Today’s EV startups have two choices for setting up supply chains for EV manufacturing. The first choice is to build a supply chain and the second one is to use knock-down kits. Selection of either choice helps them to achieve their goals but with a compromise. What is their goal and what kind of compromise they have to face?
With the rising crude oil prices, and increasing air pollution; the government has started incentivizing electric mobility through policy initiatives. The OEMs and startups are coming up with a goal to build an EV ecosystem for tapping into the huge market the country offers. To achieve this goal, the startup needs to mass produce electric vehicles. Two choices are available for mass production of electric vehicles. First, they can spend years in building a reliable and resilient supply chain before they roll out the electric vehicles. Second, they can order knock-down kits and assemble the electric vehicle at their plant. A knock-Down kit is a collection of parts required to assemble a product. These parts are manufactured in one country and exported to another country. If a startup opts for the first choice then they have to compromise on their faster go-to-market strategy and they will remain uncompetitive in the market. Also, startups need to spend time in finding the right pool of talent that has the knowledge of manufacturing processes required for producing EVs. Now, it may seem good to opt for the second choice as it can allow faster go-to-market strategy and doesn’t require efforts to find the right pool of talent. But there’s a catch. EV companies and their customers won’t receive any incentives from the government. The criteria for receiving incentives are not met as there is an absence of locally manufactured components. Also, import duty is levied on knock-down kits and it will increase the cost of electric vehicles. Is there any alternative choice that can help startups to expedite go-to-market?
Yes, there is an alternative choice which allows startups to focus on core engineering, manufacturing, and assembly and also allows them to receive incentives from the government. The alternative choice is ‘on-demand manufacturing’: an approach wherein goods are produced only when the customer demands and in the quantity required. On-demand manufacturing provides various benefits which allows it to be considered as an alternative choice.
- Receive benefit of existing supplier network
An on-demand manufacturing platform like Karkhana.io has already spent years in developing a supplier network. The supplier network includes local suppliers having various technical competencies in different manufacturing processes.
- Achieve more focus on core activities
Karkhana.io has experience in electric mobility. The EV companies are at a stage where they are iterating prototypes for testing various features. When the prototype is finalized, the product will be released for production. The core skill of these companies lies in their EV technology, not the manufacturing. They may end up wasting time in finding suppliers, finalizing quotations, learning the manufacturing processes, etc. Trusted partners like karkhana.io can help during the entire prototyping process as well as help manufacturing components for the production stage. Thus, EV companies can focus entirely on doing R&D, marketing and solving challenges of charging infrastructure, battery packs, etc.
- Achieve local content
The components will be manufactured by domestic suppliers and thus the percentage of local content in an electric vehicle will increase. With on-demand manufacturing, 60% of components for 2W, 50% of components for 3W and 40% of components for 4W can be locally manufactured. This will allow companies and customers to receive incentives from the government.
Startups have two choices for their go-to-market strategy. Selecting either of them leads to a compromise in terms of losing on incentives and slower product launch. By opting for alternative choice, startups can hand over the non-core, custom part manufacturing, supply chain management and program management activities to their on-demand manufacturing partner. Thus, allowing them to strategically optimize their resources by focusing only on their core activities of R&D, design, core manufacturing, assembly marketing and sales.