Amid the BluSmart-Gensol saga, which has become the new focal point for the debate around startup corporate governance lapses, the downfall of Log9 Materials has largely gone under the radar.

After raising more than $60 Mn from VCs and industry majors, Log9 has struggled to adapt to the shifting realities of the Indian EV battery market.

After multiple pivots and technology failures, the 2015-founded EV startup is now embroiled in legal battles with customers and burdened with mounting debt. Key decisions taken by the company around battery chemistries have proven to be strategic mistakes.

Under severe financial pressure since last year, Log9 has laid off the majority of its workforce, lost a cofounder and is in the process of selling parts of itself to save the ship.

Sources told Inc42 that hardly any employees remain at the company. While its Bengaluru and Delhi facilities are open, physical centres in Hyderabad, Jaipur, Mumbai, and Chennai have been completely shut down.

So what went wrong for the company, which was once heralded as India’s deeptech darling? How did a company that made headlines until 2023 for its bold claims around India-manufactured cutting-edge battery and cell technology fall apart so quickly?

Well, the answer isn’t straightforward, and it involves several layers from the company’s tech stack, its decision to pursue leasing model and its failure to address customer issues. Employees also blame the management for steering the ship into directions that were not profitable. There was also a fundamental misjudgment of how to scale a tech and asset-heavy business using VC money, employees said.

How Log9’s Promise Faded Away

When Dr. Akshay Singhal started Log9 Materials in 2015, the idea was to build a groundbreaking fuel cell technology with aluminium and graphene. Kartik Hajela and Pankaj Sharma joined him soon, and the trio started building these cells that could beat lithium-ion (Li-ion) cells and cater to the growing EV market in India.

Four years after starting out in a brand new category, it caught the eye of Sequoia Surge (now Peak XV) and Exfinity Venture Partners who infused $3.5 Mn in a Series A funding round.

In 2019, Log9’s CEO Singhal told Inc42 that its aluminium-air fuel cells were expected to have a 30%-40% lower cost than Li-ion batteries, and also a better fit for India’s climatic conditions and due to the domestic availability of aluminium.

Over the next two years, the likes of Amara Raja Batteries Limited (ARBL), a major player in the automotive battery world, invested in Log9. But soon enough, Log9’s technology emphasis started shifting from aluminium-air fuel cells to innovation in LTO cells, a kind of Li-ion battery.

By this time, the Bengaluru-based startup had become one of the poster boys of deeptech innovation and R&D in India’s nascent EV industry. The startup also managed to rope in a trusted global name onto its cap table when PETRONAS Ventures invested in a $40 Mn round in 2023.

Log9 had the backing of some of the most noted investors in the game — in the energy space and in the Indian deeptech startup ecosystem. In its lifetime, the startup has raised close to $75 Mn in equity funding and much more in venture debt and from banks.

The company had three key areas of operations and revenue sources: cell manufacturing, battery manufacturing, and EV leasing. The stack looks something like this: cell manufacturing is linked to battery manufacturing, which further boosts the leasing business.

However, Log9 started with battery manufacturing as this was its forte. It shifted its focus from one battery chemistry to another as the market evolved from its early days.

An EV battery can be manufactured or assembled with imported cells or companies could produce the cells in-house. Log9 chose the latter to support its plan of owning the full stack, which we have alluded to above.

But before it could start cell production in-house, the startup kept depending on cells imported from China for its battery packs.

In 2022, it invested INR 150 Cr to establish a cell manufacturing facility in Bengaluru’s Jakkur area, which would become a key part of the battery business. The plan was to produce 50 megawatt-hour (MWh) of cells every year in Jakkur, but the facility only became operational in April 2023.

And even then, the production never really took off properly as Log9 claimed technology experts couldn’t arrive on time to set up the machinery imported from China due to delays in visa approvals.

However, even before manufacturing its own cells, Log9 had started the less capital-intensive EV leasing business in 2022. All of a sudden, this became a major source of revenue with two OEMs coming on board — Omega Seiki Mobility (OSM) and Quantum.

The OEMs........

© Inc42