Ather's Swapnil Jain: Indian Entrepreneurs Haven't Fully Understood the Value of Patents

Around 2013, some of the existing OEMs [original equipment manufacturers] were selling EVs [electric vehicles] in the country, but they were of very poor quality. Vehicles were running on lead-acid batteries, which meant they couldn’t go at higher speeds. 

These were all Chinese designs and Chinese imports. The build quality was such that probably within two years, the vehicle would fall apart. People doing this business had no idea about the engineering behind it.  

You had to build the technology from the ground up—the technology required for the battery, the battery-management system, the motor controller and even the general EV architecture.  

That was also the reason we believed that, as a start-up, we could make an impact here. If this were an established industry, then as people of technology, we wouldn’t really have much to contribute.  

But if you are an engineer, you have to pick areas where without technology, you can’t win. As a country, we don’t have a very deep pool of R&D talent. That means competition is limited.

It depends on what you are buying. If you are buying a commodity, then it will be cheaper to buy from China or from anywhere scale exists. There are certain areas where it is very difficult to beat China because of scale—like lithium-ion battery cells or semiconductors.

But when a product or technology is unique to you, it doesn’t make sense to buy that technology from outside. The battery pack is a good example. The cell, in a sense, is a commodity, but the battery pack is not. It is very specific to your application. It defines the life and architecture of the product.

As an OEM, it is very important to optimise cost at the product and system level, rather than at a component level. That’s where many people get it wrong.

They look at individual components and say something is cheaper in a particular place. But if you put the system together intelligently, you can make it far more optimised for your application.

Let’s be clear about us doing it versus India doing it. Do I believe India should manufacture cells? We definitely believe that.

The reason we say Ather should not—or will not—do cell manufacturing is that cell manufacturing is a business of scale. You cannot make money, and you may actually end up losing money, if you don’t have scale.

If you look at global cell manufacturing companies, only those with capacities above about 100 gigawatt-hours are profitable. Anything below 100 gigawatt-hours tends to have very low margins, and some even have negative margins.

The entire Indian two-wheeler ecosystem put together is only about 20 gigawatt-hours—not just EVs, the entire two-wheeler market. At that scale, we are not convinced that it makes sense for a pure-play EV OEM to manufacture cells today.

Plus, cell technology is still evolving. If you invest in a particular technology and a better one emerges tomorrow, you may have already invested ₹2,000 crore in capex that could quickly become obsolete.

Cell manufacturers typically serve multiple industries—not just automotive. The same cells can be used in energy storage, power tools, laptops, drones, and many other applications. That flexibility makes the capex viable.

But as an automotive OEM, I want maximum flexibility. If sodium-ion becomes the best technology tomorrow, I don’t want to be locked in because my entire plant is built around lithium-ion. Until the technology becomes stable and less volatile, I wouldn’t want to invest large amounts of money into it.

It’s extremely important to choose the right investors.

Not every investor is patient, and if an investor doesn’t understand the business, they can push you into doing things that aren’t right.

We were fortunate to have investors who allowed us to build with patience, while also ensuring that we scaled at the right time. Thankfully, we never faced pressure from investors asking why we weren’t immediately making money.

Those, who understand how the hardware businesses work, are not likely to insist that everything must be done in two years.

If you are confident that what you’re doing is right, then one or two years up or down doesn’t really matter, because you’re building very strong fundamentals that are hard to shake in the future.

I don’t think founders should worry about investing in R&D, because as a technology company, if you’re not investing in R&D, then what is your moat against any new player that comes in?

The only question is how much is good enough before you start making money. In our early days, maybe we went a bit overboard with everything we built.

You don't want to get trapped into thinking, “I’m doing R&D, I’m doing R&D.” It may sound good as a founder, but you might be doing R&D on the wrong things. That’s why starting to see some results is important—not because of investor pressure, but to understand the market better and assess whether you’re investing in the right areas.

So, new founders need to figure out the right balance between investing in R&D and putting a product out in the market.

A lot of people look at patent filing as an activity, which is a misconception. A patent is not adjacent to the business. It is a part of the business.

Many patents are filed just for the sake of it, to show that “we have filed a patent.” They actually have no real value attached to them.

If your patents don’t have real-world value, they are useless. That’s where you start thinking that patent filing is adjacent to running the business.

But if you are generating IP [intellectual property] that is directly important and of strategic value to your business, then obviously you want to protect that IP first before it goes into production. 

As a country, we haven’t fully understood the value of patents. We’ve been comfortable with a rent-seeking approach—making money from what we already have   

As global pressure increases, people are beginning to realise the importance of owning technology.

You have to build the right kind of organisation, because sometimes R&D doesn’t happen due to organisational structure rather than lack of funding.

It’s a leadership problem—how leaders think, how they expect engineers to work, whether they allow creative freedom and whether they expect outcomes.

There’s a reason some companies are good at R&D and others aren’t. If the organisational culture is not conducive, R&D gets stifled. The same people go outside and get things done, which means the issue is with opportunities. And opportunities are created by leaders.

You have to create people, systems and processes—everything that seems boring for a start-up. Unless you do these boring things, you can’t scale...If you’re really building a product company and a valuable organisation, you have to build an institution.

We’ve seen this with some ex-Ather employees. They’ve gone on to other organisations and influenced R&D there, or started their own startups focused on R&D. That’s how the cycle grows—provided the environment is right.

One thing that their political leadership recognised, and which seems to be happening in our country as well, is that technology is very critical.

They started very much like us, as part manufacturers. But they realised that it would have no real value.

Factories would move to wherever labour is cheapest. So, they started investing heavily in technology. One advantage they had was that they made failure very easy. They kept putting in money; even if you failed, it didn’t matter.

They have hundreds of four-wheeler EV start-ups. Maybe only BYD or probably Xiaomi will succeed out of those, but the fact that they allowed all these people to experiment changed the culture there.

I’m very hopeful that the same thing will be applicable to us with the ANRF [Anusandhan National Research Foundation] funds coming in and some of the discussions happening around technology.

With this kind of money, start-ups have an opportunity to bring large disruption and make big players uncomfortable. You can always put trade barriers on something coming from outside and get away with it. But if someone within the country builds technology that disrupts you, then it becomes very difficult to defend. 

That will start another cycle, forcing big players to invest more in R&D. So, it’s a good catalyst to start this innovation cycle. 

People say they don’t have money. That’s not true. If you look at the top-500 companies in the country, they have enough cash. But how many of them are actually investing that cash into R&D? That’s an important metric. 

Most of the current generation of leadership probably hasn’t seen much value generated out of IP. What they’ve seen is value from putting up more plants. 

You buy technology from somewhere, do a JVC in technology, and as a country all you do is print parts and run factories. We just run factories—and even that, we don’t do very efficiently. 

Unless leadership has seen how technology can impact business, we are not going to get out of this cycle. As a country, once enough people start doing serious R&D, another virtuous cycle begins. You create a pool of people who understand good R&D, and they influence others.