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The Mobility Pioneer | Rajiv Vij @ Carzonrent India Pvt. Ltd.
158 Plays3 years ago
In this edition of Founder Thesis, Akshay Datt speaks with Rajiv Vij, a person who became the Czar of rented cars in India. Rajiv is currently the Chairman and Managing Director of Carzonrent.
An alumnus of FMS Delhi, Rajiv started his career at Hindustan Motors which gave him exposure to the taxi business at that time and at ITC’s International Travel House allowed him to interact with the best and the biggest car-rental brands in the world.
Building on this experience, he started Carzonrent in 2000, with a seed capital of 29 lakh. And today, through numerous pivots, it is one of the leading personal ground transportation service providers with a network present in more than 75 cities in India and has recently ventured into sustainable mobility solutions with Plug Mobility.
Tune in to this episode to hear Rajiv speak about his inspirational journey and how with Carzonrent he attempts to streamline the largely unorganized personal ground transportation industry in India.
What you must not miss!
- Why asset-light model proved to be the best way to scale up?
- EVs – The Future and the gamechanger
- Launching Plug as mobility-as-a-service
If you want to be a podcaster, then check out Zencastr.com which is also the generous sponsor for this episode. Zencastr is like a shopify for podcasters taking care of all your needs from recording to editing to hosting.
Show your love for this show by using this link to sign up: https://zen.ai/founderthesis
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Transcript
Introduction to Zencastr and Founder Thesis Podcast
00:00:00
Speaker
Before we start today's episode, I want to give a quick shout out to Zencaster, which is a podcaster's best friend. Trust me when I tell you this, Zencaster is like a Shopify for podcasters. It's all you need to get up and running as a podcaster. And the best thing about Zencaster is that you get so much stuff for free. If you are planning to check out the platform, then please show your support for the founder thesis podcast by using this link, zen.ai slash founder thesis.
00:00:27
Speaker
That's zen.ai slash founder thesis.
00:00:47
Speaker
Hi, I'm Akshay. Hi, this is Aurob. And you are listening to the Founder Thesis Podcast. We meet some of the most celebrated charter founders in the country. And we want to learn how to build a unicorn.
Rajiv's Early Career and Entrepreneurial Spark
00:01:05
Speaker
Raji, which grew up in a completely different India. After completing his MBA from FMS Denny, he joined Hindustan Motors to sell their ambassador brand of cars, which used to be the top selling car in the country in that era. He then went on to head International Travel House, which was an ITC subsidiary, providing a premium taxi service to ITC hotels and to their corporate clients.
00:01:27
Speaker
In the year 2000, Rajiv decided to quit his stable job to become an entrepreneur or a businessman as it would have been termed in that era.
Cars on Rent Foundation and Growth
00:01:35
Speaker
He decided to start a business in the space of mobility, named it Cars on Rent and the rest as they say is history. Today Cars on Rent is one of the few profitable survivors after the taxi boards of the last decade.
00:01:47
Speaker
A war which was fought on the pieces of investor money and left almost no survivors. Cards on rent is now embarking on its most ambitious growth plan yet. One which involves moving to a pure electric vehicle's fleet and using best-in-class technology to drive better outcomes for all stakeholders. Here's Rajiv telling Akshay Dutt about his roller coaster journey of two decades.
00:02:11
Speaker
I studied in Ramja schools in Delhi and then I studied at Hindu college and then at FMS in the Delhi University. Vote for Mr. Sike Birla. I was selling the good old Ambassador car.
00:02:28
Speaker
and then the trucks that were manufactured by Hindustan Motors in their Uttarpara plant in Kolkata. At that time, it was still Calcutta. And after that, I worked for five years with an ITC company, International Travel... In International Travel House, what were you selling? Like, was it like...
00:02:47
Speaker
So, International Travel House as you know is a corporate travel company and they also have tourism, they have foreign exchange. They also have a company which had the rights for Europe car as a brand in India.
00:03:02
Speaker
So it was all a part of my portfolio to run corporate travel, foreign exchange, inbound tourism, outbound tourism, and of course car rental. And I think car rental really caught me.
Rajiv's Leap of Faith into Entrepreneurship
00:03:15
Speaker
By 2000, I also realized that, you know, it is not giving me the satisfaction. It's not giving me a sense of achievement that I would want to have on a daily basis. And so I decided to move.
00:03:28
Speaker
without another job in hand. I had no job in hand. And you were married at that time? I was married. I had a daughter and I know that when I decided to leave, I just came home one day and said that I've decided to leave. A friend of mine, when I told him that I'm going to set up a company, he said because nobody else made you the managing director.
00:04:13
Speaker
Okay. Okay. So like, you know, I mean, 2000 is an era where
00:04:19
Speaker
there was no appetite for risk in general in India. What made you want to take on that risk to start a business and no fixed salary and you're married, you have financial commitments? So interestingly, that's what was probably my biggest strength. My biggest strength was a very firm belief.
00:04:43
Speaker
in the potential of this industry and in the future of this industry in India. And secondly, my belief that I understand what requires to be done and I will be able to make a change. As in you saw that existing players were not serving the need.
00:05:03
Speaker
There was no clear. What was the clear? Even in 2005 when I went to raise my first funding and most of the investors were actually cynical and they said, which industry are you talking about Rajiv? There is no clear. There is only this black and yellow meter taxi that you see that also are all 20 year old vehicles. So which industry, what scale, which exit, what are you talking?
00:05:29
Speaker
And you know, so I started from there. Like tell me about that launch. Like how did you actually, because car rental is like upfront investment business, right? I mean, you need to buy cars before you can rent them. So how did you launch? Like, did you have that corpus with you?
Securing Partnerships and Corporate Contracts
00:05:47
Speaker
So my total savings at that time were about 29 lakh.
00:05:52
Speaker
And when I wanted to purchase my first set of cars, I wanted to purchase about 30 cars to begin with. And then, you know, I decided that we will set up an operation in Delhi, Mumbai and Bangalore. Oh, all three together. Okay. All three together. And we said that we'll start with about 10 cars each in every city. You know, so we didn't have money. We had no collaterals that we could give to a bank.
00:06:17
Speaker
But I must say at that time, there was this team of young professionals at ICICI bank who were extremely supportive and they were supportive because they knew what I can probably do in the long run and that I understand this industry, that I'll be able to do things. Our business plan was right.
00:06:42
Speaker
With a capital equity of 29 lakh and zero business in hand, we were able to go and get 30 cars funded, which was roughly at that time about one and a half crore of funding. And you know that somebody to put that confidence on me
00:07:04
Speaker
was a great sort of morale booster that, you know, we'll now make it. And, you know, after that, of course, you know, simultaneously, I then immediately went back to some folks at Hertz, whom I knew. And I told them that, you know, I have set up this company and I would like to build your business in India.
00:07:26
Speaker
so can we collaborate so their first reactions were like you know our our franchises in different countries are guys who run large hospitality chains they run airlines they have they have large automotive businesses etc how will you do it and and i remember when i went to new jersey at that time to meet the chairman of the board of hearts this old
00:07:50
Speaker
Very nice gentleman who was an ex-Ford person because Ford used to own earths at that time. So he told me, he said, Rajiv, where will you get the money from?
00:08:01
Speaker
And I told him either I am sorry, but you know if you are looking for somebody who has all the money, there are many many people in India and I could put you through to a lot of them. I am not claiming that I have money, but I am telling you I know what requires to be done in this industry, what can be achieved in this industry and I am putting my career, my personal savings at stake.
00:08:24
Speaker
and you know 2000 also if you remember was a year where a lot of businesses were actually being built with somebody bringing in the domain knowledge and somebody else putting in the money so I also told him I said you know that's that's how I look at this business so money will come from where it will come I said I don't know if you are asking me to tell you where the lock for this money is I don't know
00:08:47
Speaker
But if I do my business right, money will come. And I think over the last 20 years, the entire team has focused on doing things right. We have not, we have not necessarily ran after every opportunity, but we have also built the business in a manner that it is sustainable.
00:09:10
Speaker
We have continued to innovate. We have continued to stay in a startup mode for the last 20 years. At the end of the meeting, he signed and I signed. And we became the master licensee for Hertz in India. In the year 2001, we started representing. And guess what? Within a few months of our starting, 9-11 happened.
00:09:43
Speaker
So like what was your plan to get customers? Like who would rent these cars? Were you looking at H&Is or corporates or like hotels? So our focus in the beginning was completely corporates.
00:09:58
Speaker
We went to some of the large corporates in each of these three cities. And each of these cities have large number of corporates. Some of them we had known from our previous role. Some of the sales team members who joined, they had some connects. But we went in the market and we said that this is what we are doing. This is what we bring to the table. And these are the SLAs and service commitments that we make as a brand.
00:10:25
Speaker
And I must say the customers were very supportive. Accenture was incidentally one of the customers who was the earlier approver and said that okay, go ahead and we'll give you business. So we got some maki names on our customer list right in the beginning. So that was again very very encouraging for the entire team. Why would
00:10:49
Speaker
Corporate not just do a taxi. Why would they do a rental car? What was the gap that this was filling as opposed to doing a taxi? No, so I don't know when you say taxi and when you say rental cab, the difference is corporates always use rental cars. As in you were providing a driver and car? Yes, everything was with driver. It was not self-drive. I thought it's like the US model of
00:11:18
Speaker
This is a bit of confusion because we all like to call ourselves a car rental company. In reality, I don't know what we rent because what we rent is only a service with a driver. Customer sits on the rear seat. No, he doesn't drive.
00:11:33
Speaker
because Hertz in the US is like self-drive, you know, that model. You're right. I mean, you know, actually Hertz doesn't even understand, they didn't understand at least at that time as to what the business is in India. And then, you know, they understood, they learned it over the years along with us. The business in India has largely been a car with driver business. The self-drive business we launched much later because that market in India is still developing. So essentially this was like a,
00:12:01
Speaker
premium service for corporates like for like like a daily rent or something like that like short term requirements. This was a service for corporates for their requirements for local airport transfers for local movement of their executives for intercity movement of their executives as also some long term requirement for their expatriates and their local guys who were
00:12:27
Speaker
who are wanting cars dedicated to them which they could use all the time so this was all of that. And then how did your business grow like these 30 cars were they like fully utilized in the first few months or like
00:12:43
Speaker
So very quickly we had to take a few cars from the market from other operators and run them in our fleet. The business, while as I mentioned 9-11 happened, but our business kept on growing. And I must say in the early days when we became a licensee for Hertz, it did open a lot of doors for us. Not that we got too much support in terms of customer acquisition,
00:13:10
Speaker
But, you know, a global brand and Hertz is a very powerful brand. So we were able to acquire some customers with that brand. Of course, ultimately, you know, customers want service delivery, they want pricing, they want operational SLAs, they want all of those things which we delivered to them and the business continued to grow.
00:13:32
Speaker
So you told me 2005 is when you first went to raise money, right? Like by 2005, what stage had you
Technological Investments and Innovations
00:13:40
Speaker
reached? Like how big was the fleet or what kind of revenues were you doing? So as I said, while initially we focused on the corporate business, but I was also very keen to build the business with the hotel industry.
00:13:58
Speaker
So in 2003, when I looked at the market and I said, you know, how do we get into a hotel chain?
00:14:07
Speaker
Now, as you know, when I worked at Travelhouse, Travelhouse is an ITC owned company. So, all the ITC hotels used Travelhouse, all the Oberoi hotels used Mercury and because that's the company that they own. So, the only company, only hotel chain and there were really three hotel chains at that time. The third one was the Taj group.
00:14:31
Speaker
but very challenging to get a large contract there because they had different service providers in every city.
00:14:44
Speaker
And I didn't want to do one hotel, two hotels, etc. I wanted to grab the entire chain and that's the kind of partnership that I wanted to do. It was a significant effort. It took us over a year to crack it. And our pitch was very simple.
00:15:02
Speaker
I was telling them that, you know, as far as the guest is concerned, when he comes into a Taj property, whether that is in Delhi or Mumbai or Bangalore or Chennai or Timbuktu, he wants the Taj service. He doesn't care who you use for your car rental services. He is not concerned. And at that point of time in their different hotels, they had 23 different service providers.
00:15:29
Speaker
And each provider using different model. His experience is a broken experience. And you know Taj, there used to be this gentleman Raymond Bixson who was the managing director of Taj Hotel at that time. His family also incidentally owned some car rental business in the US.
00:15:47
Speaker
And I went and sold this whole story to him. And they were at that time trying to review all these services. And they had appointed McKinsey to do a review of all the services. And so the next thing was that we had long meetings with these young consultants from McKinsey who were doing their early projects in India. And they then went back and then I think presented it to them that, yes,
00:16:17
Speaker
they need to move to having a single service provider and standardized services, standardized uniforms, standardized cars, standardized processes, systems, training, et cetera, et cetera. And then we won that contract. Of course, we also got into higher than J.W. Marriott and Renaissance, et cetera.
00:16:38
Speaker
But by that time, we had these two service lines in 2005. And we were doing a business of roughly about 2, 2.5 crores a month. Our annual revenue was about a 25 crore revenue at that time. And what was the fleet size? We had a fleet of... 2005, we had a fleet of about...
00:17:09
Speaker
600, 700 cars. Yeah, about 600, 700 cars. We grew very, very fast. I mean, you know, extremely fast. We grew at that point.
00:17:19
Speaker
from 30 to 700 is very, very first year. So we grew to about that fleet. So that was the time that we went for our first fundraise. And what was the objective for the fundraiser? My belief was that we will require significant investments into physical infrastructure and into technology tools.
00:17:43
Speaker
And therefore we wanted to go and raise some money. Give me examples like what like physical infrastructure, you mean cars or like? No, no, no, no. You see this this business and you know, because I had before that I had traveled across North America and Europe and even in Asia Pacific region. I had seen how car rental locations are, what kind of setups they have.
00:18:10
Speaker
And in India, because you also have drivers, so you also have the additional requirement of training, you also have the additional requirement of restrooms for them, you have the requirement for their uniforms. So you needed all the infrastructure to make sure that you can deliver what you are committing to the customer.
00:18:30
Speaker
You needed to get drivers, you needed to train them, you needed to make sure that they carry a uniform which is fresh, which is clean. You needed to make sure that when they are not working, they can rest at some place. You needed to make sure that you have a place where the cars can be washed, cleaned.
00:18:46
Speaker
You needed to make sure that routine repair maintenance work can happen right in your workshop instead of the car going into an outside workshop and then getting stuck there. So, you needed all that setup in each of your locations. Plus, I also believed and while most people at that time were not using any technology tools, this industry was still working on long registers.
00:19:10
Speaker
I felt that if I need to scale, which I was committed to scaling, I was very clear that I need to have a robust technology tool. So back in 2000, 2005, I wanted to implement Oracle system for our financial management. And people were not even using Telly at that time.
00:19:36
Speaker
And the moment he raised money, that's the first thing that I did. I went to PwC and gave them the mandate to implement Oracle into our entire financial management system. And I think it's worked very well for us. Nobody else has the access to data and information that we have. And we had this even at that point of time. That was the purpose of a fundraiser at that time.
00:20:02
Speaker
And I think financial management is a key lever in this business because you are taking cars on like that installment or EMI and then you have to therefore plan the inflow and outflow to meet the EMI's and optimize the return on every car.
00:20:19
Speaker
So Akshay, interestingly, I'll tell you, you are right. And you know, financial management is very, very critical because, you know, there is a car, there is maintenance, there is insurance, there are taxes, there are documents, there are ownership issues. There are all of those things that you need to manage. You need to manage the tenure for those cars. You need to make sure that the EMIs are being paid on time, that the documents are being managed well, et cetera, et cetera. But also in 2005 itself,
00:20:48
Speaker
or even towards the end of 2004, I had also come to another conclusion.
Innovative Business Models and Ecosystem Development
00:20:57
Speaker
That long term, it'll be impossible to scale this business if I was to only continue to build this in an asset-heavy model.
00:21:12
Speaker
And so much before the current generation of aggregators came into the market, I had floated a model back at that time, which was called a driver come owner model, which was based on two fundamentals. One was that the driver's earnings
00:21:40
Speaker
must be directly related to the revenue earned by a car which he drives and the cost of ownership of that car. And the second is that that driver must have a long term interest in that asset.
00:22:00
Speaker
Yeah. If these two principles are in place, then you can keep on scaling. Otherwise you cannot. Now the interest of the driver is aligned with your interest. He will make sure it is clean. He will make sure it is well maintained because it's his own car. Absolutely. Absolutely. So this was, this was very, very interesting. And then, you know, at that time I had 800 drivers on my rolls and about 800 odd cars that we had.
00:22:32
Speaker
And we implemented the scheme. Each of those 800 drivers resigned from a permanent employment with the company because they knew that they would make more money. And I was able to convince them that this money, because it will be legitimately earned,
00:22:52
Speaker
will help them improve their standard of living, will help them improve their family, will help them do things which they otherwise will not do because you know if you are earning money illegitimately by stealing etc, that's not going to help you reach too far because you will also use that money for gambling or whatever else that you do.
00:23:13
Speaker
And so you know it worked very well over the years and of course over a later period as we got into more businesses which were asset heavy but this business we started that model and you know that has also helped us in scaling up over the years. So do you help the driver to get a loan? Do you give some advance towards the upfront payment for it? Like how do you enable this?
00:23:40
Speaker
So Akshay, we have built an ecosystem because now we are in that mode where our business model is really mobility as a service model. And that's what we do. We have invested very heavily in technology over the year. We have always had a large technology team. We have implemented the AI and ML and all those tools some time back and then automated all our processes.
00:24:07
Speaker
We centralized our operation. We set up a national command center in Delhi. We set up a shared service center in Delhi. So we did all of those things. And therefore, what we do now, and there are about 5,000 driver's vendor partners who are part of our system. While the loan is taken by them, the financial liability is theirs.
00:24:32
Speaker
But what we do is two things. One is we acquire customers. And so we deliver them revenue. We deliver them the revenue that they need to generate on that asset to remain profitable to make their money. But besides that, what we do is we have partnered with all the major OEMs. So we help them get the cars at the best prices. We get the best warranty terms from these OEMs.
00:25:01
Speaker
We also have partnered with financial institutions, banks, NBFC companies, fintech companies, etc. So, we get them the funding for the cars at preferred prices, as processes. We also give our contract with them to the financial institution, which gives a comfort to the financial institution that their money is safe. Also, in the B2B model, because we have control on all the cash flow.
00:25:29
Speaker
The money comes to us. The money doesn't go to the driver directly. Therefore, the financial institutions feel comfortable in funding them.
00:25:38
Speaker
But besides that, we have also partnered with the workshop aggregators. We have partnered with the pre-owned car companies, insurance companies. So to manage the residual values, we help them through that entire ecosystem that we have built to support them. Because you see, all said and done, they are not rich guys. They are investing money.
00:26:04
Speaker
And that is a key part of our business. It's a very, very critical partnership that we have with these driver fleet partners, fleet owners. So we have built this support mechanism which provides them support through the life cycle. And that relationship has worked well. They have all also grown with the company. So that has worked very well.
00:26:27
Speaker
So from about 700 cars that you had in 2005 and you had now two verticals, one was corporate, one was second was hotel. So tell me, like, you know, what were the next major milestones in the journey? So 2006, when we, I mean, you know, 2005 and 2006, we raised two rounds of money. Was from Sydney Ventures, then from Sequoia Westbridge.
00:26:52
Speaker
That's the time that we got into operating these business. How did you finally show investors the big picture because like you initially were telling me about those challenges of telling investors like they did not see a business like you know they did not see they don't understand the space so to say so like
00:27:12
Speaker
I think because I understood this industry, how this industry has grown in other parts of the world, what has worked for this industry. I had also studied a lot of the global brands in terms of looking at what worked for them, what didn't work for them, what kind of events took place when they saw high growth.
00:27:35
Speaker
what kind of events took place when they went down and what are all kinds of products, services, customer relationships, what have they built in. And I think that deep understanding, the domain expertise that I brought to the table, I think it worked well. And of course, the fact that I was putting my career and my personal savings at stake, it convinced. And interestingly, even in the first round,
00:28:02
Speaker
By the time we were ready to decide as to who to take as an investor, we were spoiled for choice. We had key investors who wanted to put in money into the company and we finally had to decide on one. So that worked. In 2006, of course, Sequoia Westbridge, who were together at that time, they came and invested money. And in less than one year,
00:28:25
Speaker
of the earlier round which was in 2005, we were able to raise money in the second round at almost two and a half times the money that we at the valuation that we raised in the first round. For 2006, after we raised the money, we got into operating lease business. So, you know, when I was at Travel House, I had actually brought a lease plan into India in a joint venture with Travel House.
00:28:56
Speaker
Now what lease plan does is that in corporate there is always an employee car policy. This is of course a very large business in US, Europe and even in Asia Pacific region.
00:29:09
Speaker
In India, of course, this business has remained. But that business, you know, you can scale up to a huge level with very few people and which is everything is really outsourced in that sense. So we got into that business in 2006.
00:29:30
Speaker
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00:29:50
Speaker
Like essentially when a company gives a car to an employee, then instead of buying that car, they lease it from you and pay you a monthly lease price and you take care of maintenance.
00:30:03
Speaker
But not the fuel. Fuel would be paid by the employee. Even fuel, we would get him a fuel card and even that we would take care of. So we got into that. Then we got into radio taxi business. In 2007, if you remember, radio taxis came into India.
00:30:21
Speaker
So we launched EasyCabs as our radio taxi brand in 2007 and we got into Delhi, Mumbai, Bangalore and Hyderabad, all four airports to provide services to the air travellers at that time. That was our first B2C play and we built that up.
00:30:40
Speaker
Then in 2008, did you face challenges in going B2C? Because in B2B, it's easier to control many aspects of service quality, and the money is coming directly to you. In B2C, that's not the case. Now they pay the driver directly. So what we did, again, I decided to start with a model, because by that time, we had already introduced the driver-cum-owner model.
00:31:09
Speaker
So we created a driver come owner model in the radio taxi business with some modifications. Now what we did is that and you know at the peak of that business we had almost three and a half thousand cars. We gave cars to drivers, we bought the cars, gave those cars to drivers.
00:31:29
Speaker
and took money from drivers on a daily basis. Okay. Like a daily rent. Like a daily rent. So, you know, if we had to take, let's say 30,000 rupees a month and hypothetically speaking, so we would just take a thousand rupees a day. And, and, you know, then the rest is all his. Right. Then you don't need to. We remove this whole.
00:31:52
Speaker
because customers were going to pay him cash. And I didn't want to get into trying to stop him from taking that cash, etc. That won't work. Even the Olas and Hoogers have not been able to stop drivers from accepting cash. So we did that. In 2008, the airport refurbishment and some Greenfield airports came in.
00:32:13
Speaker
Bangalore Airport came in, Delhi came in, Bombay was refurbished, Hyderabad Airport came in. So we went and set up our operations at the airport arrival terminals and then started servicing air travelers who were landing there from the arrival terminal. And this was prepaid or like cash paid after the journey to the driver? So what we do at the airport counters for the car rental is that you prepay
00:32:43
Speaker
Based on where you want to go. So, and you know, we created some zones and said that, you know, for each of those zones, this is the price. So that we did. In 2008, we did another interesting stuff.
00:32:59
Speaker
Emirates was looking for a partner to service their first-class and business class passengers. Like pick up drop. Pick up drop. So we went and pitched to Emirates and again, a long process of selection and diligence and whatnot and whatnot, but we built the entire processes. We showcased our capabilities to them and we got that contract in 2008.
00:33:24
Speaker
And that resulted in our launching what we called a limo service in India. So that was the first real limo service that we launched with a fleet of 100 Mercedes cars in 2008. So we did that. So those two, three years after that, we did a lot of stuff and the business kept on growing. 2008.
00:33:48
Speaker
Otherwise, of course, because of the economic slowdown in 2008, it was otherwise a difficult year for the economy. But I think our business kept growing because we kept taking new initiatives all the time. So that that kept on happening. 2011, we raised another round of investment from BTS advisors, which was the European boutique fund. They invested in it was 2000. And how much had the valuation increased by then, like from compared to the last year?
00:34:17
Speaker
Oh, again, I think we, I mean, you know, of course this was a long gap from 2006 to 2011, but I think our valuation went up maybe three times more over that period. So, yeah, that also happened.
00:34:32
Speaker
And the fund was for what objective? What did you want to use the funds for?
Strategic Shift Towards Technology and Sustainability
00:34:37
Speaker
This was now growth capital. We were wanting to grow, to add more fleets, to build our leasing business, to build the taxi business, to build the airport presence, to build the limo business. So we were doing all of that stuff and we raised money. And how big were you at that time? Like fleet size or revenue?
00:34:57
Speaker
we had by that time reached revenues of about 300 crores and 2011-12 yeah about 300 crores and we had we had a fleet in 2013 yeah 2013 we had a fleet of about 8 000 cars which of course was into leasing business into taxi business
00:35:21
Speaker
by that time we had also launched self-drive under miles brand so we also did that but yeah the business business kept growing. 2014 I took a sort of strategic decision I said they are you know now and at that time as I said we had almost 8,000 cars on our books and we had a debt of over 400 crores
00:35:48
Speaker
for the car purchase. And I was beginning to think that I need to now move to becoming more a technology driven player than an asset driven player. And so we did some interesting things at that time. In 2014, we decided to exit from the leasing business.
00:36:12
Speaker
So Sumitomo Corporation came and acquired that business from us. So we got a very good valuation for that business, almost four times the top line of that business. We also decided to, you know, because by that time the aggregators had already come in and they were offering taxi services at a very low price, burning a lot of money, subsidizing prices, etc, etc.
00:36:39
Speaker
So we also decided that we'll figure out a way as to when we would exit from the taxi business because my belief was that, you know, for the next 10 years, nobody in this industry will make money.
00:36:54
Speaker
I think is now only just another one or two years. We will reach 2024. But by the end of 2017, we also moved away from the taxi business. We exited that business. EasyCabs business you exited.
00:37:10
Speaker
And as far as the self-drive business was concerned, we separated that into a separate company, which now is run as Miles Automotive Technologies. And my daughter, Sakshi, she runs that company. So that we made into a separate entity.
00:37:27
Speaker
And this company we focused heavily on corporate business, airport and airline and hotels business and some amount of government business very selectively. That's what we started doing. Like more B2B focus. Entire B2B and some amount of B2B to C because you know when you go to airports or you go to even hotels because finally hotel is not your customer, your customer is the end customer.
00:37:55
Speaker
But we did that and that also happened but I think all good moves because what also happened
00:38:05
Speaker
is if you see this was a very timely move by us to move to an asset light business model. So while moving from an asset heavy to an asset light model is always a very challenging thing because you need to take hard decisions. Sometimes you have to decide on what business to take, what business not to take. Sometimes the customers insist that you need to own the car. But again, I think we are the only company in this space
00:38:34
Speaker
to have first of all tried because nobody else even tries to do this kind of a thing and to have really successfully executed the plan over a two and a half year three years kind of period where we transitioned from an asset heavy business model 8,000 cars 400 crores of debt.
00:38:57
Speaker
to no cars and zero debt. By 2017 you were zero debt. By 2017 we were a zero debt company and I keep telling everybody that if you do this as a part of your strategy, this is great.
00:39:15
Speaker
But unfortunately, if you see the pandemic is now forcing many players in this industry to take that route. But that's the hard reality. So that will happen. And what was your turnover by 1718? Like you were at 300 karol in 14.
00:39:35
Speaker
Yeah, yeah, 17, 18. I mean, you know, because we were now not capturing the turnover for the cars. So it was more like a 170, 180 crores kind of turnover. But, you know, you make more money here.
00:39:51
Speaker
You have less hassle, you don't owe anything to anybody and your return on equity is much, much better. And so then from 17 onward, like what's the next major milestone like? So you see, after that, frankly, I have been looking at how to move to the electric vehicles fleet.
00:40:10
Speaker
Because if you remember, 1718 was the first time that India also started having some kind of an electric car. I wouldn't call it a real car, but there was something which was called an electric car, but with very low battery range. Do you talk about the Riva?
00:40:27
Speaker
Yeah, I'm talking about the Mahindra produced like including the Vareto, the range was low, the performance was not good, the reliability was not good, even Tagore when the when the government went in for that entering process also came out with Tagore, but again, same kind of problems, technology outdated, etc. So all of that, all of that was there.
00:40:48
Speaker
I look at this industry, did very deep study over a period of time, tried to understand what are the key challenges, what all needs to be done, what is something that is required in the car, what we should really look at, what
00:41:04
Speaker
kind of customers we can service but for that what kind of car what kind of battery range what kind of ecosystem what kind of technologies would we require so they did all of that and and i think in the last year year and a half of course as you know some better cars have come you now at least have 200 kilometers plus range cars available as as basic sedans you also have vans from from mg and then byd now
00:41:29
Speaker
which have a range of 300 to even 500 km. You also of course have the luxury cars from Mercedes and BMW and Audi and Jaguar. So cars have now started coming in. The second thing that has come is that the charging infra companies have also come in.
00:41:49
Speaker
Besides the global companies, there are also Indian companies which have come up. So, they are also building it up and it is therefore now possible for us to service all kinds of requirements. It does not have to be restricted.
00:42:06
Speaker
to only the employee transportation business which is what was done by all these cars over the last few years and so a few months back we decided that we will do it and again the approach is the same. My belief is that we should do it as a part of a strategy
00:42:25
Speaker
We should lead this transition of the industry from the polluting IC diesel engine vehicles to the clean fuel, the cars which can save CO2 emissions. I am sure some of the others will be forced by customers or by the market and some will possibly be forced later through regulation. The industry will transition.
00:42:50
Speaker
There is no doubt. How soon it will transition will get decided over a period of time.
00:42:57
Speaker
We clearly believe that we have an opportunity to lead this transition of this industry from the IC fleets to EV fleets. And we feel that this also is going to change the complexion of this industry from a fragmented small operator, you know, the industry which has no entry barriers to an industry which will get more organized.
00:43:22
Speaker
which will use more. What do you mean by fragmented small operator? Because you have Uber and Ola as large fleets. So are you talking of that? Uber and Ola have consolidated a lot of the B2C industry. I am now talking of the B2B industry. The B2B industry continues to be fragmented. And there are still hundreds and thousands of players who are there. So the EV transition
00:43:51
Speaker
will change the complexion of this industry because you need a certain kind of technology. You need abilities to integrate your technology with the IOTs of the car. You need technologies to integrate with the charging infrastructure. You need technologies to track the battery range that is available in the car and what is the distance that the next duty is to cover before allocating that duty to a car.
00:44:18
Speaker
You also need to have scale to have access to dedicated charging infrastructure because this is not a fuel pump. You know, the fuel pump infrastructure got built over maybe a hundred years period. But for running your fleet, for running it efficiently, you need charging infrastructure access and the prices here are not being defined by anybody.
00:44:44
Speaker
They are dependent on who you are, how much fleet you have, what is your business model and how will you operate. So all of that is the driving force which will consolidate this industry.
Electric Vehicle Focus and Infrastructure Partnerships
00:45:03
Speaker
The public charging infrastructure today charges about 20 rupees a unit.
00:45:09
Speaker
But you can get significantly better prices because after all the energy price is not 20 rupees a unit. There is infrastructure cost that people are investing on infrastructure. So I think those things will happen. And our partnership, of course, with Fortham that we have announced today, this partnership brings in the muscle that we require in terms of financial strength.
00:45:38
Speaker
But also it brings in the knowledge and understanding of charging industry, the energy industry, because they have done it in the Nordic countries. They have done it in Europe. They understand this very, very well and they have the ability to make the investments that are required to support our fleet. We believe that over the next five years period, we will induct a fleet of about 19,000 cars into cars on rent, which will be run under the plug.
00:46:06
Speaker
brand and you know these cars in the fifth year they will generate a revenue of about 350 million dollars and you know there is money there is more margin available because of the positive total cost of ownership of an EV the customer is benefited in terms of cost the fleet owner is benefited because there is more margin available the fuel cost is lower
00:46:30
Speaker
We can also have better margin on the same vehicle. And therefore, you know, it works for everybody. And, you know, on top of that, over this five years period, as per our assessment, compared to running the same number of diesel cars, we would achieve a saving of about four lakh tons of CO2 emissions.
00:46:53
Speaker
And that's what we are really setting out to achieve. And I have no doubt that our team and our partners will support us that we build it up. So I have a lot of questions to ask here. So first, let me start with, why is the current B2B mobility service market so fragmented? Is it because margins are low? So it is mostly like mom and pop operators who are happy with that margin.
00:47:21
Speaker
See, actually, if you see any industry Akshay, the industry gets consolidated if there are some entry barriers. If there are no entry barriers, anybody can buy one car and become a taxi operator, car rental operator, he will put nathasing, car rental service and you know, starts that. I mean, you know, that's, that's fine. Nothing wrong, because that is the entrepreneurship that you have in our country, which is great.
00:47:50
Speaker
But the compliances, the drivers getting their wages right, the cars having all the documents right, they having the right insurance, the taxes being paid, all those things are important. And when you don't have the industry with any kind of barriers, then you will continue to have more and more and more and more players, which is of course one way that the industry operates.
00:48:19
Speaker
And so tell me about this partnership with Fordham, like what is Fordham's background? So Fordham is, as you know, a Nordic company and they are one of the largest European player in the energy business. They have annual revenues of almost 65 billion euros. And in India also they have... They're like a transmission and distribution company.
00:48:45
Speaker
No, they are actually an energy company which is into all kinds of energies. The solar energy, the hydro energy, they... Like Shell and... Yes, yes. So, and you know, the charging infrastructure of course is one part of their business which they have been building. In India also, I think they have already set up about 114 or some charge stations already. As part of this partnership,
00:49:13
Speaker
to support our fleet of 19,000 cars in 79 cities across India. They will set up about 3,200 charge points. These 3,200 charge points will actually have an energy in terms of how much energy they can deliver of roughly 100,000 kilowatt.
00:49:36
Speaker
of energy is what these 3200 charge points will be able to deliver at any point of time. So that's what this partnership is. We of course are committing to them that we will have these cars so that will help them achieve a certain utilization of this infrastructure.
00:49:55
Speaker
that will also make sure that, you know, the investment that they are making, they'll be able to make a reasonable return on that investment over the next five years time. So that's the partnership. Okay. And these are like dedicated for cars on rent slash plug or like they're like public infrastructure. So you see the charge points will be installed for us.
00:50:19
Speaker
But we are not going to be able to use them 24 hours a day because our cars will be working. Our cars cannot be charging all the time. Therefore, when these are not being used by my fleet, then instead of keeping them idle, we will also make them available to the third party fleets, public, everybody they can charge.
00:50:41
Speaker
Okay, so they will build it and you will operate this charging infrastructure. They will run, they will operate, they will build, they will invest, they will do everything. My business model will remain the asset light model. Also, you know, the charging industry will evolve. There is a lot that is going to happen in this industry, but this is their business. They will be able to manage those changes. Ultrafast chargers will come.
00:51:10
Speaker
There will be more energy, there will be more battery chemistries that will come. So they will be able to do those things and bring the best technologies that we require to support
Benefits and Management of EV Fleet
00:51:22
Speaker
our fleets.
00:51:22
Speaker
Right, you have a specialist who's taking care of charging and you can focus on mobility and the 19,000 cars will continue to be in the asset light model like the driver will. We've had great discussions with the banks and financial institutions and they are all happy to
00:51:40
Speaker
to fund the cars because, you know, as I mentioned, the business is being given by us. There is existing business or existing customers actually spend about 1500 crores annually on transportation.
00:51:55
Speaker
We are first of all just targeting to increase our wallet from these customers because you know they should spend more and more on cars on rent, EV fleet than anything else and then of course you know new customers etc that that we are acquiring not only incorporate and hospitality, airline, airport, government, PSUs, SMEs so that's that's how we are we are going to be building it up.
00:52:17
Speaker
Obviously, customer acquisition is not a challenge for you because you already have those relationships in place to get them to convert to EV. But what is the benefit for a customer in terms of, is there a commercial benefit also? Is it cheaper? So the proposition to the customer is simple. When the EVs, of course, started in India, the players who offered an EV, even for employee transportation, they asked for a premium pricing.
00:52:42
Speaker
We are instead saying that number one, you don't have to pay anything more. So there is no extra cost to begin with. Number two, when you take my basic package, because the car, the initial capital cost is higher, so the basic package price is same as the icy car, but on the extra kilometers when you run.
00:53:06
Speaker
Because extra kilometer, my charge rate, let's say on the IC car, my charge rate was for a basic sedan, a 15 rupees a kilometer on this car, because there are only two components for the extra rate. The extra rate is the fuel cost and the maintenance cost. And the time.
00:53:24
Speaker
Now, fuel cost in the other case is maybe eight rupees a kilometer. In this case, the fuel cost is maybe one and a half rupees a kilometer. And therefore, you know, I can probably reduce that to one third or maybe even lesser. So that's one. The second is that, you know, in the last one, one and a half year, the fuel prices have been going up. The energy prices hopefully will be more stable.
00:53:54
Speaker
And because of the fuel prices going up, the customers have been incurring more cost. They have been paying more as a fuel price impact. They have been paying me a surcharge. That will not be there. So that will be a saving. And then on every invoice, I certify the invoice that on this journey, when you travel on an EV, you have saved X number of CO2 emissions. Is that monetizable? CO2 carbon credits?
00:54:22
Speaker
So as of now in India, as of now in India, it has not been structured. But I think there is an energy exchange that has come in. Carbon credits is something on which the government is working on.
00:54:37
Speaker
soon hopefully they will become monetizable and you know we will of course provide also a proper certificate to every one of our customers on the CO2 savings that they make. So you know they can achieve their ESG targets, they can achieve their net zero targets, they can achieve all of that.
00:54:55
Speaker
That is a major upside to doing this. Because I think ESG is a big trend in the investing. Investing debt, you get debt at lower prices if you are ESG friendly, and you get more investor interest if you are ESG friendly. And so what is current status? What is your fleet size today of plug?
00:55:22
Speaker
We have started doing a few pilots the cars as I mentioned over the next about 15 months between now and end of March 23. We will build a fleet of about 2000 electric vehicles and then over the next four years we will build it to 19,000 cars.
00:55:44
Speaker
We are right now placing some orders on the OEMs. Which cars have you identified? There are only three manufacturers right now that we are looking at. There is a basic sedan which comes from Tata Motors.
00:56:00
Speaker
And there are the vans which come from MG and the BYD. These are the only three that you want to start immediately. We will get into luxury cars, but a little bit later, we want to wait for what happens on this Tesla, you know, the duties, etc, etc. And what kind of pricing it comes in, because that may be another another opportunity that we will look at. But then I think there are more manufacturers will bring in more car models.
00:56:27
Speaker
What is the range currently that these cars make, like 200? About 200 kilometers plus on the ground range is available. MG car gives about 300 kilometers on the ground. And this BYD, the E6 car, this gives you a range of almost 500 kilometers. BYD is also like, they are building in India like these EVs. They are assembly, I mean, you know, everybody's only... Assembling, okay. What is the role of technology in building this EV fleet? Like, tell me about some of the interesting things that technology is enabling.
00:56:56
Speaker
So, as I said you see what is important in this is one that you need to always get the health of the car and for that an integration with the IOTs of the car is very critical.
00:57:13
Speaker
The technology tools have to be capable of doing that and we have proprietary technologies of our own so we have done that integration with these car models. Downtime can be reduced using technology because you can predict when maintenance is needed.
00:57:28
Speaker
Not only downtime, you actually know what is the situation of the car, battery, how is the battery management system working, what kind of range is available, what kind of preventive maintenance if any is required, what needs to be checked, everything you can get, huge volume of data that you can get.
00:57:48
Speaker
even how the car is being driven, all that you get to know. The second which is important is that you are also able to integrate with the entire charging network because access to that network, making bookings for when you want to get energy in your car, which is the nearest location, the navigation to that, all of that is the second part.
00:58:11
Speaker
The third part, as I said, is this whole issue of to decide which car to get which duty, depending on what battery range is available. Rostering and allocation. The rostering is something which is the third part. Which is, I think, a very complex. Complex algorithm. The fourth, of course, is the asset security.
00:58:37
Speaker
So we have also built capability in terms of tracking, geofencing, the more immobilizing, et cetera, et cetera of the car. So that there is also asset security that is there. And it is also an issue of customer security because customer safety security is also driven through that. At the backend, we have built systems which are based on an exception-based alert system
00:59:03
Speaker
which are proactive alerts that take place so that we make sure that there is complete reliability, tracking, safety, security, et cetera, of all kinds of customers. So those are important. Basically, all the inefficiencies which drive up cost of mobility can be eliminated by using this smart. I would say many of them, but I won't say that that's the end. We will continue to upgrade and we'll continue to use more and more technology to
00:59:33
Speaker
to upgrade and keep improving customer experience and keep improving the operational efficiencies into the system. Most of the founders which I interviewed tend to be on tech side, where they have a product and they're purely building online products. In your case, you're running a very operations-heavy business. What are the ways to
01:00:00
Speaker
run this efficiently like you know in the initial days for example did you like travel to all the cities like you launched in three cities were you like on the ground a lot to make sure things are managing how do you make sure that things are being run well and how has that evolved over the years i think 20 years back you are right that it was a a operation heavy manual operations kind of business that's when when i started but today
01:00:30
Speaker
Our business is as tech heavy as any tech company. After all, you know, whether you look at any of the delivery companies, yes, they have technology for the customer to place their order, they have technology for the delivery boy to get that order, for the restaurant to get the order to prepare, but then somebody will have to pick it up and go and deliver.
01:00:59
Speaker
And so, you know, everything else is going to be, you know, somebody, the food is not going to fly and reach your house through this box that we are both talking from. So I think similarly, as far as today's business is concerned, our business is completely a technology business. Yes, I still, as I said, I call myself a servicing company and not a technology company, but
01:01:28
Speaker
We as a mobility as a service provider, what do I own? I own technology, I own customers, I don't own assets. So, that final delivery of the service is done by somebody else, I make sure that he is doing it right.
01:01:49
Speaker
I make sure that the car is clean, that the driver is right, that the driver is duly checked, that the driver will remain in a certain geofenced area, that the transaction is being tracked, that the customer is getting the right experience that he should get. But all of that happens from my national command center. I have no people sitting on the ground who are doing all of this, nothing. Like, when did you eliminate people on ground? And have you replaced it with video feed or like you said that the car is clean?
01:02:17
Speaker
There are, so there are the technology is now capable of checking a whole lot of things because you know we implemented the AI tools into the system. So a lot of the quality control issues.
01:02:35
Speaker
got transferred a couple of years back to the national command center like like the national command center and actually I mean at the national command center also nothing happens because the system itself it looks at some pictures which are uploaded and based on those pictures it decides whether a duty can be given to this car or it cannot be given to this car documents are uploaded the system reads those documents and it knows whether there is a fraud document or everything is is is fake or it is correct
01:03:03
Speaker
So we have done those things a couple of years back. And because all these tools we have built in-house, so there is also a lot of domain knowledge that we have within the organization where people are doing this stuff.
01:03:18
Speaker
So like driver takes photo of the car before he gets duty and then those photos if the system approves only then the driver gets rostered otherwise he doesn't get rostered that day and maybe he takes a photo of himself so that he's in uniform you check that.
01:03:34
Speaker
And the system is capable of checking whether this photo, when has this been taken? Is it a current photo? Is it a past photo? Has this photo been repeated? So the system does all of that. Manually, it is not even possible. It's impossible and it's very, very time consuming. And in our business, you cannot supervise a driver on the road. There is no way.
01:03:55
Speaker
And how do you do the driver training? Because in B2B that service element is important. So now there are online training programs which are available on their phones.
01:04:08
Speaker
They have to go through that and there are some online tests that are done based on which we know what they are doing or not doing. If there is a negative feedback about a driver, he goes through a refresher program. So currently, what is your breakup of business? Like how much business comes from, say like this pickup drop of call center kind of a setting or how much comes from?
01:04:31
Speaker
Very, very little, very, very little. I mean, you know, our majority of business is business travel, where the company executives are traveling locally or outstation. So why is that? Like the call center business is low margin, is it like? You know, if you look at the call center or this IT, ITS companies, employee transportation business or crew transportation business,
01:04:58
Speaker
With the IC fleets, my view has been that this business does not give you enough margin. It is difficult to manage the customer satisfaction. And therefore, you neither make profit nor you build a brand. And so we have been very, very selective on that. We have stayed away from expanding that part of the business.
01:05:25
Speaker
But I think when we look at the EVs, there is a whole different game that the EVs will have. And so we are creating some models where the customer satisfaction as also the margins will be better, significantly. Do you have the competitors in this space of like organized competitors? Like one is, of course, they're like small and organized players, but who are the
01:05:50
Speaker
No, no. There are large players, including the Oryx, Amos, Travel House, etc. They're all there. And any of them getting into the UV space like you are? Not to my knowledge as yet, but I'm sure they will. Sooner or later, they will. And I hope they do. Are you planning fundraise in the immediate future?
01:06:09
Speaker
In the EV business, we will, we will raise funding because we intend to make more investments into technology. We intend to make more investments into, into expanding our network, also into bringing more customer acquisitions, et cetera. So we will, we will raise some amount of funding. So my last question for you. So, you know, where do you see yourself, say by 2030? Playing golf.
01:06:41
Speaker
I've been waiting to go and play golf.
01:07:07
Speaker
Before we end the episode, I want to share a bit about my journey as a podcaster. I started podcasting in 2020 and in the last two years, I've had the opportunity to interview more than 250 founders who are shaping India's future across sectors.
01:07:22
Speaker
If you also want to speak to the best minds in your field and build an enviable network, then you must consider becoming a podcaster. And the first step to becoming a podcaster starts with Zencaster, which takes care of all the nuts and bolts of podcasting, from remote recording to editing to distribution and finally monetization.
01:07:43
Speaker
If you are planning to check out the platform, then please show your support for the founder thesis podcast by using this link zen.ai founder thesis. That's zen.ai founder thesis.