State-run Convergence Energy Services Ltd (CESL) -- that has recently floated an initiative called 'Grand Challenge' which aims to create demand for electric buses aggregated across nine cities -- wants to be seen as more than just a leasing agency. This new-age public sector undertaking (PSU) -- a wholly-owned subsidiary of Energy Efficiency Services (EESL) -- looks at itself as a market maker.
"There's a very big demand for leasing, especially fleets. But don't expect CESL to become a giant leasing agency for the government. Instead, I'd prefer it became a market maker. We're not just building the infrastructure but would also like to build our market, but getting other financiers comfortable with electric vehicle leasing," Mahua Acharya, managing director and CEO, CESL told BusinessToday.
By being a market marker, Acharya aims for CESL to make money through demand aggregation. "Initially, of course, the objective was to lease it out, but the demand is so big that I have to find an alternative business model. I can't make money only through leasing. I'll share the load with another financial institution. They'll make money by leasing. I'll make money through demand aggregation," she said.
CESL's Grand Challenge initiative invites state transport undertakings (STUs) to communicate their demand for electric buses. It will then aggregate this demand, and based on a rating system, STUs will be allocated their total number of buses. After that, OEMs or operators will be given tenders to fulfil this demand. The cities to be covered under this initiative are Mumbai, Delhi, Bangalore, Hyderabad, Ahmedabad, Chennai, Kolkata, Surat, and Pune. Acharya says that CESL is working on designing business models to increase the uptake of electric vehicles, aggregate demand, and build a charging infrastructure.
"Right now the motivation appears to be how much money can discoms make with EVs, whereas it should be the opposite. How much can I make EV charging free for some time? Fundamentally, by itself, it's a loss making business. But we are all doing it. It's the role of the government to do this," she said.
"All over the world, the government has solved the chicken and egg problem of EVs. The other thing is that you can't expect private players to develop charging stations on public land. It's hard enough for a government agency to get a small piece of land," Acharya added.
The Covid-19 pandemic has had a huge impact on the EV demand, especially in the shared mobility segment. "STUs say that they want buses, because it was always part of their fleet augmentation or fleet replacement programs. But they don't want it right now. They want it in about 18 months to 24 months, and that is because of Covid-19. The ridership has come down, people are more nervous about getting into crowded buses. Those things are big dampeners," she said.
This is not the first time that the PSU is trying to become a giant demand aggregator. EESL, in 2017, had a mandate for demand aggregation under the government's Faster Adoption and Manufacturing of Hybrid and Electric Vehicles scheme but it failed to create the proposed demand.
As part of the tender floated by EESL, Mahindra & Mahindra and Tata Motors were to supply 10,000 units to be used by senior government officials, but they refused to use those cars citing poor performance and low range.
"That's a difficult business I've inherited from the parent EESL. The uptake has been lukewarm. Nexon is the only mid-range car and then you have the Kona. The price difference between the two almost 2X. There is fundamentally a lack of diversity in supply. I've struggled with that but I've started passing the message to the government that we need to change the whole fleet and make a policy decision happen over time. We can't go on with one's and two's [sales] anymore," she said.
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