Electric Blue | Outlook Business
Home  /  Enterprise  /  Big Idea  / Electric Blue | NOV 04 , 2019

Big Idea

Electric Blue
Walking is tedious and short cab rides are tough to get. Yulu, with its shared bikes, offers the next ‘woke’ mode of transport

Hari Menon

"We had to visualise how the shared-mobility product would look and understand consumer habitsAmit Gupta, Founder and CEO, Yulu

Living just a few kilometres away from a metro station or a bus depot is always a boon. It gives such joy, not having to shove your car into every space that opens up in a traffic jam or not having to dissolve into incoherent road rage. The bane, however, is that journey from home to the public transport hub. The shared auto stand is too far to walk to, and Ola or Uber booking makes no sense for just a one or two kilometre ride. You could take your vehicle, but the pain of finding a parking spot! Now, what if you could just hop on to a bicycle or a two-wheeler, waiting for you at a lot in your neighbourhood? It’s convenient and you get to brag about going green. 

That’s the solution Amit Gupta began working on, when he decided to not retire by 40. He was already a successful entrepreneur at 30 for founding InMobi in 2007, the mobile-based advertising platform, and retirement would have been easy but boring. He was living in Bengaluru, a city known for its infamous traffic. So, in 2016, the IIT Kanpur-grad brought together fellow alumni RK Misra and Naveen Dachuri along with childhood friend Hemant Gupta to put short-commute woes to rest. Thus, Yulu was born.

Making Miracles

Although ‘last-mile mobility’ is a trending subject globally, few companies in India have seen much success. Out of all the players in the field, Yulu boasts the largest electric vehicle (EV) fleet. Ventures such as Bengaluru-based Bounce and Rapido are well-known names in their home ground, while Mobycy is yet to make waves and Zoomcar has temporarily phased out PEDL — its bike-sharing service. 

All of these are accessed through a smartphone app. Once you spot an available bike through Yulu’s app, you switch on your Bluetooth and scan the barcode on the bike. The IoT-enabled bikes are unlocked once paired to your smartphone, and you’re good to go. Through it all, make sure you have some cash loaded on the app. 

The bike-sharing service offers two types of vehicles right now. One is the Miracle, the electric scooter that doesn’t even require a licence to ride. The other is Move, a regular bicycle for the days you feel particularly fit, or missed your leg-day at the gym. Now you don’t have to wait for the cab driver who can almost never find your location without at least calling you thrice. 

It’s definitely an advantage and the biggest cab aggregator has taken notice — Uber has partnered with the start-up to run pilot projects in Bengaluru. Essentially, the Uber app will host the option for locating and unlocking the bike. 

Kaushik Madhavan Vice president-mobility, Frost & SullivanOne can find a Yulu bike from a Yulu zone and drop it back at another. These hubs are built over select areas in a city, identified according to demand. For example, you will find a Yulu zone every 200-300 metre in Electronic City, Bengaluru. You can also leave it at motorcycle-parking spots, but if it is out of the app’s coverage area or more than 500 metre from the zone, you’re likely to attract a penalty. Kaushik Madhavan, vice president-mobility at Frost & Sullivan, says, “Micro-mobility solutions will be a boon in geo-fenced localities such as gated communities, tech parks, and vast college campuses.” Yulu must know it too because it has established tie-ups with WeWork, OYO Life, Colive and a few shared economic hubs. This gives the company easy access to users and space to set up its parking zones. 

And there’s another party that plays an important role here: the government. Municipal corporations approach the start-up to build Yulu zones near metro and bus terminals so that fewer people use private vehicles. For instance, every metro station in the tech city has a Yulu zone. 

Besides Bengaluru, which accounts for two-thirds of the usage and assets, Yulu is also present in cities such as Pune, NCR and Navi Mumbai. “Although we are reasonably present in Navi Mumbai, the formal launch in Mumbai is expected to happen soon,” reveals Gupta. This may come as major relief for Mumbaikars since commuting is one of the biggest pain points in the financial capital. Yulu will be present across the entire Western line stretch till the suburb of Malad in the North. 

The concept for Yulu may sound simple and easy, but the team had to develop the business model from scratch. “We didn’t have policy, infrastructure or even a product. We had to visualise how the shared-mobility product would look, get it built, and the most important, understand consumer habits,” says Gupta. You say there are scooters and cycles anyway, so what’s all this fuss? Well, it’s the ‘shared’ bit that needs attention.

Yulu’s scooters have to be easy to ride for people of various heights, they have to survive the smooth riders and the rough ones, and they have to be fuel efficient.

“We tried over 25 vehicles across various formats in terms of weights and sizes — EVs, bicycles and standing scooters,” says Gupta. Then, they decided to build Miracle — an electric vehicle that can be ridden by anyone between five and six feet in height. 

There are videos circulating of shared two-wheelers falling apart from bad handling. ‘Parking’ is done by laying the vehicle on its side, helmets are pilfered and tyres are deliberately punctured for a laugh. “We would go bankrupt if our machines broke down within two months,” says Gupta. The founders, therefore, imagined the worst case-scenario and planned the design. “The minimum life-cycle of our scooter had to be three years,” he says, adding that they got that by using a vehicle that offers top-notch quality.

Wheels on the ground

Out of its two models, Miracle is what Yulu is betting big on; there are already 2,000 of these on the road. The plan now is to boost that number 50x to 100,000 within 12 months. In contrast, Gupta intends to push the 8,000-strong bicycle fleet to a rather modest 15,000. That’s because, except Bengaluru, most cities where Yulu plans to expand to — Mumbai, Delhi, Hyderabad, and Kolkata — don’t have cycling-friendly weather. Delhi has scorching summers and biting winters, while Mumbai is an extremely humid city. 

The company is not making any profit on the bicycles yet. Gupta shares, “We are losing 30 on every 100 made on the bicycle, because people don’t want to pay and put in effort (of pedalling).” But they have still come far from losing the entire 100 on Move, from six months ago. “We have increased asset density over time, which has increased usage. Eventually, your cost and revenue match up. But, is that good enough when you deploy a huge number of bicycles? No,” he adds. 

Whereas, when it comes to the EVs, the business model is already sustainable and the company is making decent margin, claims the founder. According to him, the capex for EVs is 40% cheaper than a petrol-powered scooter. “An average scooter costs about 70,000 and our Miracle costs 45,000. The vehicle has a range of 60 kilometre and can be fully charged in four and a half hours,” says Gupta. 

Madhavan believes the focus on EVs is the right move. “They are effortless to operate; they offer convenience and comfort, and can travel more distance than bicycles. Hence, it will remain the dominant money-making source for Yulu,” he says.

An EV’s operational cost is also an added advantage for any business. Maintenance is lower because of fewer moving parts, and Yulu’s per kilometre running cost is less than 1, while the same for a petrol scooter is about 2. And as the government pushes the use of EVs in the country, the cost of making an EV is expected to drop by another 7,000-8,000, along with the price of batteries. Today, while the operating expense with an EV is half of what it is with a conventional two wheeler, revenue earned from both is nearly the same. 

Gupta believes a consumer is willing to shell out around 8-10/kilometre for a regular scooter or a Yulu EV. “You cannot charge more because otherwise they will shift to an Ola or an Uber,” he adds. That’s because the cab aggregators charge a base fee of up to 40 for any ride, and around 7-8/kilometre there on. Hence, at the current rate, a Yulu EV is cheaper than an auto rickshaw as well, that charges a base fare of 15-18 for the first kilometre and then 12/kilometre there on. 

With 30,000-35,000 trips, Yulu is clocking average revenue of 1.1 million each day. “We make 10 per bicycle trip, but 50 per trip on a Miracle,” explains Gupta. This translates to annualised revenue of about 400 million. And although the company barely broke even in FY19, the management claims that they saw 35x growth over the past one year. 

Navigating speed bumps

The promise is tempting but Gupta is in no rush to expand operations, because scaling up comes with its own set of challenges. If you have Yulu in your city, you’ll often find trucks hauling the neon-blue bicycles and scooters around. “Up to 15% of our assets need to be moved daily, from one place to the other to match demand with supply,” he says. 

Every one-and-a-half days, the batteries on all Miracles are changed and to make that process easier, Yulu has battery charging stations scattered across the cities it serves. “We have proprietary battery charging boxes deployed at our strategic partners such as kirana stores,” Gupta explains. Yulu pays for the electricity usage along with a nominal fee for the space. 

Besides, the company’s central server is updated every five minutes about the battery charge and location of the scooter. The moment it falls below a set threshold of 5-10%, the Miracle is taken off the network. Then, a Yulu Pilot receives a ticket and he heads to the zone to replace the scooter’s battery. The start-up has 120 Yulu Pilots on ground so far. 

But what if the battery gets low when you are riding one? When the scooter hits about 15% charge while you are en route, the app notifies you and directs you to the closest Yulu zone, which would not be more than 500 metre away in high-density areas such as Indiranagar or Electronic City. You can then swap your Miracle for a charged one at the zone. 

Clearly, it’s an asset-heavy model, and Madhavan points out, “Bringing the assets back to the hub after users utilise the vehicles is a challenge. It requires manpower and extra capital. As a result, scaling rapidly will be expensive and also unwise.” Gupta agrees, and says that’s why they are opting for slow expansion. Each city is divided into sectors and sub-sectors, where usage is tested for up to three months to gauge demand.

Vinay Raghunath, partnerbusiness advisory at EY, believes there are ways to work around the asset-heavy nature of such business models. “Some of these could include OEM leasing options for QSR, e-commerce, logistics companies or even monthly rental plan for riders, office campuses, educational institutes and airports,” he suggests. 

The asset-heavy model will need to be addressed surely but Gupta also sees it as an advantage. It could act as a barrier, keeping out players such as Ola and Uber. He explains, “Uber is a software company and has zero assets. We have mastered that art of repairing, maintaining, moving, and managing these assets. Uber can’t do that.”

Nao Murakami General partner, Incubate FundYulu will need funds and Nao Murakami, general partner, Incubate Fund, believes its bigger challenge will be deciding how it wants to raise that money. “Raising VC money will not solve the problem. They will have to get creative with how they raise their money between VC capital, project financing, debt financing, and lease financing,” he says. To avoid diluting ownership in their companies, Murakami believes start-ups should focus more on debt financing. “Since they need to own the bicycles and EVs, debt and/or lease finance is likely to dominate Yulu’s long-term funding plans,” he adds.

While the Yulu team may trust its sturdy vehicles to survive poor handling, analysts do not share the same confidence. EY’s Raghunath says that like any new technology, micro-mobility solutions such as Yulu have attracted a great deal of skepticism around theft, maintenance costs and longevity. “Companies will have to consider sustainability of local operations and target micro-markets that are more likely to adopt these solutions,” he says. 

And even though Murakami has some concerns, he remains one of Yulu’s chief investors, after being impressed with the way they have managed the business. “It’s an operationally heavy model, but the co-founders are experienced entrepreneurs,” he adds. 

In fact, Gupta reveals little when you mention funding, though hinting that another undisclosed round is around the corner. Yulu has to cut its own path and it will, with this serial entrepreneur from Kanpur and his team, who are hungry to see their electric-blue bikes zipping across metros of India.

Here's your chance to read the latest issue of Outlook Business for free! Download the Outlook ​Magazines app now. Available on Play Store and App Store
On Stands Now