Hero Electric has been pioneering electric scooters in India since 2007.
What is the secret of your longevity and what were the challenges you faced in educating Indian consumers with electric vehicles?
Sohinder Gill :
Yes its been 12 years. Passion is one word, I will say in this line is very important, without which is nothing. This business does not make money. This just shows you a future. This has deep pockets
but passion is very important, which our team has.
While starting up, there is a very big responsibility of customer education, you have to educate customers about Electric Vehicles - what are they, what are differences compared to petrol vehicles.
What were the challenges regarding customer education, your team faced when you launched in 2007?
Sohinder Gill :
In the first year itself it was clear, we cannot win the race alone. We have to speak about a new category of vehicles. That is why in 2008 itself, I had formed an association
The SOCIETY OF MANUFACTURERS OF ELECTRIC VEHICLES. There were 25 members at that time and everyone had only one objective - how we can we create awareness and also involve government. These are two pillars from then on we are working towards. Awareness is different compared to marketing, if a company speaks about a product, it counts as advertising. But awareness is part of education, whenever a person goes to the showroom to buy an electric scooter. He is told the correct information, he is not mislead and try to help his situation. We did lot of awareness via SMEV and the media helped us a lot. People did not know how an an electric vehicle worked, what are pluses, what are issues, what are benefits for you and for the country. For 2-3 years we did that and tried to help customers and non customers. We could educate both about electric vehicles. Be it two wheelers, 3 wheelers, buses or cars
Hero Electric sold more than 50,000 electric scooters last year with 600+ touch points pan India. What needs to be done to add another ‘0’ to the annual sale figure?
Sohinder Gill :
This is a very tough question. If we look at our sister company - Hero Motorcorp. When I was there, they used to achieve this volume in 2 days! We are talking about 1 year! Things are in the infancy, we keep waiting for the inflection point. I feel that, the most important is experience, word of mouth. If there are vehicles, in enough numbers on the roads, then there will be a mass movement regarding adoption of EVs. Else all these early adopters, who get experimental vehicles will only buy. Be it industry or policy makers or customers be it B2B customers we all have one objective.
Let us understand that if industry manages to sell 20-25 lakh vehicles on the road in a short time and customers use those electric vehicles and more people will find out and learn about EVs.
People will come to know about positives, negatives and truths about EVs. In advertising, we say that this vehicle saves you 30% in terms of running cost.
There is no shock in terms of sticker price, that is not just a thought but a reality. And from then on there will be a next wave of mass movement
And then the EV Industry can add not only one 'zero', we can add two 'zeroes' to sales figure!
Fantastic! We would love to see two "zeroes" in EV sales numbers. As Hero Electric is the largest player in the EV Space. You have products from Rs 40,000 to Rs 90,000 for customers to choose.
People feel that sometimes, if there are too many models, there are some issues, like old customers cannot get spare parts. How are you tackling this?
Sohinder Gill :
This is a balancing act as we have customers and dealers who keep asking new stuff and secondly we need to manage inventories, costs and also take care of after sales service. We have solved this in a unique way. If you look at our 7 models, at this time, if you actually look, there are only 3 base models and we have variants of those 3 products. Which have higher power, higher speed and few accessories. If we split them, the spares are 90% common to all variants - for example, take a look at the battery, we had 4 years back started offering Lithium batteries. If power or speed increases
then we have to increase battery size, if we increase lot of speed then battery size had to be very large. One idea was to have 3 types of batteries, If you look at our product, we have battery
for the past 4 years in one size, one specification but we offered in multiples of 1, 2, 3 per vehicle. Even after 4 years or 6 years if customer wants battery, we can offer battery to customer
and that interchangeability is very important as battery is very expensive, we have tackled which has helped our inventory and also we can offer customers and give them guarantee that it will work for 5+ years and longer.
This is also a sales related question. Hero Electric has around 600 dealers all India. On an average, one dealer is selling 8 vehicles per month, which seems low. Another issue with dealers is that new vehicles, which you spoke about offering Lithium batteries. Dealers earlier had earnings of regular battery replacement and rotation with lead acid batteries, which is not the case now. So, because of this, as you are adding dealers, we see that many dealers are also exiting the business. We are seeing lot of dealer attrition. I have two questions. For example there is a small town dealer, like Saharanpur, in UP state, if you have gone there, in such a small town, if someone wants to become a dealer, what would be his investment and what would be his return?
Please answer this and I will ask the next related question
Sohinder Gill :
Right now (during lockdown), all our 600 dealers are shut!
This is a matter of worry, as our dealer is a low investment dealer. Our network if we compare to Bajaj, TVS, Hero Motorcorp's network, our dealers investment is 1/10th or less. As this is our first objective as there is, there is less margins for dealer in after sales service.
So there is no need for a luxurious showrooms. We have simple vehicles which is for normal people. Neat clean, small room is important.
We tell our dealers to purchase their own property and not rent. Dealers who work with us have their own property and want to associate themselves with Hero's brand. We tell them from the start that, please be prepared to loose for 3 years. So they understand that he will have to invest for 3 years and then he will breakeven, he is ready and they know that Hero brand is available for 10+ years. And usually dealers stay with us, thus our attrition is low. We keep trying to increase dealer revenue stream. One our margins are better than ICE vehicle dealerships. Also our incentives, margins and turnover discounts are good - all of this makes this easier for our dealers. Second we have developed some accessories, which dealers can offer to customers -Accessories margin is different and higher.
Thirdly, dealers who have completed 3-4 years - their revenue is not from maintenance but more from spares like batteries. Battery have to be replaced after 3-5 years depending on usage. Many dealers who have been in business for 3-4 years are seeing new revenue in battery replacements. We have 600 dealers and 600 workshops. Small service is also done at the dealer workshops
We offer 6 free services to customers, which we reimburse to dealers. We don't say that dealers make money out of service compared to ICE vehicle dealers, but whatever the dealer invests, and according to their foresight they are happy with us.
This question is about distribution again. You must have seen Bajaj and Delhi's Revolt who make electric motorcycles. Both companies don't have dealerships and have experience centres. What do you think of experience centres? Do you see industry shifting from dealerships to experience centres?
Sohinder Gill :
Idea is good. Implementation is difficult. Depends on which product they are selling. Even if u see, people are buying online, if you know the brand, the size, you purchase an item. You don't go to a shop, you click and purchase online. Manufacturers can sell even a lakh vehicles, there is no need to go to showroom. Our experience says that, our customer is a type, who wants to touch, feel test ride it and understand it. That touch, feel and testing of product, which cannot be given via experience centers. Also the assurance given later after purchasing a vehicle, the same staff which is promising you, can come back to same dealer and solve issues of product. That is a very nice bond between dealer and customer.
If you get your vehicle via an experience centre for service, there might be an outsourcing agency or there is a van which gets your vehicle for service. There seems to be a distance between customer and company. In our type of product, we are in the affordable segment, our customers are not that savvy in electronic media. They might feel experience centres are not giving that personal attention, there wont be all colors, all models. Most important is that customer wants to speak to the dealer who can service vehicle for 5+ years
We spoke about batteries, you said that dealers earn money in battery replacements. This is usually with Lead Acid batteries, as life is low, dealers can earn with replacement batteries. Do you have any lead acid battery products? What is the the future of lead acid battery based scooters in your portfolio?
Sohinder Gill :
We are reducing lead acid battery models every year. At one time we had 100% lead acid batteries some 5 years back. Now, we are at 16%. Plan is to
reduce but we might have to offer lead acid products to keep sticker price low. We had plans to stopping LA Batteries this year but might move to next year. Intention is to reduce lead acid batteries. There are 2 reasons - battery itself, be it from any good company is not meant for automobile as there is inconsistency and unpredictability in battery life. This gives a negative impression on vehicle and brand. Also dealers have issues. Dealer gets some servicing margins due to lead acid batteries but also have more issues with customers. Dealers who are selling Lithium batteries in South and West regions and these dealers are happy as their customers are happy. According to me, the sooner we get out of lead acid battery the better.
Continuing the discussion on battery. Its been 4+ years since you offered lithium batteries with your electric scooter. There are two types of Lithium batteries, which you have used both. First was Lithium Nickel Manganese Cobalt Oxide (NMC) chemistry and now you are offering Lithium Iron Phosphate (LFP) battery. So tell us about this switch to LFP batteries?
Sohinder Gill :
I also have personal reason here. My son works in Tesla and he keeps advising me! He said Tesla in China have started Cars with LFP batteries,
So we thought that in a car they are using LFP batteries, which we thought was impossible, then we studied it and researched we found out that LPF's energy density is lower than NMC, but the safety performance parameters is much more stable. For heavy vehicles like bus, if you add LFP batteries it will be heavy. For scooters and small vehicles, it's fine, the weight increases say by 3 kgs, but we are able to offer to customers - 10% extra range,
100% guaranteed warranty. Earlier we used to worry bout warranty. Battery may fail in 4th or 5th year and we will replace it. Now we are confident the battery will last and customers will not be unhappy and important aspect is safety. NMC tech even now rarely, there are incidents as you might have seen in some cars too. In India too, in our SMEV, we have had 6 cases of battery starting to smoulder. There were issues of fire safety, these types of incidents have happened. Its rare, but with LFP there are no such issues. Every company has its trade secrets, our LFP battery is from a manufacturer which has some additives for extra safety. According to me and India's temperature, India's running conditions and Indians misuse of vehicles for example - people cut wires and apply tapes, short circuit of vehicles. For that basic safety has to be foolproof even is extreme use situations, vehicle has to be safe.
And for few years, we will continue to use LFP technology.
Again sticking to batteries, what do you think about Hero Electric making your own battery packs?
Sohinder Gill :
As of now I dont think we will. For captive use, companies who make batteries, the demand is not only from industry. For every battery plant there is
an economic quantity, which makes a battery plant self sufficient. Also battery tech is changing so fast. This has its own team, and business ideas are different. So this work if a specialist does its much better and we know how to make two wheelers, how to sell, how to service and it would be better to remain in the core competency. Battery is a fuel. If you offer 97 and 85 octane petrol, its your wish. If after some years if there is a movement towards battery swapping, then many vehicles will be sold without batteries. And the battery provider will have their own business model and we will have our own business model. So we might not enter into this for next 4-5 years.
Let's move on to another direction. Governments help or lack of help to EV Industry. FAME 2 scheme which was announced by government.
How is it helping your company? I have another question after this.
Sohinder Gill :
The moment you talk about government, we feel scared! They are not listening to this!?
We are proud to say that we sold 50,000 vehicles last year. We have sold without any help from government. Only 4500 vehicles availed of FAME 2 benefits. We thought about this, why do we look towards government. Why not look to be a self sustaining business?
Now we have this pandemic, the government is using funds to help people and we don't want to pressure them anymore. It's not right asking for subsidy.
We have a lesson here, we earn less but we need to have a solid business model which will not depend on government subsidy or money. You can be dependent on policy, you can ask indirect help, there is no benefit to ask for money for a long time. In the short run, what is allocated, 10,000 CR for FAME 2 they need to study what benefit is available, if we want to finish the 10,000 CR and have good vehicles on the road then the objective is different. So our request is that you may allocate funds for EVs, but what were learnings and which direction do we need for the next 2 years. So that in the 2 years itself, if we can get the 10 lakh vehicles on the road.
You just spoke now and we hope the government is listening the indirect help that you need from government, what are those?
If you have a wishlist, what are the top 2-3 items for government help?
Sohinder Gill :
What state government normally does is to benefit their states, like manufacturing should happen in their state, employment happens in their state.
Incentives are provided to start factories and we will give u benefits like GST benefits, taxation benefits, manpower and provident fund advantages will be provided. This is a forward thinking approach. Where there will be demand, people setup factories they will search places they decide to go to Telangana or Punjab. Thus these incentives are not working out. Central government has better tool, tThey can make rules for entire country and they can push this forward without putting money. I speak about 2-3 items with the government always - As you have taken such a good step regarding lockdown, every individual has tried their best, as there was an administrative heavy hand, as lockdown has to be done. As we have seen in these months we have observed huge advantages with air pollution due to use of ICE engine vehicles, our cities have polluted air.
Isn't this a good lesson? If all these businesses running use lakhs of motorcycles, scooters, old BS3 vehicles, everyday delivering goods. Why can't these businesses switch to electric vehicles?
Make your fleet 20% into electric. This is an advisory, which can be given by government.
Another thing which Indian Govt does very well, over last 2-3 years, that is Swatch Bharath Campaign. It has changed the mindset because government is telling seriously. If the same thing in the Swatch Bharath umbrella, if the air pollution can also be linked to this campaign of Swatch Bharath.
Soil, Water and even Air has to be clean. Air pollution has to be reduced. We have an example too. They can have a simple slogan -
Electric Vehicles - Good for pocket, Good for country!
Third thing is small, Financiers of vehicles feel that they get few customers in EV showrooms and if they go to petrol dealers they will get more customers. Government should just give public sector banks via Pradhan Mantri Yogana they have loads for rickshaws they can also link this regarding market rate. Public sector banks should lend on priority for customers of EVs. If the customer gets loan, as 70% of vehicles sell via loan, automatically we will see huge population of EVs.
I keep saying these 3 items like a "BhramaAstra" to government.
There is no money involved only direction.
People look at Hero MotoCorp and look at Hero Electric, they do a comparison of vehicles, people feel in terms of suspension, in terms of overall fittings and finish, people feel Hero Electric has lower standards compared to products from Hero Motorcorp. What is Hero Electric doing regarding these quality improvements?
Sohinder Gill :
There were 2 parts - we have got out of the first part where our customers used to call us, when we used to use lead acid batteries. First year of using lithium battery too this happened, customers used to tell us that battery does not give us range expected or this has some issues. We used to tell them that we don't make battery. But they tell us, it does not make a difference to us. It's a Hero product. So its your responsibility. Your vehicle will be poor if the battery is poor. We we had to get out of that as market was increasing. Due to a recent change of LFP batteries, there is a big step where we can say Hero vehicle battery quality is good.
Another thing is EV's are lighter compared to petrol vehicles which are heavier. Everything has to be light weight, as every ounce of energy has to be used even if you save 10 grams in weight you might get better range. There is dynamic balancing between quality and light weight this also is a content exercise by adding better materials. Can we improve quality? We are proud to say that in last 4-5 years we have been continuously improving the products as of now, our main model which sells, Optima model sells a lot to individuals, NYX sells in large numbers to businesses there have been such huge improvements and today's customer has a huge satisfaction level. Compared to previous customers, we also offer customers who have old models. If you want to refurbish your vehicle, we will offer a heavily discounted scheme so that we can rectify our mistakes which happened many years back in old models, we are ready to refurbish those vehicles.
Mr Gill, now we have a few questions, the community at large has asked, we would like to put those across to you.
- Anubhab Khundu our Youtube channel follower asks the following
Why don’t Hero Electric launch performance oriented vehicles with speeds > 60 kmph?
Also is the Dash model coming in a high speed, long range version as Hero Electric had promised during the launch of Dash? Any tentative idea of what specs will it have?
Hello Anubhab, we ask this question to our RnD team as well. Everyday we discuss when we will launch 60 kmph or high performance models.
And we always get an answer to this question. If we are talking bout efficiency, if we are talking bout value for money, if you ride a scooter in 60-70 kmph speed, the cost will go above 1.25 lakhs and running cost will be higher as well and this is a proven fact you can look at any high speed vehicle then you should not run at 30 kmph and run it at 60-70 kmph speeds then u can see the consumption, it increases 3 times, battery replacement costs also increases, which becomes a big amount to around Rs 40-50k. And sticker price goes to more than 1 Lakh. We look at all of this and we say EVs are good for the pocket We are not in that segment. High speed electric scooters is a good segment, that is a lifestyle segment, they buy it as enthusiasts, to be proud they do it for environment or tell their friends, to show off. And you can do lots of things with that vehicle like single wheel riding!
But dont think that you have saved money and when I went to replace battery. I did not feel good to spend lot of money in 4-5 years. We wont get into that segment. As you have seen in Auto Expo, we always show these products, but we always think about time to market. We are not making a fool of you, one hand value for money and other side there is no value for money
when battery prices go down and we feel it when battery prices go down say after 3-4 years, then it might change.
Regarding Dash, it's the same thing, we have 8 product range and variants we might remove one line and have a Dash high speed version. Maybe we will do it this year
We might add Dash high speed variant soon.
- Pramit, our Telegram group follower asks the following -
When can I expect your vehicle with a longer warranty for battery and motor?
I think we offer best in class, 3 years warranty and generally if you see there is a difference between warranty and life.
Depends on your use, if you use a 70 km range vehicle every day for 70 km per day, surely your battery will experience range degradation.
Who are the people who will ride 70 km per day? Most users are light or medium users. B2B warranty is different and retail warranty is different.
Retail we offer 3 years warranty. Motor too we have unconditional warranty. People who ride 30-40 km per day usually life of battery is greater than warranty. Even if we give, we might charge AMC for businesses which might need extra involvement, which is not the case if you are a light or medium user. The question is for these who use vehicle like crazy for busineses, in that case, our offering depends on case to case.
For example we offer our vehicles to Amazon, we offer a project, which offers a lot many things - warranty, AMC, buy back schemes and so on. For a light/medium user, this warranty is more than enough and total vehicle's warranty is 3 years comprehensive. Any manufacturing defect has 3 years warranty
- Mukesh, our Telegram group follower asks the following -
You showed an electric motorcycle at the Auto Expo? Can we see it in dealers by the end of 2020 or it is just another Hero Electric concept shown at Expos but never seen in the market?
We can give the dealer address, where the electric motorcycle is! The cost of this vehicle was told to you which would cost you less than 2 Lakh rupees. What is the market for such a product. Even if we sell this or launch this for a reason. Hero's product has to be good we will not sell it, we might keep it, we wont have our passion behind such a product.
- Sateesh Reddy, our Youtube channel follower asks the following
Do you have any conflict of interest with Hero MotorCorp as they sell ICE scooters and motorcycles? If they plan to launch EVs in the coming future, will it be a problem for Hero Electric?
In a family there will always be conflict! No business is divided, based on brand. I can manufacture petrol motorcycle. Hero Motorcorp can make electric vehicles and sell it too. They already own Ather. The point is about the brand. Which brand can be used to sell. I can sell using Hero brand, they can sell EV's using other brands. If I sell petrol motorcycle, I wont use Hero name. This was a very amicable division, where we can do business
but there needs to be a division of brand, be it cycles or other products, which family and which brand is defined clearly.
We really enjoyed talking with you and chatting with you about various aspects of Hero Electric. Thank you so much for sharing this with us.
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