00:00 Intro
01:22 How Ather Started
03:44 Build, Build and Build
07:44 Negative 350% Gross margins
11:04 Bad Marketing
13:07 Strategy to Win
Ather Energy’s journey began in 2009 at IIT Madras, where Tarun and Swapnil started working on energy-related projects. Their initial venture was a fan called Famp, designed to convert thermal energy from oil lamps into electrical power, but it failed to take off. However, their interest in the energy sector persisted.
During their final semester, Tarun became fascinated with battery swapping, convinced that electric vehicles (EVs) were the future. They initially aimed to manufacture lithium-ion batteries to refurbish ageing EVs.
In 2013, Ather pivoted from battery packs to developing India’s first smart electric scooter. The existing electric scooters in the Indian market were of poor quality, often imported from China, and failed to meet performance expectations. Ather aspired to create a superior scooter that could rival petrol-powered ones in performance and design. This required designing and manufacturing the scooter entirely in India.
Tarun and Swapnil began their project in the robotics lab at IIT Madras by dissecting a YO EXL electric scooter to understand its components. Their initial prototype, built with a Rs 5 lakh grant from IIT Madras, began a long and arduous journey. Lacking sufficient funds, they resorted to crowdfunding, taking pre-orders for 25 scooters to raise capital. This strategy attracted an investment from IIT alumnus Srini V Srinivasan, allowing them to move into their first office and develop a more refined prototype.
The development phase was intense, spanning five years and resulting in the unveiling of the Ather S340 in 2016. However, translating a functional prototype into a production-ready vehicle proved challenging. They had to design and manufacture every component themselves, requiring a network of vendors capable of meeting their stringent quality standards. Many Indian vendors were ill-equipped to produce parts to Ather’s specifications, stalling progress.
Hero Motocorp’s investment of Rs 205 crore in Ather was a turning point, providing financial and strategic support. With Hero’s backing, Ather set up a production facility in Bengaluru and finally launched the Ather 340 and Ather 450 in 2018. The Ather 450, in particular, lived up to its promise, outperforming even petrol scooters in acceleration.
Despite their innovative product, Ather faced significant financial challenges. The production cost of the Ather 450 was nearly Rs 5 lakh, while it sold for only Rs 1.25 lakh, resulting in a 350% negative gross margin. The company was burning through its funds rapidly and was on the brink of shutting down. Consulting firms predicted only a 30% reduction in automotive costs, but Ather needed more substantial savings to survive.
To address this, Ather reduced its production to 200 scooters per month, despite having the capacity to produce 2,500. They leveraged Hero’s expertise to streamline processes and cut costs, achieving positive gross margins by 2021. However, by this time, the competitive landscape had changed dramatically.
While Ather was grappling with financial viability, competitors like Okinawa, TVS, Bajaj, and Ola Electric entered the market. Okinawa, by importing scooters from China, captured a significant market share, and Ola’s aggressive marketing strategies overshadowed Ather’s efforts. By 2024, Ola dominated the market with a 50% share, while Ather lagged behind.
Ather’s marketing strategy, or lack thereof, contributed to its struggles. Tarun had always emphasized product development and customer service over marketing. Consequently, while competitors aggressively marketed their products, Ather’s superior quality failed to translate into sales. Ola, despite quality issues, leveraged heavy marketing to achieve impressive sales figures.
Despite its setbacks, Ather has built a strong reputation for quality and innovation. Customer feedback highlights satisfaction with Ather’s scooters, and word of mouth has been a significant growth driver. The company has also focused on software, recognizing its potential as a future revenue stream. They offer over-the-air software updates and plan to monetize technology upgrades and accessories like smart helmets.
Ather has also addressed criticisms about its scooters’ family-friendliness with the launch of the Ather Rizta, designed for the mass market. This move indicates Ather’s willingness to adapt and expand its customer base.
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