Volektra has a valuation of $12 million in its current round. In 2022, the company generated $1.2 million in revenue and made a small profit. This gives the company’s raise a 10x revenue-to-valuation multiple, which is fair to investors in this industry.

As environmental concerns and gas prices drive EV sales up, Volektra’s sales have the potential to grow quickly and could give investors a 10x return.

Volektra operates in several small and quickly growing markets. 

Let’s take a look at the rickshaw market first. The Indian e-rickshaw market was worth $273.6 million in 2022 and is growing at a 6.6% annual rate. Even more interestingly, the global e-rickshaw market was worth $1.7 billion in 2022 and is projected to grow at an exceptional 31.8% annual rate. It’s clear that there is high demand for rickshaws around the world. If Volektra can close the right deals with rickshaw manufacturers, it can grow along with the market.

The global e-bikes market is valued at $17.8 billion and is projected to grow at a 13.5% annual rate. E-bikes are trending around the world, and Volektra can position itself as an affordable and environmentally friendly solution for bike owners.

Volektra’s founder and CEO, Manish Seth, has the right profile to lead this company. He has what I expect from a founder: an understanding of his company’s product, passion, and business acumen.

Manish has extensive experience in the automotive industry working in leadership positions for Ford and Volkswagen. He also worked on converting gas-powered cars to electric for Ford, which is exactly what Volektra is focused on. Manish has an understanding of both the Indian and European markets, which is essential for this international company. And last but not least, I like him. Manish is a committed founder with a mission to transform the EV industry from materials sourcing to customer affordability. I couldn’t agree more with his vision. (You can learn more about Manish in his Founder Profile.)

Volektra offers two different products.

First, the company sells electric motors to scooter and rickshaw manufacturers in India. Each 1-kilowatt (KW) motor costs around $100 to $130 depending on the order quantity. The product helps manufacturers sell EVs without having to spend money on the research, development, and manufacturing of electric motors. This is a great value proposition in a market where customers care about low prices and manufacturers care about low costs. 

Volektra’s motors are also magnet-free. Magnet production requires the extraction of rare metals in China like neodymium and dysprosium. Each ton of these rare metals produces 2,000 tons of toxic waste during their extraction. Volektra could have a competitive advantage by offering magnet-free motors. While a small number of companies — like MAHLE — produce similar products, the number of direct competitors is so small that it is not a threat to Volektra. 

But are Volektra’s customers actually looking for magnet-free motors? I don’t believe so. Low costs matter more to the company’s clients than environmental impact. Therefore, any EV motor manufacturer is a potential competitor for Volektra. Given that amount of competition, the founder’s network and ability to create relationships with clients will be key to the company’s success.

Second, Volektra sells kits that allow bike owners to quickly and easily turn any bike into an e-bike. The company will sell its 100 kilometer kit (which allows the bike to travel up to 100 kilometers on a single charge) for $700 and its 50 kilometer kit (which allows the bike to travel up to 50 kilometers on a single charge) for $575 in Europe. It will also sell a more affordable 25 kilometer kit for $350 in India only. That way, it will help bike owners get a more powerful bike for less money than they would spend if they bought a new e-bike.

In Europe, I don’t believe that Volektra’s product really fits a market need. There are dozens of competitors online offering kits with prices fitting every budget. Most buyers interested in Volektra’s product are cost-sensitive, so the high price of the kits could discourage them. 

However, Volektra has an edge in India. There are only two different kits available on Amazon India. They cost around $90, four times cheaper than Volektra’s products, but are complicated to install and have low ratings from customers. Volektra’s kits require a maximum of 15 minutes for installation and have only one wire, which is a major advantage. It can easily target middle class customers who want to quickly get an e-bike without paying the full price of a brand-new one.

Selling will require a network on the manufacturer side and marketing efforts on the direct-to-consumer side. Even if other options are available for customers, Volektra is differentiated enough that it has a chance in the market.

Volektra is currently only commercializing its B2B electric motor. The company had small revenue growth from $917,783 in 2021 to $1.2 million in 2022, according to founder and CEO Manish Seth, and generated a small profit that same year. It already has 10 B2B clients in India and is in discussion with more EV manufacturers.

I’m not especially impressed by the company’s performance, but I understand why its growth was small. So far, Volektra is limited by its manufacturing capacity. It can produce only 2,000 units a month for now. The company plans to be able to manufacture 5,000 electric motors per month by the third quarter of 2023 and therefore considerably increase its revenue.

Volektra faces many risks that might hinder its growth. The company’s competition is both direct and indirect. Its customers are very price sensitive and could easily prefer other solutions if Volektra doesn’t position itself effectively as an affordable quality option of electric motors and e-bike kits.

The company’s two products, the electric motor and the e-bike kit, face high adoption risk. Scooter and rickshaw manufacturers could resist transitioning to EVs or decide to develop their motors in-house. On the bicycle side, customers with a bike might simply not be interested in paying a few hundred dollars to transform their bike into an e-bike.

Another thing makes me uncomfortable about Volektra: its product diversification. The company has two different electric motor sizes and three different e-bike kit sizes. It will soon sell through B2B and B2C channels in India and B2C channels in Europe. This will require the company to deploy three different sales strategies to meet three different customer bases’ needs on two continents, all while manufacturing two different products. This is quite a lot for an early stage hardware company. I do not believe that the company has enough financial and human capital to grow in three different markets simultaneously.

This product diversification might lower the company’s adoption risk — even if the e-bike kits do not happen to have a good product-market-fit, Volektra’s electric motor will surely generate good traction. But given Volektra’s limited capital, this dispersion of efforts might also limit the company’s growth. And Volektra needs to grow quickly to gain and secure market share in a highly competitive space where it’s imperative to establish the right relationships with scooter and rickshaw manufacturers.

The need for EVs is growing around the world, and the market is entering a new phase. Small EVs such as bicycles, scooters, and rickshaws are not a luxury anymore. They are affordable enough that they’ve started becoming attractive to the masses. And as gas prices have been volatile in the last year, e-mobility solutions appear as stable and somewhat affordable products. Volektra is riding this market trend. 

The company could have chosen to bet more on the Western market by playing on its magnet-free design, a great environmental differentiator that could have allowed it to charge high prices in the Western market. Instead, Volektra entered the Indian market first because it understood that cheap products are winning the market. And this strategy is working so far. The company has enough contracts to sell its 2,000 monthly production of e-motors even without a sales team. 

Volektra is a startup offering affordable magnet-free electric motors to give lower-income customers access to e-bikes and electric scooters and rickshaws. 

There is a need for the company’s products in India, and the market should experience steady growth in the next few years. At a fair $12 million valuation, Volektra could theoretically give at least a 10x return to investors as it increases its manufacturing capacity to sustain the demand’s growth. 

The company’s success will depend on the founder’s ability to lead Volektra in different markets at the same time. Founder and CEO Manish Seth’s experience in the automotive industry and the company’s good performance in 2022 make me confident that he can continue growing Volektra’s sales of electric motors. The competition can complicate this growth, so Manish will soon have to hire a sales team to sustain Volektra’s sales as he grows the company’s manufacturing capacity. 

But the biggest risk comes from the company’s ambition to sell e-bike kits. This will bring on additional adoption risks, manufacturing costs, and marketing costs. While it can be an opportunity in a market like India where there are not a lot of competitors selling e-bike kits online, it will spread Volektra’s efforts thin.

Overall, investing in Volektra could be a way to benefit from the new attraction for e-mobility solutions in the lower-income market, but it involves high risk. That’s why Volektra has been rated a Neutral Deal.

Report written by KingsCrowd Senior Investment Research Analyst Léa Bouhelier-Gautreau on March 23, 2023.