Deal focus: Euler finds favour with India-oriented EVs
Euler Motors is one of several India-based electric vehicle manufacturers attracting significant private capital, but the company believes its customised offering for commercial users is truly differentiated
When meeting entrepreneurs for the first time, Blume Ventures typically allocates 45 minutes per session. Arpit Agarwal, a director at the India-based VC firm, made an exception for Saurav Kumar, a former Yahoo engineer who was in the process of selling his first start-up – which developed gesture control technology for smart phones – to Paytm and wanted to get into electric vehicles (EVs).
“It was so interesting, and the guy was so impressive. We spoke to him for two-plus hours and only stopped because we had another meeting we couldn’t miss,” Agarwal recalled. “That was May 2018. Six months later, we offered him a term sheet.
Blume started researching EVs in 2016. The streets of northern India were already littered with e-rickshaws – Blume calculated there were 3m nationwide, 250,000 in New Delhi alone, and over 100 manufacturers encircling the capital. The market was largely unorganised, characterised by low-cost, low-specification vehicles, and no product differentiation. Investors wouldn’t look at it.
What piqued Blume’s interest was the first smattering of manufacturers and business models targeting potentially higher-value use cases. It moved up a gear in the summer of 2018 when an intern was tasked with executing a deep dive into the three-wheeler commercial segment to assess the likely impact of electrification.
“We felt that commercial EVs made more sense than passenger EVs, because for some time to come, the cost of making EVs is going to be higher than the cost of making IC [internal combustion] engine vehicles. The only way people will realise the economics is if they run vehicles a lot, which is the commercial segment,” Agarwal explained.
Blume participated in Euler’s USD 2m seed round in 2019. Since then, it has re-upped several times, culminating in a USD 60m Series C this month at a valuation of USD 200m. GIC took the lead with support from Athera Venture Partners, ADB Ventures, B2B marketplace Moglix, and an investment unit controlled by the family owners of electrical equipment manufacturer Havells, as well as Blume.
Electric awakening
It continues a rich vein of activity in India’s EV space. TPG Rise Climate and ADQ’s INR 75bn (USD 994m) commitment to the EV unit of Tata Motors last October is easily the largest deal. This year Everstone Group’s EverSource Capital paid USD 50m for a majority stake in Lithium Urban Technologies, and EV ride-hailing and charging player BluSmart secured a Series A of the same size.
Agarwal sees the graduation to larger funding rounds as the inevitable consequence of building out capital-intensive automotive original equipment manufacturers (OEMs). As to the timing, he contends that until recently vehicles simply were not good enough.
The first generation of EVs in India was of Chinese design and based on Chinese needs. Vehicles were not suited to India’s roads, the local tendency to overload, or expectations for a 10-year-plus operating life. It is only now that EVs built and made for India by India are becoming widely available.
EV sales reached 520,000 units in the 12 months ended March 2022, a more than twofold increase on the previous year, according to Avendus Capital. Two-wheelers dominate the market, accounting for 322,000 in sales, in part thanks to a new raft of government support measures. Nevertheless, EV penetration of the broader market is only 2.7%, up from 0.9% in 2020.
In the three-wheeler cargo EV segment, sales increased from 800 to 6,400 units, with EV penetration jumping from 3.9% to 22.3%. Italy’s Piaggio, which is best known for the Vespa brand, and local counterpart Mahindra Electric are the large incumbent manufacturers. They are being challenged by upstarts like Euler, Omega Seiki, Altigreen, and Etrio.
“In this segment, in certain regions like Delhi and Karnataka where the EV ecosystem is relatively well developed, EV penetration has increased significantly in a shorter period with mass adoption of EVs,” Avendus observed in its report.
“[The] presence of multiple OEMs, development of charging infrastructure by eMaaS [electric mobility-as-a-service] players and CPOs [charging point operators] and strong demand from organised players in the e-commerce segment are some of the key drivers that have led to the build-up of the ecosystem in these regions.”
Full-stack offering
New Delhi and Karnataka are Euler’s core markets, with the bulk of its charging network – which now comprises more than 500 points – located in the New Delhi National Capital Region. Agarwal isn’t overly concerned by network size as a constraint to growth, noting that home charging will remain an important factor even when public charging infrastructure rolls out in a meaningful way.
Charging is one part of Euler’s full-stack EV ecosystem, alongside vehicles, driver and mechanic training, software, and field assistance. These were necessary ingredients because the company was born into a market devoid of any support services. They enable the provision of a truly India-centric product offering that claims quality as a point of differentiation.
Euler has produced between 600 and 800 EVs to date, starting with e-rickshaws designed for transporting goods in tough conditions. Approximately 250 were made and some are still in operation. Last year, the company launched HiLoad EV, which can carry up to 688 kilograms and has a single-charge range of 151 kilometres. More than 9,000 orders have been received so far.
“In the three-wheeler cargo segment, most people use diesel-powered vehicles with 350cc engines and 500kg capacity, but it’s usually overloaded to 750kg. They are hard on the driver, slow-moving, and cannot cut in and out of traffic,” said Agarwal.
“The EV has no gear or clutch, so it’s easier to drive and it can carry far more weight. It is designed with new materials, so it has more response, and the powertrain has higher torc, so it feels more powerful and goes up and down inclines smoothly.”
Euler claims the HiLoad EV is India’s most powerful EV three-wheeler for commercial users. Agarwal adds that products like these give drivers the confidence to switch to EVs because they recognise the practical benefits – stressing that the key to Euler’s success is end-to-end in-house development and the integration of mechanical design, software, and systems.
“This vehicle has been engineered from the ground up: everything is designed for an electric powertrain. The battery is at the bottom for a lower centre of gravity, so the vehicle can be taller without losing balance. And Euler is probably the only one in the market with a liquid-cooled battery, which allows for longer life,” Agarwal said. “These things are important in terms of performance.”
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