Cut to July 2024, and a lot has changed. Jaggi has shifted to a bigger, swankier office deeper in Gurugram, with dedicated parking and elevators for employees. And he is no longer cribbing about the lack of cars. The slowdown in the growth of electric cars—Tata’s EV sales have declined year on year for the last four months—means it has gone from a seller’s to a buyer’s market in a matter of months. “Sales executives from companies now regularly show up at my office looking to strike a deal,” Jaggi told Mint.

Fresh from a trip to London and dressed in his usual crisp white BluSmart shirt and blue turban, Jaggi has other concerns now. While he maintains demand for rides is strong and growing, scaling up would require more charging points. This is a major pain point that is also impacting demand for electric vehicles in general. In the case of BluSmart, which prides itself for being a full-stack EV ridehailing firm (unlike Ola or Uber, which dabble in everything), it means the company will have to do the capital-intensive heavy lifting to set up a bunch of charging stations.

“As our fleet expands, we have to increase the number of chargers. We have to go with the flow of the city. There are two peak periods, morning and evening, where we want all cars to be charged. To do that we have to keep adding chargers,” said Jaggi. “The charging point comes first and then the car. Getting the car is no longer a big problem, nor is financing. Charging is where we need to speed things up.”

Currently BluSmart has 50 charging hubs to support its 7,600 cabs. But given that the company plans to have around 30,000 cabs by 2026, it would need to quadruple the number of charging hubs and stations.

That, however, is an added burden and one that the company did not foresee when it started out in 2019. Unlike its rivals, who follow an asset-light aggregator model (cars are owned by the drivers and the companies charge them a commission for providing customers), BluSmart owns all the cars in its fleet and employs drivers on monthly salaries. The cost of the vehicle remains either on the books of the company or with third-party lessors. The cost of charging infrastructure is a separate cost, adding to BluSmart’s capital expenditure.

The asset-light model keeps costs low and aids a quick scaleup but loosens control over the consumer experience as platforms have limited say with drivers, leading to issues such as rampant ride cancellations. But owning a fleet is capital intensive and restricts scale up—it has been five years but BluSmart still operates only in two cities. Launched with the twin promises of zero ride cancellations and no surge pricing, it has largely kept its word.

The asset-light model keeps costs low and aids a quick scaleup but loosens control over the consumer experience as platforms have limited say with drivers, leading to issues such as rampant ride cancellations.

“Both models have their pros and cons but it is interesting that besides them nobody has been able to continue with the asset-heavy model,” said Rohan Agarwal, partner, Redseer Strategy Consultants. “This is a fast-evolving segment and business models will change. I am not sure if they can continue following this model forever.”

In a highly competitive industry that is not immune to disruptive forces, BluSmart has created a niche for itself. In the process, it has also found a clutch of backers, including trophy investors such as Bollywood actor Deepika Padukone, and more recently, former Indian cricket captain M.S. Dhoni.

A potentially long grind with more challenges awaits.

Chasing profitability

The pivot to setting up charging stations before it can deploy more cabs on the road has extended the firm’s road to profitability. From just 70 cabs in 2019 to 7,600 in 2024, the company has expanded its fleet at a decent clip. It has also set up 50 large charging hubs—37 in Delhi NCR and 13 in Bengaluru. Each hub can charge around 150 cars simultaneously.

Charging and cab hailing are now two separate businesses for the firm. Although cab hailing is the significantly larger business, the company is trying to improve the finances of both businesses. For charging, that means reaching out beyond its own BluSmart cabs to third-party fleet operators to offer this service.

“The utilization at our charging stations is low, at about 22%. The target is to get to at least 40-45%,” Jaggi said. “There is definite potential for non-BluSmart cabs to account for 20-25% of business. We have only now opened them up for others and they account for less than 2% right now.”

The company claims that at a standalone level, the charging business is profitable. The tariff has been designed so that charging hubs break-even once 20% utilization levels are reached, said Jaggi. Anything beyond is a direct addition to the bottom-line.

The cab business, however, continues to burn cash. Jaggi said the unit economics is such that each cab should do about nine trips every day to break-even. Right now, they do about seven, up from four trips two years ago. With the expansion of business and its fleet, revenue has gone up from ₹9 crore in 2020-21 to ₹160 crore in 2022-23. But so has the loss, which has widened from ₹39.4 crore in 2020-21 to ₹216 crore in 2022-23 (see chart).

BluSmart is yet to file results for last financial year but claims its revenue has risen to ₹390 crore with a relatively smaller increase in losses.

To make matters worse, acquiring new cars in future will be dearer with the end of the FAME-2 scheme, which offered ₹10,000 per kWh subsidy for cars meant for a fleet. For the XPRES-T EV sedan, which comprises the bulk of BluSmart’s fleet, it meant a discount of ₹2,15,000. Even if the subsidy comes back under FAME-3, which is likely to be announced in the next few months, it is expected to be much lower.

“We are bothered if the utilization is low. Our service isn’t an issue (but) availability is. If we can provide you with a cab anywhere in Delhi NCR in five minutes, we will have infinite demand,” said Jaggi.

To aid profitability, the company introduced differential pricing earlier this year, dismaying some, who likened it to another form of surge pricing. It now has 30% higher fares during rush hours—8:30-10:30 am in the morning and 5:30-8 pm in the evening on weekdays for city rides, and 3:30-6:30 am in the morning and 9 pm to 1 am at night for airport rides on all days. The company said this was done to adequately compensate drivers, who ended up making fewer trips in these slots.

“How soon can we cover the entire geography and reduce waiting time? The hindrance is the number of cars and charging stations. Once we have an ample number of EVs on the road and are able to meet customer demand, our losses will automatically narrow sharply,” Jaggi added.

Fewer cars, fewer trips

BluSmart Riders need to book a cab at least 40 minutes in advance on an average. The company’s EVs are not available to consumers on the go because there just aren’t enough of them. It has 6,000 cabs in Delhi versus Uber’s 50,000, and so making them readily available, especially during peak hours, would lead to a lot of cancellations as it would not be able to service all bookings.

Another reason to have advance booking is to make optimum use of the range instead of having cabs cruising while they await fares. For instance, the Tata Xpres-T EV sedan, which is the most common BluSmart cab, has a range of 210-230 km, which is good for at least four trips before its battery runs low.

Also, while it does not have surge pricing, BluSmart’s fares are 10-20% higher than the others—depending on their surge pricing rates. As a result of all these factors, the number of trips a BluSmart cab makes is far lower than an Ola or Uber cab. On average, an Uber cab makes 10 trips every day against seven for BluSmart.

But overall, because of its small fleet, BluSmart does about a third or a fifth of the total number of trips Uber’s fleet makes in a month.

Indeed, there is a buzz in the market that BluSmart is struggling to get enough customers in the off-peak hours, between 11 am and 5 pm and has sounded out rival aggregators for a potential tie-up. If true, that could mean Jaggi’s target of achieving break-even in the next two years is too optimistic.

Missed targets

Profitability is not the only target that the company has missed in the last few years. In 2022, it was targeting a much grander scale-up, with a fleet size of 100,000 cabs by 2025/26. But that deadline is likely to end with BluSmart having a fleet of around 30,000 cabs.

Other misses include plans to launch a three-wheeled reverse trike vehicle developed in-house, as well as a small four-wheeler. Jaggi had set an aggressive deadline of launching the three-wheeler by August 2023 and the four-wheeler by January 2024. Both vehicles, which are being developed and are to be produced by Gensol EV, a subsidiary of Ahmedabad-based solar firm Gensol Engineering Ltd (also owned by the Jaggi brothers), are facing delays.

“The plan for launching the three-wheeler is on. The delay is due to testing. We thought it would take six months but it has taken 18 months. Now that is done, it should be in the market by December,” said Jaggi. “The car is still in the design stage. We will start building the factory for it only after the three-wheeler is launched.”

With the focus on profitability and pushing up utilization of its charging stations and cabs, it has put plans to enter other markets, including Mumbai, on the backburner.

“Right now we are going easy. The focus is on the two markets, Delhi NCR and Bengaluru, which is 45% of the whole cab hailing market. If we enter Mumbai now, it will take time to get to four trips per day then another year or two to get to six trips and then on to nine when we break-even. We don’t wish to rush now but consolidate,” said Jaggi.

Beyond India, Blusmart entered Dubai with a fleet of 100 Audi e-trons and has plans to expand that fleet threefold in the near future. Again the reasoning for the diversification was better margins. As in India, the Audi e-trons are either owned or leased by BluSmart.

The focus is on the two markets, Delhi/NCR and Bengaluru, which is 45% of the whole cab hailing market.
— Anmol Jaggi

“The Dubai market presents a highly attractive opportunity due to its potential for significantly higher margins and profitability compared to India. Average order values in Dubai are four times higher than in India, translating to a projected revenue per car, per day of ₹15,000-20,000, as opposed to ₹3,000-6,000 here. In addition, the UAE has a strong EV charging infrastructure,” said Punit Goyal, one of the seven co-founders. “We identified a market gap in the premium limousine segment. There is a significant demand for mobility in the peak season from September to March.”

Funding spree

While it had to realign its targets on multiple operational fronts, BluSmart has managed to stay on track on funding, albeit after facing some hiccups. In 2022, it had to put off its mega Series B $250 million funding round due to a disagreement between an existing and an incoming investor.

The company has raised $136 million since launch. The bulk of that money has been raised in the last 18 months, since the cancellation of the $250 million round, including a recent Pre-Series B funding round of $24 million ( ₹200 crore). The fundraise saw participation from new and notable investors, including responsAbility Investments AG (a leading impact asset manager); Sumant Sinha of Renew Power; M.S. Dhoni Family Office; existing investors, and the BluSmart founders.

The money was raised at a time when the Indian startup ecosystem was experiencing a prolonged and severe funding winter. Clearly, there is no dearth of backers for BluSmart, even at a time when the overall electric mobility narrative has lost some of its sheen. What explains this?

“The ride hailing industry itself is tipped for healthy double-digit growth. It has already surpassed pre-covid numbers and the growth is coming from companies that are bold with their innovations—either on different form factors, thrust on more affordable rides, business models like zero commission, or electric mobility,” said Agarwal of Redseer.

“In four-wheelers, (there is) a very small but fast-emerging premium segment. Electrification will be a big driver in future.”

BluSmart believes it will be able to leverage this headstart by the time the others get around to firing on all cylinders on EV cabs. “On an operational cost basis, nothing can compare with EVs. We should not read too much into the temporary decline in sales of electric cars because in a fleet, the use cases are different,” said Goyal. “It is good that others are not that serious right now. It gives us more scope and time to scale up. By the time they get serious, we will be out of reach.”

In four-wheelers, there is a very small but fast-emerging premium segment. Electrification will be a big driver in future.
— Rohan Agarwal

Unlike other startups, a key feature in each fundraising round by BluSmart is the active participation of the promoters, with the Jaggi brothers leading the way.

In 2023, for example, the promoters repurchased a 2% stake that US venture capital fund Mayfield India held, giving it a 100% return on investment over four years. The seven promoters—Anirudh Arun, Tushar Garg, Rishad Sood, Rahul Jain, Goyal and the Jaggi brothers—hold a 35% stake in the company. Through ESOPs, employees own another 9% in BluSmart.

“If the business is great, I should own a very large portion of it. We have a 35% stake now but I want to increase it to 50% or more. If the business is not great, only then reduce your stake,” explained Jaggi.

If that was a dig at Bhavish Aggarwal of Ola Electric, who is diluting his stake in the company’s (initial public offering) IPO, it was a thinly veiled one.