Over the shoulder view of young Asian businesswoman

How organisations can link capital with investible EV projects

Episode 5 of the EV Y podcast explores the investment outlook for e-Mobility businesses, how the market is changing, and what businesses can do to secure capital.

The episode highlights:

Why diversification is so important to secure investor confidence.
How the investment picture is constantly changing for the EV market.
Why sustainable businesses are essential as we look to the future.
How startups can tackle challenges in the early stages of securing funding to grow and expand.

Learn more about the EV Y Podcast.

Podcast transcript: How organisations can link capital with investible EV projects

42 min approx | 7th December 2021

Ade Thomas:
Hello, and welcome back to EV Y, the podcast that asks the key questions in the e-Mobility industry. I'm your host, Thomas, and every episode, I'll be talking to expert guests to delve into the what, why and how in the EV industry. Today's episode is all about investment. As the e-Mobility industry grows, huge amounts of investment cash are essential to ensure businesses can scale up to meet the needs of a mass market. But how can companies in a growing sector prove to investors they're worth the risk? That's what we'll find out today as we ask, “How can we link capital with investable EV ideas and projects?”
Thomas:
To help answer this question, I'd like to welcome our guests for today. Firstly, from EY we have Perkins. Andrew is a partner in corporate finance at EY who has over 25 years’ experience as a financier and is passionate about the environment and reducing carbon usage. Our featured guest is Harper, CEO of GRIDSERVE. Toddington is an experienced clean energy entrepreneur, determined to deliver sustainable energy and move the needle on climate change. Andrew, Toddington, thank you so much for joining us today. To start off, I'd like to ask you both why you're in the e-Mobility sector. Andrew, what drew you into this area?
Andrew Perkins:
I've been advising in the clean energy sector for over 20 years now. And I came from the oil and gas sector, which was interesting at its time, but actually I wanted to be in the clean energy sector, partly because clearly it was clean energy and a positive. Waking up in the morning, it's a positive work every day. And then actually just has been a fascinating area because it's evolved so much so quickly over the last 20 years. And more recently, to your question of electric vehicles, that is a very, very major part of what we do these days, and it's going to be very important to get it right in order to reduce the carbon usage across our roads and globally.
Thomas:
Thanks very much indeed, Andrew. And Toddington, I know you're a real leader in the sector, particularly coming into it first of all in the solar energy space. What brought you into this world so early on?
Toddington Harper:
I mean, I was pretty much born into renewable energy. My father and my mother were delivering solar projects almost 50 years ago. It was at a time where solar panels were 99 and a half percent more expensive than they are today. And I grew up in the Middle East surrounded by solar batteries, small wind turbines, and so on. So really that was my first starting point in life. And it was only when I discovered that the rest of the world was powered by fossil fuels that I found it all very confusing.
Harper:
So I spent probably the last 20 years of my business career really trying to get back to that sense of what I understood when it all made sense, initially focusing on clean energy. And we've built a number... I built five businesses, sustainable energy businesses over this period, a huge amount of solar power. And actually, part of the journey of building solar power, I realised actually you still use fossil fuels to build renewable energy projects because you still need transport solutions. At which point I went and bought myself my first electric car in 2014, which was absolutely brilliant, but I then realised just how difficult it was to get around. And really solving that solution is very much what we're doing today in GRIDSERVE.
Thomas:
Thanks very much, indeed, Toddington. Great insights there from both of you. And Toddington, I totally share your sentiment around sustainability and climate change being a key variable for consideration.
Thomas:
We'll move on now to a question from one of our listeners. Max Hughes has sent us this question. How is the risk profile of charging infrastructure companies changing over time? Are they becoming a safer bet for investors as demand grows or more risky as competition increases? Good question there, Max. Toddington, what are your thoughts on that, first?
Harper:
I mean, the risk is reducing significantly. When we first designed and started going to investors with our plans for the first Electric Forecourt, which we built and commissioned at the end of last year, it was about three or four years ago. And at that point in time, people weren't really sure, certainly investors weren't really sure that electric vehicles were going to be the mainstream solution. People were still talking about hydrogen and electric vehicles and various different options, compressed air and so on. And so actually taking a project that was considerably more expensive than any other piece of charging infrastructure that had ever been delivered to investors was a very, very difficult sell.
Harper:
The way that we were able to get it over the line was to say, "Look, at petrol forecourt, you generate money, not just from petrol, but also from the retail. We've got that as well. We've got coffee. We've got convenience retail. We've got a small supermarket. We've got all these kind of items. We also had a battery and the battery could make use of the grid connection and generate revenue even when vehicles weren't charging. We can also help assist the uptake of electric vehicles themselves. Oh, and by the way, there's charging." And believe it or not, we had to actually say that because I mean, it really irritated me at the time, but I had to literally create business cases for delivering an electric forecourt that didn't include EV charging because the investors would say to me, "But what happens if nobody current turns up to charge?" And I literally had to have a business case that said, "Don't worry. People can still drink coffee and if they drink enough coffee and all these other ancillaries, then even if people don't turn up to charge, it'll still be okay," which was really crazy.
Harper:
Anyway, that we don't have anymore, obviously, because we have built them. People do turn up to charge. Actually, a lot more people are turning up than we expected. But I think the real game changer from our perspective was when the Government announced that they were going to ban the sale of new petrol and diesel cars by 2030. I mean, that just completely changed. It removed any, from our perspective, market failure situation. And it came a situation of not if this is going to happen. It's just when and how quickly. And for us that just completely transformed the environment.
Harper:
So in the context of your other question, what about competition? From our perspective, I don't really think that's the concern at the moment. I think the issue is how to build enough charging infrastructure as quickly as possible because this is an enormous opportunity, and it's an enormous opportunity for a lot of different people. There's a lot of scope for many different competitors, but I think at the moment, it's all about how do we get enough infrastructure in the ground as quickly as possible? And as I said, as a result of the net-zero commitments from the Government and the phasing out of petrol and diesel cars, for us, the investment horizons have got a lot more straightforward.
Perkins:
I would completely second that, Toddington, in that the business risk and actually the business models that are being deployed at the moment across the electric vehicle space are becoming more mature, and it's charging, but also everything else that goes with it that then reduces the risk.
Perkins:
I have a bit of a challenge though on, well, reflecting for the investors in the US, all the SPACs that have gone out there have actually about halved in price on the share price. And I think, really, I suppose what that does is reflect to me that the business models have to be the right business models. So actually, the risk of deploying capital as you're saying has gone down, but actually there's still not a proven investment vehicle that is the right vehicle for equity investors. And I think to get the scale of the money coming in, we really need to get those models right so that the public markets can lend or can participate in this market. And I think the same goes for debt. I don't think we are yet seeing the right debt models for people to participate.
Harper:
That's actually interesting. We also look at the share prices of different companies that they list, including the SPAC vehicles. And what we've noticed in the last few weeks is that whilst a few weeks ago it certainly did go down, we're now seeing prices go up to where they listed at, and actually beyond, which we saw as very encouraging. In terms of your wider point about the right business models, where we come from is that what we are doing is we're focusing on delivering something that we call sun-to-wheel in the same way that successful oil majors, you couldn't imagine an oil company without oil. So our view is that EV charging without having the ability to control, influence the raw cost of the commodity that you're ultimately selling is actually more of a risky proposition too.
Harper:
It's where we're approaching this space, and I guess it helps with our sustainable energy background is this whole wider concept of sun-to-wheel, being able to generate clean energy and actually then use that clean energy in electric vehicle charging, which also includes using batteries as well as big part of the process. But from our perspective, having a combination of different revenue streams and actually being able to control your raw commodity cost is pretty essential, and to be competitive in the future, we think that'll be more and more important.
Thomas:
Thank you both. We'll be answering a listener question every episode, so send yours into evsummit@green.tv. So today we're talking about investment and exploring how to link capital with EV ideas and projects. Toddington, are you finding the banks are keeping up with the pace of your business model?
Harper:
Yeah, I mean, we're very lucky to have some phenomenal investors, backers, Hitachi Capital, now Mitsubishi HC Capital, phenomenal backers, TPG Rise Fund as well. I think what people are very happy about is that our assets are performing, and actually the utilisation that we were expecting, theorising many years ago, creating models that had anything more than zero are actually quite considerably above our expectations. It's not really surprising because the tailwinds are just so strong. I mean, there's not really a day now where we don't hear something about electric vehicles, sustainable energy. I'm actually talking to, recording this from COP26, and obviously, it's absolutely mainstream. And I think now electric vehicles are surpassing 15% of monthly sales.
Harper:
So I think being able to demonstrate that already today with a fairly limited number of electric vehicles that we have in the market, we're getting really strong utilisation above where we were expecting. And given that it's only today and tomorrow, and in the years to come, we're going to be in a mass market.
Harper:
Personally, I feel that there's a lot of comfort from the investment community. We're talking to a lot of additional people who a few years ago were possibly a bit more timid. Now, they’re definitely a bit more bullish. I think it's probably not too long away from now where there's potentially more appetite than projects to serve. But certainly, we feel it's all going in the right direction. Yeah, that's certainly what we feel.
Perkins:
EY does a EV Country Readiness Index, which is always a nice one to do. And we look at that, and I think the UK rating is fourth. I was wondering what your thoughts were in relation to how we could, how the UK could improve its position in that. I mean, above it is Germany and China, and I think the US as well.
Perkins:
And just to give you a bit of background on that before we go in, I think we're rating it in relation to EV sales, and our EV sales last year were up by 140% on prior years. And it's about consumer intent to buy electric vehicles. And we rated, it was 41% of consumers were looking to buy electric vehicles when we asked them. We were slightly lower on the charges per electric vehicle. I think it was slightly under 0.01 as opposed to above, which other countries can be. And we had relatively low numbers of battery manufacturing capacity in the UK. So those are the sort of four sort of major areas, which I suppose we measure. So are there measures that the Government should be doing in order to increase the attractiveness of the UK as an EV opportunity?
Harper:
I guess just adding my context on this, there was a few years ago when we were building solar farms and we had a lot of frustration with government policy because the subsidies that were in place were being changed very, very quickly, and it made delivering these businesses very, very challenging and quite bumpy. And it was really refreshing actually to have moved beyond that now and be in a situation where we feel very, very aligned, I mean, completely aligned with what the Government, the clear direction of travel.
Harper:
I think for us, it was the moment that the Government actually brought in net zero as a concept that changed everything. I believe it was Theresa May’s Government that brought it in. And for us, it was just, it was incredible because it went from a situation of everything being quite woolly. If you remember, it was we're going to reduce emissions based on, I think it was 1990 levels by X percent by Y, excluding this, not including shipping and aviation and... It was just like, what does this stuff actually mean? And it was very, very difficult to get clarity.
Harper:
And then when net zero as a concept came in, it just all became very clear. It was like, aha. Okay. So the plan is to get to, well, zero, ideally, but net-zero, because zero is inherently quite tricky, carbon emissions. And we're going to get there by 2050, which in context is 28 years away from now, which is pretty incredible as a concept. But actually, that's the long stop date, and the ambition is to get there as quickly as possible.
Harper:
And really since then, it's been clear to us that every then major rule, every piece of law, legislation that's been put in place has taken that into account right way through to how the Government and why the Government has brought in legislation to phase out the sale of new petrol and diesel vehicles. Because actually, there's a 15-year life, roughly, to a vehicle in the UK. And if you don't phase out the sale of those vehicles within a certain period, then we're not going to hit our 2050 targets.
Harper:
So really for us, it was that pivotal moment of net zero that's then created the atmosphere, the environment, the structure for all of the other laws that have now been brought in. And for businesses like ours, what it does, it just creates certainty and a very clear direction of travel. And as I said, it feels great because it feels like we're really now aligned with the Government pretty much in all aspects in just trying to achieve net zero together in the earliest possible timeframes, which is fantastic. And I think that gives us the certainty and the clarity to keep scaling from where we are now, which is obviously what we need, because let's make no mistake about it. Getting to net zero in 28 years is one heck of an undertaking. I mean, that is an enormous turnaround that's going to need to happen. And that will only be possible with real clarity about the direction of travel. And fortunately, we have that and we're certainly gearing up to deliver it.
Thomas:
Toddington, I know you are super keen on sustainability and on climate change as the master goal behind the need to move to solar and to EV. What do you think is needed to deliver on these net-zero targets?
Harper:
A few years ago, I have to admit, I was beginning to wonder whether it was actually going to be possible to really turn the situation around. Just because of the scale of what's needed, you would need one incredible response. And I just, I was starting to wonder if the world was just going to slowly walk into this, keep slowly walking into this climate crisis. And then the pandemic happened. And I was just amazed. I'm sure we were all amazed that within a period of days, we just completely changed the way that we were operating our societies. And actually, rather amazingly, it was all very functional. We were still able to get on. The world didn't stop. But we certainly changed, and we changed incredibly quickly. And the response to then creating the vaccines and so on was also just incredibly fast, much, much faster than anybody ever thought was really possible.
Harper:
And actually, that gave me real hope because I thought, actually, it is possible. If people care enough about a subject, if people really, really understand the importance and have the same level of concern, that actually we can fix this. And if you think about it in terms of we talk about a decade to transform this. Well, the pandemic, it was in a matter of days, wasn't it, that things happened. And if we are able as humanity to address an issue like the pandemic as quickly as we have, then ultimately, if people could really understand ... And it's harder to understand, because its, people are slow walking into the climate crisis as opposed to the pandemic which hits very quickly. But the climate crisis is so much more of a problem than the pandemic.
Harper:
This is the very home, the planet that we live on, the air we breathe. Without planet Earth to protect us, where are we? We're alone in the universe and there isn't a vaccine to protect us from that. It is the biggest crisis. It's the biggest issue I think probably that humanity's ever had to face. And if people really do face up to that fact and come together to fix it, then I have absolutely every hope that it can be done. So the solutions are within our reach. This is on our watch. It's a next decade, so this decade thing. It's on our watch. The solutions are within our reach. We just need to make, as humanity, a choice to actually deliver on this, on what needs to be done, and get on with it. And because we are as humanity, just the world's greatest problem solvers that have probably ever existed, then I have absolute confidence that it's possible to do it.
Harper:
And that's why I believe in answer to your question, that we can get ourselves out of this issue, but only if people really across the world make the choice to actually do so.
Perkins:
I would just add one thing to that, which is actually the trigger on COVID and the vaccine. Well, on the COVID virus was that it affected people individually, and therefore they had individual change of behaviour. Climate change going to affect people individually, and it's the realisation of that that will enable people or to change like they did with the vaccine. And then it's the, across the global scale, enabling people to actually change. So we have the opportunity to change in the UK, in the US, etc. Was actually in other parts of the world, in India or China, just, they are beginning to change and they'll change incredibly rapidly. We've seen it recently in China. India won't be far behind once they recognise the benefit of it. And going back to actual technology, the cost of owning electric vehicles are comparable or better than fuel. Maybe not right now with the power price being high, but that's we're in transition. But basically the long-term cost of ownership is the same. And therefore, actually the shift to electric vehicles is now, and should be being made on economic grounds alone. So for personal interest. And I think that that's going to start meaning that people will be changing their personal behaviour.
Harper:
I mean, I a hundred percent support that, Andrew, and perhaps I wasn't making that point strongly enough as well. Prior to COP26, the last climate change conference I went to was in 2009 in Copenhagen, and I saw it fall apart. And I was sure afterwards that the reason it fell apart is transitioning to a... It was a low-carbon economy at that time, as opposed to a net-zero-carbon economy. It was just too expensive. It was very, very expensive to make energy, clean energy, much more expensive than fossil fuels. Electric vehicles weren't really on the horizon, but those that were, were again, just extremely expensive. And in a decade, it's completely gone the other way.
Harper:
It's now a lot cheaper to make clean energy than fossil fuels. Even in the UK, which hasn't got the greatest solar radiation in the world, solar energy is now the lowest cost form of making energy, and that's just incredible. In only a decade. And the cost of lithium ion batteries is now coming down very, very quickly as well. And actually, using an electric vehicle is much less expensive than using petrol and diesel vehicle. And actually, when you then... Even though they cost a bit more upfront to buy them still, or they're not for long. Probably only for two or three years. If you lease an electric vehicle, which is why we are really focusing on assisting the uptake of electric vehicles through leasing, you spread a slightly higher cost of buying a vehicle with a much lower cost of operating it. And you spread that out from day one, which basically means somebody can get an electric vehicle now, and it can cost them less on a monthly basis than a petrol diesel one. And that's just incredible.
Harper:
So not only is there an absolute imperative that we have to fix this issue, but it's an economic... It's an incredibly exciting economic opportunity to do so as well. We've moved beyond the situation of the Stern review, the economics of climate change, where the cost of inaction was greater than the cost of action to a situation now, where the economics of action are significantly in our favour, and because we're in that situation, and I think because we now have the belief probably from the pandemic and also the unequivocal evidence coming from the IPCC scientists that this is on our watch and we need to sort it out now, then really it can happen, and it can happen very, very quickly.
Thomas:
It's just fantastic to hear such positivity for the future from the both of you. I want to bring us back to our main question now for this episode, which is all about linking capital and investible ideas in the EV sector. So can I ask you what you think companies less established than GRIDSERVE need to do to make sure they can secure investment?
Perkins:
There's no doubt there are significant funds in the market at the moment looking to invest in across the electric vehicle infrastructure network. And I call it that in the wider sense. So we've recently raised money for battery manufacturers. We're looking at the other end, the recycling side. In the middle, once you've got the batteries going into the vehicles, the charging networks, I mean, significant amounts of funds are going to have to go into that sector, and they are ready to go into that sector.
Perkins:
I think there is a block at the moment on the way they can invest, and there's not... It's the finance market, equity market moves very quickly. The debt market moves slightly more slowly. And actually the debt market likes to have vanilla investments to make. And at the moment, the market, there's not such a thing there. So I think we're going to see lots more equity coming in, but really we want to supercharge the market by an increase of debt because that will enable recycling of capital and the cost of capital come down, making it even cheaper for the ownership of vehicles.
Perkins:
So what I'm hoping to do and involved in, is actually de-risking the investments across this sector so that banks can invest. And I'm expecting that to be... Well, they're already involved a bit, but I'm expecting to see it much, much bigger over the next six months, and then a ratcheting up thereafter. So I don't think we've got a problem on the equity side. I think there's lots of equity coming in and there are equity investments because they can look sort of across the sector at the bigger picture and really what's driving this is Toddington was talking about talking earlier on, which is the, just the number of electric vehicles coming out and the increasing utilisation across the whole sector.
Thomas:
Thanks Andrew, do you have anything further to add to that, Toddington?
Toddington:
Yeah, sure. So I've got, I guess, a couple of points to come back on that. I'll talk more from a solar perspective, but I'm sure it will correlate as well towards EV charging. When we had a thriving subsidy market in the UK, I think banks were extremely comfortable around that because just by generating a kilowatt hour of energy, people knew the value of that kilowatt hour irrespective of what you did with it. At least the big part of it, because you were paid a certain amount of money just for generating that energy in the first place. And that money, that amount was then indexed, linked, and it was very, very straightforward. And banks got very comfortable on that, but it wasn't real. It wasn't real. It was just a period of time that these subsidies were put in place in order to reach the position where we didn't need them because we could deliver scale and we could get to a real market based on supply, demand, fundamental economics.
Toddington:
And so what happened as we came out of the subsidy era for solar is that we found people were yearning for what they used to have. People used to... A phrase was used a lot, and is still used a lot, about merchant solar and banks really struggling. Well, I'm not sure how to finance merchant solar, which from our perspective was, if you like, a bit of a hangover from the days where we had this artificial situation, this artificial prop that people were really wishing that they had again.
Toddington:
The way that we got around that and the way... Because we've actually managed to build the UK's first large scale, completely non-subsidised hybrid solar farms. And the way that we got past that issue was we substituted this artificial piece of value that was a subsidy for actual real tangible value, i.e., we called ourselves GRIDSERVE as a starting point. And we said, "We're not just going to build renewable energy projects that produce energy and actually add to the grid's problems," such that a situation where we're in now that if it's a very windy day, sometimes people have to turn off wind turbines because the grid can't cope with it. Or it's a very sunny day. You have to shutter solar farms because the grid can't cope with it or the price goes negative. I mean, that's the opposite situation where you need to be.
Toddington:
And so we thought, "Well, let's turn that around. How about we then add batteries to the equation? We can store that energy for when it's more valuable. We can also use batteries to help stabilise the grid, and that's what's needed if we're actually going to get to net zero. And we can actually create real, tangible value because we're actually using these projects to serve the grid, to prop up the grid, as opposed to just generate clean energy." And so what we swapped then was as a piece of kind of artificial value that was very helpful for a period of time to drive down costs with actual, real sustainable value in terms of delivering projects that actually can help get us to net zero and hopefully beyond.
Toddington:
And so, what we felt was a real need to help with education and helping people get over the line. I detect there's still a bit of that from banks. People would much rather it was guaranteed that a certain number of people would turn up and charge every day from the charges. And again, wouldn't that be lovely? And I guess you can get there to an extent with fleet vehicles, but again, I would just say, it's not really real, is it? And in the real world that we live in, is that people do turn up and they do buy petrol from petrol forecourts, they buy food from shops, and there isn't an actual guarantee that those people will turn up on that day and buy that amount of food.
Toddington:
And I just think it's really helpful for people to move to the next phase that we're in now, that we are in the era of the mass market of electric vehicles. And those who come in earlier in our opinion are likely to have more of an advantage, more perspective, more upside than those who sit on the fence and wait for the perfect moment to come in. I think that would be my suggestion. Certainly I know the investors who've backed us are certainly in a stronger position and understand the market much better than those who haven't got the level of insight that we now have.
Toddington:
I would say one other piece of perspective is for those you mentioned looking to raise money at an earlier stage than GRIDSERVE. The reason that GRIDSERVE are in a position that we are in is that we don't believe in the concept of no. If you believe what you're doing, and if you believe it's important, if you believe that you're right, it just means you haven't met the right person yet that agrees with you. So no doesn't mean no. It just means you haven't got to yes yet. And the difference between success and failure is giving up. And so if there are people out there looking to start businesses that they're a hundred percent certain is the right thing to do, and what they're saying is falling on deaf ears, it just means they haven't met the right ears yet. So just keep going, and you'll be all right.
Thomas:
Well, I think that's the perfect place to end the podcast for today. Toddington, Andrew, thank you so much for your time and for those inspiring ideas. I'm sure our listeners will have learned a lot from this particular podcast, a subject of intense interest in many of them, I'm sure.
Thomas:
To end every episode, we highlight an exciting and innovative hyper-fast growth company in the sector. Today, our guest I'm delighted to say is Ollie Jones, who is co-founder of elmo. Ollie, really, really, really pleased to have you on the podcast today. I know a little bit about elmo, but for our audience, tell us about your journey, but tell us about what brought you into the sector. Why did you think that EV subscriptions was something you wanted to work on?
Ollie Jones:
Sure. Well, thanks very much for having me, Ade. My background isn't from the industry. I previously worked in growing and operating a web platform called Angel Investment Network, and that was all about connecting entrepreneurs with investors to get their businesses, relatively early stage businesses, off the ground. And as I was going through that process, a lot of the businesses that we started focusing on were what we called at the time impact investment opportunities. And so I was beginning to develop an itch myself rather than sit on the other side and do what I can to help those entrepreneurs and investors actually dive in and work at the coalface of making an impact.
Ollie Jones:
And fortunately, I made friends with a chap called Luke Gavin about 17 years ago, and he had been working at Octopus Energy right when they were launching. He then moved to a strategy consultancy called Element that was focused on cleantech and renewables, and he was on the transport team. And it was through those two experiences that he formed the kernel of the idea for what became elmo. And he pitched it to me over a New Year's drink at the start of 2019. And what attracted me to it was that I immediately understood the consumer proposition and how it could, if we had executed properly, make a really meaningful difference for accelerating mass adoption of electric cars for those motorists who need to have a car and can make a difference for reducing their carbon emissions by going electric.
Thomas:
Thanks very much indeed, Ollie. We'll come onto the subscription model side of things in a moment, but this podcast series is looking at investments. So let's take a little look on that side first. What's been your biggest challenge? Has access to capital been a major challenge for you in driving the business forward?
Jones:
It has been. So we were fortunate enough to raise a pre-seed round when it was essentially the two of us, an idea and what we thought was a compelling narrative. We got investors on board at that moment, and that allowed us to build the first iteration of technology, pull together key partnerships, build up a community of subscribers, and finance an initial fleet. But after that point, it became increasingly difficult because while we had this compelling market moment, lots of demand, oversubscribed from a consumer demand perspective, we developed what we thought was a really good proposition. And we had a lot of interest, and we got stamps of approval from the likes of the Tech Nation Net Zero programme, the Cambridge Institute Sustainability Leadership, everything was all moving in the right direction.
Jones:
But when we came to raise our subsequent round of funding, we had this chicken and egg scenario where we had investors interested in funding the business itself, but before they were prepared to move, they wanted to see that we had vehicle financing lined up at scale, that we could achieve the kind of ambition, scale ambitions that we were talking about. And at the same time, we were talking to prospective vehicle financiers. They wanted to see that we had the business funding in place so that they could, they would have security for their financing. So that was a bit of a balancing act, and fortunately, we managed to solve it at the end of September.
Thomas:
So that's great that you solved that problem, that you found the key to unlock that issue. What was that key? How did you manage to resolve that dilemma?
Jones:
So it was about finding an investor who could cover us on both counts. And so at the end of September, we received investment from Constellation Automotive Group, which is the company that owns the likes of BCA, We Buy Any Car, and Cinch. And as a strategic partner, both on the capital side, but also on the vehicle remarketing, the access to the industry, they are ideal for what we're trying to achieve over the next few years.
Thomas:
Good. Is that, well, you mentioned... Obviously, let's go back to the EV subscription business model. I mean, it's a super exciting model, and one I personally use myself. So tell us a little bit more about the EV subscription side and why you think it's such a compelling model, and obviously one which has now attracted investment?
Jones:
So I think there are two things going on here. There's the consumer adoption problem. Many people are still put off by the higher upfront cost, the perceived complexity, the risk on the asset, and the sort of lifestyle risk as well. And all of those combine in different ways for different people, but ultimately create the effect of the mass market sitting on the fence about switching. And that of course has a knock-on effect for when we talk about decarbonizing the transport sector. And at the same time, we've got this sort of evolving consumer preferences. So we don't buy films or music anymore. We stream them. We subscribe to them. And I think the same thing can happen with automotive. And that's what we've seen so far with the demand from our customers and elsewhere in the industry.
Jones:
And so we think that by combining the two, solving those consumer reduction problems, can be done through reimagining the traditional lease model, removing the deposit, removing the lengthy contractual commitment, bundling ancillary services like insurance, maintenance, breakdown cover. We even include a carbon offset for manufacturing emissions. Bundling them into an integrated and seamless customer experience so that someone can book a car online in five minutes, get verified in 24 hours, and have it delivered after four working days. And then they can hand it back pretty much whenever they want to. By doing that, we reimagine the traditional lease and use that as a mechanism for accelerating consumer adoption of electric cars. That's the plan.
Thomas:
Very good. So, I mean, like all fast growth e-Mobility businesses, it's a hugely dynamic sector and the need for ongoing investment is pretty much ever present. Bearing that in mind but looking at supply issues, there's now a real issue with getting hold of EVs, isn't there, which I think doesn't just apply to elmo, but is across the board a big issue. How will you square up those two things?
Jones:
So the market is very constrained at the moment, and it probably, from what I understand from manufacturers, it will remain that way for the next 12 months. We are very lucky with our new investor partner that we now have access to channels to source vehicles that we didn't have access to previously, which perhaps gives us a competitive advantage in the space. But then also from the conversations that we're having with the manufacturers, despite the context, what we're seeing from a large number of them is a real interest in the subscription model as a way of getting customers into their EV product, often for the first time. It's the most accessible way for these companies to bring their product to market effectively. And so while there is market constraints, there's also so much interest for the manufacturers that we're in the process of securing pretty significant supply for next year and beyond.
Thomas:
So you've just secured funding and that's great. Are you looking at the next funding round? Where does that journey take you?
Jones:
It's in our thoughts. There's a few operational and strategic things we want to get in place first. I think we'd expect to see lots of follow-on investment from our new partner, and it maybe solves a lot of that funding roadmap that if we'd gone down a VC route, for example, and we'd done a traditional series A followed by series B, we'd probably already be thinking about that series B. But with this, with Constellation, it perhaps makes that less of a requirement for us.
Thomas:
So Ollie, thanks very much, indeed, for those sage words. Looking to the near future and indeed to medium term, where do you see elmo going? What are your plans for the next say three to five years?
Jones:
So the last three years have been about getting to the point where we've proven the model, proven the concept, and unlocked that piece of landmark funding. And now it's about scaling up so that we can actually achieve the ambitions that we set out to do at the start. And that is about helping more people switch, helping drivers switch, reducing carbon emissions, and ultimately playing as big a role as possible in the electrification of consumer transport. And I think just to put some of that into context that at the end of 2020, there were 5,000 vehicles under subscription in the UK. By 2025, according to Frost & Sullivan, there'll be 600,000 vehicles under subscription in the UK, and our ambitions at elmo are to be a big part of that.
Thomas:
Well Ollie, that's really exciting to hear, and congratulations to you on driving the business forward to this really interesting moment. I'm sure things will only get more interesting from this point on. Thank you Ollie, for those super insights into elmo. It sounds like you're on the cusp of some really exciting growth, and I'm sure we will wait with great interest to see what happens with elmo next.
Jones:
Thank you very much.
Thomas:
So that's it for episode 5 of EV Y. Thank you very much indeed for joining us. We've got just one more episode coming up in this series, so please do subscribe and make sure you don't miss it. And send in your questions and comments to evsummit@green.tv. We'll be back here for episode six.

If you’d prefer to listen on the go:

Listen on Apple Podcasts

Listen on Google Podcasts

Listen on Spotify

Presenters:
Andrew Perkins – UK&I Partner, Corporate Finance

External presenters:
Toddington Harper – CEO Gridserve
Olly Jones – Co-Founder of elmo
Ade Thomas – Founder of Green.TV and EV Summit

Podcast

Duration

41m 50s

Listen to episode 4 of the EV Y podcast as we discuss how OEMs can secure local, sustainable EV battery supply.

48m

How governments and businesses can work together to meet climate targets

This EV Y podcast episode delves into the topic of the EV ecosystem and how businesses and governments can work together to meet climate targets.

54m 43s

Why EV fleet transition is essential for transport decarbonisation

In this episode we discuss how and why fleets must transition to EV in order to help accelerate the wider decarbonisation of transport in the UK.

43m 52s

What the future holds for charging infrastructure

EV Y is a podcast series exploring the shift to Electric Vehicles. Episode 1 features a discussion on the future of charging infrastructure.

42m 16s

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

Insights

Trending topics

Spotlight

Services

Spotlight

Industries

Case studies

Careers

Spotlight

About us

Top news

How organisations can link capital with investible EV projects

The episode highlights:

Podcast transcript: How organisations can link capital with investible EV projects

42 min approx | 7th December 2021

Related Podcast