Road to

Profitability
Prepared for ABC Ltd.

Accelsior
Anshumaan Singh, Bharat Matta, Sukriti Hand
Indian School of Business (ISB)
Executive summary

Passenger vehicle segment will turn unprofitable by 2040 years

EV is an attractive industry that is on the rise and for ABC, to reap most benefits, is
recommended to enter the EV charging infrastructure industry through a JV with an
Electric Power company

The successful implementation will depend on building the right partnership, piloting
for e-rickshaws and leveraging existing infrastructure with focus on clean energy

Entering EV will yield a 15.6% IRR

ABC has ~20 years before the passenger vehicle market
starts bleeding cash
Domestic prices are highly correlated with oil prices per barrel
- Pre-covid estimates1 have a CAGR of ~1% for the next 6 years

Push from the government to move to EV decreases 13% fuel demand

- Total vehicles in India currently = 25M
- Total vehicles in India in 2026 (P) = 32M (CAGR 4% 3)
- Projected EV by 2029 (CAGR 36%)2 = 4.3M or ~13% of total vehicles
- Assume 13% vehicles result in a 13% decrease in fuel demand

Hence, by 2026 due to modest increase in prices in response to oil price per barrel and a
reduction in conventional vehicles will put a net downward pressure. A conservative
reduction of 2% y-o-y in domestic prices is a fair measure

Extrapolating it further, the typical profit margin of a downstream business of 25% will
tend to 0 in ~20years i.e., by 2040
1 https://knoema.com/infographics/yxptpab/crude-oil-price-forecast-2020-2021-and-long-term-to-2030#:~:text=Brent%20crude%20oil%20prices%20will,monthly%20Short%2DTerm%20Energy%20Outlook .
2 https://www.financialexpress.com/auto/car-news/electric-vehicle-market-india-projected-growth-annually-iesa-report/1792728/
3 https://www.statista.com/statistics/607818/vehicle-production-volume-by-segment-india/#:~:text=Passenger%20vehicles%20and%20two%2Dwheelers,million%20vehicles%20were%20sold%20domestically 3
Possible exit strategies for ABC
Privatise downstream
business and don’t enter EV
Sell off current downstream business
Advantage: Minimises losses that will occur
due to decline in price of oil/natural gas and
due to shift in commercial vehicles to Electric
Vehicles by cutting down operations
Disadvantage: Merely cuts losses with a one
time cash inflow from the sale and is not
inline with the strategic vision and mission of
meeting India’s energy demand
Future prospect: Eventually 1/4th of the total
costs of downstream and transportation can be
cut down.
Focus on renewables and
start investing in EV later
Steadily divert focus towards clean energy and
build an ecosystem that can power the
increasing Electric Vehicle demand in the
future. Existing petrol pumps to have added
EV charging ports when demand picks up
Advantage: High prospective revenues in the
future and closer to the mission and vision of
ABC to meet the energy needs of the country
Disadvantage: ABC doesn’t have the expertise
in electricity generation and transmission.
Setting the ecosystem will be expensive, and
will take too long, increasing losses
Future Prospect: Potentially become a
responsible renewable energy provider with a
presence across the entire value chain.
Recommendation
Focus on renewables, enter a
JV & start investing in EV
now
Partner with a Power Electric company to
source power for EV charging facilities at
petrol pumps and enter the EV market now. In
parallel, continue focussing on renewable
energy and leverage energy in the EV infra
Advantage: Creates an immediate additional
source of revenue with tremendous growth
potential and caters to ABC’s vision and
mission
Disadvantages: A JV involves higher levels of
stakeholder management. The decision
making can also slow down as a result
Future Prospect: Potentially become a
responsible renewable energy provider with a
presence across the entire value chain.
4
Implementation strategy to transition into the EV market
through a JV with an electric power company

Continue Position as India’s

Enter JV with a Expand into clean
upstream EV service
trusted partner energy
operations ambassador

- Efficiency improvements - As an O&G company, - Continue building on to - Foreseeing the upcoming

through AI / digital ABC doesn’t have the
- Well reutilization using expertise to produce and
emerging technologies to distribute energy across
produce carbon-free India; it has the
hydrogen for fuel cells infrastructure and
- E&P optimization to credibility to do so
adjust for increasing non- - A JV with a trusted
transport demand electric power company
will help enter the EV
charging industry
the recent efforts in new
clean energy (esp. Wind
Energy, and Solar
Energy) to maximize
power generation and
supply
- Will help reduce - Come across as a
dependence on non-
renewable sources and
move towards alternate
sustainable sources
tide, ABC can venture into
the EV market now and
create a competitive
advantage, building onto the
existing customer
credibility
responsible corporate
reducing dependence on
non-renewables

5
Phased approach for implementation to leverage improvements in EV
technology and subsequent uptick in demand
Upstream
Invest to optimize:
Divert CapEx from new E&P
projects to efficiency
improvements on existing wells
2025
Pilot charging infrastructure:
Initiate partnerships with regional
power grids to set up charging points
at 500 pumps across the country for e-
rickshaws
Negotiate tax rebates for setting up
charging infrastructure under FAME-
II
Partner with govt./EV/cab companies
to launch consumer awareness
campaigns to alleviate ‘range anxiety’
Leverage technology to maximize
efficiency:
Use returns from efficiency
improvement projects to invest in AI
/ Digital twin based optimization
projects
Begin solar panel setup across
existing real estate (including at
petrol pumps’ roofs)
2030
Launch clean energy brand of ABC
Ltd
Focus promotional efforts on
positioning ABC as a socially
responsible company with a 10 year
goal of serving clean energy to
passenger vehicles
Increase footprint within Tier-1 and
Tier-2 cities by offering proprietary
charging point setups at residential,
commercial and industrial facilities
Extend charging service to BEVs and
Shift towards cleaner energy
Utilize non-productive wells to
produce zero-carbon hydrogen to
power fuel cells
Complete set up of solar panels
across all available real estate.
Continue exploration of alternative
sources of clean energy as
technology evolves
2035
Test scope beyond vehicles
Utilize clean energy and initiate
sourcing beyond the vehicle
segment. Supply clean energy to
industrial units and homes in
strategically selected areas with
abundant reserves as a pilot
Complete transition
Optimize and shut down drilling end
E&P for all passenger vehicle
related production
Supplement existing solar
infrastructure with wind power and
leverage battery enhancements to
cover all retail points
2040
Downstream
Deliver on promise:
Shut down all oil and gas
production, transport and retailing
activities catering to passenger
vehicles.
Harness solar energy to charge
EVs and batteries at all charging
hubs converted from petrol pumps
Financial measures
Number of charging points and hubs 45,000 hubs
required in India by 2040
1,00,000 points

70% Expected increase in requirement of

energy by EVs for 2040 42L Expected revenue from each charging hub every
5 years

14LYearly operational costs of each charging hub 15.6% IRR of long-term strategy

Thank You 7