electric vehicle business in 2010, when it bought the Bengaluru-based e-car manufacturing unit—Reva Electric Car Company. 20 By May 2017, Mahindra had invested around ₹ 6 billion in the development and sale of electric vehicles. But demand was not catching up with production. Mahindra expected great potential for such vehicles, despite the low demand. It also believed that such potential in a highly price- sensitive market could be reaped only by cost-cutting measures and reducing the entry price. 21 Mahindra manufactured e-cars in its Nasik and Chakan factories in the state of Maharashtra. 22 The e-cars it manufactured could reach a speed of 85 kilometres (km) per hour and run for 140 km on a fully charged battery. 23 Batteries were essential for the production of e-cars and other vehicles. Mahindra imported battery cells and assembled them in battery packs at a facility in Bangalore, in Karnataka state. The facility had a capacity of around 400–500 units per month. 24 Expecting a steep rise in demand and reducing costs through large production, Mahindra was stepping up its investment in electric battery packs. It planned to increase the production of battery packs at the Bangalore facility to 1,000 per month. In its eagerness to win the e- car race, Mahindra also planned to set up a new battery pack facility at Chakan, with a planned capacity of 5,000 per month. Mahindra expected that with such initiatives, the cost of batteries would decrease by two- thirds of its prevalent cost. With a reduction in the cost of batteries and other motor components, Mahindra expected the cost of car manufacturing to drop by 20 per cent. It was also simultaneously working on new technologies that would enable it to manufacture vehicles that could reach a maximum speed of 200 km per hour and cover a distance of 350–400 km on a single charge. 25 This document is authorized for use only in Ku, Fred Kei-tat's Business Economics at NUCB - Nagoya University of Commerce & Business from May 2019 to Jun 2019. 2019/6/18-2019/6/21 Business Economics - Prof. Ku, Fred Kei-tat Do Not Copy - NUCB Business School
Page 3 9B18M092 Besides the internal cost-cutting measures, Mahindra was relying on the government’s production subsidy for electric vehicles to original equipment manufacturers (OEMs). Although Mahindra was hopeful about the success of its cost-cutting measures and increasing demand, it was looking for consistency in government policies. Pawan Goenka, the managing director of Mahindra, emphasized the need for consistent policies: “The only plea we have is for the government to be consistent with the subsidies they are giving. The responsibility of cutting costs thereon lies on the OEMs. However, you can’t expect a return in the next two–three years; will have to look at the long-term returns.” 26 Like the Indian government, Mahindra saw a great future for e-cars. Therefore, Mahindra’s chairman welcomed and expressed his support of the ambitious plan of the government to shift to e-cars by 2030: “It could happen earlier too, considering the sort of disruption that is happening. . . . Sometimes it’s better not
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