or that cost to do that thing. It’s similar to having a water filter at your home. Like when you move into a new place, you need to have clean water. You’re going to go buy a water filter, fit it up. Drink water. Simple. When you go get a vehicle, you will figure that out. That’s a solved thing for B2C, or at least a passenger four-wheeler.
[00:23:02]Akhil: Where I think the problem statement that, that same correlation might not work is for the two-wheelers because I came across some statistics saying that about 60% to 65% of users or vehicle owners don’t have a parking space. So what that traditionally translates to is, now a person does not have a wall space.
[00:23:22]Akhil: They can park anywhere. So now there’s this big junta of people who will now look to public stations. And if 60, 65 is a huge number from a vehicle ownership point of view, how do we convince that individual to say, you know what, the public infra that’s been set up, that is more than sufficient. You do not need to think about charging as a question. You again, go back to what Arun was saying. When I look at a nice vehicle, I only look at what are the vehicle parameters. I trust the brand that they’ve figured out fuelling, OMCs are already taking care of it. I trust that the OEM takes care of the servicing needs for me, right?
[00:23:59]Akhil: I’m only looking at how much mileage is it going to give me? How fast will this go? How comfortable are they? How many airbags are there going to be? What are the safety features? We need to drive the population to that level of comfort and not ask the question of, “Oh, has the chicken or the egg come first?” We shouldn’t make them ask that question. So just focus on, “Hey, you’re buying a vehicle. This thing is sorted, right?”
[00:24:23]Akhil: Like that level of comfort is a long way out. Even though I work in the interoperability space, even today, I’m hesitant to go get a vehicle, right? Like for me, even when I bought my first EV, I was like, yaar, I didn’t have a charger at my parking lot. And I was figuring out, okay, this is going to be very difficult. How do I figure this out?
[00:24:40]Akhil: And I have two levels of basement. I have to pay… like the plug cost me 2k. The wiring from my meter all the way to my parking lot is 13k. Now the question is, why as a consumer, do I have to pay that extra to get this kind of privilege? I think, that question of charging is going to be a very pertinent one to be solved as quickly as possible, if we need to start seeing adoption go upstream, like it has to uptick in that way.
[00:25:12]Arun: Like I’m not saying everything else would be the same, right? I think EV is such a beautiful platform that the world will just innovate on every year, like EV can be a low-cost vehicle if you want it to be. It can be a faster vehicle if you want it to be. Everything about manufacturing is changing about EVs, everything about distribution and service is changing about EV.
[00:25:30]Arun: So I think every layer of this will fundamentally change how we think of a distribution, how we think about service, how we think about manufacturing, how we think about vehicle variants. Like, today, everyone’s vehicle is so similar, the product experience will be so much better for EV. But I think they are all opportunities.
[00:25:48]Arun: They are all opportunities that people will tap into. But I think the bottleneck today, like you said, is on energy. Like the one thing we should solve for, that solves 80% of this immediately, the pain point is definitely charging.
[00:26:02]Rathish: So there’s a slight difference in what both of you are saying, but one what you’re saying is that, hey, it’s going to be a two-cross-two decision matrix. Like you said, here, it’s like buying a computer and saying, “Listen, I know I’m buying a computer, but what chip is inside?” Is it an Intel, AMD, is it, whatever? Even if I’m buying a Mac, is it an M1, M2? etc. I’m actually making that choice. What I hear Akhil is saying is that, “Hey, I hope the guys figured this out.” As in, for me, the charging is going to be abstract. Now there are very two different ways in which consumer behaviour can fall. I guess we’ll find out as we go, but I think that is an important difference in how both of you are looking at the world.
[00:26:36]Rathish: So, coming back to the challenges. And now we’re only zoning in on the charging, which we agreed is the biggest challenge. I wanted to, one, get your sense of the macro picture. So firstly, as you said, at-home charging is a solved problem.
[00:26:51]Rathish: What is the current policy environment? Is this actually okay? Are there external challenges that are actually stopping innovation? Or is the innovation challenge largely internal, right? Like in us finding the right technology — because you’ve already solved for charging in 15 minutes.
[00:27:05]Rathish: If you look at the full system, right? As people playing in the system, what are some of the biggest challenges today that are holding us back on the charging side?
[00:27:15]Akhil: Arun, do you want to take this? At least setting up the infra, I think you might be the right person to answer this.
[00:27:20]Arun: To quickly structure this, it starts by user experience at the base of it, right? And this is where I believe India is very unique, right? In the US, like I said, most people afford large batteries. They can park at home, charge at home. Public charging is during highway road trips. For 45 minutes, 1-hour charging is good enough.
[00:27:36]Arun: Now that doesn’t work in India. Most segments are parking in the road. They can’t afford large batteries, which means you are depending on public charging every day. And if you’re going to depend on public charging every day, it’s got to be really quick. I think sub-10 minutes or 15 minutes is what’s needed. So it could be swap. It could be rapid charging. It could be whatever it is. My personal opinions aside. But I believe that’s what’s needed to get people going. It’s sort of like e-commerce where people don’t want same-day delivery anymore. Either I’m okay to wait 2-3 days, right. Or I want it in 10-15 minutes.
[00:28:07]Arun: And it’s sort of similar model that’s happening with EVs where one-hour charging is sort of an orphan child. Like, you don’t know what to do. You don’t want to go to a public place and wait for one hour every day. And so that’s a clear dichotomy where either people are like, I’ll park at home and charge overnight, which I think is the best way to charge your vehicle. It’s the lowest stress on the grid. It’s the cheapest way for you to charge. But a lot of people don’t have that probability with capability, which means you need to be able to actually charge very quickly somewhere else. And that sort of sets the problem up, which is, if you really want quick charging, and not having quick charging sets up a whole bunch of problems.
[00:28:40]Arun: Firstly, if I don’t have the ability to charge fast, then batteries get a little larger. So the way there are a bunch of vehicle-side issues, right? Which vehicle gets heavier, vehicle gets more expensive. And on the charging side, it’s a question of profitability. I set up a piece of land. I charge two vehicles a day, three vehicles a day, and five vehicles a day. It’s a terrible business. In fact, in the city, I’d rather give that piece of land to some other business, right? Than actually be a charging business. So for charging it goes back to the whole… you need to be able to push more energy on the same piece of land. So it goes back to faster charging and faster the better, right? In charging, we say faster is cheaper.
[00:29:17]Arun: So actually the faster you go, your end cost of energy comes down to the end user, right? So it’s interlinked, like solving this fast charging business can actually solve for a bunch of problems and fundamentally on the profitability of the charging station. And that’s how you scale this up. This can’t be a government subsidy-based programme, right? Things scale when, at least in India, when something makes money and people are willing to franchise it out and scale it up, put personal capital and scale it up. And today we’re not able to prove profitability on the charging and it is sort of interlinked.
[00:29:46]Arun: If it’s too slow, people don’t want to use it. So you have a whole bunch of these assets that are now lying around not being used, which further creates more anxiety to say, I don’t want to invest in charging business. So it’s sort of a negative flywheel. You’ve got to flip that flywheel on the positive.
And the third layer to this is, then, responsibility, right? Who owns what? If you really want to charge fast or you want to swap fast, I think that’s where probably a divergence of thought on will it be one company that has to solve both sides? Is it a unified protocol that people will just solve on the battery side, people will just solve on the charging side… how’ll that sort of interact. Yeah. So I think this is what needs answering.
[00:30:22]Rathish: Let’s say there are three buckets of vehicles. One bucket is, I have a charger at home. I am going to charge at home. The second bucket is, I have a fleet or a depot. Like I’m thinking buses, I’m thinking anyone who has a fleet, they’re going to do that short round, come back to the place, and then they can…
[00:30:38]Rathish: And then there is the ones that are going to be standing on the road largely. I’m thinking auto drivers. I’m thinking a lot of two-wheelers that are today parked. Maybe even some of the car owners who today actually don’t have at-home parking and etc. Do you have some sense of the numbers? Like in India, is the third bucket 50% of our market? 10%, 30%? Do we have some… I mean, it doesn’t have to be accurate number. But as a size of market today, do you know which size each of these buckets are today? Oh how big is the third bucket in some sense?
[00:31:10]Arun: Yeah. So if you actually look at and this is, this answer, I think is specific to segments, right? And if I can answer for commercial vehicles, I think that’s where we really understand this. and two-wheelers don’t really do much with respect to energy consumption. I think we should just skip that for the conversation. Really look at commercial vehicles, right? These are 10% vehicles, 70% of our on-road energy consumption. So really from a sustainability point of view, from an oil imports point of view, that’s what needs electrification.
[00:31:34]Arun: And we look at that 90% + of these vehicles are owned by… even if you look at buses, very small percentage of them are owned by STUs who have dedicated hubs and can invest behind the infrastructure that you’re talking about. Even most buses are owned by private fleet operators right?
[00:31:49]Arun: And if I’ve ever seen a private fleet operators parking but it’s a basic parking hub, there’s no power infrastructure. And secondly, these buses need to go all over the place so it’s not just about whether you park at the hub, but charge at the hub. It’s also, you need to charge along the way, along the highways.
[00:32:04]Arun: And this is true for even a three-wheeler. So if you go across the segment, if you’ve got a three-wheeler, 90% of, I think more than 95% of three-wheelers are owned by individual drivers, right? And very similar when you talk about Tata ACs, that segment as well. These are vehicles that are fundamentally parked on the road, right?
[00:32:19]Arun: Now it’s hard to define how many of them have dedicated parking, or I don’t have that number, but in the few surveys that we’ve done, which is upwards of 300 drivers when we started Exponent. Like pretty much everyone we spoke to, parked on the road, right? And this point of parking in the road is different every day.
[00:32:33]Arun: It’s not like they have a dedicated parking, right? And this is generally a one-kilometer walk away from where they’re staying. And if you’ve actually seen a lot of these parking hubs, you’ll see there’s a security guard. There are like 100 autos or 40 autos parked there.
[00:32:46]Arun: So that’s how parking is done. So for them, we realise the home charging is just not an option.
[00:32:52]Rathish: Hmm. Got it. Akhil, you wanted to add to that?
[00:32:54]Akhil: Yep.
[00:32:55]Akhil: Like my answer was on the question that you asked, right? What are the challenges we’re facing to remove that inhibition that users have? I’ll just distil this down to two points. One is real estate. Second is the grid operator, who are the discoms. Those are the biggest challenges today in actually setting up infra in that manner.
[00:33:16]Akhil: So, similar to park and charge. If someone needs to go get a hub where I can get enough power to set up that many chargers. It’s 3.3 sockets. It’s like running 50 fridges or 50 air-conditioners in one location. So grid becomes a very important thing. And then the biggest challenge, and this is purely based out of data that I see, because we have access to about 21 charge-point operators.
[00:33:40]Akhil: That’s about 50,000 to 70,000 chargers across India. And we have some of these largest fleet operators also on our platform. Like we have 95% of Uber drivers using our platform on a daily basis, both in their hubs and in public. So I get to see ground reality of setting up a hub. What are the challenges? What is the lead time to even getting into a new pin code? So real estate becomes one; a combination of real estate and the grid access. Those are two critical things. If those two things come together and that is everywhere, then it’s sorted. Everyone just, because money is there. People are willing to put the capital in.
[00:34:17]Akhil: It’s the, “Hey, can I get the real estate and can I get the grid connection plus the cost of all of this thing? Can I fundamentally put all of these things together and can I easily access it?” And that’s not readily available today. Like in certain locations, one operator could literally purchase all the future capacity also for that grid.
[00:34:36]Akhil: Like that’s also happening in the market, right? Again, it’s just choking out competition. So that happens in the market. Real estate, some people might not want to give it out to charge-point operators. So, if anyone can solve for that, like grid access, and again, there are companies who can solve for it. But that plus availability of land, I think availability of land is a problem that exists today. Like people will end up solving it. There are multiple people looking at how to solve it. Not just in the EV world, outside of EV. But the second part, grid, because as I was telling Arun before we started this, the biggest benefactor of the EV charging industry is a discount.
[00:35:11]Akhil: 50% of revenue is eaten or given to the discom, right? Like 10 rupees, 8 rupees whatever, 4.5 rupees is your rate. But eventually the discom pockets about 10 rupees close, right? And customer is not going to give you more beyond 20. Like their price range is going to be between the 10 to 20 spectrum. And so you’re battling with 10 rupees and then amortising your hardware and all this stuff.
[00:35:32]Akhil: So the fun is, grid operator is the biggest challenge. We’re giving them the most money. And then you have real estate as well. So it’s these three parties that come together. So that’s my biggest challenges that I’ve seen in this market.
[00:35:45]Rathish: Got it. Super. So I love how we are just zooming into one level to another, right? We started with EV. We said charging is the biggest problem. Within that we said commercial vehicles, 90%,10% massive gains in terms of emissions. Within that, forget the ones that are on the fleet that are in the public place is the problem.
[00:36:05]Rathish: And we started breaking it down into what does it take to make that happen? And I think there are two users largely here, right? The person who’s offering the charging infrastructure, the person who’s using the charging infrastructure. The person who’s offering the charging infrastructure, Arun, what you’re saying is, they have to run a viable business and they can only run a viable business if they can charge fast. So net throughput per unit of land is measured by the time it takes to charge. So the more I charge the vehicles, I’ll do better. Plus you’re also saying that, listen, that has to be just viable in terms of access – to your point – grid access should be possible, land access should be possible. So if they can get grid, they can get land and they can get a fast charging infrastructure, their business is set. Like in some sense, the money in some sense will come. This is a viable business. For the person who’s wanting the charging infrastructure, and we haven’t spoken about that, I’d love to hear your thoughts.
[00:36:53]Rathish: What are their biggest concerns right now? One, of course, availability will be one. Hey, there shouldn’t be any anxiety of just making the miles. What else are they thinking about today when they look at charging infrastructure?
[00:37:04]Akhil: Are you more worried about the person setting up the charger or are you looking at a user who’s looking at consuming? The user, right?
[00:37:11]Rathish: The person we have already agreed, right? Like they have to have high throughput, land, and electricity. The person using the infrastructure, what are they worried about? Hmm.
[00:37:21]Akhil: User, I’ll give you the data right now. Like, on the user side, at least I’ve seen price becomes very important. Because we are a cost-sensitive market. Anything that shoots up beyond a certain factor, it just doesn’t make sense for them. Especially in the commercial segment, right? So as soon as they see 13, 14, 15 and above, they literally look for other options. Is there an alternate option that I can look at?
[00:37:45]Akhil: Second is accessibility. And this is, I’ll share one data point here. This is one of the leading last-mile logistics providers in India. Their CEO had shared a quote with me saying, one out of ten EV owners on their platform decline a job due to range anxiety because they’re like, “I don’t know if I can do this job.”
[00:38:09]Akhil: Like, “I don’t wanna take it.” They decline. That’s 10% on a daily basis. And imagine that revenue hit at the bottom line, right? For that user. And there’s a daily wage owner who’s looking to make that money on a daily basis. And they’re leaving out one job on the table just because they have range anxiety.
[00:38:25]Akhil: So it’s the discoverability. It’s that, “Hey, can I get the right price point if, even if I discover it, is this going to charge my vehicle quick enough so that I can go back home?” And that’s that last tallying it to that 1 out of 10, is that, “Hey, even if I get that charger, if it’s slow, oh, it’s going to take me time to go back home. Like I don’t want to be stuck in the middle of the night on a road just because it took me four hours to charge my vehicle.” It’s those three things that keep, that’s the cogwheels that keep on spinning on what are the apprehensions that users have and that’s what I’ve seen in the market.
[00:38:59]Rathish: Got it. Yeah.
[00:39:01]Arun: I think perfectly sort of cued in right, when you’re focusing on this segment, and what Akhil was also saying. I think what we’ve realised is there’s nothing called range anxiety, right? It’s charging anxiety. That’s really all it is, right? Most petrol owners don’t know what a full tank of gas gives them.
[00:39:20]Arun: You’ve never really cared about it because you’ll always find a petrol station. It’s always there and it will 100% give you fuel. So that’s the sort of trust we have on that energy network. I think that’s what’s missing today, right? And I think once you solve for that, fundamentally you don’t need to worry about large batteries or range anxiety or anything like that.
[00:39:39]Arun: And I think charging anxiety comes in three aspects. One is availability of charging network, which is a density aspect. Second is the speed. And third is reliability. So can I get there quick enough and how long will it take once I get there, but once I get there, will it actually work, right?
[00:39:57]Arun: And the third thing sounds ridiculous. But like I said, we do have the industry standard rapidly today is 70% which means 30% of the time and enough reports about it. That report goes from 50% to 80% and Akhil probably has more data than me on this because he works with more charge-point operators. But it’s ridiculous, right? It’s just the fact that the charger and the battery are not able to speak to each other.
[00:40:18]Arun: You’re not able to start charging, forget whether it’s fast or slower. Right? So I think these three aspects play a huge role. Pricing, of course, like anything. Price discovery, I think, is still happening in the industry. And based on happiness, we’ve realised people pay a few rupees here and there. Especially in our case people worry a little bit less about price because they realise this is their additional revenue. Like they top this up to earn more. So it’s okay to give you a few rupees extra if I’m getting thousand rupees worth of demand. So that’s how they look at it. But yeah, I think pricing apart, those are the three metrics we look at.
[00:40:51]Rathish: Excellent. Very, very useful. So I’m going to reframe the question now. So just saying, how do we solve for charging anxiety at population scale? If we solve for this, we are on our way to the utopia of EV adoption in some sense. Would that be a fair statement to make?
[00:41:09]Arun: For sure.
[00:41:10]Akhil: Yeah, definitely.
[00:41:13]Rathish: That’s a sharp statement by itself. And let’s get the stupid ideas out of the way already, right? Because there are some stupid ways of solving for it, but we should get it out of the way so that we can get it in the others.
[00:41:22]Rathish: The first stupid way is, as we said, just make the battery really large, which doesn’t work because it makes the vehicle more expensive, vehicle more complicated, total cost of ownership goes high, all of that stuff because you can reduce charge anxiety by just making the battery larger. But that’s not a viable option. So that’s out.
[00:41:37]Rathish: The second option, which comes up every once in a while, but I know it’s a stupid option is to standardise everything, right? Because if you’re standardising everything, it just makes it easier for everybody. It’s like petrol. Petrol is petrol is petrol. So might as well be the same. I have some views on this, but you guys know. I know the way you’re nodding you have very strong views on standardisation.
[00:41:57]Arun: Yeah,
[00:41:59]Rathish: Both of you. And then we’ll come down to this. Hmm.
[00:42:03]Akhil: Arun, I don’t know like, the question feels very set-up like, so I’ll have…
[00:42:08]Arun: I feel like I’ve been set up for this.
[00:42:10]Akhil: Exactly, that’s what I’m telling you. I know that you’re being set up for this, so I’ll let you lead on this.
[00:42:16]Arun: So we filed our first patent for swap in 2013, right? It sounded like a fantastic idea. This is obviously the way forward. It was just like a few months into building a vehicle, you realise this is disastrous. It’s disastrous for the OEM, actually. Right? Like how do you get Hero Honda, Bajaj to come together and use the same engine, right? You’ll commoditize and kill the industry. There’ll be no competition. There’ll be no good R&D (research & development) capital. That’s it. But also realistically, the funny part is, let’s say I set up a swap station, right? I actually have two, three vehicles come in and out every hour. You run out of batteries, right? So you need to rapid charge the swap batteries. And that was actually the moment you realise there’s no point chasing swap because then it becomes an operational band-aid of sorts for the time being, right? You need to fundamentally go back to the old energy train model. We talk about powertrain, but I think maybe we have an energy train from grid to wheel, right?
[00:43:09]Arun: In that whole energy train from segment you have the charger and battery like we spoke about it, that we have to solve for the energy transfer rate, that more vehicles on the ground consuming more energy means we have to transfer energy from the wall to the vehicle faster and faster.
[00:43:21]Arun: There’s no escaping the problem, right? Trying to escape the problem only leads to more issues, more competition and more costs. And to another point, there’s nothing called a large enough battery that we realised, right? So we actually… actually commercial vehicles, right? Whatever number you say, people outrun that at least twice a day, twice a month. So you have to design for that peak utilisation. So I think these are my two points.
[00:43:47]Rathish: Excellent. Akhil?
[00:43:50]Akhil: See, this is a very controversial topic. I don’t think standardisation, like again, it should happen in the market, I don’t want to stifle innovation. The day standardising comes in, innovation gets stifled. What I think is necessary for the market is an agreement between parties to exchange information or interop with each other. Whether it means… I’m not focused on hardware. You can’t like without standardisation, there’s no way you can bring in interoperability. I’m talking about purely software, right? From a software point of view, and assuming every other connector, let’s say whatever connectors are out there, it eventually gets distilled down into two or three connectors.
[00:44:36]Akhil: Let’s assume a world where we have for two-wheelers there’s two connectors, for three-wheelers there’s two connectors, for four-wheelers everyone is adopting CCS2 (Combined Charging System 2). Let’s assume that’s the world that we live in. The biggest pain point in that space is going to be software. That’s a given. That will be there. And the reason why that is going to be there is there are multiple factors in the act of charging. So there is like, I’ll give you an example of a residential charging scenario that happens today, right? A lot of people go and set up these community charges in society complexes. After 6pm, I can guarantee that there’s going to be an undercurrent or an undervoltage kind of situation happening in that charge point. Because the building sucking up all the energy, there’s all these users who’ve come home, switch on the lights, everything is on peak utilisation. Charger is gone. Someone’s plugged their vehicle in, charger wonks off, done. Now, how do you solve for that? Now, there are different OEMs building these chargers. Everyone has their own interpretation of how this should be, worked out. “Hey, should my charger just give up after 190 volts? Should I be resilient enough?”
[00:45:46]Akhil: So there is a grid problem, right? How do you manage grid? How do you, as an OEM, figure out what that grid is? How do we, as a software vendor, manage those two elements together? Then comes the vehicle-to-charger interaction. Assuming it’s a pretty hot day. Someone’s come in. Vehicle’s hot. You plug the charger in. It’s not charging. Like, it just gives up. It says, “I’m not in the mood for charging.” That’s a sign that happens behind the scenes.
[00:46:12]Akhil: Now, okay, the charger might not understand this, because the charger is like, “Hey, hang on! This vehicle just said disconnected.” Like it’s disconnected for some reason. I can give you today in our data. We get on a daily basis, roughly about 10, 000 to 20, 000 errors that happen on charges. 70% of those errors have ‘others’ written on them. The stop reason is ‘others’. It doesn’t specify what the error is. Why did this thing stop? It’s ambiguous. And this is, go through the plethora of all the charger OEMs out there. So imagine an interoperability vendor like us or a payment vendor like us. CPO (Chief Product Officer) has no idea what this is, what’s happening, right? They’ve deployed these chargers and end up using.
[00:46:55]Akhil: For me, I have a responsibility to the user and I look at this data and I’m like, how do we solve for this? The only way to solve for this is again, either I need to go start getting into the hardware market and start fixing these hardwares myself.
[00:47:09]Akhil: Or we publish this data and we say, look, you guys have to be more transparent. You need to communicate these things upstream. And a very classic example of this, how we solve this for Uber. As we all know, in India, there are power cuts. Teen baje, do baje, (3 o’ clock, 2 o’ clock) it will happen, right? It’s given. We literally worked with all the OEMs and said, “Hey, whenever you have a power cut you just tell us the stop reason is power loss.”
[00:47:35]Akhil: Whenever you come back online, so some chargers will have a power backup, some chargers won’t. But you tell us when it’s a power backup, a power loss situation. We’ll go ahead and restart it automatically for you. It’s, again, an industry-first at hubs that, at least in India, that was the first time someone has done that.
[00:47:52]Akhil: But the idea was very simple. No one was able to do it at scale because none of them figured out, okay, this is the actual reason they just said, “Haan kaatoge (there’ll be a power cut)“. And what the impact this causes is massive. So you have a hundred cars in one hub trying to charge. All of a sudden, three o’clock at night, current is off. Now, half of the vehicles, not even half, 75% of the vehicles are like half charged. Drivers show up at six in the morning. They’re like, “Hang on, my vehicles are not fully charged. What do I do?” So that’s like, the problem goes from grid, charger, and vehicle. A software is a perfect play to help solve for those problems that’s happening in between this. But it’s a long way out. There’s a lot of collaboration that needs to happen, in order to solve for that fundamental problem.
[00:48:39]Rathish: So just coming back to the framing that we had, right? We said, if charging can be made, the charging anxiety can be removed, we achieved the utopia for electrical vehicles. And we agreed that larger battery is not the answer. And I also agree, by the way, that standardisation is not the answer.
[00:48:56]Rathish: It was not a trick question — because I believe standardisation is important in a life cycle. The question is when, right? If we all aligned to type C too soon, I think we’d all have had rubbish mobile phones today. I think we let the time it took for us to sort of land at type C. And I think for an evolving landscape like this to standardise too soon will only mean curtailing, and in worst ways, rent-seeking, right? So I think that’s out of the way as well.
[00:49:19]Rathish: So what we are saying is we have to solve for charging anxiety with smaller batteries, with diverse technologies in a way where, and as you were talking, Akhil, I realised distributed accountability is going to be reality. Is it the vehicle that’s the problem? Is it the battery that’s going to be the problem? Is it the charging infrastructure going to be the problem? Or is it the software that’s connecting, the problem? That’s a tough problem to solve, right?
[00:49:45]Rathish: When you put it like that, what are the biggest levers? One, Arun, not because you’re on the podcast, but genuinely, as I’m listening to this, it’s clear that a faster and a more efficient battery infrastructure or charging battery is very important, right?
[00:50:01]Rathish: Because it just is the fundamental material science that has to solve for it. Number one, Akhil, what you’re doing in terms of helping consumers discover the various charging points that are available for them, independent of who’s offering this as another starting point.
[00:50:17]Rathish: Before we get into what you guys are doing, what else is going to be very critical for us to be able to solve for charging anxiety, given all of these constraints? Some things that you’ve already touched upon. A far more sophisticated software is very necessary. Because we need a lot of the understanding of why it’s not working, what’s not working, early monitoring, early alerts, all of that. But what else would you say is important?
[00:50:39]Arun: I think here it’s not just material science, right? I think with battery and chargers, I think if I would look at this like unlike UPI (Unified Payments Interface) where we are fundamentally transacting software alone, right? And it’s sort of a ledger, which has no ambiguity about that process, right? So you can have in some sense, a two-sided handshake and it can be open source of sorts.
[00:51:01]Arun: We’re transferring energy. There’s a lot of ambiguity, a lot of risk management. Actually, in today’s world, there’s nothing called a static charging profile. Actually, every time we charge a battery, we charge it differently. Not just us, a lot of people in the world do that. And that’s where you have two ways.
[00:51:16]Arun: One is you have a static way to do it which then becomes… can be open sourceable, right? Or you have a proprietary way, which is, how does a charger battery intershape, handshake, how they transact and how they transact quickly, reliably, safely. It’s like the world of Visa versus UPI today, right? I think if you look at the innovation curve there, you started with two-sided protocols, right? And now you have an open source, but the only differentiator there is, here you’re transacting real energy, right? Real nuts and bolts.
[00:51:48]Rathish: Hmm.
[00:51:48]Arun: I think that’s where you end up needing risk management. Can I charge this battery very quickly at this temperature or can I not, right? It’s actually not a charger decision or a battery decision. It’s actually a two-sided decision. And there in some sense, lies a little bit of the challenge and the opportunity. I think that’s what we see it managing that transaction. And we think that aspects of this that are very high level, for example, it’s very clear call out between us as a battery company and the OEM. Between battery and motor. There’s a very clear carve-out there that we are starting to see. We started with a very clear carve-out before the charger to the grid, right?
[00:52:23]Arun: And that’s where Akhil’s solution sort of fits in there, right? Which is everything from discoverability of the charger, upper running payments, et cetera. I think that you will start seeing a unified protocol coming together. You’ll probably even see a unified grid access, right? If the discoms start innovating maybe we’ll have energy parks.
[00:52:40]Arun: You can just have open source current electricity and everyone can set up their own charging stations. And so I think that’s the sort of worldview that we start seeing.
[00:52:50]Arun: And that’s some sense of the challenges that we believe needs to be solved. And I think there’ll be interoperability. I think the great thing like early days laptops, you had enough ports, you have two, three ports. I think you’ll have two, three ports in every vehicle where people will say, I want to subscribe to XYZ charging station. You’ll probably have two, three charging stations of choice and you’ll have your favourite one and you’ll have your backup ones. It’s fairly easy to do that. I think interoperability is a must and I think must be brought in.
[00:53:17]Arun: But the only point I want to make and end this is that there’s nothing called one charger for all. I think if we actually try to build one charging network for everyone, it’ll be a disastrous network for everyone. It won’t be great for anyone. And in some sense, that’s product management 101. Don’t try to build for everyone. To layer that.. to open that layer up, if I look at a two-wheeler, it requires 10 kilowatt of battery. An LCV (Light Commercial Vehicle) requires a 100-kilowatt of battery, right? At 400-volt platform. So if I actually try and build a charger that has to serve a two-wheeler and an LCV, I end up needing so much hardware that it’s going to be so expensive.
[00:53:59]Arun: And then my pressure to drive utilisation will be actually much higher because every time let’s say I have that charger and a two-wheeler comes and charges up and hogs up the station for an hour, it’s going to ruin my economics, right? So the minute you look at that, my immediate reaction would be, okay, let’s split up the two-wheeler charger and the four-wheeler charger.
[00:54:18]Arun: So as you start looking at this, every category requires and every use case requires a very different network, right? And so you’ll start seeing that evolve. You probably have a baseline network for interoperability for across vehicles, but just fundamental physics needs you to have different voltages, different power levels.
[00:54:36]Arun: And then the business economics post even more… to start carving out niche networks for different segments. And I think the cool thing is like a single petrol pump cost two crores, more than two crores, to set up, right? A single charger can cost as much as one lakh all the way to five lakh. So fundamentally it’s 20x, 40x less expensive. So you’ll just see a lot more charging stations.
[00:55:00]Rathish: So Akhil, Arun feels like, you know, let’s not make it everything interoperable. Let’s not make everything unified, etc. What is your take on this?
[00:55:08]Akhil: Okay. I’m going to differ with you, Arun. But I think (at the) hardware level, he’s right. Right? Like every vehicle will have its own unique treatment. Because how do I pump enough energy into the battery of the vehicle without impacting it? That’s a science. That’s going to be there. How you control the charger is also going to be unique.
[00:55:28]Akhil: So the way you… like Arun has built his business, that’s going to be retained as there’s a clear value proposition to it. Where I think unification will start happening is on the software layer, right? So let’s assume that as a vehicle owner you don’t want to go out and say, “Oh, is this just this one network that I can use for charging my vehicle?” Like, that will never be the case. It will be multiple. They need to have that choice. They will always ask for it. I have had OEMs as Arun’s one example was, hey, your initial version of laptops have multiple ports, right? Yes, people will build out vehicles with multiple ports, charging ports, right? Like one that would work with Exponent, one that would work with something else. But that will happen, that will get shipped. Eventually, over time, I see it as, hey, there is going to be networks, hardware networks and vehicles separate like, it’ll work. Users will, or OEMs will ask them to go to the right network based on what the vehicle needs.
[00:56:30]Akhil: That is going to exist. Everyone will have a differentiation there. I think the key is going to be the act of payments. When I click that button or my vehicle asks this charger to start charging, does it start charging? Or do I have to do like a Aadhaar verification form before I start charging? Because if you look at even BESCOM’s (Bangalore Electricity Supply Company) app today, you have to literally like, it’s like a janampatri (horoscope), right? Like you have to write down what your vehicle number is, everything, in order to just start a charging session. You don’t need that. You’re paying money now to download and start charging your vehicle.
So what I strongly believe is there’s going to be a unification in the software layer that will happen, whether it’s a community-driven exercise or the market figures out that this has to happen. And all of this has to be linked to this user’s credit card or debit card or UPI. That’s a different function, but the physical delivery of energy will be a different function. And I’ll give you a cross reference list to an example of UPI itself, right? Banks, day one, they were not perfect when it came to software. So even UPI today, the act of settlement of UPI behind the scenes is just manual. It just happens quickly on the face of it. But behind the scenes, there’s a bunch of banks and Razorpays and everyone scrambling together to figure out, “Okay, how do I settle this money?” How do I make sure that Arun’s got his share, Rathish’s got his share? So same thing, that evolution will happen. So A, the launch of that unified… some community, some market has to put that, “Hey, this is what is going to happen. Everyone needs to come on board with this or aligned on this.” And then eventually that progress is going to happen where things are going to get patched up.
[00:58:10]Akhil: Like I can give you an example of, I can bet that if I integrate with Arun’s network, I’ll have less headaches. Because if I ask him to start charging, his system will go ahead, start the charging session because cloud is his, the hardware is his, battery is his. Everything is perfect, right? He has a pretty nice stream of data from everywhere. And over time he’ll improve that ecosystem.
[00:58:33]Akhil: But if you look at a traditional CPU (Central Processing Unit) out there, cloud will be someone else’s, hardware is someone else’s, battery could be someone else’s. So there’s three failure points across the system, plus four, because the grid is also in between. So four failure points. So even if I build that unified layer, pinging the system to go start charging, it’s not going to work on day one. It’ll take time to get to that place. But that’s the future. The future is unified payment system plus energy delivery will be distributed and staggered. There will be multiple vendors in that space based on a vehicle type.
[00:59:10]Rathish: I think both of you are using two different words and I wanted to sort of, because that’s a really important difference, right? Arun, you said standardisation. Standardisation is everything having a same, let’s say a standard that you apply in a tier two, which means that there is a sameness to what we are talking about.
And Akhil, you’re talking about unification. Unification is that, hey, irrespective of whether you’re the same or not, there are some layers on which we are able to have an abstraction that sort of brings us all together. And fundamentally, and I’ll tell you my bias, my fundamental bias is there is some level of digital public infrastructure thinking that is necessary when, especially when, as we laid it out today, so many stakeholders have to engage, not just Exponent, right? And the person who charges the battery, the OEM, et cetera. So I want to maybe just think about what can DPI’s (Digital Public Infrastructure) role in, in this problem be right? And maybe if there is time, talk about the UEI (Unified Energy Interface) as well. Is there a chance that the fundamental transactions in this universe, the EV charging universe, can be standardised at a protocol level, not at an implementation level, right?
[01:00:19]Rathish: For example, when you say start charging, stop charging, error codes, payments, status checks, warning models, those are all protocols, right? These are just things that you use. This is not the actual physical infrastructure. Let’s say if we assume there are going to be vehicles on the road that need a different charging infrastructure.
[01:00:41]Rathish: So let’s assume that diversity is going to be the norm. It’s not going to be an exception, but is there an opportunity for us to build an interface where not just like a Akhil or a Pulse as a network, right? But anyone can build a solution where I say, “Hey, for my configuration, show me the appropriate charging infrastructure.”
[01:01:00]Rathish: Could be any of them, right? For Exponent, it’ll only probably show Exponent’s one. Two, for this, start charging, stop charging, measure charging, show errors, all of that stuff… Is there a way, without standardising, we can achieve unification through that digital public infrastructure approach?
[01:01:15]Akhil: I’ll draw parallels to the payment gateway industry that we have today. Why does someone actually, like… why can’t you just directly integrate with banks? UPI is standardised. Now all you need is, be a payment aggregator. Get an acquiring bank access, the UPI stack, and you can start directly integrating with the banks.
[01:01:33]Akhil: The reason why they don’t do that is it’s just much more difficult. There is too many, like everyone has their own treatment of the UPI stack or the UPI protocol. Now there’s a reason why a Razorpay or a Juspay or a Paytm or a PhonePe, like they all index on one thing, like success rate. Hey, if you come to a gateway, we are gonna give you success. Awesome success rate.
[01:01:54]Akhil: Protocol is still the same, right? Everything is underneath the hood. The act of telling a bank to push money into your bank account is the same. But there are chances of failure. So companies like us will exist. Protocol is what governs the whole thing. Protocol says, “Hey, if you want to move energy from here to here, use this.”
[01:02:14]Akhil: But protocol is not going to say, “Oh, you know what, this particular network has not done its job. Let’s penalise them.” Not going to happen. Neither, the market won’t embrace something like this. Now, what the market or the people looking at the protocol can do is, “Okay, I’m going to adopt this protocol.
[01:02:30]Akhil: I’m going to keep it. It is up to them to figure out how well I should respond to these requests.” Case in point. Let’s take UEI as an example, which is a backend-enabled protocol for energy transactions. Let’s assume a CPO (Charge-Point Operator) consumes it. Says, “Okay, I’m back and enabled today.” Now, based on the data that we have, I can tell you again, 50% failure rate, anyone who integrates it, right?
[01:02:54]Akhil: So if it’s a regular CPO I can tell you that 5 out of 10 will fail at the first try. Now, what is the consumer going to look at? Consumer is going to look at, “This is a horrible app. I’ve tried, like it’s taken my money first and I’m trying it; out of 10 times, 5 times it’s failed already.” So people are going to blame the app. Now, when you start doing that, people are not going to blame the protocol. It’s not that. Protocol’s done nothing. Protocol’s just said, “Hey, Akhil has asked for money in exchange of the… Akhil has asked for energy in exchange for this amount. Can you facilitate it? Go forward and do it.” A, the way that market or the economy structure would exist is, you would have charge-point operators or CPOs. They will exist. They will have their own unique system to communicate to the charger and do all of their stuff. But there is going to be a transaction layer and payment layer. Payment layer will use the existing infra that is there, like UPI.
[01:03:49]Akhil: Transaction will be UEI. So, think of it as, I paid 500 rupees for charging. Act of charging started. Some power cut happens. 300 rupees is what has been debited. Actual delivery has been of worth of 300. Now, you as a CPO, and as an application which I have, because users come on my platform, I am obliged to give them back the 200, or not deduct the 200. How do I communicate that across this ecosystem? That’s what UEI does. So UEI will ensure that the right attribution of amount and energy happens between the multiple players.
[01:04:25]Akhil: Think of it as a nice layer that will look at, “Hey, are you playing well? Did you actually indeed do 500 and you’re not doing 400 and telling me it’s done 500? Or are you taking less money from this customer and you’re delivering more energy to this customer?” So that layer should exist and there’ll be multiple companies that will come on top of it.
[01:04:43]Akhil: But that’s the world that I see, right? Hardware, that’s where, hardware, battery, chargers, cloud. Cloud payments and interoperability. That layer will need a protocol. That’s what UEI is about. And in that protocol, there’ll be customers there. There’ll be companies there that’ll ensure that, hey, who’s adhering to the protocol.
[01:05:03]Akhil: “Hey, this user requested this much amount of energy. Are you doing this much amount of energy? Hey, you owe this customer this much amount of energy back.” Like, all of that comes into, there’ll be a parallel economy that will get built on top of it. So yeah that’s my take on this.
[01:05:17]Arun: Like I said, I mean, there is an energy transaction layer, the way I could put it, which I think has a lot of nuances, because that’s where there’s nuts and bolts involved, right? I think that’s where voltages are different, power levels are different, connectivity requirements are different.
[01:05:32]Arun: Even at that layer, you can have interoperability. I think it comes at a cost, but I think it’s not too high a cost. Vehicles are large enough, especially commercial vehicles, with the focus being commercial vehicles. It’s very easy to put a second connector, say, have multiple connectors, network accesses.
[01:05:47]Arun: But I think anything about that from discoverability of charging networks, payment gateways, et cetera, I think you can make them interoperable. For example, that’s not a focus of innovation for us. So I think that’s how I split. So even at an energy transaction layer, there’s both nuts and bolts and proprietary software. Lot of algorithms and intelligence at that layer which I think most companies would find it hard to share.
But I think if I took a look at that, at an abstract layer of ledger which is basically, how much did I charge? Did I charge error code? You could have. Most error codes could be open sourced. I think those things will evolve. So again, you’ll have proprietary error codes, which, because you’re doing something different and you’ll have standard error codes. And most error codes can be fairly standardised. Are you charging? Are you not charging under voltage or voltages? There’s not too much innovation there. So I think that’s how we see this problem. I think there’s some intelligence layers. On top of the business on ops management, I think queuing, route management, stuff like that. I think different companies would probably build different intelligence layers on top of that, which can be easily built on top of an open protocol. So I do believe in unification very strongly. And I do believe in interoperability very strongly.
[01:06:58]Rathish: And maybe if I tie this back together, what we were saying, and we started with this thinking that what does the person who’s running the charging infrastructure want and what does a person who’s using a charging infrastructure want? Number one, when we talked about charging anxiety, A, we said fast charging is going to be important. Two is, a lot of throughput of users that are coming in, like the person running the charging infrastructure wants to be as discoverable as possible. The person using the charging infrastructure wants to discover as many opportunities to charge as possible. They want a seamless user experience on both sides.
[01:07:29]Rathish: This person doesn’t want to … I mean, the reason QR code with a coconut seller today is because “Listen, I’m not going to differentiate on how I collect your money. You just scan it and give me the money. I’m gone.” And the person who’s buying is saying, “Listen, I want to spend as little time giving you the money as possible.”
[01:07:43]Rathish: What we are saying is that the speed of charging in some sense is going to be a place where there’s a lot of innovation and a lot of proprietary work that has to happen because we are still discovering the truth. But discoverability of charging infrastructure on both sides is actually something that an open network can enable. Seamless experience can be something that an open network can enable. And that will actually ensure that people then focus on the problem they want to focus on. Right? And it was something you earlier said, Arun, even the engagement of discom is not something anyone is going to differentiate on. I’m never going to come back and say, “I have a better relationship with the discom.”
[01:08:17]Arun: Yeah.
[01:08:19]Rathish: And as metered as it is, you know, as possible, it’s better. So which then makes it easier for everybody to focus on what they really want to focus on in terms of their value, right? And for me, this is and this is an excellent way for us to even think about where unification will unlock value and where there is a need to have diverse solutions without standardising.
[01:08:39]Rathish: Because a lot of times when we talk about this, the intuitive thinking is to say, standardise everything! Which is why I said that’s a rubbish solution. But there is still that blend that we can create where we enable proprietary value to be unlocked while achieving unification in layers where customer experience and customer value and friction can be reduced significantly.
[01:08:59]Akhil: Yeah, so five years from now, right? I think if touch-wood, if Pulse is also based there, the way I see this is, users will start valuing companies or charging operators who will start on the first click. It will become a differentiating factor. I can clearly see that. There are so many customers that call us up and say, “My money is taken. This has not happened. Charging has not happened.” Eventually, so we can talk about all the good hardware, good interoperability stuff. At the end of the day, customers are going to value that when I click that button, has it actually started charging? Because the act of fueling a petrol pump is very simple. If I go there, there’s one guy who will guarantee that when he presses that thing, petrol is going to come through that nozzle. In a charger, that’s not the case today. And eventually, that’s where, and I think that’s where I see that someone like an Exponent can build out a fairly large business because that’s reliability based.
[01:09:56]Akhil: That’s the way I see it, and faster. Again, just adding to those two points of how do you differentiate in that kind of economy, in that market, that this is how it will be.
[01:10:05]Rathish: So I want to paint a picture of the endgame and I want you guys to let me know whether I’ve got this right. The endgame really is that as a user of charging, I mean, as a user of an EV, I have an app that tells me where is my next possible compatible charging points today in the infrastructure.
[01:10:05]Rathish: So I want to paint a picture of the endgame and I want you guys to let me know whether I’ve got this right. The endgame really is that as a user of charging, I mean, as a user of an EV, I have an app that tells me where is my next possible compatible charging points today in the infrastructure.
[01:10:25]Rathish: But not only that, I will get the data of, is this charging infrastructure reliable? Is this charging infrastructure accessible? And also the time it takes for me to charge my vehicle at that charging infrastructure. Based on this, because I have the choice of distance and time, I take the call to say, “Hey, this is probably the one that I will go to.” And then the charging provider has the incentive to then provide the fastest charging infrastructure and the easiest possible time with the most seamless experience, which inherently means that they’re going to choose the charging players and the battery providers who actually can give them the fastest charging infrastructure.
[01:11:06]Rathish: So incentive gets aligned across the board because of the observability of quality, right? Which is, reliability and speed that we talked about earlier has become more visible for everyone, right? So the app doesn’t tell me which is closer. It tells me which is closer, which is most reliable and which is the fastest.
[01:11:25]Rathish: And then I’m able to make that decision. And because data on reliability, speed and distance is universal, not standard — universal, enables us to make better choices and set up better incentives for everyone. Is that an endgame that is good for all of us?
[01:11:46]Arun: I think the endgame is you don’t have to choose, right? I think today with Google Maps, you don’t actually decide your route. You just trust the data, you trust the route mapping. And I think that’s what will happen now. I think charging is a deviation. It’s not what you want to be doing. So you actually want to be going somewhere.
[01:12:07]Arun: So I think systems will figure out what’s the best solution for you. Everything from how, to what’s your least drive deviation, to fastest charging, to most reliable payments. And how do you get it, get you out. And I think that can all be integrated and a lot of that can be unified. I think that’s the end state where if you have, let’s say 50,000 charging stations in Bangalore and you’re going to have, I don’t know, 5 million vehicles, more than that. You just imagine a number of transactions, right? At any second, any minute you also have to ensure the right vehicle turns up at the right time station.
[01:12:39]Arun: And what do I mean by that is the charging station has to be right for the vehicle, but the vehicle also has to be right for the charging station, economic in a property point of view and you also need to ensure not enough vehicles are targeted to the same charging station. So you’ve got to manage queuing. And so I think that’s the end state where people don’t think and don’t have to make decisions. They just drive. Or maybe that also goes away.
[01:13:05]Rathish: Yeah. But I think you’re taking it one step further. You’re saying that data is available for somebody to desire and tell me what to do. I don’t even have to think about this entire thing. There is software that makes this computation and tells me, this is just the way to go. Yeah. I agree.
[01:13:19]Arun: Yeah. Today, I think the computational power already exists. I think data exchange doesn’t happen. Like today, as simple as payments, right? Charge-point operators don’t know who they are charging, Right? So just managing payment becomes painful. So we’re still like solving that basic exchange of wallet IDs and exchange of user ID project. But of course, as we open up and build a lot more unification across layers, I think this will definitely happen.
[01:13:44]Akhil: So I have a very funny story to share on that point of like choice. I also believe that it should not be a choice. And the conversation was, we were talking about introducing ratings on charge-point operators. And somehow one of my friends actually said, “Yeah, you never look at, is petrol pump ka attendant was very nice to you versus the other one. And you don’t go to that favourite, you know. You’re like, petrol, petrol hota hai, (Petrol is petrol) like you go there and you go there. Like one guy is not nice and the other guy is not nice. That’s not going to be a deciding factor. It’s a journey. It’s the intent. That’s how you’re going to make that decision making. And so the way I look at it is from a data point of view, it’ll be ubiquitous. Eventually as humans, let’s assume a world where there is N number of chargers. Let’s say, I think China is about 10 is to 1 for two-wheelers… I think four-wheelers. So let’s assume that’s the kind of ratio that we have for charges versus vehicles. Then, as a user, you’ll start earmarking locations.
[01:14:41]Akhil: Because today, even if you drive a vehicle, you’re not always opening up Google Maps and doing it, but that journey is going to be there. People are going to start with discovery in Google Maps, going to understand, learn all of those, and then eventually, you’ll be like, “Ha, I know there is a charger on this road.”
[01:14:56]Akhil: The second factor is going to be reliability as you spoke about, right? And I think, Arun’s point is very critical, and which I don’t think other CPOs care about right now in this market, which I wish they do, and opening access will enable that. Because then this will start showing up in other platforms now, they will actually start getting pink because what’s happening today, you have a network, you build your own app and you put it out there.
[01:15:23]Akhil: Now, if you are a company who listens to customer feedback, great. But if you’re a company who’s (saying) “Boss, I have set up chargers, I put up an app, go charge there, right? If charging doesn’t start, it’s not my problem.” It’s either the software guy or it’s the hardware guy. Go call them. If that’s how you’re running the business, it’s not going to happen.
[01:15:42]Akhil: So eventually it’ll weed out these players. It’ll go to a world where everything is highly reliable and you don’t have… users don’t have to have a choice. The way we’ll get to that is that interoperability key, right? Like the software interoperability. Because it opens up visibility. It builds that trust to the user that, oh, I will have a charger at the corner of the street.
[01:16:03]Akhil: And eventually it will push all of us to build a better platform, build a better ecosystem. And I think folks like Exponent will be the first ones who will build that stack and put it out there, right? Like they’ll show that, okay, this is what the right one is. And everyone starts. Obviously, people building it into disparate infrastructures will eventually evolve to that, “Oh, these are the best ones in the market. Hence, I’m going to get the best reliability if I use these things.” That’s the world. Interoperability plays a very important role there.
[01:16:28]Rathish: So one last question. To get to that world, if you had two, three things that you want to happen in the ecosystem that will help you get there faster from where we are, if that’s where we want to go. Any top-of-mind thoughts saying, if I wish this happens, we will get there faster.
[01:16:47]Akhil: I think, from an interoperability point of view, I think there needs to be a push from the government. Like, community members can come together, but it can be accelerated. A ministry could be a catalyst for the whole programme. For example, UEI. We have 20-plus partners already participating in UEI, adopted the protocol, running it. Why isn’t the rest of them on it? Or why isn’t the rest of them interested in understanding what this is? A, it’s the visibility. Obviously, we got to make more noise. So it’s not just, waiting for a ministry to come. But B is very important, which is, getting a ministerial backing on that, right?
[01:17:26]Akhil: So if a ministry comes in and says, “You know what? I think this is a good initiative. These companies have done it. And here’s what the traffic that they have garnered so far. Go ahead. Here’s my blessings. Go run!” That can be such a huge catalyst for that, for UEI specifically. That’s one thing I would say, is something that is needed in this market. Again, selfishly, because it destroys our business case.
[01:17:51]Akhil: If UEI become successful, we’ll have to figure out other things that we can do on top of UEI, yeah, but it’s so important that the market needs a solution like this, and a ministry can accelerate it. Otherwise, it’s just going to take its own time.
[01:18:05]Arun: I think the risk of sounding like a private company complaining about the government, but really I think it’s infrastructural support. There are things that private companies can solve. There are things that private companies will not want to spend money. So I’ll leave. It’s analogous to a road. No one’s going to invest in road. We’re all going to invest in vehicles and manufacturing and technology that runs on top of it. Availability of grid infrastructure, speed of availability of grid infrastructure, cost at which it’s coming in. Today actually what Arun was saying, is bang on.
[01:18:35]Arun: The discoms make the most money in EV charging, right? They make money upfront, right? You’re paying everything from installation fee to like monthly demand fee even if vehicle doesn’t come, charge or not. We still have to pay the cost of charging, So it’s a huge first-mover disadvantage in setting up charging if you’re the first charge-point operator in an area that draws the power line and sets it up. You actually end up bearing the 100% of the cost. The next charge part of the system next to you actually gets rides on top of that.
[01:19:02]Arun: So anything that’s a first-mover disadvantage, private companies, will say, “Let’s not move.”
[01:19:05]Arun: They’ll wait. This is especially true with the intercity charging. If you look at buses, if you look at cars, there’s nothing called a national, like you have NHAI, you don’t have a national grid, right? So you don’t.
[01:19:16]Arun: So actually if I want to do a Bangalore-Hyderabad, I actually have three governments to deal with to actually set up power. So, while you have aspects of the government that’s looking at vehicle in a unified manner, regulations for vehicles, incentives for vehicles, all of this in a unified manner, there isn’t actually a unified framework for grids and power infrastructure. Honestly, the government should just be setting up e-parks, energy parks everywhere, right? And give it a PPP (Public-Private Partnership) model like you set up a national highway and there’s a PPP model. Government should be setting up energy parks, and it’s a commodity, right?
[01:19:47]Arun: Like it’s good. You can have multiple… You can have a swap player. You can have a rapid charging player. You can have a charging player. They’ll all come, rent it out, set up their chargers in front of it. After that private companies will take over, right?
Everything from building right hardware, finding customers, onboarding customers, building the right batteries, building the right vehicles. Financing these things, all of that is something that attracts private companies, VC, capital, venture debt, all of this. Banks will all get behind this. But the infrastructure is something that needs a longer term view. And it is fundamental infrastructure for the country. It’s not going away.
[01:20:19]Arun: The 220 volt AC is standard. It’s not going away. That’s something we can all build interoperability on. That’s something that government should take the first step on.
[01:20:28]Rathish: Excellent. Thank you. Thank you. Both of you. Fascinating conversation. I learned a lot. I want to quickly summarise what I picked up from the discussion. So it’s just as a way to sort of synthesise all that we talked about.
Number one, we started with the broader EV play. It’s fair to say that it is a technology and it is an approach, a paradigm that is here to stay. The benefits of EV, not just for environment, but from a driving experience from the vehicle design is very clear, but the question for us is, what does it take for that to become population scale? And we broke it down and said, charging experience is going to be one of the critical levers for us to be able to make this ubiquitous. As you rightly said, it’s not a reach anxiety. It is actually the charging anxiety that we really have. And we said solving for that, you know, has multiple options. One is at-home charging, already taken care of. The other is the fleet charging, already taken care of. But, for India, given the size and the number of vehicles that we have on the road, having charging infrastructure on the road is going to be the problem that we have to solve for.
[01:21:30]Rathish: And solving for that in a way that makes sense for the person who operates the charging infrastructure, and for the person who’s using the charging infrastructure is going to be important. For a person using the charging infrastructure we talked about the discom access.
[01:21:43]Rathish: We talked about the real estate access, but we also talked about making money being a direct correlation to throughput of vehicles charged. Which means that more vehicles have to discover them. More vehicles have to be charged as fast as possible and more vehicles have to pay them as fast as possible. If that can be done, it will happen.
[01:22:01]Rathish: But a person who’s driving a vehicle, it is essentially to be able to discover as many charging points as possible. Know which of them are reliable and know which of them are fastest. Right? I just sort of put this together.
We said there are things that are going to be proprietary because there’s a wide range of innovations that are happening at what we call the material layer, which is really that how is the actual battery design? How does the charging infrastructure speak to the battery? How does the charging infrastructure work? And I think it was unanimously agreed that standardising that too soon will mean that we will stifle innovation. There is way more entrepreneurial innovation that has to happen in that space to stop it, right?
[01:22:36]Rathish: What we agree, the other two problems, which is the problem of discovery of charging stations and the problem of ensuring seamless transactions in a reliable manner, and you brought up the point where you also highlighted just making sure that even if 30 to 50% times it fails, how do we address failure is actually the norm, not an exception. And how do we do it in a manner that is fair, is very important. And that part of it is unification. We agreed that aspects like error codes can be unified. Data can be unified. Discovery through that data, recommendations through that data will only make things better. Finally, we ended with what does it take to make this happen at scale?
[01:23:13]Rathish: As always, the government is the one person we talk about who’s never on the call. But we always have ideas for them. But the truth is that the infrastructure that we need to run this at scale is far more. You talked about energy parts. You talked about access to discoms. You talked about the whole new way to build this right for it to run at scale that the government has to take care of. And also not just at the infrastructure level, at the standards level, at the risk of putting Akhil out of business, UEI needs to have large-scale adoption because it makes it easier for everyone, right? And I think that’s very critical.
[01:23:45]Rathish: Infrastructure always lags innovation, right? But in the hope that we drive innovation forward, we hopefully find infrastructure catching up. Thank you so much. Both of you. I think it’s been a fascinating conversation. I hope you enjoyed it as much as I did. Thanks so much for taking the time.
[01:23:59]Arun: Thank you. Fantastic being here. Thanks so much.
[01:24:02]Akhil: Thank you.
[01:24:04] Rathish: Thank you for joining us on this edition of Decoding Impact, a Sattva Knowledge Institute production. If you like our conversation on digital public infrastructure, do head out to the Sattva Knowledge Institute website, where we have a lot more knowledge articles and podcast episodes on digital public infrastructure.
[01:24:22] Rathish: Do check out Season One and Two on Spotify, YouTube, or anywhere else that you consume our podcasts from. Join me again another fortnight where we come back to you with another podcast episode on Decoding Impact.
