"It's like running a car at the cost of a two-wheeler.

"

- Sudarshan Maini, Chairman, Reva Electric Car Co., in August 2000.

"The largest part of the Indian car market is for small, affordable vehicles that can be driven in

narrow roads and parked in the tightest of parking lots."

- Chetan Maini, Managing Director, Reva Electric Car Co., in 2001.

Electric Car Reva: Introduction

In May 2001, Reva1, an electric car, was launched in Bangalore (Karnataka) by the city-
based Reva Electric Car Company (RECC). Reva was claimed to be India's first zero-
polluting, battery-driven car with a running cost of just Rs 0.40 per km. 2 One of the first
electric cars in the world to go in for mass production, Reva was slated to become the
cheapest car in India.

It was priced at about Rs 0.2 million and the first ten cars were delivered to customers in
July 2001. Reva generated a lot of excitement in the Indian automobile industry since it
offered many significant advantages over conventional cars.

Its low running cost, gearless driving, dent proof body material and other state-of-the-art
technologies made it an alternative package. Reva was soon being compared with India's
largest selling car Maruti 800. Though available at almost the same price as Reva, Maruti's
running cost was almost four times higher than that of Reva.

The car was also being seen as the answer to reducing the increasing pollution levels due to
automobiles. Media reports claimed that Reva was all set to bring about a revolution in the
Indian passenger car industry. Some analysts claimed that the electric car would create an
entire new market and attract small families in hordes. Hormazd Sorabjee, auto analyst and
editor, Autocar India, said, "If Reva's claim of keeping the running costs at Rs 0.40 per km
is achieved, the car will be attractive to cost-conscious consumers who are ready to
compromise on the limitations of an electric car."

The Indian Passenger Car Industry

Till the late 1970s, the Indian passenger car industry offered limited choice to the
customers, with only two popular models in the form of Hindustan Motors' (HM)
Ambassador and Premier Automobiles' (PAL) Padmini. The government not only controlled
the price mechanism in the industry, but the entry of foreign players was also strictly
regulated.

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The situation, however, changed in 1981 with the setting up of Maruti Udyog Limited (MUL),
a joint venture between the Indian government and the Japanese automobile major Suzuki
Motor Corporation. MUL's small, fuel-efficient and well-designed car, Maruti 800, soon
became a huge success. Consumers, whose choice had been restricted to the 'old-fashioned'
Fiat and Ambassador cars, went in for the small car. By the late 1980s, MUL became the
market leader, leaving PAL & HML way behind.
After the Indian economy was opened up to foreign players in the early 1990s, many
multinational auto manufacturers entered the country. The industry scenario changed when
the foreign companies set up joint ventures or subsidiaries. The passenger car industry was
segmented based on price as the small car (upto Rs 0.3 million), mid-size (Rs 0.3 - 0.5
million), luxury car (Rs 0.5 - 1 million) and super luxury car segments (above Rs 1 million)
(Refer Table I & II for industry statistics).
TABLE I
THE INDIAN PASSENGER CAR INDUSTRY
Approximate market
Segment Models* share of the segment
(1999-2000)
Economy
(up to Rs Maruti Omni, Maruti 800,
46.8%
0.25 Padmini.
million)
Mid-size Premier 118NE, Ambassador
(Rs 0.25 - Nova, Fiat Uno, Zen, Hyundai
0.45 Santro, Daewoo Matiz, Tata
million) Indica, Contessa.
Peugeot 309, Tata Estate, Tata
Sierra, Maruti Esteem, Cielo 43.1%
Luxury Executive, Honda City,
(Rs 0.45 - Mitsubishi Lancer, Ford Ikon,
1 million) Opel Astra, Fiat Siena, Opel
Corsa, Daewoo Nexia, Hyundai
Accent.
Super
luxury Mercedes Benz and other
10.1%
(Above Rs imported models.
1 million)
Source: www.karvy.com
* The list is not exhaustive.

TABLE II
THE INDIAN PASSENGER CAR INDUSTRY - PLAYERS AND MARKET SHARES

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 April 1999 - January 2000
Volume Market Share (%)
MUL 323,058 63.4
Hyundai Motors India Ltd. 59,773 11.7
Telco 43,053 8.45
Daewoo Motors 29,549 5.8
HM 21,093 4.14
Ind Auto 17,649 3.47
Ford India 4,523 0.89
Honda 7,383 1.45
Opel Astra 2,036 0.40
Mercedes-Benz 748 0.15
Fiat India 60 0.01
PAL - Peugeot 9 -
Total 508,934 Growth (YOY): 56.3%
Source: Society of Indian Automobile Manufacturers (SIAM).
For the financial year ended March 2001, 590,647 units (Refer Table III) of cars were sold
by the Indian passenger car industry. However, the industry's growth had an adverse
impact on the environment, in terms of increasing pollution levels across the country (Refer
Table IV for a note on the pollution caused by automobiles).

With steadily depleting oil reserves and increasing pollution, the emission regulations
became stringent and automobile makers were looking at alternatives to the conventional
engines. In the early 1990s, electric vehicles (EVs) started gaining popularity. They had
been neglected after the onset of Internal Combustion Engines (ICE)3 in the early 1800s.
Many EVs were launched in the market by major players across the globe. GM was the first
major manufacturer to produce an electric passenger car EV1.
TABLE III
PASSENGER CAR SALES IN INDIA BY VOLUME (1994-2000)
Volume Growth (% YOY)
1994 209,203 27.0
1995 264,822 27.0
1996 345,486 30.0
1997 410,992 19.0
1998 417,736 2.0
1999 409,624 - 2.0
2000 638,815 55.8

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 2001 590,647 - 7.54
Source: www.karvy.com
TABLE IV
A NOTE ON AUTOMOBILE POLLUTION
Automobiles are one of the major causes of environmental pollution. The increase in the
number of vehicles on the road also increased pollution. Besides damaging the
environment, automobile pollution has also been identified as one of the primary causes
for many health problems like eye irritation, and lung and respiratory disorders. The
major sources of pollution from automobiles are its emissions including hydrocarbons,
nitrogen oxides, carbon monoxides and carbon dioxides. All these pollutants affect the
environment in different ways. The nitrogen oxides damage the ozone layer, which
protects the earth from the harmful ultraviolet rays. The oxides make 'ozone holes'
thereby allowing more ultraviolet rays to pass through. The oxides of carbon are major
contributors to global warming. Carbon monoxide reduces the flow of oxygen in the blood
thus causing health problems.

Automakers around the world have been working on new models reduce pollution. The
'Big Three' - GM, Ford and Chrysler - were one of the earliest automakers to launch low-
emission and zero-pollution vehicles. David E. Cole, director of the U-M Office for the
Study of Automotive Transportation (OSAT) said, "Automobile manufacturers and their
suppliers will continue to face many formidable challenges in the next decade as they
address the growing environmental challenges, and the tough global competition and
more demanding customers."

Governments have also been working towards containing pollution caused by automobiles
by implementing 'emission norms.' These norms indicate the permissible emission levels
from petrol and diesel vehicles. Introduced for the first time in Europe, the norms were
called as Euro I and Euro II. These norms required manufacturers to reduce emission
levels by making some technical changes in their products. India adopted the Euro norms
as Bharat I and Bharat II respectively.
Source: ICMR

The first low-emission vehicles were the Hybrid Electric Vehicles (HEV), which combined the
ICE of a conventional automobile and the battery and motor of an electric vehicle. The
combination offered many advantages including fuel efficiency and environmental benefits.
These vehicles were developed to overcome the disadvantages of an electric vehicle. The
electric vehicles could be used only for short trips, as its battery had to be recharged after a
few kilometers.
Some of the first HEVs include Toyota's Prius, Honda's Insight and Civic. In 1991, the GoI
framed the first legislation on air pollution. By mid-1990s, the emission level for
automobiles was tightened. The industry started using the latest technology and produced

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increasingly cleaner cars.

It produced Low Emission Vehicles (LEV) in 1996 and Ultra LEV (ULEV) by 2000. By 2000,
the new vehicles in the industry had emission levels, which were about 80% less compared
to the 1989 levels. The emission level came down from 360 tons per day to 70 tons per
day. A four-wheeler complying with the Euro II norms emitted 2-3 times less carbon
monoxide and 3-4 times less hydrocarbons and nitrogen oxides.

Background Note
The Maini Group (Refer Table V) was established in 1973 in Bangalore (Karnataka) by
Sudarshan. K. Maini (Sudarshan)4, who aimed to blend western technology with Indian
craftsmanship.

The group followed the 'single zero principle'5 and its philosophy was 'Karma Parma
Dharma' (Work is Worship). The group's products ranged from precision components to in-
plant material handling equipment and, from granites to abrasives. The group was also
involved in international trading and offered ERP solutions. Maini Group had technological
agreements with Abressa (Spain), Clark-Blue Giant (US), Hensel (Germany), HIAB
(Sweden) and STILL (UK).

Some of the major clients of the group included General Motors, Bosch, BT, MIC, OMR and
other Indian companies in the automobiles, consumer goods, engineering, and food
processing and pharmaceuticals industries. The group was known for its quality standards
and its plants had ISO 9001 and QS 9000 certification. Chetan Maini (Chetan), son of
Sudarshan, the chairman of the Maini Group, was always fascinated with cars and designed
his first car during his school days.
He made a remote-controlled, battery-operated toy and bagged the first prize at the
school's science exhibition. He graduated from the University of Michigan, Ann Arbor, with a
specialization in solar-powered vehicles. After graduating, he worked at General Motors' EV
factory as an intern for six months. Chetan then joined the US-based Amerigon Electric
Vehicle Technologies Inc. (Amerigon)6, which was involved in building EVs.

At Amerigon, he built about six types of Solar and HEVs. He was also the leader of the team
that won the 'GM Sun Race of Solar Vehicles' in 1990 and the team also bagged the 3rd
position in the World Solar Challenges in Australia. In the early 1990s, Chetan planned to
build his own EV and established RECC with the help of Sudarshan. Chetan said, "Cars are
my passion, and the Reva is my dream that will soon become a reality."

Sudarshan had dreamt of launching a small car in Bangalore and making the city pollution
free. However, he planned to build an electric car after his son Chetan, joined Amerigon as
a project manager for an EV project. Explaining the primary objective of RECC, he said, "It

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is the passion for the environment and turning Bangalore into a pollution free city." Further,
the Maini Group manufactured electrically operated material handling equipment.
Sudarshan explained, "...the group's material movements division, which manufactured
electrically-operated material handling equipment, offered us the obvious choice to venture
into the electric car industry rather than the conventional car market. It is a car that is
made for India to suit Indian conditions using material available in India."
TABLE V
THE MAINI GROUP COMPANIES
Year of
Company Operations
Establishment
Manufactured and supplied of more
Maini Precision than 500 types of machined
1973
Products components to the OEMs like Bosch and
General Motors.
Produced fuel filters, filter inserts, hand
Karnataka
1976 primers, roller tappet pins and
Electronics
diaphragms.
Bangalore
Commercial 1980 The trading arm of the Maini group
Corporation
Maini Materials Offered total in-plant material handling
1986
Movement solutions to a wide range of industries.
A 100% Export Oriented Unit. Produced
Maini Granites
1992 high precision, high quality granite
Limited
tiles.
A joint venture between the Maini
Group and Abressa (Spain), the
company produced a wide range of
Maini Abrasives 1992
abrasives for grinding or polishing of
marble, granite, ceramics, terrazzo and
artificial stones.
Offered a range of business solutions in
information technology, including
Maini Info
1999 integration of packed applications for
Solutions
product development and process
management.
Source: www.mainigroup.com

On The Road to Reality

Reva Electric Car Company (RECC) was established in 1994 through a joint venture between
the Maini Group and Amerigon. Amerigon had a 32% stake in RECC's Rs 58 million equity

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and Maini Precision Products and Maini Materials Movement held the remaining 68%.
Amerigon helped RECC in building the chassis of Reva.

The car was manufactured at RECC's plants at Bommasandra in Bangalore. The car's key
technologies included its steel frame, the energy management system and a motor
controller. The motor controller was developed through a technical collaboration with Curtis,
one of the world's leading manufacturers of motor controller for electric vehicles.

In 1996, RECC built the first prototype for Reva and received the mandatory certification.
The prototype was also put through the 250,000 km 'shaker test'7 at the Automobile
Research Association of India (ARAI), Pune. It was also tested at ARAI for homologation 8
and was certified for road-worthiness. The prototypes were also tested in the US.
They were also tested on the Indian roads in conditions of heat, humidity, and monsoons.
However, Reva was not launched immediately. Chetan explained, "We had no definite plans
to launch then. It's just that we've been making absolutely sure that when the product is in
the market, it doesn't have any problems."

In addition, RECC wanted to ensure that at least 75% of the car's components were
available in India. The car had 1,100 components out of which 99% were manufactured in
India. In terms of value, the components manufactured in India accounted for about 75%.
The company aimed to achieve an indigenisation of 100% by the end of 2002.

Further research was done to make the car more comfortable and efficient. AT Kearney
Consultants9 had conducted a market survey, based on which it recommended some
changes to the car. The recommendations included extension of the wheelbase to create
more internal space and improvements in riding comfort.

In 2001, the commercial version of Reva was launched in Bangalore. Reva was a two-door
hatchback10, which could accommodate 2 adults and 2 small children. RECC did not adopt
any marketing or promotional strategies as the company felt that the cars should be sold
without the help of advertisements. Sudarshan said, "We mostly depend on public relations
and use minimal advertising." The car was targeted at two-wheeler owners planning to buy
a 4-wheeler.

It was also positioned as an ideal second car for housewives, professionals and students.
RECC also planned to sell the cars to tourist operators to be used as taxis. Sudarshan said,
"At Rs 0.40 per km, it is the cheapest car to drive around." RECC also promoted itself as an
environment-friendly company. It promoted many environment-linked events on World
Environment Day. The car also had the slogan: "I don't pollute when I commute."
Initially, RECC had only one company-owned showroom in Bangalore and planned to open
more showrooms in some of the major cities across India. The company planned to launch
the car in a phased manner, nationally. Depending on the demand, the company appointed

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dealers nationwide. In late 2001, RECC launched Reva in Goa. By January 2002, RECC
appointed about 7-10 dealers in North India. In April 2002, Reva was launched in Delhi and
Surat.
To promote the sales of Reva, RECC requested the state governments to exempt Reva
owners from road tax and sales tax. This was granted by the Karnataka and Rajasthan
governments. In September 2001, RECC entered into an agreement with ICICI 11 to provide
loans to people planning to buy Reva. As per the agreement, customers could get loans
covering about 75-85% of the cost of the car. In February 2002, Reva was planning to
extend its agreement with ICICI for leasing the cars at a nominal cost.
According to the agreement, Reva would take care of all repairs, and any customer could
own the car on a pre-determined monthly amount. After three years, the customer could
either retain the car or return it to the company. The insurance premium on Reva was also
low and RECC offered to replace the car in case of repairs or accidents. Sudarshan said, "We
will ask no questions. They will get to drive a new car till the earlier one is repaired and the
insurance claims are settled." The company also offered to make customized cars to suit
individual requirements.
In February 2002, RECC introduced a new scheme under which it agreed to buy Reva back
if a customer was not satisfied with its performance. The customer could get back the
money invested excluding about Rs 43,000, which accounted for taxes and insurance.
Sudarshan said, "It is a new concept and the scheme is for a limited period. We want to
promote electric cars as much as possible. What is heartening is that not a single customer
has brought back his car to us." By April 2002, RECC had sold about 180 cars in Bangalore
and Goa.

The Future of Reva

In late 2001, RECC reported that Reva was well accepted in the four cities it was launched
and that the company was working on new versions for the domestic as well as
international markets. Ashok Dharwadkar, chief financial officer in a technology company,
who was the third Indian owner of Reva, said, "The performance of the car is good and the
company offers good service. There are still a few nagging problems like high noise level
and fall in efficiency while driving uphill."

In January 2002, RECC launched Reva Deluxe at the Auto Expo 2002 in New Delhi. The
Deluxe model had a new look with upgraded interiors, defroster with heater, a stereo
system, and climate control seats (CCS)12. Chetan said, "The development of the new model
is a result of the feedback of our very satisfied customers in Bangalore, where over 150 cars
are now running.
The introduction of climate control seats is in line with Reva philosophy of using cutting
edge technology, patented by Amerigon, leaders in advance automotive technology." RECC
has planned to launch the car in other cities like Jaipur and Hyderabad by the end of 2002.
RECC is currently working on a new version to be launched in the UK market. The company
has also entered into alliances to export the cars to Nepal.

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It was also negotiating the export of the car to the UK, Japan, Mauritius, Israel, Norway and
Sri Lanka. Exports to these countries were expected to start by the end of 2002. Sudarshan
said, "We will be sending some cars to Nepal soon and have signed MoUs with Italy,
Norway, Japan and an agreement with Israel and what we will be able to offer will be much
cheaper than the EVs available outside the country. For instance, our product will cost
around $9,000, while an EV in other countries come at around $20,000 or more."

However, some analysts are skeptical about Reva's success in the long run. They feel that it
would be difficult for RECC to promote the car, as the petrol-driven Maruti 800, the largest
selling car in India, was available for about the same price as Reva. In addition, Maruti had
a higher seating capacity (Refer Table VI). Moreover, Reva could go only up to 80 km and
had to be charged before that limit. As there were no mobile recharging facilities in India,
the car had to be charged at home or at the working place.
TABLE VI
COMPARISON OF TECHNICAL FEATURES BETWEEN REVA AND MARUTI 800
Maruti 800 Reva
Length 3,335 millimeter (mm) 2,638 mm
Width 1,440 mm 1,324 mm
Height 1,405 mm 1,510 mm
Wheel base 2,175 mm 1,710 mm
Minimum turning
4,400 mm 3,505 mm
radius
Separately excited DC
Engine/motor 4 stroke petrol
motor
Maximum speed 140 km/hr 65 km/hr
Braking system Disk and drum Disk and drum
56 Newton Meter (2,500 56 Newton Meter (2,500
Maximum torque
rpm) rpm)
Steering Rack and pinion Rack and pinion
Operating cost Rs 2.15 per km Rs 0.40 per km
Seating capacity 4 adults 2 adults, 2 children
On-road price Rs 0.237 million Less than Rs 0.2 million
Source: Business Today, April 22, 2000.
Other major Indian automakers were also entering the segment in India. In 2001, Mahindra
& Mahindra was testing its three-wheeler 'Bijilee' and was planning to enter the 4-wheeler
segment. However, Sudarshan seemed to be confident of success saying, "We are in a
totally different market segment with the Reva being marketed as a personal 'city' car."

Prof. C.C.Chan, president of the World Electric Vehicle Association, said, "The future of EVs
is bright... for a sustainable ecology, we need to have environment-friendly vehicles. But it

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depends on whether you can mass-produce, ensure reliability and good performance at
reasonable costs. These will define its future." It remained to be seen if Reva could spark an
electric revolution in the Indian passenger car industry.

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