Resources

• The Project Drawdown transportation sector report describes the sector’s contribution to climate change and the strategies and technologies that reduce emissions, including alternative transportation modes, improved efficiency, and electrification.
• BloombergNEF’s Electric Vehicle Outlook 2020 report predicts that electric vehicles (EVs) will represent 58% of passenger vehicle sales by 2040
• This 2020 Decarbonising the Indian transport sector pathways and policies report by Climate Action Tracker lays out options for decarbonizing India’s rapidly growing transport sector to meet the goals of the 2015 Paris Climate Accords. Electrification, combined with decarbonization of the power sector, is “undeniably essential” to reducing emissions
• Learn more about some other vehicle battery swapping companies.

Guests

Host: Rebekah Emanuel, Head of Social Entrepreneurship, Harvard Innovation Labs
Guest: Uday Khemka Co-Founder and Vice Chairman of SUN Mobility

Transcript

Uday Khemka:
Today, there are about 2 million electric rickshaws on the streets of Northern India but these rickshaws charge at night and it takes all night and they drive off at 7:30, 8 in the morning and they do the morning traffic. They've got a real problem as far as the vehicle utilization is concerned because that driver has to go home at midday. He goes home and he plugs that vehicle into the wall because it's in the red zone on its charge. He's not using the vehicle for most of the productive day. Against that, we've come up with a solution-

Rebekah Emanuel:
What would it look like if the majority of vehicles on the road in the world's most crowded cities were electric? Uday Khemka has insights. I'm Rebekah Emanuel, and this is Climate Rising, a podcast from Harvard Business School. Together, we explore climate changes business implications and opportunities.

Rebekah Emanuel:
In this season, we focus on entrepreneurship in the climate change space. I'm the Director of Social Entrepreneurship at the Harvard Innovation Labs. I work with current and future entrepreneurs every day. One thing entrepreneurs are obsessed with is how to grow their venture and achieve economies of scale to make their idea profitable.

Rebekah Emanuel:
Today, we'll be talking about the possibility of a massive transition from internal combustion engines to electric vehicles in India, one of the fastest growing economies in the world. Rather than focusing on EVs as luxury purchases for individuals, here we focus on their potential for mass transit and vehicles for hire.

Rebekah Emanuel:
We're joined by HBS alum, Uday Khemka, co-founder of Sun Mobility, who's on a mission to accelerate mass adoption of electric mobility by making it more affordable and accessible. Sun Mobility's quick battery swapping model aims to overcome things like high upfront costs, range anxiety, and long charging times.

Rebekah Emanuel:
They're forging new partnerships that allow massive scale, working with the likes of India Oil, Piaggio, and Uber to make electric vehicles the default choice of Indians regardless of income. Welcome Uday, we're excited to have you here today.

Uday Khemka:
Delighted to be on Rebekah, thank you for having me.

Rebekah Emanuel:
I want to start with a picture of a normal day. When you see electric vehicles in the streets of many U.S. cities, they're often personal vehicles, but the picture is different in India. Can you just tell me what I'd see sitting alongside a normal road?

Uday Khemka:
Rebekah, a normal road in India has tremendous density. There is not a square foot of that road that isn't occupied by some vehicle or creature. You're absolutely right. As far as electric vehicles are concerned, in India, they can be a few personal vehicles, but 90% of what we're talking about are mass transit applications, three-people vehicles that carry people like taxis, we call them rickshaws and autos, in Thailand, they call them tuk-tuks, and as well as electric buses. These formats carry 85% of middle-class commuter miles in urban cities in India. That's what we mean when we talk about electric vehicles in the normal Indian street.

Rebekah Emanuel:
Let's say, I drive all day for my job or I buy cars for a shared vehicle company. Why are electric vehicles so appealing?

Uday Khemka:
Well, you've got to look at it first of all, Rebekah, from the country's standpoint. It's not just about the Paris climate goals of India, which is becoming a very important player in those negotiations.

Uday Khemka:
It is also to do with the air pollution of our cities, we have 14 of the 20 most polluted cities in the world and even more than that, it's about the fundamental macroeconomic imbalance of the Indian economy, which imports a huge amount of its fossil fuels. Yet, it also has the highest solar radiation on the planet, which allows the generation of huge amounts of clean energy, which can be redirected to substitute that fossil fuel in the form of electric mobility.

Uday Khemka:
If you look at it at the systemic and national level, there's a tremendous impetus towards electric mobility. At the personal level, the pros are, it's such a clean ride. It's such a wonderful driving experience compared to a traditional vehicle and without any of the pollution of a two stroke engine. The traditional “con,” which our company was trying to solve, is it's been a more expensive product for the end customer.

Rebekah Emanuel:
Tell me a little bit about how you've solved that.

Uday Khemka:
I'd like you to imagine a 12 meter bus from the greatest EV country on the planet right now, which is China, a traditional Chinese electric bus has a 3000 kilogram battery. Now just imagine that Rebekah in your mind's eye, three tons of weight that takes up 30 passenger seats. [crosstalk 00:05:26].

Uday Khemka:
The reason that vehicle has that 3000 kilogram battery is it's designed to be charged all night and to run all day but you can imagine the problem with that weight and that crowding out of the passenger space is met with an even more important problem, which is that it vastly increases the price of that vehicle because the battery is so expensive. In India, my partner, Chetan Maini, who has been the great EV entrepreneur of our country and was on the government's commission for electric mobility and looked at the data from around many cities across India, realized that as far as municipal buses are concerned, 90% of bus routes in these large Indian cities are less than 50 kilometers.

Uday Khemka:
Yet, the Chinese solution was designed for a single charge creating a 230 Kilometer all day driving range, which made no sense. If you could come back to the bus station, every 50 kilometers, you could collapse the size of that battery by swapping it and you could swap that robotically. Therefore, you could take away 75%- 80% of the cost, the weight, the size of the battery. If while you were to own that battery and provide the energy as a service, suddenly you'd collapse the cost of the vehicle to being at par with a diesel or I.C.E. Vehicle for the first time on the planet.

Rebekah Emanuel:
I C E that's internal combustion engine, right? That's the old style way of charging my car.

Uday Khemka:
That's exactly right.

Rebekah Emanuel:
That makes a ton of sense if I'm a bus driver or if I'm the bus company. If I'm an auto rickshaw driver and I drive one of those awesome three wheelers and I wanted to charge my electric vehicle... At the moment, my understanding is I drive to a normal gas charging station like Indian Oil and I could also swap my battery and pay about the same as if I'm using oil. Can you tell me how that came about?

Uday Khemka:
Let's go back to the situation before Sun Mobility’s battery swapping technology was developed. Prime minister Modi, our Prime Minister. For the reasons I described earlier to do with India's economic imbalance, decided to promote mass mobility of these three-wheel micro mobility formats back in 2014-15. Today, there are about 2 million electric rickshaws on the streets of Northern India. But these rickshaws charge at night and it takes all night and they'd drive off at 7:30, 8:00 in the morning, and they do the morning traffic. They take people from the subway station to work. But the problem is not just that the batteries are very expensive, they have to buy these batteries, these lead acid batteries, and they diminish in that capacity over six months. They have to give them back after six months and spend a lot of money to buy another battery with an ever-diminishing range.

Uday Khemka:
They're also heavy, but most importantly, they've got a real problem as far as the vehicle utilization is concerned, because that driver, who I mentioned earlier, who goes and plies the traffic from 7:30, 8:00 in the morning, has to go home at mid-day. He goes home and he plugs that vehicle into the wall because it's in the red zone on its charge and he relaxes all afternoon and he's got to off charge at about 4:30, 5:00 in the afternoon and then he goes out and catches the peak of the evening traffic. It's not a disaster as he gets the two peaks, but from an asset utilization standpoint, you can imagine how suboptimal that is.

Uday Khemka:
He's not using the vehicle for most of the productive day. Against that, we've come up with a solution, with the buses, it's a 20 foot robot that does this swap in under three minutes. You bring the battery back, it's a smart battery, it's got three layers of electronics. It's sending data through a communications chip all the time to a digital twin in the Cloud, because it's our battery, we're monitoring it 24-7 and when it comes to that station, you open the cover, you put your old battery in. It sort of welcomes it home and says, "Welcome home 705. How are you?” Starts all the diagnostics and releases a new battery. Now the interesting thing is that the new battery is configured to your specific vehicle spec, the OEMs have a spec for what they want the battery to do, and that's exactly what it tunes into.

Uday Khemka:
You take that battery and you put it into the vehicle you're driving and the embedded software means that it integrates with that and you drive off. Now with this, you can actually end up driving the entire productive day and evening.

Rebekah Emanuel:
This network now is not just in one place, two places, is that right?

Uday Khemka:
We've now gone 12 cities across India and of course our ambition, the dream is to be in every city and in every place. In order to do that, we've partnered with India's largest oil and gas company, Indian oil. Indian oil has more petrol stations than the number two and number three fleet owners combined, it’s in every nook of our country. We've already started to deploy our swapping stations right within the petrol stations as you described earlier.

Uday Khemka:
What's interesting about it is, really there could be no other easy solution. The problem in our country is that when a gas stations, a very centrally located in congested areas of the city very often, which means the access to these petrol stations is tough. Can you imagine what it would be like to install charging points into these stations? It would just kill the traffic completely and kill the existing fossil fuel business as well.

Uday Khemka:
Instead of that, this swapping model makes it very easy because the owner of the vehicle can just park it anywhere, take out the battery and walk in to where the ATM used to be. These days, people use cellular payment systems, so ATM's are becoming less popular, or go into the air conditioned area of the petrol station and pop in their battery and get a new one and just walk out again. It means that the entire traffic management becomes optimized in a way that would not be possible, if you tried to use a charging technology of a more traditional kind.

Rebekah Emanuel:
A lot of people will know the story of Better Place. Which is the Israeli startup that tried to launch battery swapping and failed, or people might know the story of Tesla who considered battery swapping, but instead built an embedded battery. Tell me what makes this case different.

Uday Khemka:
Shai Agassi, who I have known well, someone I think is a courageous person, set up Better Place with a vision battery swapping in Israel and then some other countries, but there are some differences. Better Place firstly was created much before the ubiquitous shift to electric mobility that we're seeing now and that meant that he could only work with one OEM.

Rebekah Emanuel:
Just to clarify, working with one OEM, an original equipment manufacturer. In this case, the manufacturer of the vehicle.

Uday Khemka:
We work with many, many OEMs. We have integrated the vehicles of market share leaders in every segment- scooters, motorbikes, small rickshaws, big rickshaws, buses- whereas he had to work with one. You're absolutely right. Secondly, it was early days in the paradigm that they came up with was a capital heavy paradigm.

Uday Khemka:
The idea was swapping petrol stations with civil engineering, built into the whole system, which made them pretty expensive. We've gone in the opposite direction and we have created containers that are very inexpensive and very mobile. Thirdly, the focus was on personal mobility and our focus is entirely on mass transit. Why does that matter? Because it means you can sweat your asset with constant usage, as opposed to in personal applications where you only get a limited asset utilization.

Rebekah Emanuel:
What you're saying here is if I'm driving my personal electric vehicle, I do it only however much I drive that day, which if I'm sitting in front of my computer a lot of the day or I'm outside a lot of the day, it might not be that much, but if I'm a professional auto rickshaw driver, then I can use it as much as I am at work and then lend it to someone else.

Uday Khemka:
That's exactly right. That's a great multiple in terms of the number of hours you're using and that means that the station that we own also gets an intensity of usage and cap X return. It also means that when you... We do something different to Tesla, the central problem of electric mobility is the expensive battery, what Elon Musk did was to wrap an expensive sports car around it, which is fine.

Uday Khemka:
That allows you to drive your Tesla against your friend's Porsche up to Lake Tahoe from Palo Alto or whatever but you must imagine emerging market realities, where traffic conditions are 15 miles an hour, we've done something very different. We have not emphasized very high-performance metrics, but instead tried to emphasize those parameters that would increase our return on capital and that's been... and keep the product affordable.

Uday Khemka:
We've done that by emphasizing battery life, which is considerably more than Western paradigms. Now this works, if you can, and bring those future cycles of battery into today's net present value by sweating the asset day and night. That's your mass mobility model right there and quite different to anything that's happened in Western models that I've looked at.

Rebekah Emanuel:
I've also heard that sometimes the maintenance is less on electric vehicles, just because there aren't as many moving parts. Has that been your experience?

Uday Khemka:
Of course, yeah. That would be the case universally for electric vehicles, it's a total paradigm shift and that doesn't matter whether you’re battery swapping or using a traditional electric vehicle. It's always the case and there's so many advantages. Wear and tear is much less and it lasts longer and if you've driven an electric vehicle, you know how difficult it is to go back.

Rebekah Emanuel:
Yes, you can certainly imagine, also if I met auto rickshaw driver, who's driving every day that I love the fact that I'm not, always doing repairs.

Uday Khemka:
We have a giant partnership with one of the world's largest scooter companies, Piaggio, and their ad campaign, it's making a simple auto rickshaw, cool and modern and the rickshaw driver has his own app, which is co-designed by Sun Mobility and the Sun Mobility swapping system and the cool Piaggio scooter-

Rebekah Emanuel:
Sun Mobility is partnered with Uber. Can you tell me, what's it like to be partnering with Uber?

Uday Khemka:
Uber are terrific. They are very committed to this shift, both to micro-mobility and to sustainability. We are learning together. There's a huge universe of learning ahead. What's exciting about the new economy is how you are really innovating at the edge and we have a great partnership with them and we anticipate huge volumes together, but you must understand that for us it's an ecosystem. It's not just Uber, you need to integrate the swapping technology with many, many different manufacturers. In our model at least, we don't believe there's such a thing as a Ford oil and gas station, Ford petrol station, a petrol station is for Ford and General Motors and everybody else.

Uday Khemka:
Firstly, you have to integrate with all the different manufacturers. Then you integrate with someone like Uber, but also with fleet partners, as well as ride-hailing apps. Then you need to integrate with the delivery points like Indian Oil and other power distribution points. It's the classic network economy business, Rebekah, tough to set up, but then with very high barriers to entry and therefore hopefully defensible margins.

Uday Khemka:
That doesn't mean you shouldn't be trying to reduce costs dramatically. You're in the energy business and that's the constant imperative of anyone playing in that business and it's also really important if we want the scalability of this to get to a point where it impacts climate change. At any rate, that's the nature of the business and Uber is a very important part of that ecosystem.

Rebekah Emanuel:
How do you see Sun Mobility evolving in the future?

Uday Khemka:
It's so interesting because you were trained classically to look at the core business plan of a business but what amazes me about Sun Mobility, is that aside from the core Indian micro mobility business plan, it's like a basket of options. We are taking micro mobility to other countries. You can imagine the urban density and micro mobility characteristics of Southeast Asia, of Eastern Africa, of other emerging markets, but even of developed country micro mobility markets in last mile delivery, food delivery, document... apparently people don't really deliver documents very much anymore, I maybe the last who actually gets documents delivered to me.

Uday Khemka:
There are many kinds of micro mobility delivery and we'll be also integrating a swappable delivery van at the right moment. All that B2B activity fee commerce players, for DHL type players, and others as well. It's a huge market for us in Europe and in the U.S. on micro mobility. When you apply the same analog to bus, India is a huge bus market for electrics, but I'm also an ex-banker and I'm also interested in Western markets where credit quality of government partners is high and we've had hosted and been part of few electric mobility bus summits, and we're shocked to find that people don't really fully understand bus battery, swapping models.

Uday Khemka:
We can swap a battery in less than three minutes and we've massively compressed the cost of the whole system. As a result, we offer a very cost-effective solution to Western partners who are fleet operators or municipal government, and with high credit quality characteristics, we can build the new asset class in terms of yield that pension funds, sovereign wealth funds, and others can benefit from.

Uday Khemka:
You can imagine the financial innovation that can come out of that. Talking of financial innovation, how our batteries produce huge amounts of data 24-7 and not only on the batteries but on driver behavior and traffic patterns, everything else.

Uday Khemka:
You can imagine the FinTech businesses that come out of that- insurance, leasing. So I'm quite amazed by the kind of prolific option value of these new business models as they emerge. None of that means you should lose your core focus. Of course, you should focus... you do find the most extraordinary business development activities.

Uday Khemka:
We even had an approach from someone in Las Vegas who said that their electric buses go in a circuit any time there is a circuit of less than 50 kilometers, we should be extremely competitive. They said they had one, and could we come to Las Vegas? It's a little early for us, but no doubt one day we'll try and contribute to that micro economy as well.

Rebekah Emanuel:
Take the conversation you were having about pension funds and developing a new asset class. Can you walk me through it with an example?

Uday Khemka:
Sure. If you remember, there was a time when governments produced their own energy and then there was an innovation that changed everything. That was a power purchase agreement, as you know. From that was born the renewable energy industry because private sector players could invest in power plants and sell that solar energy into the grid.

Uday Khemka:
Well, we’re at the same point for EV bus mobility, in other words, you could create these bankable and robust long-term contracts with cities and states wherein you could provide municipal bus services per kilometer. Now that means that the operator could just operate as an op-co and pension funds and sovereign wealth funds can own these buses and the charging or swapping stations and provide that on a per kilometer basis under long-term transportation procurement contracts.

Uday Khemka:
That's really exciting because it means that neither do cities need to own buses nor do transportation companies need to own buses. That you have a whole new asset class that yield seeking investors can own, and make this so much easier for people who are good at managing services or delivering public utilities.

Rebekah Emanuel:
Instead of the city of Boston or the city of Delhi running all their own buses, someone who's good at it will run it and then other folks, no matter who they are, governments, pension funds, put their money in and there's a contract based on how much distance they cover.

Uday Khemka:
That's exactly right and for that, what's really important and which is so exciting, and you keep people like me really find this super exciting, is you have the ability to innovate and use standard of standardized bankable contracts all over the planet that will create this vast new asset category, generating new yield, for pension funds that are very often underfunded.

Rebekah Emanuel:
I don't always hear the word geeky banker and innovate together, but I really like it. Can you take me back to the beginning of that combination, geeky banker and innovate, and tell me what you used to work on when you first graduated business school and how you got into climate and EV?

Uday Khemka:
You know, so my beginning...the beginning of my career was in the 80s, where you were trained not to allow your ethical and moral motivations to be too apparent. You were trained to just talk about IOR and multiples. Thankfully, the world has changed dramatically over these last decades. Even in that era, you were encouraged to focus on those sectors of the economy that generated large-scale net present value and it wasn't clear whether new energy and new transportation would do that. I was always encouraged to focus on those passions of mine, which I'd had from a very young age, through our family foundation. So when I returned to the group, our board would say, "show us examples of where you can build a billion-dollar business doing this” and they were very few and far between. I had to do that through our family foundation and we worked on many things focusing on how a large-scale sovereign wealth funds, and pension funds invested.

Uday Khemka:
That became a big theme of my philanthropic life because I'd been trained as a financier. Back in 2015, I approached our family board and I said, "I have...in a very loyal way I hope, tried to focus on all aspects of our group's business, our family groups business, in every industry that the board wanted me to focus on, as well as innovating and creating private equity and venture capital institutions and would you please give me permission? Would you give me a mandate, from now to the day I die, only to focus on businesses that could create significant economic value, but also make a significant impact on climate change mitigation?"

Rebekah Emanuel:
What did they say?

Uday Khemka:
They knew about this passion. They'd seen it for 25 years and by this stage in 2015, you could see many businesses that had created multi-billion-dollar market cap innovating in this field. They were tremendously supportive and I feel so grateful and lucky to have, to work in a family business where we share a sense of moral purpose together. Since 2015, there was not a single thing I do as a business person or as a philanthropist that isn't focused on large scale climate change mitigation and I feel proud that Sun Mobility is part of that puzzle, all though by no means the only part of it.

Rebekah Emanuel:
There's a lot of other people out there who are thinking about climate and also thinking about their careers. What advice would you give to others who are thinking about making a transition from a career that hasn't been in climate into climate entrepreneurship?

Uday Khemka:
The superficial thing for me to say, but it coincides with the truth, is that there are tremendous opportunities today in building a career focused on mitigating climate change. Because mitigating climate change is in all aspects of the way we all societies operate, our economies operate, the way we generate electricity and energy, the way we transport ourselves, the way we build our buildings, the way we treat our forests, the way we manage our land, there’s hardly anything that does not have opportunities to create economic value and at the same time mitigate carbon, it’s abundant.

Uday Khemka:
You would need to be super blind, not to see the dollar signs on every tree around you in 2020. It's just everywhere. If you have the sensitivity and the imagination, just to explore for yourselves. However, that's not the comment I'm going to make. The comment I'm going to make is for God's sake, we've got five years to make a difference.

Uday Khemka:
You know, Paris agreement 2015, we had 10 years arguably. Friends of mine are returning, having seen these crater sized, these stadium sized holes in the Siberian permafrost where that secondary effect that you were reading about of methane release, after permafrost melt has already happened, and we're fully aware of the Arctic melt and the ocean acidification.

Uday Khemka:
Why are these things important? Because if we cannot stop the level of carbon rising to the point of significantly accelerated global warming, the problem is that you will suddenly see these natural effects getting to such scale that they are very, very difficult to stop. That is a big problem because then even if we do move everything to solar or to electric mobility, we just can't stop that runaway train very easily.

Uday Khemka:
The battle is the next five years and every human who listens to this podcast, in whatever walk of life you're in, don't just do it because you can make money and create value for yourself and your family, do it because it's existentially important.

Uday Khemka:
The only way we can really make a difference is to harness the vast power of capitalism in this direction and there's so many ways to do that. If you're an HBS alum listening to this or a student listening to this, you have an infinite set of possibilities to make a large-scale difference.

Uday Khemka:
The words large scale are important because if you end up doing something that makes you feel good, but it doesn't make a sufficient quantitative difference to carbon, that may not be worthy of who you are. Ask yourself that question, could this make a quantitative difference to carbon over the next 5 to 10 years? If it can, you will find a way of making money in creating net present value. Forgive me. I didn't mean to hijack your question for a pitch, but I do think we're in a very unusual moment in the history of humankind and I speak from the heart.

Rebekah Emanuel:
Thank you. I think that one can't end on a better note than that. I really appreciate it.

Uday Khemka:
Rebekah. It's been an honor for me. Thank you very much.

Rebekah Emanuel:
That's it for this episode of Climate Rising. Next time, how the forestry industry can pivot from being a major greenhouse gas emitter to driving large scale carbon solutions.

Rebekah Emanuel:
We talk with David Brand, CEO of New Forests, about what it takes to transform the forestry industry. He outlines how to use forestry to keep natural forests from being cut down and the new financing solutions that underpin this change.

Rebekah Emanuel:
Climate Rising is produced by the Business and Environment Initiative at Harvard Business School. I'm your host, Rebekah Emanuel. This episode was created with the help of associate producer, Micah MacFarlane, HBS class of 2020, and producer Mary Dooe. Thanks as always to the team from HBS Business and Environment Initiative that created and support the podcast. Mike Toffel, Jennifer Nash, Lynn Schenk, and Elise Clarkson.

Rebekah Emanuel:
You can subscribe to Climate Rising on Apple podcasts or wherever you listen and please leave us a review. We appreciate the feedback. You can also find show notes, links to resources discussed on this episode on the Climate Rising homepage, climaterising.hbs.edu.