Mahindra & Mahindra’s green gamble

India’s Mahindra & Mahindra has become the first to launch a four-seat, zero-emission vehicle in the country. But will the car’s advantages translate into sales?
Electric vehicles have largely failed to find traction globally, but that has not stopped homegrown automobile company Mahindra & Mahindra from dreaming big for its first four-seat electric car, the e20, launched in March.
“If anybody can succeed in promoting the use of electric vehicles in India, it is going to be us,” says Chairman Anand Mahindra. The company has set a target to sell 500 units each month.
For electric cars, that is ambitious, but it is easy to understand why Mahindra is betting on the car. With an operating cost of 0.50 per km—nearly one-tenth that of petrol cars and one-fifth that of diesel cars —and a price tag substantially lower than its global counterparts at Rs 5.96 lakh (US$10,731), the e20 has several advantages. It does not require regular servicing, it is low maintenance, and being fully automatic, it is easy to maneuver in traffic.
Industry experts say electric vehicles are still not going to be popular in India. The most fundamental problem facing the car is its inability to support long drives. The e20’s lithium-ion batteries can only go for 100 kms per charge. While the car can be recharged using any 15 amp socket, just like laptops and mobile phones, lack of charging points along highways makes it unsuitable for weekend getaways.
For now, the company has only set up 253 charging stations in the eight cities where the e20 will be launched. Of these, 95 charging stations have been put in Delhi and 102 points in Bangalore.
Sales figures for Reva, the country’s sole electric car until now, reflect this issue. Fewer than 5,000 units of the car have been sold in the 10 years that Reva has been in the market. Nearly half of that has been due to exports to European markets such as the UK and Norway.
Another problem with electric vehicles is the cost. Many feel the cost of an electric car does not match its capabilities. “Prices of electric vehicles globally are prohibitive,” says Abdul Majeed, partner in Price Waterhouse -Coopers. The Nissan Leaf sells for around Rs 23 lakh (US$41,412), while the Renault Zoe and Mitsubishi i-MiEV are priced at Rs 17 lakh (US$30,609) and Rs 25 lakh (US$45,013), respectively.
Mahindra & Mahindra has been able to keep costs low at Rs 5.96 lakh (US$10,731), but that economic advantage largely disappears in the face of expensive batteries. Replacing the imported lithium-ion battery, which comes with a warranty of three years or 60,000 km, could set owners back by as much as Rs 150,000 (US$2,700).
In the absence of cheaper batteries, the company is banking on the car’s cost advantages to drive sales. “On driving an average of 1,200 km every month, a customer would be able to realise savings in fuel cost of about Rs 70,000 (US$1,260) every year,” says Pawan Goenka, chairman, Mahindra Reva Electric Vehicles.
At present, the price of the e20 varies from state to state depending on the subsidy provided by the government there. However, the prices could come down by Rs1-1.5 lakh (US$1,800-2,700) if the central government also decides to offer subsidies under the National Electric Mobility Mission Plan.
The company’s facility in Bangalore is among the largest in the world for electric cars. It has an annual capacity of 30,000 vehicles. However, it does not have a paint shop, press shop or a body shop. The body panels of the e20 are made of polymers and glued on to the frame by hand. The technology is not meant for mass production as it takes 12-13 minutes to roll out a car as compared to one to two minutes for manufacturing an internal combustion engine vehicle.
However, not everyone believes the prospects are bright for electric vehicles in India. “The e20 is an interesting product and is priced competitively. But electricity grids in India do not have the capacity to charge households, how can it be expected to power a population of electric vehicles? India needs to work on power generation and transmission before talking about electric vehicles,” says Deepesh Rathore, managing director, IHS Automotive India.
The car’s dependence on India’s coal-fired power plants also raises questions about its actual environmental costs. “Electric vehicles are only as ‘green’ as the energy sources used to charge them. Charging electric vehicles in India remains a challenge as 60% of electricity is generated from coal-fired power plants,” says a YES Bank report in association with Teri BCSD.
Mahindra & Mahindra counters such charges by citing reduced CO2 emissions. “Even if the e20 is charged from the grid, the carbon dioxide emissions are at least 30% lower as compared to a fossil fuel-powered vehicle,” says Goenka. In addition, the car is also equipped to harness the energy of the sun to charge itself.
(April 2, 2013)