Challenges, Opportunities For Automotive Start-Ups

Challenges, Opportunities For Automotive Start-Ups

Challenges Opportunities Automotive Start-Ups India
{data-social}

The automotive landscape in India is a fairly diverse one, with domestic players competing for decades on one side, and global heavyweights looking to capture a slice of the market pie on the other

The global megatrends are paving the way for a revolution in automotive businesses and have also created opportunities for start-ups to get a foot in the door. While certain start-ups have been successful in establishing themselves, others are still struggling to garner support from the industry. We take a closer look at the macro trends influencing the automotive start-up landscape.

EVOLUTION OF AUTOMOTIVE START-UP SPHERE

Experts evaluate that the advent of automotive start-ups in India began with two factors – the first was the introduction of regulations for safety, emissions, fuel efficiency, crash testing, etc. that helped a lot of new companies come into existence. The other was due to the emergence of new business models such as shared mobility, subscription services, leasing, etc.

Today, many of the start-ups in India are primarily focussed on the electric vehicle (EV) space. Within the EV space, many companies are working to develop solutions for charging, including ideas such as battery swapping. Telematics is another area that has witnessed a lot of action. Many telematics companies have started operations over the past two-three years, specially focussing on fleet management solutions or asset management solutions that are aimed at small, medium and large fleet operators, forming another strong front in the start-up landscape.

The third front that is witnessing a lot of start-up activity is safety and ADAS (advanced driver assistance systems). Eventually, safety and ADAS in vehicles will lead to autonomous vehicles and autonomous driving. For instance, Revv – a shared mobility company – has partnered with Mobileye, to equip its fleet with driver monitoring system and ADAS that are installed in vehicles. It is either camera-based or radar-based, giving a beep, or an audible output for the driver to take corrective action.

The fourth area that has been witnessing traction for some time now is data analytics. There are a number of smaller companies that are looking at forging partnerships with Tier I manufacturers and suppliers or make a mark in the aftermarket space as data analytics companies.

CHALLENGES OF DOING BUSINESS IN INDIA

The first and most important challenge faced by start-ups in India is credibility. Unless these start-ups enjoy the backing of an established company, or an established entity in the automotive space, it is difficult for them to develop and grow a business.

Attracting investors or venture capital funding is still one of the biggest problem areas. This explains why many start-ups approach private equity players, among others, to get some form of funding for their technologies or solutions. Also, a number of start-ups have capabilities in analytics or software, but they don’t have access to data. Further, they don’t have partnerships with OEMs or component manufacturers, and are not able to get hold of the raw data that can be used for some form of an analysis or solution.

Amid numerous challenges, there are a few brands such as Ather Energy that have managed to not only establish themselves, but also create a niche brand in the market. Then, there are others like Okinawa, Ampere Vehicles and 22Motors in the electric two-wheeler space, Greenfuel Energy Solutions and Altigreen Technologies in the propulsion domain building from strength to strength. Even if we look at Ather’s product itself, it is not like any other electric two-wheeler out there in the market, when it was first launched in India. The product offers high performance and quality that makes it comparable to other ICE two-wheelers in the market. The company also began offering subscription services, which no other manufacturer was doing. Experts believe start-ups can create a unique identity and position itself in the market better by being innovative and flexible.

TECHNOLOGY-CENTRIC STRATEGIES

Technology is at the centre of many start-ups in India. With technology, there are multiple industries that come into the picture. Beyond automotive, these can be manufacturing, healthcare, robotics, mobility, aerospace and a lot more. Mobility as a bigger field can cater to many used cases. If experts are to be believed, these start-ups need to develop certain deep dive capabilities as well as vertical specific capabilities. For companies that are dedicated to a particular industry such as mobility, they are capable of researching a lot more technologies. However, looking at generic technology such as AI, these will have opportunities across diverse sectors.

INDUSTRY DOWNTURN & OUTLOOK

Analysts believe that the short-term scenario for the Indian automotive industry will be slightly challenging. A close look at the R&D funding in companies indicates that there hasn’t been any reduction in overall R&D spending. OEMs are still focussing on long-term opportunities, which is a positive indicator. Start-ups may face postponement of funding over the short-term, but experts believe that the auto industry will soon emerge from this phase.

While automotive start-ups may have a foot in the door, in order to co-exist with established companies and OEMs, these new organisations will have to adopt a different approach. Industry analysts believe that collaborative partnerships are the only way forward and that there would be no other format that will allow start-ups to co-exist with OEMs. Established players will need to partner and support the start-up community by either investing, or granting access to technological, engineering and R&D resources.

Further, experts also believe that the auto industry is moving towards an era where companies will not be able to exist independently. With collaborative partnerships with OEMs, start-ups with the right solutions may be able to gain traction in the industry and succeed.

TEXT: Joshua David Luther