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Report on
Options for Financing Mahindra Reva Vehicle



Prepared By
Amogh Pradhan












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Table of Contents
Sr. No. Particulars Page No.
1. Acknowledgement 3
2. Executive Summary 4
3. Introduction 5
4. Methodology 23
5. Findings & Conclusions 24
6. Suggestions/Recommendations 30
7. Appendices 31
8. References/Bibliography 33








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1. Acknowledgement
I take this opportunity to express my profound gratitude and deep regards to Mahindra and
Mahindra Ltd. for giving me the opportunity to conduct the project Options for Financing
Mahindra Reva Vehicle. I am obliged to state that I have been able to complete the project on
time and have been able to achieve the objective that was set at the beginning of the project.
I also take this opportunity to express a deep sense of gratitude to
Mr. Amol Tawde (Dy. Gen. Manager, Mahindra & Mahindra -Corporate Finance)
Mr. Ajay Patel (Dy. Gen. Manager, Mahindra Reva Electric Vehicles Private Limited)
Mr. Rasesh Joshi (Dy. Gen. Manager, Mahindra & Mahindra - Corporate Finance)
Mr. Nikhil Sohoni (Vice President, Mahindra & Mahindra - Corporate Finance)
who took out their precious time to help me extensively in completing the project by
providing me with the much needed insights about the project.















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2. Executive Summary
Mahindra Reva Electric Vehicles Private Limited is a manufacturer of Electric Vehicles. In the
current scenario, the Electric Vehicle Industry is facing some challenges because of which it is
not able to pick up the required pace in the Automobile Industry. The reasons vary across
regions. With Mahindra Reva, the major reason is its Acquisition Cost and the Maintenance
Charges. After taking into consideration various reasons for its non-acceptance in the market, it
was found that a new Financing Model is required which can help the company to achieve a
good market share and also would help to protect the environment by reducing the Co2
emissions.
This can be achieved if the company continues the current financing pattern of Battery Leasing,
and in addition to two new plans should be framed
1. Direct Sale with a Resale Value Guarantee Plan
2. Direct Sale to a Subsidiary from the Group Company which will have a business model of
renting the EVs to the customers
Future of electric cars look bright as it certainly has potential to reduce our dependence on oil
and fossil fuel, which can significantly bring down global pollution and help control climate
change. If someone is keen on buying an electric car, we would recommend you to go buy one,
because any support to a new and upcoming technology just helps to makes it better.








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3. Introduction
3.1. About the Project (objective)
Mahindra Reva manufactures Battery Operated Electric Vehicles (EVs) at its plant at
Bangalore. It is found that due to high capital cost of these EVs, customers are
reluctant to think of buying /coming to Showrooms for purchase of the EV. With a view
to expanding the market share, the company is exploring possibilities to reduce the
initial capital cost of EVs. The objective is to frame a Financing Pattern that would help
the company to increase its revenues which will lead to an Increased Market Share.




















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3.2. About the Organization
3.2.1. Mahindra & Mahindra Limited
Mahindra & Mahindra Limited (M&M) is an Indian multinational automobile
manufacturing corporation headquartered in Mumbai. It is a part of Mahindra
Group, an Indian conglomerate, headquartered at Mahindra Towers in Mumbai,
India, with operations in over 100 countries across the globe. The group has a
presence in aerospace, agribusiness, aftermarket, automotive, components,
construction equipment, defense, energy, farm equipment, finance and
insurance, industrial equipment, information technology, leisure and hospitality,
logistics, real estate, retail, and two wheelers. It is considered to be one of the
most reputable Indian industrial houses with market leadership in utility vehicles
as well as tractors in India.
Mahindra & Mahindra was set up as a steel trading company in 1945 in Ludhiana
as Mahindra & Mohammed by brothers K.C. Mahindra and J.C. Mahindra and
Malik Ghulam Mohammed. After India gained independence and Pakistan was
formed, Mohammed immigrated to Pakistan. The company changed its name to
Mahindra & Mahindra in 1948. It eventually saw business opportunity in
expanding into manufacturing and selling larger MUVs, starting with assembly
under license of the WillysJeep in India. Soon established as the Jeep
manufacturers of India, the company later commenced manufacturing light
commercial vehicles (LCVs) and agricultural tractors. Today, Mahindra & Mahindra
is a key player in the utility vehicle manufacturing and branding sectors in the
Indian automobile industry with its flagship UV Scorpio and uses India's growing
global market presence in both the automotive and farming industries to push its
products in other countries.
Over the past few years, the company has taken interest in new industries and in
foreign markets. They entered the two-wheeler industry by taking over Kinetic

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Motors in India. M&M also has controlling stake in REVA Electric Car Company and
acquired South Korea's SsangYong Motor Company in 2011. In the 2010-11 M&M
entered in micro drip irrigation with the takeover of EPC Industry' Ltd, Nashik.
M&M has a global presence and its products are exported to several countries.
Its global subsidiaries include Mahindra Europe S.R.L. based in Italy, Mahindra
USA Inc., Mahindra South Africa and Mahindra (China) Tractor Co. Ltd. in early
2008, Mahindra commenced its first overseas CKD operations with the launch of
the Mahindra Scorpio in Egypt, in partnership with the Bavarian Auto Group. This
was soon followed by assembly facilities in Brazil. Vehicles assembled at the
plant in Bramont, Manaus, include Scorpio Pick Ups in single and double cab
pick-up body styles as well as SUVs. They planned to sell the diesel SUVs and
pickup trucks starting in late 2010 in North America. In 2009, Forbes ranked
Mahindra among the top 200 most reputable companies in the world.

















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3.2.2. Mahindra Reva Electric Vehicles Private Limited
Mahindra Reva Electric Vehicles Private Limited, formerly known as the Reva
Electric Car Company, is an Indian company based in Bangalore, involved in
designing and manufacturing of compact electric vehicles. It was acquired by
Mahindra Groupin May 2010, with a majority stake in the company, being
renamed as Mahindra Reva Electric Vehicles Private Limited and is
headquartered in Bengaluru, India. It is a pioneer of electric vehicle (EV)
technologies and one of the worldss most experienced EV manufacturers.
Founded in 1994 as the Reva Electric Car Company, thecompany was a joint
venture between the Maini Group of Bangalore and AEV LLC of USA.Reva
focused on creating affordable electric cars through advanced technology. The
company's sole aim was to develop and produce an affordable compact electric
car, so in 2001 RECC launched the REVA. RECC joined up with several automotive
experts to develop components for REVA. Curtis Instruments Inc. of USA
developed a Motor Controller specifically for the car. The car had a high-tech
power pack for which Tudor India Limited supplied customized Prestolite
batteries. The Charger for Reva was developed by Modular Power Systems of
USA (a division of TDI Power). Later, RECC started manufacturing the charger
themselves through a technical collaboration agreement between MPS and the
Maini Group. In 2004 GoinGreen of the UK entered into an agreement with RECC
to import REVA cars and market them under the G-Wiz moniker. In 2006 Reva
received an additional investment of $20 million from Draper Fisher Jurveston
and Global Environment Fund (GEF). In 2008 a revamped REVA model was
launched called the REVAi. The company started production of a Lithium-ion
variant called the REVA L-ion in 2009.
In 2009 at the Frankfurt Motor Show, Reva presented its future models Reva
NXR and Reva NXG. ]During the event Reva and General Motors India declared a
technical collaboration to develop affordable EV for the Indian market. As a

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result of this General Motors India announced an electric version of their
hatchback in the New Delhi Auto Expo 2010: named the e-Spark, in which Reva
was to provide battery technology.
On 26 May 2010, India's largest sports utility vehicles and tractor maker
Mahindra & Mahindra bought a 55.2% controlling stake in Reva. Mahindras
president of automotive business, Pawan Goenka, became the new companys
chairman. As a result of the change in the ownership, General Motors pulled out
of the tie-up with Mahindra Reva that was to produce the e-spark.
Mahindra Reva exemplifies the Mahindra Groups vision of the Future of
Mobility. The Future of Mobility envisions an automotive ecosystem that brings
Clean, Convenient, Connected, Clever and Cost-effective (the 5 Cs) mobility
solutions to customers across the world. The company manufactures cars,
licenses out its electric vehicle technologies, electrifies existing platforms, and
helps to deliver integrated zero-emissions mobility solutions.
The companys new factory in Bengaluru, the first automobile plant to get
platinum rating from Indian Green Building Council, capable of producing 30,000
cars per year, was inaugurated in August 2012. It is currently the world's largest
operational example of a plant specially dedicated to the assembly of battery
electric vehicles. Recently, Mahindra Reva was ranked 22nd in the prestigious
Fast Company magazine listing of the Top 50 Most Innovative Global Companies
of 2013. The company also won the Innovation award from a respected Italian
magazine, Focus, during March 2013. It is one of only three global companies to
have received this award for the development of the new Mahindra e2o and
the new environment friendly plant at Bengaluru.






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3.3. About the Industry
3.3.1. Electric Vehicle (EV) Industry
Electric Vehicle is an automobile that is powered entirely or partially by
electricity. They are powered by lithium-ion batteries, those which give power
to a mobile phone or a laptop. They are designed to run cheaper than the
normal gasoline cars as well as reducing the impact of driving on the
environment An electric car does not produce co2 while it runs. EVs reduce
dependence on petroleum and tap into a source of electricity that is often
domestic and relatively inexpensive. Just as important, EVs have the potential
to unlock innovation and create new advanced industries that spur job growth
and enhance economic prosperity.
In the long-term, EVs are important to countries seeking to decarbonise the
transport sector. Electrified road transport has been around in some form for
more than 100 years, although by the 1930s its use by light-duty passenger cars
was displaced almost entirely by the petroleum-fueled internal combustion
engine (ICE). EVs appeared on the market both in the early 1900s and briefly in
the 1990s. In the last 10 years the world has again considered vehicle
electrification in light of increasing and volatile oil prices, deteriorating urban
air quality, and climate change. This renewed interest represents a third age
of electric vehicles, starting with the mass-market introduction of EVs in 2010.1
A number of governments are now establishing clear deployment goals for EVs,
which include PHEVs, BEVs, and FCEVs.
Automobile manufacturers and consumers are also embracing this
technological shift, driven in part by stricter fuel efficiency regulations and a
desire to mitigate risks from oil price fluctuations. Robust rates of growth in
sales in a number of major markets, new car models from a variety of
manufacturers, and significant cost reductions in components such as batteries

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are helping to grow the nascent EV market. Innovative products and business
models such as wireless charging, car sharing, and workplace charging are
contributing to a new ecosystem that is further enabling electrification.
Governments are assisting in this market transformation by providing sizable
investments in research and development as well as consumer incentives.
As countries seek to address future energy requirements in a rapidly growing
and changing world, achieving sustainable transportation has emerged as a vital
mission. Electric vehicles (EVs), in particular, represent one of the most
promising pathways to increased energy security and reduced emissions of
greenhouse gases and other pollutants.By helping to diversify the fuel mix, EVs
reduce dependence on petroleum and tap into a source of electricity that is
often domestic and relatively inexpensive. Just as important, EVs have the
potential to unlock innovation and create new advanced industries that Spur
job growth and enhance economic prosperity.
EV sales in Q1-Q3 2012 only reached 1% of total vehicle sales in Norway and
Japan, but as EVs begin to penetrate the automotive market, the shares are
likely to increase. In fact, in the last quarter of 2012 EV sales reached over 1% of
total vehicle sales in both the Netherlands and the United States, furthering
gains in market share. At the end of 2012, the highest sales shares of EVs were
in Norway, Japan, Ireland, the Netherlands, and the United States. The main
PHEV and BEV markets can be found in the 15 EVI countries with worldwide
sales shares being about 96% and 89%, respectively. Analysis of EVI data show
that to reach the EVI goal of 5.9 million in annual sales of EVs in 2020, the 2011
EV market (approximately 45,000) would need to grow by 72% compounded
each year until 2020. Meeting this target of course becomes more of a
challenge each year, but as 2012 came to a close, total sales numbered
approximately 113,000, a more than doubling of the market. While this one-
year growth is ahead of the curve, it will be much more difficult to double sales
in later years, e.g. between 2019 to 2020, than in the first year. Nevertheless,

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the result is that the market has doubled and the growth rate is ahead of both
IEAs 2DS scenario and cumulative EVI sales/stock targets to date.
3.3.2. Indian EV industry
India is one of the top automotive markets in the world. According to a report,
transport together with affordable housing, is among the two most capital
intensive sectors and a development priority for the Indian government.
Transport faces significant deficiencies in public infrastructures. Public
transport as well as energy dependency and supply are strong concerns and the
challenges in the near future.
EV is widely regarded as one way to reduce the carbon footprint, even if the
customers are reluctant to pay a premium to go electric. EV growth rate has
been slow. However, electric two-wheelers are quite popular in India (2/3 of
the market, approx. 400,000 on road) Most electric vehicles are equipped with
lead-acid batteries, but moving to Li-Ion and Ni-Metal Hydride.
Besides the general issues linked to EVs (lack of infrastructure, battery charge
time and range anxiety), the specific barriers for EV deployment in the Indian
market are:
Unreliable grid and frequent power outages lower consumer confidence in
PEVs.
Vehicles cost.
Competition with other alternative energies: CNG, biofuels etc.
Low local technologies development (batteries, electronics) and low
availability of key components (electronics, controls)

The electric vehicle industry is small. The only company making cars is
Mahindra REVA, whose two-seater REVAi has sold 1,500 vehicles domestically
and has recently launched the e20 with Li-ion batteries. Despite these doubts,

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Mahindra REVA sees big potential for EVs. Early this year it expects to debut a
sporty model, the NXR, and manufacture it in a new factory in Bangalore slated
to make 30,000 cars a year within three years. Tata has developed the concept
of the range extended Hybrid Tata Megapixel and Hyundai is introducing the
i10 EV model.
To stimulate the domestic market for electric vehicles, the Indian government
created the National Council of Electric Mobility, and launched a 3.5 Billion
plan associating the industrial stakeholders to increase production of EVs and
hybrids and build charging points with the ambitious target of 6 million vehicles
by 2020. Duty exemptions for imported batteries and hybrid vehicle parts are
also included in the new budget. The local governments have also launched
initiatives and incentives for the deployment of EVs, the development of smart
grids and the integration of renewable energies. However, the main problem is
the high cost to adequate the electrical grid to EV needs.
There are major opportunities for the development of battery and electric
motor technologies, in which technology gaps between India and the EU have
been identified, and also areas with potential for expansion in the value chain:
from raw materials, to energy supply and mobility services.
Among the upcoming opportunities the ones that offer great potential include
the Dedicated Freight Corridor/Delhi-Mumbai Industrial Corridor, public feeder
transport, new development townshops, and infrastructure.




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3.3.3. Segments under Electric Vehicles
3.3.3.1. Plug-in electric vehicle
A plug-in electric vehicle (PEV) is any motor vehicle with rechargeable
battery packs that can be charged from the electric grid, and the
electricity stored on board drives or contributes to drive the wheels for
propulsion.
3.3.3.2. Battery electric vehicles
A battery electric vehicle (BEV) uses chemical energy stored in
rechargeable battery packs as its only source for propulsion. BEVs use
electric motors and motor controllers instead of internal combustion
engines (ICEs) for propulsion. A plug-in hybrid operates as an all electric
vehicle or BEV when operating in charge-depleting mode, but it switches
to charge-sustaining mode after the battery has reached its minimum
state of charge (SOC) threshold, exhausting the vehicle's all-electric
range (AER).
3.3.3.3. Plug-in hybrid electric vehicles
A plug-in hybrid electric vehicle (PHEV or PHV), also known as a plug-in
hybrid, is a hybrid electric vehicle with rechargeable batteries that can
be restored to full charge by connecting a plug to an external electric
power source. A plug-in hybrid shares the characteristics of both a
conventional hybrid electric vehicle and an all-electric vehicle: it uses a
gasoline engine and an electric motor for propulsion, but a PHEV has a
larger battery pack that can be recharged, allowing operation in all-
electric mode until the battery is depleted.


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Distinct Geographic Distributionfor PHEV and BEV sales -
The largest share of the worldwide PHEV market is in the United States, due to
the predominance of the Chevrolet Volt. Japan claims the second spot, largely
due to increasing sales of the Toyota plug-in Prius.
In the worldwide BEV market, Japan holds the largest share due to sales of the
NissanLEAF, followed by the United States, then China, due in part to the use of
electric taxis in Shenzhen and Hangzhou. France is in the fourth spot, in part
dueto Bollors Bluecar, a part of the Paris EV car sharing scheme Autolib.
The total number of FCEVs is very low due to a limited number of models on the
market, limited infrastructure, and higher costs compared to a BEV or PHEV.




















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3.3.4. Players in the EV Industry worldwide
BMW- i3,i3 REx,ActiveE
Scion iQ EV
Chevrolet- Spark EV,Volt
Honda- Fit EV, Accord Plug-in Hybrid
Fiat 500e
Nissan- Leaf
Mitsubishi- i
Smart electric drive
Ford- Focus Electric,Taurus FWD 3.5L,Fusion Energi, C-Max Energi
Tesla Model S
Toyota- Prius PHV, RAV4 EV, Prius
Cadillac ELR
Coda

Porsche- 918 Spyder, Panamera S E-Hybrid

BYD e6
Fisker Karma









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3.3.5. Challenges Facing the Electric Car Industry
The electric car industry is prepared to launch a number of new products over
the next two years. It includes everything from compact cars, to work vans, but
the success of electric cars is far from assured. The electric car industry, like any
new industry, is facing a number of challenges. Unfortunately, those challenges
are becoming more of a chain-cycle.
The major challenge is costs. Battery technology is expensive, and because
batteries in electric cars need to be able to hold massive amounts of charge to
make the cars practical for most drivers, they have to be built using expensive
materials, most of which are tough to procure. Because electric cars cost a lot
to build, they also cost more than comparable gasoline cars to buy. That makes
consumers reluctant to adopt them. Electric cars could be less expensive if
electric car makers could ramp up production volume and use economies of
scale. But, for that to happen, lots of consumers need to buy electric cars which
is something that likely won't happen without prices coming down.
Beyond the costs, electric car makers have a lot of convincing to do with
consumers. A very less number of customers are sold cars on the idea that
electric cars make sense for their life. This is because of the driving-range of the
e-cars. Electric car makers are finding that people are worried about how far
they can travel in electric cars before their batteries dry off. In a gasoline-
powered car, running low on gas is something usual; the driver just has to drive
to the nearest gas station, fill up and in about five minutes hes back on the
road. Charging an electric car isn't quite so simple. Most of the vehicles
currently in the market and those which are planned for the near can only go
about 100 miles (160.9 kilometers) on a single charge. And, unless you have
access to a specialized chargingstation, getting a full charge takes around eight
hours. Most of the people drive less than 40 miles (64.4 kilometers) a day and
can easily charge their electric cars overnight. But given the situation that, you

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drive 80 miles (128.7 kilometers) in a day, come home and find out that there's
an unexpected emergency and you need to drive another 30 miles (48.3
kilometers), the first thing that will come to your mind is the Public Transport.
Consumers thinking of situations like these make for a big hurdle that electric
cars still have to clear.
The charging stations are another challenge -- they can alleviate a number of
concerns consumers have about electric cars. Electric cars represent a vast
change to the country's infrastructure. While some charging stations are out in
trial phases, most of the charging is done at home, in a garage. That means that
people who live in shared housing or those who use street parking will likely
have the hardest time to charge their vehicles. If infrastructure is improved and
more charging stations are available, more people would buy electric cars. But,
changes to infrastructure won't be made until more people buy electric cars
and call for it.
So, its a cycle which starts from a hope that customers buy electric cars and
ends at the same point in order to achieve the next challenging milestone.









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3.3.6. Future trends in the industry
The future looks quite promising for Electric Cars. There is lot of research
happening in this space. Speeds of electric cars have already improved
significantly and there is no doubt that it cannot improve further (as trains in
many countries already run on electric motors).
Storage and Charging remain the major area of focus for the future. But there
are many companies working to solve this challenging problem. We already see
cars with batteries that can make them run for 160 to 320 KMs. Then there are
companies like Better Place that are trying to design switchable batteries and
switching stations. Charging is one of the major concerns for batteries as it
takes quite some time to get fully charged. Better Place has designed a system
where empty batteries of electric cars will be replaced with a fully charged
battery in a few minutes. To do this they are trying to setup a network of
switching stations. They have already testing the concept in countries like
Israel, Japan, China and Western European countries.
Research is on to develop quick charging batteries, and the day is not far when
electricity distribution companies will set up their charging posts on highways,
with all such posts connected to the electricity grid (or smart grid). Charging will
be quick and will be as simple as charging a mobile phone with payments made
by swiping a card on a machine connected to the Internet.





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3.4. About the product
The Mahindra e2o, previously REVA NXR, is an urban electric hatchback car
manufactured by the Mahindra Group. The e2o is the REVA G-Wiz successor and was
developed using REVA's technology. The e2o was launched in India in March 2013 at a
price of Rs 596,000 (US$11,000) after a 29% government subsidy granted by the city of
Delhi.

The electric car has a lithium-ion battery pack that takes five hours for a full charge,
and with a weight of 830 kg (1,830 lb), delivers a range of 100 km (62 mi) and a top
speed of 90 km/h (56 mph)














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3.4.1. What it offers
Hill Hold Courtesy Lights
Follow-me-home Headlamps Reverse Camera
Digital User Manual GPS Navigation
Integrated Maps Bluetooth
iPod connectivity One-touch Foldable Seats
Projector Headlamps LED Tail Lamps
Scissor Wipers Rear Defogger
Electric Wing Mirrors Keyless Entry & Start/Stop
4 JBL Speakers & 2 Tweeters Dual-damping Glove Box
CD/DVD/USB/AUX/ MicroSD Smallest 3.9m Turning Radius
6.2'' Touch Screen Infotainment System Your cars Personal Web Page
Driver Information System

Safety
3 Crumple Zones
Side impact dual beams
Gear Shift & Charge interlocks
Immobilizer
ISOFIX Child Seat mounts with ALR rear seat belts for added child safety
6 Energy absorbing structures in the front
Adjustable headrest on all seats






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3.4.2. Demerits of the product
3.4.2.1. Cost of Ownership
At Rs 5.81 lakhs in Delhi (Ex-Showroom), the Mahindra Reva e2o is very
expensive for any sort of mass adoption. A major part of this cost is made up of
the lithium ion battery (expected to be around Rs 2.5-3 lakh). The e2o can be
benchmarked against the Wagon R from Maruti Suzuki which costs Rs 5 lakh. In
terms of charging, the e2o should cost Rs 50 per 100 km. The Wagon R, at a
conservative fuel efficiency of 10 km to a litre, and price of petrol at Rs 75
would have a running cost of Rs 75,000. So effectively a customer would save
Rs 70, 000 every year. Except that in the total cost of ownership equation, this
doesnt work out very well. And in the 5
th
year, the lithium ion battery needs
replacement. At the batterys current cost is not expected to go down
drastically in the future, this completely alters the cost of ownership
economics against the e2o. The Maruti Suzuki Wagon R CNG from a buyers
point of view, makes far better economic and practical sense.
3.4.2.2. Driving range
The Mahindra Reva E2O in India runs for about 100 kms with a full charge.
Latest technologies available internationally make cars capable of running for
about 160 to 320 km per full charge.
3.4.2.3. Charging the battery
Charging of the batteries is another concern as it takes about 4 to 8 hours to
charge the batteries fully. Even a quick charge to 80% capacity takes about 30
mins. Currently there is no infrastructure to charge the batteries on highways,
although one can charge the battery anywhere where electric point is
available.
3.4.2.4. Low Speed
Mahindra Reva offers a top speed of 104 km/hr which is comparatively low
than the other gasoline cars in that segment. The fastest electric car in the
world Tesla Model S can go up to the speed of about 200 km/hr. Many people
in India worry about speed of electric cars and they do so mostly because
electric vehicles available in India in the past were quite slow.

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4. Methodology
During the project, I, under the guidance of Mr. Rasesh Joshi had got the opportunity to
have a discussion with Mr. Ajay Patel, currently working with Mahindra Reva Electric
Vehicles Private Limited.
Mr. Ajay Patel gave us some insights about the company and how does the operations
take place. I could use these insights while working on the project and was able to
recommend some plans for the same.
I had gone through some of the websites and blogs which helped me to gain a deeper
knowledge about the Industry and understand the problems which are currently facing
the industry.
The links from other companies helped me to generate a new financing pattern which was
required to solve the problems which the company is currently facing.












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5. Findings and Conclusions
5.1. Findings
5.1.1.1. Current Finance Options
5.1.1.1.1. Option 1
Sale of EV alongwith battery; buy back of battery by Mahindra Reva from
customer and leasing of battery for a user fee
Effect-
Battery to be retained in the books of MReva.
No incurrence of VAT but Excise Duty on battery lost.
Income Tax Depreciation is available.
If batteries are replaced subsequently, credit of CVD paid on import of
battery is available to be set-off against service tax liability.
Advantages and disadvantages of the scheme
Advantages
The custody of the battery would be with the customer when the
customer sells back the battery to the company
The customer will not have to bare the maintenance and
replacement charges for the battery
Company can expect a rise in Sales as the customers would be
attracted towards the product because the price of the battery
which forms a major part of the price would be reversed back to the
customer inturn lowering down the cost of the car
Disadvantages
Since the custody of the battery is not with the company, lease of
battery would be liable for 14.5% Sales Tax
The user-fee for the lease of the battery would attract Service Tax
@12.36%


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5.1.1.2. Option 2
Sale of EV and lease of battery separately
Advantages and disadvantages of the scheme
Advantages
The customer will not have to bare the maintenance and
replacement charges for the battery
Company can expect a rise in Sales as the customers would be
attracted towards the product because the price of the battery
which forms a major part of the price wont be present in the
invoice
Disadvantages
The user-fee for the lease of the battery would attract Service Tax
@12.36%
Since the custody of the battery is not with the company, lease of
battery would be liable for 14.5% Sales Tax
Under both the alternatives, there is a proposition to reduce the value of the battery from
the value of the car and instead charge a User Fee on monthly basis for use of battery to
customers to whom the EV would be sold coupled with transfer of right to use battery on
payment of User Fee.

Potential issues with the above options
1. Considering the concept of effective control, when the customers pay a User Fee for
using the battery, whether VAT would be applicable on such lease of batteries?
2. When such batteries are sold/given on lease separately, not along with the EV, whether
the concessional rate of Karnataka VAT(5.5%) or higher rate of Karnataka VAT (14.5%)
would be applicable.



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Some options opted by other companies

1) Tesla Motors, Inc.
Tesla Motors, Inc. is an American company that designs, manufactures, and sells electric
cars and electric vehicle powertrain components.
The Financing Model for their vehicle is -
Resale Value Guarantee Plan-
They guarantee that the vehicle will have a resale value after 3 years of atleast the
guaranteed resale value specified earlier.
This value is 50% of the base price of the model at the time of the purchase, plus 43% of
the original purchase price for all options including the upgrade (inclusive of taxes, fees
and accessories). The period for such upgrade or buy-back should be between 36
months to 39 months from the Effective date of the guarantee.
Key Points-
Resale value after 3 years will be of atleast the guaranteed resale value
Resale Value = 50% of the purchase price of your car + 43% of the purchase price of the
new upgrade
The period of resale should be within 36 months to 39 months

Advantages and disadvantages of the scheme -
Advantages
1. Reduced cost of acquisition for the upgrade The customer will have to pay a very
less amount for his new upgrade
2. The customer will get a higher price for his used vehicle, which would be higher than
the market price if he decides to sell that car in the market.
3. Since the plan works out only when the customer goes for an upgrade, the company
can have a loyal customer base.
4. The company can start up with a New eCar Rental service with the used cars which
they purchase from the customers.

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Disadvantages -
1. The vehicle should be financed only through the U.S. Bank or Wells Fargo in order to
get the benefit
2. Once the company purchases the depreciated vehicle, it would be an added cost to
them because they are not going to use this vehicle anywhere else.
3. The company would be selling the new upgrade vehicle at a very low price, so the
manufacturing costs may not be covered
4. If the vehicle has been driven for more than 15,000 miles then the resale-value
would be reduced by $0.25/mile over and above 15,000 miles.

2) Yobykes
YObykes are a range of Electric Scooters, manufactured by the Automotive Division of
Electrotherm Limited in India, an Ahmadabad-based electric two-wheeler maker.
Electrotherm India Limited, has a new business model called 'Switch' which will Rent-out
two-wheelers in India. The model has two phases, in the first phase the company will
rent electric two wheelers to corporate, government bodies and educational as well as
other institutions. The revenue model would be based on monthly hiring charge and
membership revenues generated from members. The second phase will offer this rental
service to retail consumer, wherein the retail customers would be invited to join as
members and would be charged based on the minutes the vehicle is utilised. The
revenue model would be based on utilisation of the vehicle and membership fee
generated. The project will use RTO approved electric scooter-YoBykes, which are
manufactured by Electrotherm.
Key Points -
For Corporate & Govt. Bodies, Educational & other Institutions- Monthly Hire &
Membership Revenue Plan
For retail customers- Classification of Rent
i. Type 1 Byke - 1 Re/Min

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ii. Type 2 Byke - 1.25 Rs./Min
iii. Type 3 Byke - 1.50 Rs./Min
Advantages and disadvantages of the scheme
Advantages
1. In the first phase, the company can have a large customer base since it caters to
the Government Organisations and Corporate Bodies.
Disadvantages
1. It would become difficult for the company to survive in the market as there
would be a close competition from the Gasoline Two wheeler rental dealers.

3) Bollor Bluecar by Vehicule lectriques Pininfarina Bollor
Vehicule lectriques Pininfarina Bollor (VEPB) is a joint venture owned by Bollor and
Pininfarina. The result is the Bluecar which is a small four-seat, three-door electric car
supplied by Bollor, designed by Pininfarina and manufactured by Cecomp in Bairo,
Italy.
The finance structure is termed as Autolib's carsharing.Autolib' is an electric car sharing
service provider from France. The scheme intends to deploy all-electric Bollor Bluecars
for public use on a paid subscription basis, based around a citywide network of parking
and charging stations.
They had estimated that Autolib drivers can save about 7,000 per year by using the
service rather than buying a car in Paris. Cars in Paris are driven only about 5% of the
time and stay parked the remaining 95% of the time. This simple statistic reveals how
sensible urban mobility services are. Every Bluecar can provide 15 times the use than an
individually-owned vehicle.A trip from North to South of Paris requires only about 15%
of the battery charge of a Bluecar. Local incentives such as preferential parking, road tax
exemption, registration tax exemption, and access to bus lanes add to the value
proposition. This public service is offered for the many travellers who cannot afford to

29

buy a private car and need to travel to areas in the greater Paris region that are not well
connected with public transport.
Advantages and disadvantages of the scheme
Advantages
1. Customers are at a benefit if they subscribe to a monthly plan or maybe a rental
plan because the daily and weekly rent is much higher
2. Since the people in Paris use their car for about 5% of the time, they can save on
the investment to purchase a car and can adopt to the Rental scheme.
Disadvantages
1. The competition from the Gasoline car rentals would make it difficult to survive
in the market.
2. As the company deals only in the rental plan, there would be a lot of wear and
tear with their vehicles which would increase their maintenance cost.











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6. Suggestions/Recommendations
After analyzing the current financing pattern which Mahindra Reva has opted and the options
which the other companies have opted, I would recommend the following plans
3. Continue with the current Battery Leasing option
4. Sale with a Resale Value Guarantee Plan
The plan encompasses the vehicle having a resale value after a period (which was
specified during the purchase) of atleast the guaranteed resale value specified during
the purchase of the vehicle.The value would be a combination of a certain %age of the
base price of the model at the time of the purchase, plus a %age of the purchase price
for all options including the upgrade (inclusive of taxes, fees and accessories).
5. Direct Sale to a Subsidiary from the Group Company
This is aimed at Mahindra and Mahindra forming a new company under its umbrella
which would purchase the vehicles manufactured by Mahindra Reva and will start a
Rental scheme to Rent them to the retail consumers.

The first option of Battery Leasing would constitute 50% of the sales.
The three options of Direct Sale at the Dealer, with a Resale Value Guarantee Plan
and to a Subsidiary from the Group Company would constitute to the remaining 60%
of the sales equally.










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7. Appendices
Working of Tesla Motors Resale Value Guarantee Plan-
Type 1 Type 2 Type 3
Cost of the Car 3,707,807 4,302,007 5,104,177

Resale Price for an upgrade to Type 2
= 50% of Type 1 Price + 43% of Type 2 Price
= 1853903 + 1849863
= 3703766
The Customer will have to just pay the difference of
=4302007 3703766
= 598241

















Tesla Model S

Variant
Factors 60 kWh 85kWh p85kWh
Price 3,707,807 4,302,007 5,104,177
Downpayment 10% 10% 10%
Finance Rate(Annual) 3.50% 3.50% 3.50%
Monthly Cost 58,588 66,847 77,959
Incentives/Mo. -891 -891 -891
Monthly Savings 36,186 46,822 61,143
State Credit 445,649-891,299

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The subscription pattern for Bollor Bluecar -
















Year Month 7 Days 24 Hours Shared Subscription for 4
users(16hrs/month)
Subscription 12/month 30 15 10 165/month
1
st
Half hour 5 6 7 7 7,5 beyond the 16
th

2
nd
Half hour
(pre June, 2012)
4 5 6 6 -

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8. References /Bibliography
http://mahindrareva.com/pdf/pressrelease/Mahindra%20Reva_Charging%20Infra%20e
xpansion_Bangalore%20Airport_press%20release.pdf
http://www.iea.org/publications/globalevoutlook_2013.pdf
http://www.ebtc.eu/blog/overview-of-the-electric-vehicle-ev-market-in-india/
http://auto.howstuffworks.com/challenges-facing-the-electric-car-industry.htm
http://forbesindia.com/blog/business-strategy/why-the-economics-of-mahindra-reva-
e20-dont-work/
http://www.bijlibachao.com/general-tips/all-about-electric-cars-technology-for-the-
future-pros-and-cons-and-our-take-on-it.html