Andy Palmer, a British auto industry magnate and vice-chairman and CEO of Ashok Leyland-backed Switch Mobility, says, in addition to the electric buses, the company is gearing up to launch a series of electric LCVs next year and an electric van by 2025. In an interview with Nabeel A Khan, editor, ETAuto, Palmer reveals the battery strategy and how the company plans to be competitive by adopting common components and batteries across platforms and by using the advantage of India to take on the Chinese rival BYD in the UK and Europe. The edited excerpts.

Q. You said, BYD has China, and Switch has India. Can you elaborate on it? How are you going to leverage the India advantage?

I'm sure that you've heard this many times. But most car companies look across the map, and they work out where's the cheapest place to buy at an equal level of quality. And right now, the cheapest place in the world to buy good quality is India. China also is good, but not as good as India.

There's no point in having that capability if you don't use it. The drive for the 12-metre bus in India and the 12-metre bus in Europe has 75% commonality. This would mean a massive cost reduction in the UK or Europe though less in India. But it's a win-win for both sides. And yes, that means that we'll source parts from India.

Q. What is your short-term and long-term target in sourcing from India? Have you got the suppliers on board?

For the 12-metre vehicle, yes. For the nine-metre vehicle, where we see 67% commonality, not completely yet. The European van is further down the road. It's not until 2025. So, I can't tell you except that, for example, the chemistry that we use in the battery is common across all of those products and that is NMC, a combination of Nickel, Manganese and Cobalt. And, ultimately you get the buying power.

Q. What’s your battery strategy to bring down cost? You have a Chinese cell supplier in India, How is it going globally?

In India a Chinese supplier, yes. And it's different for the UK which is a Korean supplier, LG Chem. That's not going to stand still, you know, the chemistry is changing, the law or the regulation on localization is changing. So obviously, the rollout of our battery strategy is also changing.

But yeah, we evolve with the battery. And we get to a point where we have commonality across all our cells. That means we are able to buy a big volume and we are also able to get the attention of the other cell manufacturers. So commonality is clear. And even between an Indian LCV and an English double decker vehicle, you have commonality, for example, they both use a 650-volt system. They both, therefore, use the same cell and that is automatically 40% commonality. Thus we can become similar to BYD, as far as we're leveraging our advantage of a footprint in India,

Q. If I understand it correctly, commonality means all these will be produced in India and then brought to the UK and other markets?

Well, it does in general. It also puts the Indian supplier under some pressure, because it does mean that you could go the other way. You know, price, quality, cost of delivery and the like are always matters of competition. We have a check and balance. But basically, the point is that you want the same part number. If you don't get the same part number, you want the same supplier, preferably from the same factory. So if that's your principal, and you have an open competition, normally the Indian suppliers should win.

Q. Between lithium iron phosphate (LFP) and Nickel, Manganese and Cobalt (NMC), what is the cost differential right now?

In the open market, there is a difference - LFP is cheaper. Let's say LFP at purchase price is about 20% cheaper. But you need significantly larger space, weight, and cells. So if you go for NMC you get higher energy density. And what you're able to do is, for example, for the same distance, you can have increased payload because your battery is lighter because your GVW is controlled. So it depends on where you put the value.

If your value is simply one of the lowest bills of material, then LFP is okay. If your point is value, then NMC is better in my opinion.

Q. I just want to understand if hydrogen ICE is very challenging when it comes to safety. Because even if there is a leak, you can't feel but it's really dangerous. Have we been able to fool-proof that and we have seen that as one of the best options for large trucks and buses?

In terms of what should be electric, the number one in the list should be the urban bus. Because certain buses go 100 miles a day. The most efficient and the lowest cost way are electric. The second is light vehicles; more than cars, they should go electric.

And you have the discussion about heavy goods vehicles. I personally think that hot hydrogen is the right technology because it utilises about 80% of the internal combustion engine. And the main challenges, of course, are cost and NOX. So you have to manage the NOX.

Then, is the technology mature? The answer is no. It still needs a lot of work and development.

But to me, it's probably the easiest step for HCVs. You probably go CNG and then hot hydrogen. The question is, do we ever get to choose up? In my opinion, we'll see synthetic fuel. And I think we'll see synthetic fuel because it will be used in aircraft.

And some parts of that synthetic fuel could be a very interesting alternative for sports cars, where you want the sound of the engine, and the hydrogen fuel will make sense. For cars? I don't think so, except where there is a very long distance. But I think by the time that you develop something else, the battery capacities will have grown. If you can get to Solid State, and the battery capacity has already overtaken it. So I think hydrogen in passenger cars has always been tomorrow's technology and probably always will be tomorrow's technology.

If you're looking simply at acquisition cost, I think the answer is probably when the battery reaches around USD80 per kilowatt hour; but I don't know when we will reach that level. If you had asked me six months ago, I would have said yeah, probably within the next two or three years. But with the war and the general geopolitical issues, it's gone up. So I don't know. But I still think it's ultimately the right route.

"In terms of what should be electric, the number one in the list should be the urban bus. The second is light vehicles; more than cars, they should go electric."

Q. Coming back to India, what battery chemistry do you think will be right? For commercial vehicles how do you see the adoption of BEV and Hydrogen ICE?

In that sense, India is a champion, and the fact that Switch can be a champion in India is a really useful point. Then if I look at things I'm not very satisfied with as India doesn't have its own battery cell manufacturing capability.

And that's a strategic miss. Because in the future it is the new oil, and you ought to have it and you have got to invest. And I hear a lot of discussions in India, about how we should follow China and we should manufacture LFP. And my view is that we should not imitate China.

India needs to be on the cutting edge of technology. And so it needs to adopt, it needs to be on the path of NMC. Moving to high silicon means moving to sulphur and sodium and eventually to solid state; it needs to be on that route.

Q. Why do you suggest that?

I think there's a tendency to view the Indian market that comes back to the Datsun mistake, that is everything has to be low-cost. And I think India isn't that but the point of India is it has to be of good value.

And when you look at NNC, it is more expensive than LFP, but it's more efficient and you can put in more power and you can use less. So my sense is, Indians as customers can smell value. And that's different to a foreigner sometimes looking in and saying oh, it just went cheap.

I'm sure, you know that we chose not to participate in the CESL. And I don't say that CESL is bad. I don't think the idea of aggregation is quite good. And India is leading the world in terms of mobility as a service, so rupees per km and that's to be admired. I think the warning sign is not to make it a race to the bottom. So if everybody is just bidding based upon price per km, then ultimately, it's the customer that suffers, because you have to cut some quality or you have to cut some function to get the cost down.

So I would say, don't take a manufacturer that's not committed to net zero carbon. Don't go to a manufacturer that's never built a bus before, don't go to something that's going to compromise on quality.

Q. So, how are you going to compete with the manufacturers who are focusing on acquisition costs and winning government tenders?

I will tell you a little story. When I was at Nissan, I was responsible for pickups. And one of the most profitable pickups for Nissan. Really good quality, well-priced pickup. And we were selling well. And then the Chinese came with a copy. And at the beginning, they started to have an impact on our market share. People started to buy it because it was 25% cheaper than the Nissan one. We know that they never did a repeat purchase. So my view of business is to stay at the quality and stay true to your ethos. If you lose some orders as a result, it's okay.

Now look, at Switch we're winning orders. I mean, we have launched the double decker. We won that 200 units based upon a very high quality product, a very innovative product. It uses NMC batteries, it is net zero carbon and is sold on rupees per km so we can win those and we got 6000 orders in the book, more than enough for a few years of production. So we're seeing a win-win situation. But we won't compromise our ethos.

That's the keyword and I don't want the brand to be a brand of poor quality. I want people to think about Switch as an automotive saving the world.

Q. So you will not be participating in CESL?

Well, I've had a number of conversations with CESL and I've expressed my concern and you know hopefully over time they'll make sure that the pre-qualification criteria is set in a manner that would allow Switch to compete.

Q. The 6000 order book that you have is for what kind of products? And when do you plan to produce them? And I'm sure you have huge plans in Europe and the UK also. So how are you going to go about that?

Well, we're building plans. So for example, in Spain, we're building a new manufacturing plant. In India, we've doubled our capacity. The Spain investment is about USD 20 million before incentives.

Q. How is your fund raise programme unfolding?

We've taken our time. We have a very aggressive plan because we intend to be the only other global EV bus maker than BYD. BYD has the advantage of China, we have the advantage of India. So obviously you need to fuel that ambition with new products. You've seen us launch three new products in the last two months in India and Europe. And yes, we have spoken about USD 200 million in the short term.

"We are raising at both levels about USD 200 million for Switch and another amount for OHM mobility, from different investors. Switch investor is more capex, and a more traditional private equity firm. Whereas OHM, which is basically the mobility service, is more like an annuity, long term money."

And perhaps something similar in the medium term also. We want to find the right partner. We're not interested in IPOs. Also, we need partners that have the same vision as ours. We are raising at both levels about USD 200 million for Switch and another amount for OHM mobility, from different investors. Switch investor is more capex, and a more traditional private equity firm. Whereas OHM, which is basically the mobility service, is more like an annuity, long term money. But yeah, we're raising them both.

Q. How much do you expect to raise?

I'm not gonna answer that question. What I can say is that we have raised. We wanted to have an anchor investor. And so we chose Dana, because they could also help us with other things. As an anchor investor, they came in at USD18 million. So it gives you some context. And as I said, our intention was never to be boom and bust. So our intention is gentle value creation.

Q. You're also very aggressive on electric LCVs. How soon are you going to launch?

I'm not going to open your Christmas present before Christmas. But yes, clearly we are in the light commercial vehicle business.

Q. Next year, you're launching?

Yeah. Yeah.

Q. So how many of them are for India, UK etc?

So there's gonna be a series of light commercial vehicles for India. You know the market where we are good at and where we are not good at. We are going to try and have a complete offering. And then, in around 2025, we launch a van for the Western market. Price point is very different. So what you see is that there are two types of market. The emerging market which is value sensitive, and the emerging market which is more expensive. By covering these two, we're one of the unique companies that have an understanding of both. Then we're in bus and van business. Within the bus, I would say that we have a nine metre platform and a 12 metre platform, single Decker, Double Decker, low floor, medium floor high floor.

So, contextually if you want you have those three basic platforms. The key is the commonality between Europe and India. For example, on the 12 metre bus, we have 75% commonality by value giving enormous benefit for selling in Europe.

But it even has volume benefits for India. Then we have our light commercial vehicles, the two types, one which is very orientated towards low cost, low entry cost, and low running costs with a small battery. And then you have another one which is more around the Amazon type of model for the UK and Europe, which is scalable. So the point of that is that rather than forcing Amazon to adapt its business to your van, you adapt your van to its business. That's broadly speaking, I would say, the way we see the product portfolio is looking.

Q. Are you looking at SCV (small commercial vehicles) also like Nissan-Ashok Leyland Style in electric?

Yes, I told you the intention is to have a complete offer, from sub-two tonne. However, LCVs will come first.

At the beginning, we have to establish the name of Switch and so OHM interfaces with fleets where you're doing the mobility as a service. And so it's an exclusive pipeline for reaching those types of customers. So, Switch only sells to OHM and OHM, only buys from Switch.

Q. You have 6000 bookings, how many of them for Indian companies and how many from overseas?

First of all, so that we don't confuse 6000 with other big numbers, these are actual orders. The vast majority of them are Indian. I think 180 in Spain, and a smaller number in the UK. The UK is stuck at the moment, because of the government's funding of the space. That will change over time.

India was almost nothing two years ago. The UK was big. Now it's the other way round. But what we know is that Europe will grow because it will be the largest CV market in the world. So we're speculating on the long term.

Q. How do you see the collaborations among rivals to develop EV platforms and product, will you be open to such alliances?

Theoretically, it sounds good. But practically they are competitors. Okay, you would say, Nissan and Renault, and Mitsubishi also created. It's not as good as it sounds. There are negatives of collaboration, as well as there are positives of collaboration. If you're collaborating, then you have to compromise on something. If you're doing it by yourself, then you can be very sure about it. So I'm not negative to the possibilities of collaboration, as long as it doesn't move us from our core values. And the ultimate core value is net zero carbon.

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Courtesy: ET Auto.