M&M forms subsidiary for EV four-wheelers, to roll out four cars by FY26

Mahindra was the first major OEM in India to enter the electric car segment.

Automobile major Mahindra & Mahindra (M&M) has formed an unnamed subsidiary (EV Co), for the launch of electric four-wheelers in global markets. To be asset light in nature, the newly formed entity will also look after sales, customer care, marketing, supply chain coordination, product strategy, planning, HR and finance of Electric passenger vehicles. Apart from Mahindra-branded vehicles, it may use its own brand of products.

The subsidiary was launched a day after M&M received a Rs 1,925-crore commitment from British International Investment (BII) through a binding agreement of equal investment from each sides into EV Co. The investment from BII will come in two tranches – Rs 1,200 crore by June 2023 and Rs 725 crore later on. BII will have stake of up to 4.8% in the form of convertible instruments at a valuation of up to Rs 70,070 crore.

“This investment by BII is only for passenger four-wheelers,” confirmed Anish Shah, managing director and chief executive of Mahindra Group. “Separate announcements will be made on three-wheelers and other segments,” he added. He had stated a day earlier that M&M would work jointly to bring other like-minded investors in EV Co to match the funding requirement in a phased manner. He clarified that the external investment will help the company reduce its earlier earmarked capex of Rs 10,000 crore by Rs 1,925 crore.

EV Co aims to roll out four cars, under its ‘Born–Electric’ (Ground-up EV) platform by FY2026. This will be in addition to the XUV400 scheduled for launch in September 2022, with deliveries to start in January-March 2023.

Rajesh Jejurikar, Executive Director, Auto and Farm Sectors at M&M, believes that the electric SUV market is at an inflection point and the company aspires to be a leader in that category “We would outline our long term vision, which includes our comprehensive product, technology, and platform strategy, at the UK event on August 15, 2022, followed by a reveal of the electric XUV 400 in September 2022. By 2027, we would expect 20-30 percent of Mahindra SUVs out of the entire portfolio being electric and that means annual sales of two lakh unit,” he said.

“It’s a master stroke!” said Puneet Gupta, analyst from S&P. “The electrification is taking off in India and is alluring companies to go on full throttle in terms of restructuring their organisation and look for alliances. This will help M&M to align with future and give them a direction to work in full swing into the EV world.”

Sameer Usgaonkar, Director, Head of Project Finance South Asia at BII, maintained that EV Co is expected to hit a valuation based on “specific milestones” that will be achieved by the company in the future. “We did extensive due diligence, including a series of meetings with the management team and got comfortable with that valuation,” he said.

Mahindra was the first major OEM in India to enter the electric car segment. After taking over Chetan Maini-owned Reva Electric Car Company, it formed Mahindra Electric and introduced cars like e2O and e2O Plus. But sales failed to meet expectations and these models were eventually phased out.

Rival Tata Motors had announced last October that TPG Rise Climate along with its co-investor ADQ would invest Rs 7,500 crore (around $1 billion) in a new subsidiary – to be incorporated soon – to focus exclusively on electric vehicles (EVs) at a valuation of up to $9.1 billion. Tata Motors has already declared a $2-billion investment plan for its EV subsidiary.

“We’re now looking forward to more news on VW-Mahindra Electric partnership which will give further fuel to this alliance,” summed up Gupta.