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Reva Ready To Look At Growth Capital

30 November, 2009

All elements appear to be in place for a multi-dimensional growth for Reva Electric Car Company, a Bangalore-based company formed as a joint venture between Maini Group of India and AEV LLC of California and backed by US investors Global Environment Fund and Draper Fisher Jurvetson (who have both invested $10 million each). When everyone in the world is talking about low-cost automobiles, after Nano became a reality, Reva, tucked away in Bangalore, is quietly experimenting with a plan that will potentially change the way automobile manufacturing is perceived.

Reva is working on a platform technology that brings down the cost of manufacturing a car to just a fraction of conventional auto assemblies. Reva, which is variously called cute and a toy car, has sold a little over 3,000 cars mostly in Bangalore and London but it is at an interesting phase where many of its experiments seem to be paying off. Reva, the electric vehicle, is actually now a small part of the business, which will soon be dominated by revenues from licensed manufacturing, licensed technology and mobility solutions. In an interview with VCCircle, Chetan Maini, deputy chairman, Reva Electric said, “we started as an EV company. We see Reva as a total EV mobility solutions company, driven by customer insights, ideas and technology. We are not just looking at a product. At a macro level, energy security and climate change will dominate our next 10 years. Our products will leverage on that and be a platform creator.” Excerpts:-

How has the journey been so far for Reva?

We have been focussing on the markets of Bangalore and London to understand consumers and technology.  It has helped us create a platform for next generation technology. We internally view Reva as an ideas and knowledge company. The visible part of the business is Reva, the vehicle.

You have entered into licensed manufacturing agreement with US based Bannon Automotive to produce Reva locally. Is this a new revenue stream that Reva will explore going forward and would it further enter into similar JVs for licensed manufacturing?

We are in talks with Bannon Auto and they (talks) are very encouraging. We are yet to finalise an agreement with them.

We have explored talks with several players in the world. Five years hence, between licensed technology and licensed manufacturing, we will generate nearly 50% of our business.

Now, it takes 20 hours to assemble a car. The labour cost may be $40 in India and $500 in the US. What we are bringing to the table is affordable technologies that enable a cost effective solution. Consumers are looking at lowering carbon footprint and local manufacturing will gain traction. This also makes a lot more sense as regional requirements are different. What we are talking about is how franchisees can break even by producing less than 5,000 cars. The approach is a paradigm shift from how automobile manufacturing is looked at.

This low-cost, modular manufacturing plant platform will cost just 10s of millions of dollars as opposed to a few 100 million dollars for a conventional plant. This will enable manufacturing of vehicles in different countries closer to the markets where they are used.

What is the capacity of the Bommasandra (in Bangalore) plant and when will it get operational?

Our new plant with a capacity of 30,000 vehicles will be up and running next year. In many ways, it will be a baseline of how a plant should be put together. It is about a philosophy and mindset change of how to make a local and profitable car. The total investment on the facility is Rs 30 crore excluding land.

What about the new car launch? Will the existing Reva be phased out?

We are launching NXR, the family car platform, in the second quarter of next year. We will evaluate consumer thoughts and take a call on phasing out or continuing the existing Reva model. The next generation car NXG will be rolled out in 2011.

What is the scope of your pact with General Motors?

Licensed technology is a big (revenue) stream. The pact with General Motors to electrify their Spark range for the Indian market is a big one. We start with the Spark platform. We are going to review other products for the Indian market. We will be creating kit and technology to put into other platforms that GM makes in other parts of the world. We will start with India. We see it panning out as a substantial business over time.

What are the other business opportunities?

We are developing EV mobility solutions to fast-charge cars using telematics. To really make EV successful, we need to build infrastructure and easy mobility solutions around it. If the car falls low on energy, through sms technology, we will reach the vehicle for fast charging. We are also looking at electrifying a range of vehicles such as pickups, three wheelers and buses. We have received lot of interest from several players on technology licensing.

What is the kind of funding requirement to put all these plans in place?

These plans will require capital. We are transitioning to become more than an EV company. We will have to look at growth capital for the new businesses.

What has been the user experience so far?

Reva costs Rs 3.6 lakh.in Bangalore and under Rs 3 lakh in Delhi. It is a second car that people prefer to use for city driving. The economy of operations of Reva is low at 45 paise per km versus Rs 4 per km for regular cars. From an economy perspective, the total cost of ownership is low.

Our challenge is to remove batteries form cars and separate energy from the cars to lower the costs. The GM pact will allow us access to their distributors and also wider reach with the Spark EV platform.

At present, the cars run in Bangalore and London where there are 1,000 odd cars each. Some of them have successfully completed 1 lakh km. Our new platform is a family car that can seat four adults. It has European standards on safety, fast charging, telematics and easy user interfaces.


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1 Comment
Deepak A Shrivastav . 6 years ago

the interview really going to help me in exam’s

Reva Ready To Look At Growth Capital

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