There has been a considerable attention all of us have paid towards the EV play stocks, ranging from charging station operators to auto components makers to vehicle producers. With India having unveiled its EV charging policy today, my gut has been proven right and I now firmly believe India’s EV play is likely to be similar to its Telecom revolution. Let’s see what, how and why.
There’s no denying the fact that EV is here to stay. However, a lot of people have been betting on companies vying to put in Charging stations such as Tata Power etc, which in my opinion is a bit misjudged bet. If EV is like our telecom revolution, it’s end game is every person charging at her home with a plug-in fast charger, which charges in under 30 minutes to run atleast 500km in single charge. This vehicle has to compete with the IC vehicles in performance, looks and durability, ofcourse along with price. Now on the former front, players such as battery makers, charging infrastructure players are being rewarded and on the latter front, it’s about which car or bike is better and who wins the race.
If we see how telephones have moved to smart phones, the real juice is in garnering market share in smartphones, and not in being a component maker to iPhone or Vivo. Also, the charging station operators will be like the PCO operator or a cyber cafe guy whose shop was killed the moment people got wireless phone at cheap rates and cheap data to consume. In 2002, anybody who would have said India’s telecom story will be huge is proved right. However,if you would have believed that a guy running a STD booth wi be rich ten years later, than you misjudged. It’s extinct now. Similarly, if you believed Indians will consume a lot of smartphones , you were right. However, if you believed, it will be great for cheap Chinese firms or telecom companies, you misjudged.
Similarly, this whole charging station theme is going to take us nowhere. Today, India has allowed anybody to operate a charging station without license. So a guy running a shop can very well open one and he doesn’t need Tata Power to set him one. He can just put solar panels on his rooftop and provide a socket. Also, come elections, politicians will offer free charging stations, zero price etc as freebies and in five years, even though we will have huge number of charging stations, nobody will be paying a dime for them.
Secondly, those believing that a battery maker is going to make a lot of money needs to look no further than her smartphone. Ten years ago, in an age where we have less than a GB RAM and one camera, a decent phone cost not less than 30k. Now, at the same price, you have almost 12GB ram and latest operating system. So even when the phone got smarter year after year, it’s almost being offered at same price, which means adjusted for inflation, phones are getting cheaper every year. And for every company to survive, they have to bring out even smarter phones at same price range, barring let’s say Apple.
In the same way, batteries will keep getting more powerful and cheaper as EV revolution unfold. So except a few early players, they are not going to make a killing. Also, in five years time, when you’ll have your car being recharged in 15 minutes to run 500km, you will still not be paying extra bucks for battery.
However, the real juice in telecom was made by the phone manufacturers who led the way. Apple is now worth more than $3 trillion. Similarly, we have Tesla over a trillion market cap. My bet is, a carmaker who can keep rolling out models after models of cars which can be better in all ways will get a disproportionate share of market’s adulation. And the ones who think they can wait it out are staring at irrelevance.
On this note, we had Greaves Cotton suddenly being treated because it has significant stake in Ampere which makes electric two wheelers. If that’s a template which is going to play itself out, Hero might be on the cusp of a very strong upmove as it owns 34% in Ather Energy, another electric startup and just yesterday announced another 420crores investment to raise its stake further.
So in my view, this Tata Chemicals and Tata Power type fad will fade away. These two will still survive as they’re part of a larger Tata plan to build in house capacity to eventually sell more Tata Motors cars. However, other companies which have caught investor frenzy recently might not take you to the moon and back.
Life is all about Compounding! 