For Mahindra and Mahindra, EESL order win a big loss, but will still go on; here is why

By: | Published: October 6, 2017 5:39 AM

Pawan Goenka, managing director, Mahindra and Mahindra (M&M), said on Thursday the order win on the world’s largest single electric vehicle procurement initiative by EESL (Energy Efficiency Services Limited), would be a loss-making proposition for the company.

mahindra, mahindra eesl order, mahindra eesl deal, eesl mahindra dealHowever, he said the company would still participate as this initiative would make electric cars popular in the country.

Pawan Goenka, managing director, Mahindra and Mahindra (M&M), said on Thursday the order win on the world’s largest single electric vehicle procurement initiative by EESL (Energy Efficiency Services Limited), would be a loss-making proposition for the company. However, he said the company would still participate as this initiative would make electric cars popular in the country.

Goenka was speaking via a conference call.

The automaker on Wednesday agreed to match the lowest bid made by Tata Motors for the first phase of the order to procure 10,000 electric vehicles. The bid made by Tata Motors was for Rs 11.2 lakh per unit, which was Rs 2.35 lakh cheaper than the bid made by M&M. Tata Motors is going to deliver the electric variant of the Tata Tigor.

For phase one, 500 units will be supplied by the two automakers, the delivery date for which is November 30. Of this, M&M has qualified to supply 150 electric vehicles while Tata Motors will supply 250 units. The details on the remaining 100 will be revealed at a later date.

According to Goenka, the 150 units to be delivered in the first phase of the order would hit the auto major’s revenues by around Rs 3.5 crore. “The Rs 11.2 lakh per unit price cannot be justified, mostly because the eVerito model that we will be supplying is a larger vehicle than the car being provided by the lowest bidder,” said Goenka.

He said, “We will be making losses on this order, the details of which we cannot share. But this will make electric vehicles popular, and hence, we feel that we should be a part of it. We will have to compensate for the losses made here elsewhere.”

Due to the loss that M&M will suffer in the first phase, it may not take part in the second phase of the order. The purchase orders for supply of the remaining 9,500 electric vehicles will be done in phase two, which will be issued on completion of phase one deliveries.

Both Tata Motors and M&M will get an opportunity to participate in the second phase.

Goenka said, “We are eligible to supply 4,750 units in the second phase of the order. But considering the loss that we are making, we may opt out of the second phase entirely. On the other hand, if suppliers of the auto parts decrease the overall cost due to the increase in the order size, we may be able to fulfill a small part of the 4,750 (units) order.”

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