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BW Businessworld

Charged And Ready

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Reva, the only electric car in india's rather conventional auto sector, was launched 16 years ago and has been struggling ever since to make a mark. In 2006, 
Chetan Maini, owner of the Reva Electric Car Company, got $20 million from venture capitalists Draper Fisher Jurvetson and private equity firm Global 
Environment Fund for building ‘space frames' (equivalent to a chassis in other cars) — but even that was not enough to revive its fortunes. The Reva-I was 
ridiculed by the western press for its shape and safety standards, even though it was the best in its class globally at that point of time. The car, said 
analysts, generated a world-beating cost of about 40 paise per km. But only 3,500 Reva cars were sold worldwide in the entire decade by the company, which 
was set up in 1994 but started operations only in 1996.
The next couple of years and the global recession did not help much either. However, things finally seem to be falling in place for Reva. In the middle of 
last year, Mahindra & Mahindra (M&M) bought 55 per cent stake in the company and invested Rs 45 crore as working capital. And finally things are looking up 
for India's first electric car company.
"The deal with M&M was necessary because a large company could take Reva to the next level — going global," says Maini, the chief of technology and strategy 
for Mahindra Reva (as the company is now called). For M&M, the acquisition completed their portfolio of automobile investments, from scooters to aeroplanes.
Apart from the portfolio addition, M&M could now use Reva's technology in motorbikes, SUVs, small commercial vehicles and even in a Mahindra three-wheeler. 
In fact, the process of technology transfer has already begun with Reva's lead acid battery being used in Mahindra Gio — a 0.5 tonne, four-wheel commercial 
vehicle. "We are testing this vehicle before it is rolled out commercially," says Maini. 
There are plans for the Reva car, too. To start with, it will be sold through 150 Mahindra dealerships in 30 cities across India over the next eight months. 
Also, in four months, it will be produced at a new 4.5-acre facility in Bangalore, which will have a capacity of 30,000 vehicles per year — a massive 
increase from Reva's current 1,000 vehicles per year capacity. There is also a plan to launch variants, such as with solar recharge option. Industry sources 
add that a four-door Reva will hit the market by 2013 (the current model has two doors).
The government, too, is playing an indirect role in Reva's change of fortunes. Late last year, it announced a 20 per cent subsidy on purchase of electric 
vehicles. In Budget 2011-12, it further announced a 100 per cent subsidy for importing replacement batteries for electric vehicles.
The Green WorldThe stake sale to M&M leaves the Maini Group with 45 per cent in the company. Though they did not reveal the price at which the VC funds exited, sources say 
it was five times the initial invested value. On the other hand, M&M paid a heavy price to buy majority stake in a company that is yet to create a financial 
track record. But the reason lies elsewhere. 
For M&M, the expensive valuation is worth it, because the world over OEMs (original equipment manufacturers) are making green vehicles. Carlos Ghosn, CEO of 
the Renault-Nissan alliance, had told BW in an interview that he expected 10 per cent of all vehicles sold in 2020 to be electric vehicles (see ‘Car Market 
Is Out Of Slump', BW, 5 April 2010). 
According to the International Organisation of Motor Vehicle Manufacturers, the number of electric cars could swell to about 20 million by then. It is to tap 
this potential market that M&M wants to focus on Reva's technology. Acquiring South Korean SUV manufacturer, SsangYong Motor Company has already given it a 
global footprint and talks are on about introducing Reva through SsangYong's dealerships in Europe.
At present, only three companies — Renault-Nissan, Mitsubishi and Tesla Motors — have the capability to mass produce electric vehicles. Mitsubishi launched 
its electric car, iMiev, in Japan last year and produced 5,000 vehicles. Renault-Nissan, on the other hand, has large production capacities in the US, the UK 
and Japan. Late last year, it launched its five-door Leaf in the US and already has 13,000 bookings.
The Mahindras are in the game early and will use their advantage to build awareness about electric vehicles in India and other emerging markets. In countries 
such as the UK, they will find it relatively easier as the Reva has already built a brand for itself. In the past three years, it has sold close to 1,200 
cars in London — more than it has sold in India. Moreover, the mayor of London recently sanctioned 20,000 charge points for electric vehicles in the city. 
M&M is now working with Reva's Going Green dealership in the UK to launch the roomy 3.3 metre-NXR model this year.
"Reva is the only company selling electric cars in India. It will be some time before any other electric car makes its debut in India," says Darius Lam, 
senior market analyst at J.D. Power and Associates in Bangkok. He adds that only Toyota's Prius hybrid sells in India and that too in very limited numbers. 
General Motors (GM) has plans to launch its Volt hybrid in India in the future. Honda, too, has electric cars, which may eventually find their way to India. 
Hyundai may bring in the electric i10. But M&M could use Reva's technology in their SUVs and hybrid SUVs may be running in India soon. This gives the 
Mahindras full access to an almost untouched market.
But the electric vehicle segment is at a nascent stage in India. "It will take at least eight years for the market to develop. Any electric car manufacturer 
needs to communicate the cost of ownership to the Indian customer if it has to sell in volumes," says Kapil Arora, head of automotive practice at Ernst & 
It takes eight hours to charge Reva's 48-volt, 200 amp-hour battery with a three-phase 13 KW motor, to travel 90 km. One has to look at the units of 
electricity consumed per hour at home to calculate the mileage and the cost benefit (see ‘Cost Of Running'). Of the about 1,700 Revas in India, a large 
number are charged at home. Only Wipro offers a couple of charging points at its office in Bangalore for its employees. HP, too, is encouraging its employees 
to go green — it is offering them Rs 6,000 per month extra for driving an electric vehicle. "This is the kind of support that we need for the electric 
vehicle industry to succeed in India," says R. Chandramouli, COO of Mahindra Reva.
The Tech AdvantageFor Mahindra, Reva also presents a greater opportunity in licensing technology. Earlier Reva and GM had a technical tie-up where the two companies showcased 
Electric Spark in 2008, but after M&M acquired a majority stake in Reva, GM decided to develop its own electric vehicle and walked away from the technical 
collaboration. "We can tie up with auto makers with our technology to build electric vehicles specific to those markets," says Maini. The company had filed 16 patents, of which 10 have been granted. Most of these are regarding remote diagnostics, telematics, information management and 
energy management verticals. Further, the Mahindras will use the software muscle of Tech Mahindra and Mahindra Satyam to support the smart chips in the car.
With M&M's backing, Reva is no longer ‘a long-drawn science project'. It is now in a position to be a forerunner of change, though its performance will be 
subject to regular financial and product scrutiny. The dismal decade will be forgotten if Reva is able to rev up to success over the next few years.