Mahindra Reva plots China entry as powertrain supplier

China is the world's largest market for conventional vehicles for seven straight years now. In 2015, it also became the market with the highest number of sales of electric vehicles (EV). That too with a scorching growth rate of 223 percent (188,740 passenger EVs)!

Reason enough for a China strategy to be on "highest priority list" of Arvind Mathew, CEO, Mahindra Reva. The company has been exploring the Chinese market for a few years now, but a firm strategy is in place now to tap the "huge opportunity".

Mahindra Reva, which has branded itself as Mahindra Electric, is looking to set up a partnership with a Chinese OEM. It wants to make this move soon as the incentive window in China closes in 2020. "The growth has just been phenomenal in the last 18 months, and with a very clear forecast as to when the incentives will go away, we have to act fast," Mathew told Autocar Professional. The regulation in the Chinese EV industry requires a foreign player to partner with a local company who has been manufacturing vehicles for at least three years.

If things progress as planned, Mahindra will have a presence in the Chinese EV market soon, but not as a carmaker. "If and when we do sign an agreement, yes, you will have a vehicle with a Chinese brand but there will be an ME (Mahindra Electric) logo on it. Mathew wants to build Mahindra Reva's business as a supplier of electric powertrains because that gives the company a better chance to get the much-needed economies of scale, and a better chance to turn profitable.

Banking on local sourcing to be competitive

The China strategy may look promising, but how can a foreign player meet the low-cost levels in China and also be competitive? Mahindra Reva hopes to save costs as it will be locally sourcing a lot of the components, including the batteries, which it currently imports from China. Mathew is betting on something else also to successfully put the ME logo on Chinese EVs. "What I don't know whether a lot of my Chinese partners will have is the intellectual property. In addition to having electric drivetrains, my cars have a lot of telematics and analytics inside. They are not just dumb electric cars. There is a lot of data being shipped back to our servers. I think if I can bring that value to for a Chinese partner, source the components in China, I would be very competitive," says Mathew.

With only 22,000 EVs sold (most of them 2-wheelers) during 2015-16, India is far from giving Mahindra Reva the necessary volumes. And that is why the company wants to get more aggressive in tapping the Chinese EV market. China, for its market size, and Europe, to prove its capability and build the brand image are the two frontiers Mahindra Reva wants to scale, soon.