In this episode of Electric Car watch, we will talk about the Indian electric car startup Strom Motors and what they need to do to be a relevant player this decade.
In 2018, we were delighted to see a startup based in Mumbai showcase a unique concept. A 3 wheeled reverse trike electric car to be made in India. As many of you know, I’m a small car enthusiast as are many members of our team, and I instantly fell in love with this car and booked it.
The car costs Rs 4.5 Lakhs for the 200 km variant. Strom also offers a 120 and 160 km variant. I booked the 200 km variant, as I travel a lot both within and without city limits. Of course, the lack of DC fast charging, at least at the time of reporting, will make longer journeys more or less impractical. Nevertheless, I do plan to take the car to Poona and back, if for nothing else than to see the stares it will attract on the highway.
The year 2022 is here, and we still have no news on when deliveries will happen. The latest information I have received is that test drives for customers will start in early 2022. I booked my car in Feb 2021 and delivery was promised within 12 months. To be perfectly honest, I thought I'd receive the car by Diwali, but that didn't happen. And now I’m running out of patience. As a customer, I would not be this annoyed if Strom sent me frequent communication on the company's delivery timeline or gave me updates on any progress that is being made. I paid Rs 10,000, and I expect monthly updates, not one email every 6 months. Investing in car startups is risky business. I get it. But what I expect is frequent communication. This is basic startup etiquette 101. Every startup that takes money from its customers must communicate every month on every small milestone that is being reached. That is the only way to prevent customers from becoming paranoid and worrying if their money is gone. Remember when the original Tesla Roadster kept getting delayed back in the late 2000s? Elon Musk personally met scores of customers at the time and assured them their concerns were being heard. That kind of transparency and candid behavior simply isn't found in India.
In March 2021, Strom said they made sales worth Rs 7.5 CR or around 170 units in Delhi-NCR and Greater Mumbai. Apparently, they have a plant in Kashipur in Uttarakhand with a monthly capacity of 500 units. And they have leads of more than 500 in Delhi and Mumbai, and once they make deliveries they will focus on Bangalore and Pune.
Now, can Strom Motors sustain themselves for the next 4-5 years? That is the most important question as potential customers will need to have some assurance before investing money in the car. As there are no dealers, and all sales will happen directly with customers, assuming a margin of a lac rupees per car, that will be Rs 20 CR profit per annum if Strom manages to sell 200 cars each year. We feel that a car company selling 200 units per year is just not enough. That's less than 20 a month, and when you include overhead expenses like RnD staff and service staff, it's hard to achieve economies of scale. It's also important to keep component vendors happy. Apart from angel funding, Strom is yet to raise serious capital from investors. And they will need investment if they want to fund RnD and future product development. We still don’t have news on this. That is definitely concerning.
Increase production numbers.
The Strom team will need to up their sales numbers to > 1000 units per annum. 200 units won’t cut it. They will need regular cash flows that can be ploughed into RnD, new vehicle designs, vertical integration efforts, and so on. Also, investors will be more keen to invest their money if their numbers are better. Even 1000 per annum is too low according to experienced people in the automotive space. We spoke to EV community member and friend of the channel Mr Zarryl Lobo, who has 30+ years of experience building custom electric golf carts and refurbishing old EVs. He said - if Strom maintains low numbers and end up custom building cars for their customers, they will never get into real production and will find their business becoming unsustainable in the long run. He cited the example of an Indian car company called San Motors India, a limited edition sports car company operating from 1998 to 2011. They never made it to production and stuck to custom building cars for many years because of low numbers. Ultimately, they had to shut shop. Mr Zarryl feels that if Strom does not plan for production and remains happy with custom builds, they will be just another San Storm, yet another what-could-have-been footnote in Indian automotive history. We thank Zarryl for this perspective and if anyone from Strom is watching, you should really speak to him if you haven't already. Like the PluginIndia team, he wants Strom to succeed and do well.
So what can Strom do to increase their production numbers?
I don’t see the R3 selling in very large numbers. Let’s face it, the R3 will be lapped up by hardcore EV enthusiasts, but the majority of Indians, particularly those with large families, are practical people and won't even consider the car except as a toy to play around with. They are unlikely to be swayed by Strom's assertion that the Strom is a practical second car for families and those looking to transition from two wheelers to cars. If any car had the chance to sway people with that argument, it was the Tata Nano, and we all know what a disaster that turned out to be. Maybe the upcoming Mahindra Atom, a more conventional car, will find some success. Only time will tell.
Coming back to Strom, if they want to dramatically increase their numbers, they will have to pivot. One idea is to retain the same platform and create a variant that can be used by delivery companies. The R3 already has a 300 liter boot. Maybe they can remove the front seat for extra storage space. Some of the technology features can be eliminated in this variant for additional cost savings. A 200-km delivery vehicle costing 3.5 lacs after Fame II subsidies ought to sell nicely. EV Delivery will be a huge business this decade, and this variant can help Strom with numbers.
Don’t ever take investment help from BIG ICE legacy car makers.
They will kill you. We have seen this happen with the Reva Electric Car company, when Mahindra acquired it and systematically destroyed its products and processes and booted out its people. Even the redoubtable Mr Chetan Maini couldn't save his baby. Strom should take money from investors who are not from the auto industry.
Open Strom Rental/Experience centers in 4-5 major cities.
People can experience what a 3 wheeled car is like to drive. This will lead to more conversions.
Take ride sharing seriously
Speak to other EV startups like eBikeGo, Mobycy, and Yulu who can offer Strom-R3 as part of their last mile transportation service. This will lead to more visibility and more sales for Strom.
In the USA, 3 wheeler electric cars are beginning to take off. We have startups like Arcimoto and Aptera who will soon start manufacturing and selling reverse trikes that resemble the Strom R3. Strom can take the best practices from those companies and incorporate them into their processes. I really want Strom to succeed and remain a relevant player this decade. Strom’s success is very important as they are an EV focused startup and have no ICE baggage. Once they launch affordable electric cars in India, the BIG ICE Mafia can’t offer any more excuses and will have to think of launching small electric cars. Also, you can expect real software features and a true EV driving experience in the Strom. This isn't a retrofit like the Nexon EV or a low-powered budget car like the e2o. I really hope we see deliveries happening in 2022.
Thanks for reading. Do write in the comments below on your thoughts on Strom Motors. Give us some ideas on what strategies the startup can adopt to be successful. I will see you next week in another episode of Electric Car watch.