Tork Motors struggles to secure funding

Once a beacon of India’s EV aspirations, Tork Motors increasingly resembles a cautionary tale for the country’s burgeoning EV startup universe. The company, known for its ambitious electric motorcycles, seems caught in a downward spiral.

According to sources, the bike maker – majority owned by Pune-based auto-components maker Bharat Forge – laid off nearly 100 employees in July. Some of the workers have outstanding dues dating back to March. Moreover, reports have indicated that dealers have not been receiving the products on time. An insider said things are looking “really uncertain” at the company.

Tork Motors’ story

Tork was, at one time, the ideal startup. Under the leadership of a high-profile team led by mechanical engineer Kapil Shelke, the electric two-wheeler maker had everything a startup could ask for – media attention, high-profile investors, motivated employees and a respectable dealer and supplier network. But, as is often the case with startups in sunrise industries, the company seems to have made several missteps that have resulted in its current travails.

Electric motorcycles: a tough product to crack

The first mistake that the company seems to have made is not to read the market correctly and underestimate the engineering challenges associated with its chosen product. While the overwhelming majority of two-wheeler EV startups chose to focus on the less glamorous scooter segment, Tork was one of the handful who went after the big prize – the lucrative motorcycle segment that accounts for nearly 70 percent of India’s two-wheeler sales.

Like RattanIndia-backed Revolt and fellow startup Ultraviolette, Tork wanted to target the largest segment, assessing that India’s EV revolution will never be complete without winning over the motorcycle buyer. But the task was arguably tougher than the company anticipated. “It’s technologically far more complex in motorcycles as the placement of the battery becomes very complicated,” said Kumar Rakesh, associate director of Equity Research at BNP Paribas. “If you put it in place of the fuel tank, the centre of gravity moves up, and the handling of the vehicle will fairly deteriorate.”

The second problem relates to the range. Unlike an e-scooter, an electric motorcycle cannot do with only 80 or 100 km per charge and needs twice that due to the higher distances travelled by motorcycle users. So e-bikes require a substantially larger battery, which would also make the product more expensive, which will, in turn, affect their commercial viability. “The difference between ICE and EVs would be much higher than what it is in scooters,” Rakesh pointed out.

And Tork isn’t the only player to run into these challenges. Revolt had faced a battle with the government over subsidy claims under the FAME II scheme. Revolt later repaid the money to make itself eligible for the government’s new Electric Mobility Promotion Scheme (EMPS) 2024. Ultraviolette, on its part, has been grappling with hurdles such as high initial cost and lack of charging infrastructure, among others. 

Funding challenges

The second major hiccup for Tork was the changing environment around EVs. While EV startups had no problems attracting investors until about 2022, the funding environment got much tougher over the last two years as global interest rates started rising while EV sales slowed down. Experts believe that globally, the EV sector is seeing a slowdown because the segment has more or less saturated the so-called early adopter category of consumers.

According to Rakesh, the next phase of growth for EVs will come only when companies can successfully move from targeting early adopters to the early mass segment, and these customers may not always look at startups in the same way as early adopters. “As we move to the next level of adoption, that customer may be a little more traditional in their purchasing behaviour. Things like tech features may work for early adopters but not necessarily work for the early mass. They would go by a more traditional buying behaviour where price, durability, word of mouth, etc., would matter a lot more.”

Meanwhile, the regulatory environment, too, has changed, with governments cutting down on EV subsidies. The Indian government, for example, slashed the subsidies under the FAME II scheme in May last year and withdrew the scheme completely in March this year, causing much disruption in the electric two-wheeler space. Many EV players in the segment saw a sudden dip in volumes as prices went up by around 25 percent overnight in the absence of lucrative subsidies. Since then, the industry has been waiting for the government to unveil the successor to the programme, known as FAME III. However, very little has come by way of information so far on the allocation or the date of its likely launch.

Strategic missteps with securing funds

The company’s predicament is also due a lot to strategic missteps by the management, claimed people close to investors. According to an insider, differences of opinion started developing between the Tork management and the company’s primary investor, Bharat Forge, as sales did not keep up with projections.

According to them, Tork was unable to meet the target metrics laid down by investors, including Bharat Forge. At the same time, Tork badly needed extra funds for scaling up its business and day-to-day operations. That forced CEO and co-owner Kapil Shelke to look at other investors. In this context, Tork announced a $6 million funding from Maxis Capital in February. However, the money never materialised.

Some from the Tork management feel that lack of support from the main investor also led to the failure of the latest funding round. Speaking to our sister publication, Autocar Professional, Bharat Forge denied it had anything to do with the funding round’s failure, pointing out that it had nothing to gain from denying funds to a company where it had invested over Rs 200 crore.

Bharat Forge said, “It would be incorrect to allege that Bharat Forge had negatively influenced Maxis or other investors. Incidentally, it was Bharat Forge that introduced Maxis to the management team at Tork. Unfortunately, due to some challenges unknown to us, Maxis could not close the funding round,” it said. Kapil Shelke did not respond to Autocar Professional’s calls or messages.

Tork Motors: looking forward

Irrespective of who or what is responsible for the funding failure, the future of Tork Motors remains uncertain. Whether it can resurrect itself from the sea of uncertainty, only time will tell. But one thing is clear: India’s EV sector has more than just range anxiety to worry about.

WITH INPUTS FROM SHAHKAR ABIDI

Also see: Gogoro India plans delayed due to unclear subsidies