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Govt subsidy may rev up Reva sales

Thursday, 17 March 2011 - 2:47am IST | Place: Bangalore | Agency: DNA
Mahindra Reva Electric Vehicle (MREV), maker of electric cars, is moving into the fast lane with government incentives, wider distribution network and institutional sales picking up.

Mahindra Reva Electric Vehicle (MREV), maker of electric cars, is moving into the fast lane with government incentives, wider distribution network and institutional sales picking up.

Chetan Maini, chief of strategy and technology, MREV, said the company expects annual vehicle sales to jump to 5,000 units next year. Maini, who set up the Reva electric car in 1994, said the company has sold 4,000 vehicles globally till now.

“We are seeing a surge in demand for electric cars after the announcement of the government policy (that offers a 20% subsidy on electric cars). Next year, our target is (to sell) 5,000 cars,” he said.

In November last year, the government came out with a policy that offers a 20% subsidy on the price of 140 electric cars for the current fiscal. The subsidy budget will be increased to cover 700 cars next fiscal.

The government’s financial incentive has brought down the price of MREV’s non-AC electric car by Rs75,000 per car to Rs3.2 lakh from Rs4 lakh. For the AC car, it is down to Rs3.7 lakh from Rs4.5 lakh.

The company is also banking on institutional sales to push up its sales volumes. On Wednesday, SAP Labs announced its green car policy in collaboration with MREV which could result in sales of close to 35 cars in the next few months.

SAP Lab’s green car scheme brings down the EMI for its employees to Rs1,350 per month from Rs11,000 when bought in the market. The tech company has been able to do this by providing a green car allowance `6,000 per month, negotiating 1.5 percentage point lower interest rate from finance company Orix and providing free car charging for its employees.

VR Ferose, managing director, SAP Labs India, said the company was looking at 30% of its 900 company cars to be Reva by the end of this year. “Today, we have 900 cars owned by our employees under SAP car policy. We want 30% of it to be Reva,” said Ferose.

Mahindra Reva is looking to collaborate with more corporate houses to increase its institutional sales. Currently, institutional sales constitute less than 5% of MREV’s total sales. Maini expects it to be 30% or higher in a few years.

The company has already started building capacity to meet the rising demand. It is setting up a second plant in Bangalore with an investment of Rs200 crore to produce 30,000 electric cars. Its first plant has a capacity of 6000 cars, which will not be enough to meet the rising demand.

“We are trying to set up a new plant that will have a capacity of 30,000 electric cars.  It will be completed in 4-5 months and operational by the end of this year. It is going to take us a couple of months to ramp up the production levels (to make it possible for buyers) to get it from the shelf. Currently, there is a short waiting period,” said Maini.

According to him, higher volumes will help MREV to bring down the prices with economies of scale kicking in. “I do see volumes shooting up in the next 2-3 years with several partners coming onboard. We will see some advantage (from economies of scales) coming in and we will pass it on (to the consumers),” said Maini.

The company has scaled up its network of outlets from two cities to around 20, which is also pushing up the demand. “We will be there in 20 cities by the end of March. Next year, we will have 100 outlets in the country (compared to two outlets over a year back),” said Maini.


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