Mahindra & Mahindra buys 55% in Reva to power electric car biz

BANGALORE: Mahindra & Mahindra has bought a majority stake in electric car company Reva, making a big bet on an alternative fuel technology thatSpecial Edition Mahindra Scorpio

BMW sixth-generation 5-Series

The new Toyota Innova

Maruti Suzuki Eeco

is yet to prove its viability despite widespread focus and the millions spent by global automobile firms.



M&M, the country's largest utility vehicle company, acquired 55.2% in Reva, adding passenger cars to the auto major's electric vehicle portfolio that includes Bijlee, a three-wheel vehicle, and Maxximo, an electric-powered mini-truck due for launch later this year.



Reva's promoters, the Maini family, will hold 31% in Mahindra Reva Electric Vehicle Company while Lon Bell, the co-founder, will hold 11% . Employees with stock options will hold the rest. "We expect that there will be 1.5 million electric cars sold globally. I see no reason why Reva cars will not be 50,000 of that 1.5 million in the next 7 to 10 years; this deal is a part of the larger strategy within the Mahindra group of focusing on sustained mobility," said Pawan Goenka, president (automotive & farm equipment sectors), Mahindra & Mahindra, who will take over as chairman.



The electric vehicle category is considered by experts to hold a lot of potential given the global clamour to reduce pollution and promote clean air technology. But it has some strong critics.



"We lack confidence," Tomohiko Kawanabe, president of Honda R&D, recently told Automobile magazine. "It's questionable whether consumers will accept the annoyances of limited driving range and having to spend time charging them," he added.



Reva's cars have also not been much of a success since launch in 1994. Only about 3,500 cars are on the road. The biggest drawback is the battery capacity, its range and the need for repeated charging. The batteries are also expensive, increasing the cost for carmakers.



Betting on alternative fuel



But that is not stopping companies such as Nissan, Volkswagen and General Motors from investing in the technology and developing cars.



"The deal is definitely good for both. Mahindra and Mahindra will get hold of a better platform on the technological aspects for EV vehicles since they also had plans to roll out their mini-trucks Maximo on an EV platform. Reva on the other hand will benefit from Mahindra's strength in network, sales and marketing," said Vaishali Jajoo, senior analyst at Angel Broking.



Mahindra is betting that alternative fuel development can give it the cutting edge to compete in a highly-competitive global marketplace.



The announcement of this deal has led General Motors to scrap an existing licensing agreement with Reva to develop an electric-powered version of Spark. "GM has told us that they will look at other options for Spark," said Chetan Maini, chief of technology & strategy, Mahindra Reva, who co-founded the electric carmaker in 1994 as a joint venture with California-based AEV LLC.



For the new company, licensing technology will form only a small part of the overall business that will focus primarily on the launch of new products. Mr Goenka did not reveal the total value of the transaction. The Mahindra stake was acquired through a combination of equity purchased from the promoters and a fresh equity infusion of over Rs 45 crore ( about $10 million) that will be used to complete the construction of a new manufacturing facility in Bangalore
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