"Even our niche market is very large"

Written by Malabika Sarkar | Malabika Sarkar | Updated: Jun 2 2009, 07:03am hrs
Think electric cars and the first name that comes to your mind is Chetan Kumaar Maini. And it is not difficult to see why. As deputy chairman and chief technical officer, Reva Electric Car Company, Maini is at the forefront of the electric vehicle movement in India, and has helped build Reva to be the largest fleet of electric cars in the world today. BusinessWeek magazine has included Chetan Kumaar Maini in its latest list of the 50 most powerful people in India. In this interview to Malabika Sarkar of FE, Maini discusses the opportunities ahead for the Reva Electric Car Company, a joint venture between Maini Group of India and AEV LLC of California and venture-backed by US investors Global Environment Fund and Draper Fisher Jurveston.

The electric vehicle concept is yet to take off in India in a big way. What could be the reason

We need a lot of research and development in electric cars. There is no proper regulatory framework in India to attract investments in the electric vehicle segment while consumer awareness about the electric vehicle category is also very low. But it is different in Europe and now in the US too.

European countries are creating demand both through regulatory push and consumer awareness. The carbon emission levels have been set for the next five years. There are penalties if carbon emission from vehicles crosses a particular limit. In the US, Barack Obamas August 2008 speech highlighted that there would be about one million electric vehicles in the US by 2015. As per a plan chalked out 10 years ago, China has 15 million two-wheelers today. So strong regulatory push from the government will force manufacturers to invest in the electric vehicle concept. Having said that, things are changing in India. In the next three to five years, India will begin to see the changes as a few automakers have started talking about the potential of electric vehicles.

What have been the sales figures for your company for India in 2007 and 2008

Since inception, the company sold around 3,000 vehicles. The domestic market accounts for 50% of the total sales, while the remaining 50% comes from overseas markets. Of these 3,000 cars, the company sold 1,000 cars in London and 900 cars in Bangalore. Of the balance, 50% sales came from parts of the country such as Delhi and Mumbai. Another 50% comes from other overseas markets. In addition to the domestic market, Reva cars are sold in 10 overseas markets including London, Norway, Greece, Ireland, Japan and Nepal.

You have almost single-handedly taken forward the cause of electric vehicles in India. Being in a segment that does not have a mass consumer base, what drives you to move ahead

It is a niche today, but the potential is large. Our target is the second car in a household. Last year, 40% or 4,00,000 cars of total number of cars sold in India were to serve the second car purpose for households. With the second car, the consumer does not need to ride 500 km a day taking huge luggage. The second car is fundamentally to serve daily routine things covering short distances of around 40-50 km per day.

About 95% of the consumers drive less than 40 km per day. For this purpose, the consumer will consider cars that are easy to drive, easy to park, automatic and economical. For this kind of usage, Reva will save around Rs 4,000-Rs 5,000 a month, which would work out to around Rs 2 lakh over a period of five years plus no maintenance charges.

So when you look at the market, there is growing second car class segment that was not present 10 years ago. For instance, five years ago, only 24% of the cars sold in India served the purpose of the second car. Today that has increased to 40% because the middle-class segment is growing. Yes, the second car concept is niche, it is not the mainstream product so to say, but even that niche market is very large.

You want to be the second car of the household; but with congested roads, do you think Reva is the ideal car for city driving

Yes, Reva is the right car to drive because roads are congested. That is not only because of its size; also because it is automatic, has good acceleration, very good small turning radius at 3.5 metres and no gears. Moreover, the body panel of Reva is dent-proof, so there is no need to worry even if another vehicle hits a Reva on the road.

Is there a possibility of institutional sales for a product like yours

Today, we are in Bangalore and New Delhi and recently tied up with Reliance Digital for Hyderabad. We are talking to a lot of players including corporates and hotels. Mahanagar Telephone Nigam in Delhi, ONGC and Wipro Peripherals have already picked up Reva vehicles. Several firms have now started looking at Reva vehicles. Our larger volumes come from B2C, but now we are increasing business in the B2B segment too. As of now, 95% of our business comes from B2C, and B2B accounts for 5%. In the future, the companys B2B business will increase to 10%. Further the government subsidy of Rs 75,000 given from the Ministry of New and Renewable Energy for PSUs (public sector units), tourism and educational institutions will increase bulk sales.

What kind of government support has come to the eco-friendly car segment in India

There is no uniform policy across the country in relation to electric cars. Several things can be done at the state and central government levels. The Karnataka government has given road tax exemption for the first five years for electric vehicles and reduced value added tax (VAT) to 4%. Recently, the Karnataka government has announced that consumers can pay only 50% of the road tax after five year for electric cars. But in other states, both road tax and VAT are applicable; hence the price of the car is higher.

Moreover, VAT is not uniform across the country. In some states such as Andhra Pradesh and Karnataka, VAT is 4% and in some other states it attracts 12.5%. Some states are considering the electric vehicle as a motor vehicle and slapping 12.5% VAT, while some states are considering it as part of a renewable energy device that attracts a VAT of 4%. As far as infrastructure is concerned, its coming up slowly. We are discussing the various possibilities of setting up charging points with the government.

Now that you say it, charging the battery would be an issue, right I dont think many multi-storied apartments in India would have a charging point.

The company will install the charging point at the premises of the consumer. We do it as part of the cost of the car. Slowly the charging facilities for an electric car are catching up in corporates and malls. Companies such as Infosys and Wipro have parking space for green cars, where electric vehicles can be charged as well. Shopping joints like Forum Mall in Bangalore have a charging point for electric cars.

Unlike the situation five years ago, big companies and real estate promoters are taking suggestions from Reva these days to provide charging facilities at their new buildings. In Europe, the government and local municipalities have taken a lot of initiative in this direction. In London, where more than 1,000 Reva cars are running, all the parking lots have charging terminals. Westminster County has put up almost 100 plug points for charging. Here in India public-private partnership is required to increase charging terminals.

In any case, most customers would require charging during the night, as their charging requirement during the day is minimal. Currently, we are talking with the Karnataka and Delhi governments to create infrastructure.

As the whole of the automotive industry struggles with the economic downturn, what are your expectations for sales through 2009

The Reva owner has to spend only Rs 480 per month (at rate of 40 paise per km) to cover 1,200 km per month. A car using conventional fuel will incur an expenditure of Rs 4,800 to cover the same distance at Rs 4 per km. So with Reva, consumers can save Rs 4,300 a month and Rs 50,000 a year. The company expects 25% year-on-year growth in sales in fiscal 2008-09.

As we expand our sales network to around 15 locations from the current three in the domestic market, we hope that sales volumes will also increase. We hope to see sales increasing four to five times in the fiscal starting April 2009.