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Reva looking at franchisee models

Reva looking at franchisee models
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First Published: Wed, Oct 28 2009. 10 02 PM IST

New strategies: Reva’s CTO Chetan Kumar Maini. Hemant Mishra / Mint
New strategies: Reva’s CTO Chetan Kumar Maini. Hemant Mishra / Mint
Updated: Wed, Oct 28 2009. 10 02 PM IST
Bangalore: Depending on whom you ask, this tiny company is either the next big thing in automobiles, or a maker of glorified golf carts.
What’s indisputable is that as the whole automotive world seems to be racing suddenly toward the age of electricity, the Reva Electric Car Co. is in the lead, ahead of better-known local competitors such as Tata Motors Ltd and global giants such as General Motors Co. (GM) and Toyota Corp.
New strategies: Reva’s CTO Chetan Kumar Maini. Hemant Mishra / Mint
Daimler and Toyota are supposed to start trials of electric versions of the Smart Car and the Prius, respectively, by the end of the year. The Nissan Leaf will come out next year, as will the Chevy Volt. And the Obama administration is committing billions of taxpayer dollars to loans to help companies produce alternative vehicles, including hybrids and all-electric cars.
US vice-president Joe Biden was in Wilmington, Delaware, on Tuesday at a defunct GM plant that Fisker Automotive, backed by a $528.7 million government loan, will refurbish and use to make hybrids.
But years before the sleek Tesla Roadster hugged California highways or GM unveiled the Chevrolet Volt, Chetan Kumar Maini was making and selling stubby electric vehicles turned out by a nondescript factory here. Reva has more all-electric vehicles on the road than any other company, but it still has a long haul before it can make the vehicles marketable for the masses.
Last month, the company won an important stamp of approval when GM said it would use Reva’s technology in the electric version of its Chevrolet Spark, a small car whose conventional petrol version GM sells here already. The electric version of the Spark is expected to go on sale in India by the end of next year, according to GM officials.
Reva’s technology is “second to none”, said Karl Slym, president and managing director of GM India, adding that Reva’s appeal came from its drive train, the collection of components that move the car, which is easily installed in different vehicles and works with various batteries.
GM’s vote of confidence is a big boost for the privately held company, which has been making vehicles for eight years, but has sold only a few more than 3,000 cars and has not yet turned a profit. By contrast, big Indian auto makers sell tens of thousands of cars each month.
But now Reva’s moment may have arrived.
The company is retiring its only model, known here as the Reva i and in Great Britain as the G-Wiz—and mocked for its small, boxy size and its lack of speed. The vehicle doesn’t even qualify as an automobile but is called a quadracycle, a slower, four-wheeled vehicle similar to an all-terrain vehicle, which is not required to meet car safety standards in countries such as Britain.
Reva’s new model, the NXR, will comply with European safety regulations, seat four and travel up to 160km on a full battery charge, at speeds of up to 65km an hour—what’s known in the industry as a city car.
“I have been doing this for 15 years, and I have never seen everything come together like I have” now, said Maini, the 39-year-old vice-chairman and chief technology officer (CTO) of Reva. The company is jointly owned by his family; AEV Llc, a small technology company based near Los Angeles; and two venture capital firms.
Maini also said the company was also in talks to franchise production of the NXR in New York to Bannon Automotive, a company based in Long Island. Bannon is negotiating with local and state officials and lining up financing, Maini said, adding that once a deal was struck, a plant could be up and running in 12 months.
Companies such GM and Nissan Motor Co. are already spending billions to develop electric cars. Carlos Ghosn, chief executive of Nissan and Renault SA, said recently that electric vehicles would make up 10% of all cars sold by 2020.
But before that can happen, both electric cars and their batteries have to become more efficient and cheaper, a whole battery-charging station infrastructure has to be created, and consumers have to want the cars, which cost considerably more than petrol-powered vehicles.
In addition to these challenges, Maini’s company has to grow from being a maker of niche vehicles for early adopters into a producer of mass-market cars.
“The Mainis are certainly good guys, but I don’t think they have the resources to make that happen,” said Rishikesha T. Krishnan, a professor of corporate strategy at the Indian Institute of Management in Bangalore. They have to “align themselves with a bigger player”.
Reva officials agree that they need partners and they are trying to develop three businesses: building cars under the Reva brand; franchising production of Reva cars to other manufacturers such as Bannon; and licensing Reva technology to auto makers such as GM.
The company also says it believes that its coming cars will be much more enticing. It has such faith in the NXR that it is building a factory that can produce 30,000 cars a year. The company plans to release one new model every year; it has a sporty coupe, the NXG, ready to be released in 2011.
“It was very clear to the management and the board that we have to do something truly game-changing, and hopefully that’s what we have done with the new design,” said Mohanjit Jolly, a Reva board member and the executive director at Draper Fisher Jurvetson, a venture capital firm based in Silicon Valley that has invested in both Reva and Tesla Motors.
In many ways, Reva is the opposite of Tesla, a Silicon Valley company that has grabbed the limelight with its high-performance electric sports cars. Whereas Tesla’s cars are fast and expensive, Reva’s vehicles are small, slow and cheap, by electric car standards anyway.
“If Tesla is on one end producing cars to compete with Ferrari, we are on the other end,” said R. Chandramouli, who heads sales and marketing at Reva. “We believe in really small cars.”
Maini said electric cars have to be small and affordable to succeed in places such as India and Europe, where most car trips are short and involve stop-and-go driving, unlike in the US where commuters can drive 80km or more a day, mostly on highways.
The NXR, which is about a foot and a half shorter than the Mini Cooper, will come in two variations. In Europe, the higher-end model will sell for about €15,000 not including batteries, which the company will lease for an undetermined monthly fee.
By contrast, Tesla’s Model S sedan will cost $49,900 after a $7,500 tax rebate. That car will seat five adults and two children and have a range of 480km. Tesla is taking reservations for the car, but deliveries will start in 2011. It has sold nearly 900 of its Roadster sports cars.
If all goes according to plan—a big if—Reva, which is named after Maini’s mother, should turn a profit sometime next year, he said.
Heather Timmons from New Delhi contributed to this story.
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First Published: Wed, Oct 28 2009. 10 02 PM IST
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