In Africa’s Benin, Togo, and Kenya, a company is exchanging ICE motorcycles with electric ones without charging anything from the end consumer. The business model revolves around individuals employed in the logistics industry. Kaushik Burman, CEO of Spironet, explains how the company has put over 12,000 electric motorcycles on the road in Africa!
Q. What has Spironet done in Africa so far?
A. Spiro’s journey began with a vision to electrify last-mile transportation in Africa. Our principal investor, the ATIF Fund, has supported us in this endeavour. We started in Benin and Togo, two countries that, despite their small populations, are very agile regarding government support for clean mobility initiatives. Our model is a commercial value proposition where a rider can trade in their old bike for a new electric one, combined with a battery swap service, offering significant savings for commercial riders. These riders, like those working for Zomato or Rapido, typically have long shifts of 12 to 14 hours, carrying various loads. Our 12,000 bikes are now spread across five countries, rapidly expanding in West and East Africa. We’ve completed six million swaps.
Q. Initially, you offered an electric motorcycle for free to anyone who brought in a working old bike, along with a package for seven battery swaps at around $5. Can you clarify how this works?
A. Our model has evolved since its inception. Initially, we did have a promotional campaign offering seven swaps. We have transitioned from manual to semi-automated operations, and the number of free swaps has been reduced to three in some markets, after which customers must pay.
On average, customers pay for a daily bundle that includes the vehicle and energy network access. This price is indexed to the cost of gasoline to ensure that owning an electric bike is cheaper than a gasoline-powered one. It’s important to note that in some markets, fuel prices are regulated, so even if oil prices fluctuate, the pump price remains unchanged for extended periods. This presents a challenge as we need to navigate these constraints while still providing value to our customers and ensuring profitability.
Q. So, both the motorcycles and the battery swapping stations fall under your purview?
A. We manage the entire value chain, including developing the energy network. Based on my experience across various markets, I am solution-agnostic. While battery swapping might work well in urban areas, it’s not always feasible in remote parts of sub-Saharan Africa. In such cases, we must find a charging solution that suits the customer and the fleet operator, even if they are far from urban centres. Electricity supply can also be challenging in some parts of Africa, unlike India, where load shedding is less of a concern. To address this, we are exploring options like solar energy, especially in areas with high electricity tariffs and unreliable supply. By leveraging renewables, we aim to reduce the operating costs of our network and provide a sustainable solution for clean mobility.
Q. Given the 2.2 million two-wheelers in Kenya, with only 10% targeted for energy evolution and 3% in remote areas, is it practically viable to set up a large renewable energy network?
A. Yes! In Kenya, where there are ten major commercial cities, a distributed solar network can offset 50-60% of energy costs, reducing the operating cost of running a swap network. Renewable energy is one lever to pull to run a network profitably, alongside others like franchising, which can expand the network with a lower cost structure, market by market.
Q. Given the six million battery swaps and the high cost of batteries, would the recurring capital expenditure be a challenge in the long run?
A. This is a significant challenge that the industry needs to address. It involves a trade-off between cost, quality, and performance. Rather than over-engineering a product for a small market segment, developing a product that meets safety standards and works for a larger addressable market is more sustainable. With ongoing innovations in cell chemistry and battery performance, we can expect improvements in energy density and well-designed packs. Additionally, government distributed manufacturing and policy support can contribute to a more sustainable business model. Ultimately, the goal is to produce an affordable, mass-market product, akin to a Toyota, that is reliable and cost-effective.
Q. Do you see the adoption of electric two-wheelers among individual users in India and Africa increasing, or will it remain limited to the industry we’ve been discussing?
A. In Sub-Saharan Africa, the adoption of electric two-wheelers among individual users is currently low due to low disposable incomes and a lack of public transportation. However, as urbanisation progresses and disposable incomes increase, we can expect a higher propensity for individuals to purchase two-wheelers. In India, which is ahead of Africa in urbanisation and two-wheeler ownership, there is already a higher inclination to buy two-wheelers. The lack of public infrastructure could be a tailwind for EV adoption, especially among the younger population who prefer EVs over gas bikes. The key is for companies like Spiro and its partners to create a robust network and infrastructure, including battery swap and direct charging solutions, to alleviate concerns and encourage individual adoption of electric two-wheelers.
Q. Young population and first-time two-wheeler buyers! Is that the right target audience for the EV industry?
A. Yes, several factors could influence this choice. Government policies and regulations are playing a significant role. Several countries plan to ban the sale of ICE two-wheelers by 2034. Other East African countries will likely adopt this regulatory push towards EVs. Additionally, all governments are looking to reduce their dependence on imported fossil fuels, which hurts their currencies and economies. Health concerns related to fossil fuels are also a factor. Combined with economic parity, these elements are likely to drive a preference for EVs over ICE two-wheelers among the young.
Q. If you were to enter the Indian market, would you consider adopting a model similar to Zypp, which rents out electric vehicles to daily riders, given your experience with Gogoro and Zypp in India?
A. In India, platforms like Zypp act as marketplaces, matching demand and supply while optimising drivers’ asset utilisation and revenue potential. These models are evolving, with commercial riders becoming micro-entrepreneurs focused on maximising their earnings. At Spiro, our business model would be centred around supporting the rider’s journey to maximise revenues. In some markets, we might be similar to Zypp, while in others, we could partner with Zypp equivalents to ensure high utilisation of our bikes and swap stations. Our primary focus would be meeting the riders’ needs, which is the core of our business, before considering expanding into the retail segment or B2C.
Q. Where do you see the potential for collaboration between India and Africa in the commercial EV sector?
A. There is significant potential for collaboration between India and Africa in the commercial EV sector. India has taken initiatives like the Advanced Chemistry Cell (ACC) program, focusing on LFP-based cell chemistry, which aligns with the need for lithium sourcing and refining in Africa. Joint ventures in cell manufacturing and sourcing are promising areas. The mature Indian supplier ecosystem offers opportunities for partnerships with African SMEs, potentially through alliances or joint ventures. Additionally, Indian companies like Bajaj and TVS, already in the African ICE vehicle market, can explore EV localisation in Africa. Strategic sourcing and technology transfer between India and Africa are key, along with upskilling local talent in Africa to build capabilities.
Q. Are you sourcing from India, or is that part of a plan?
A. We are actively conducting market research and exploring opportunities for scaling up in Africa. Our engagements with African governments aim to build an ecosystem where Spiro is an anchor tenant. One of our group companies operates large-scale industrial zones, where Spiro could be a key client. The idea is to establish collaborative partnerships with suppliers of mechanical and electrical components from India and other regions to create a robust supply ecosystem in some large markets. The potential for this is quite significant.
Q. But a lot would want to partner with China?
A. The design of these vehicles is tailored to specific requirements, and this has been an evolutionary process. Initially, some of the bikes were imported from China, but we soon realised the need for modifications to suit the local customer needs and terrain. We have started last-mile assembly in these markets, and gradual localisation will occur as we move forward. It’s important to note that while some mechanical components are locally produced, the supplier ecosystem in Africa is still in its early stages of development. This presents both an opportunity and a challenge for us.
