It's a no-brainer for car aggregators to move to e-cars:Mahindra

With the launch of its electric car e2o in the UK, Mahindra & Mahindra is all set to serenade the British public, says its chairman and MD Anand Mahindra. The task won't be a cakewalk though, admits Mahindra.

Electric cars are the way forward, he says, calling them the epitome of the 21st century mobility.

There are challenges to selling electric vehicles in India, he says, chief among them being the expensive battery. In the West, buyers of electric cars judge an e-car by its total life cycle, he says.

The UK government has forecast that the potential for electric cars will rise to 8 percent of total sales by 2020 from 2 percent now -- which gives M&M a window of four years to up its game there.

A big fan of Ola and Uber, Mahindra says tying up with the car aggregators to sell electric cars is a plan that is underway. It will be a no-brainer for them to move to e-cars, he says.

He doffs his hat to Elon Musk, the inventor who has made Tesla th e byword in green cars. But he is quick to add that when car aggregators look to collaborate, they will go to entry-level car makers such as M&M.

Below is the transcript of Anand Mahindra's interview with CNBC-TV18's Ronojoy Banerjee.

Q: Mahindra & Mahindra is the second big Indian automobile company to enter the United Kingdom. Of course the Tata's did it through an acquisition and since then we know the story. It has been a remarkable success for the Tata's. You are going to go in and you have set up your own wholly owned subsidiary here. Tell us a little bit in terms of your expectations because many would say that the UK Electric Mobility market is actually on an upswing.

A: The Tata move with JLR is a very different kind of genre of entry as you said it is highly successful acquisition but of a brand that was already in the hearts of people in the UK. The UK people see it as an iconic UK brand. Our task is a muchtougher one which is to somehow get the Mahindra brand to be endearing to the British public. So, what is significant about this is that we believe if we are going to introduce the Mahindra brand here probably no better way to do it then with something that is epitome of 21st century mobility. So, that if we succeed in this then the Mahindra brand will be connected to modern, clean energy and to a highly evolved digitally driven vehicle.

Q: The Mahindra brand name will then be viewed very differently from the way you hear.

A: Exactly. Whereas if we came in with our conventional products, I am sure we could do very well with those too. In fact Europe has done well for us, for the overall Mahindra conventional brand. However what excites me is the opportunity to reshape the Mahindra brand through this launch and create a new perception de novo, almost a clean sheet opportunity for the Mahindra brand in the UK.

Q: Tech Mahindra is already here in the United Kingdom.

A: That is something that helps. If you are already known for being an IT company then as you know today it is almost as if IT and mobility are inseparable. They were separated at birth and they are just being joined again.

Q: Are you hopeful then that what we have not been able to do so far as far as electric mobility is concerned, UK will be able to do that in terms of your ambitions for your electric mobility business?

A: We of course came into this field inorganically as well, by acquiring Reva. Reva had targeted India, of course they were selling in the UK too. However when you look back at Reva, its success was in the UK, it was not in India. Since we inherited a brand and a facility in India, India is a home market. You work out all your challenges in your home market and consumers have been very supportive in that. Early adopters for us have been from India.

However I don't think we were under any illusion that given thepricing of batteries, that India would be the dominant market because In dia is still an extremely price sensitive market. So, we needed to expand our market by going abroad where we can in fact come in as you saw today at a price point that is significantly lower than other electric vehicle players here. That opportunity in India didn't exist because we were pioneers, there is no benchmark and also because we were constantly being compared to conventional fuel options which is not right in India. People are not looking at total lifecycle cost of the vehicle. However that takes time.

In the west already ground has been covered and people are accustomed to judging the value of electric cars based on their total lifecycle cost and that will help us here.

Q: While you patiently wait for the upswing to take place in India, many would say that in UK it has already started. So, may be a year earlier perhaps for M&M, wouldn't that have been more opportune?

A: No, in fact if you heard minister Letwin who came here today and very kindly raised a toast to us, he made this point. He said that we are at the tipping point. It hasn't been reached here yet. Sales have doubled almost even here of electric vehicles. However when you look at the potential it is still something like 2 percent of the market, that is scratching the surface. They are expecting the electric vehicle sales here to reach almost 8 percent of the market by 2020. So, enormous opportunity. So, in my opinion we are at right time, right place.

Q: The government is also mulling removing the benefits by 2020. So, in a sense you have that four year window to really make that impact because once those benefits are phased out then you are in a position to sell despite not having any benefits?

A: I agree but keep in mind that at the same time what we hope will happen is that there will be an experience curve and a cost curve that batteries willride down. So, the most expensive component in this vehicle is the battery, which is why it makes it mor e expensive than other vehicles. As you saw what happened in the solar PV industry, that the moment Chinese PVs drove the market down solar almost came to grid parity in India. You can see and imagine the same thing.

So, yes four years, we would love it to have been longer but I think that that the way the electric vehicles are taking off and the way battery production is going up, I imagine that the cost of electric vehicles is on a downward curve too.

Q: Bosch has also announced that in 2019 they will be launching a revolutionary battery which is half the weight, half the cost, so we need to wait and watch.

A: So, we are in a wonderful position, we are agnostic. We cheer on every developer of technology and we will just pounce on the latest technology as and when it is available and not make any commitment to any one particular technology that ties us down.

Q: Is the evolution of the electric car industry also linked to the prices of the oil for instance be cause last one year we have seen oil prices practically hit an all time low. During those moments do you somewhere feel it might have an impact?

A: Only in a very temporary sense. That is not going to be the deciding factor in the future. One is that the operating cost of the electric vehicle is negligible. We told them that driving an e2o or owning an e2o would amount to something like 10 pounds a month for the average British consumer, its negligible. So, you have to compare the operating costs and no matter where oil goes, even if it stays at this price there is a substantial cost relative to EV players. So, this becomes very attractive to consumers but also to fleet owners. For the share mobility industry it is a no brainer to move to EV because of its very low cost.

So, then what is holding it back? It is the capital cost. It is theupfront cost. For fleet owners that is less of a problem because that is amortised over much greater usage of that car, it is a shared v ehicle. Try and imagine when the capital cost comes down, as I told you it will due to battery technology, it is not going to matter what oil prices are. You are going to be comparing zero cost here almost to some substantial cost, no matter what oil prices are.

Q: Will you be reaching out to the Uber's and Ola's of the world especially considering the fact that they are now promising because many say the prices at which they are offering their services is simply unsustainable and perhaps they need to move to an electric car to make that pricing sustainable. So, will you reach out to the Uber's and the Ola's of the world?

A: We are doing it as we speak.

Q: What do we expect then?

A: I won't pre-empt that let us see, I will say stay tuned.

Q: You made an interesting comparison with Tesla and it is bound to happen. Comparisons will be made with Tesla because that is the big announcement that happened recently. You said that you were the tortoise and they are the heirs, why don't you just expand on that?

A: Normally we are very cautious about talking about competition but the electric vehicle (EV) is such where you can't have a launch and not talk about Tesla. It would have been the elephant in the room. Is this a Tesla fighter? How are they going to do vis-a-vis Tesla. Unless you pre-empt that and deal with that elephant in the room directly you are going to have people speculating on the wrong comparison.

So, the point I made here today was that we are eternally grateful to Elon Musk for having turned conventional wisdom on its head and realise that early adopters in the EV industry were priced insensitive. So, whereas the Chetan Maini's of the world earlier did not become Elon Musk because they were trying to get early adopters to adopt because of cost andconstantly talking about operating cost versus the other.

What Elon Musk did was very clever was say early adopters, people who want to save the planet have loa ds of money. Make a car that is aspirational which they don't mind being seen in and then you are going to get adoption, that's what his brilliance was. Now having done that we bow low, we are grateful to him because he has suddenly made it cool to drive electric cars. However as I said today if you are talking about saving the planet and getting rid of pollution Tesla is not going to do that. What is going to do it is when more people drive cars like this. When they drive entry level electric cars. When shared mobility providers like Uber switch to electric cars and they will not do it with Tesla, they will do it with cars like this. So, I just felt that it was better to grab the bull by the horn and say that is Tesla, we are grateful, they are going to help the tipping point and so too will Formula E which is why we are members and I thank Alejandro who was the founder of Formula E and was here at the launch today. To me he is as important as Elon Musk because he is making it exci ting. He is telling people that electric cars are fast and fun to drive.

The combination of those two things will get people interested and then what will as I said turn the skies of Bombay blue again are cars like this.

Q: So, since you made that acquisition are you perhaps most hopeful about the future of electric mobility than you have been in the past?

A: Absolutely.

Q: The evolution of the electric mobility, the regulatory environment in India many would say as it still taken a lot of time?

A: I am Indian; I have lived and worked all my life there. When you say something takes time we just say part of the territory. When it turn around things happen.

Q: When it turns around you will have the first move on?

A: There is huge opportunity foreverybody, first mover, second mover or tenth mover. There is so much penetration left. 1 percent of the market of the UK and negligible amount in India so think of the upside and think of what happens when share mobility players like Uber and Ola start using this. One of the biggest buyer of our cars today is a company called Lithium in Bangalore which is an electric mobility provider. So, mobility solutions providers are going to be the ones who will catalyse the change.

Q: Power Minister said by 2030 he wants the electric mobility to be the primarily the pre-eminent mode of a transportation. We are in 2016 we are still 14 years away. Is that achievable you feel?

A: When he said that I hope you heard us cheering in the background because we were and his ministry has been in insatiable and asking for data and looking at the information available on that transition. He is now convinced that this is doable. He is working with international agencies to help him achieve that goal. So, this is not simply a sound bite that he was giving. I truly believe them. We have discussed it with Minister Piyush Goyal and frankly what is better is that it Minister Nitin Gadkari is also aligned to this. So, when you have two ministers both in power and transport and then the Environment Minister so you have this three murti that has committed to this goal. I think it will happen.

Q: The last time you and I spoke you were very cautious about the pace of while the government was initiating reforms but you were a little cautious in terms of its effects on ground. We have just started the new financial year and there has been some good news. Good normal monsoon has been predicted after two years of drought. Consumer price index (CPI) has come down under 5 percent. Are you little more sanguine about the prospects of FY17 as you were three months ago when we last spoke?

A: I have a much more positive outlook than when we met last that is to befrank. I told you that I was always optimistic, but I was wrong about when the tipping point would come in India. I think things are finally building off that the mythical takeoff point that never used to come. Let us b e honest I have also recently posted on social media that we should not get euphoric about the monsoon forecast.. However, if we are fortunate enough to get a normal monsoon I think that combined with the affect of all the other policies that this government has done in the last two years you could see a level of growth that will surprise us all on the positive side.

Q: For the auto industry the year has once again started off in an uncertain note because the diesel ban still continues. In such a situation you are at the frontier, you are in a sense spearheading that debate because you are trying to convince the rest of the world that diesel is not as polluting as you make it out to be and we are investing, we will hit BS- I in other four to five years time but then is that like an overhang which is pulling the industry back?

A: You are asking me generic questions about the industry, so I am answering you generically on behalf of the auto industry. I don't want to answ er with the vested interest of Mahindra. I have said before and now I am on the record that I respect the judiciary of this country. They have kept democracy alive doesn't mean that we always agree with their decisions. Sometimes when you want to bring change some decisions that come in are a little egregious if you will they don't always take into account the hard facts and so on.

However, as far as I am concerned that is the law of the land we would we will obey it and we will do so happily because we think the push towards climate friendly vehicles is a good one and we are never going to line up against that. As you see our answer will always be to deliver products which will meet the regulations in fact go beyond them.Thatis our stand. So, I refused to be intimidated or to be depressed. I would rather have an organisation that is nimble and reactive enough to respond to the changes that people want and which I hope are embedded in the decision.

Q: Are your CEOs t elling you they have to review the investments owing to this diesel overhang?

A: We will never stop investing. The question is what you invest in? It is simple as that you just change tag and you say this is the direction and this is what we are going to do. We are not waiting for the government to mandate electric vehicles before we board Reva as you know. So, I just hope as far as I am concerned, my advised to my colleagues will be let us not wait until somebody pushes us in a direction. Let us just anticipate them and be ready for them.

Q: Your entry into UK also coincides with Tata Steel wanting to exit. Has that in any way in your interactions here with people in London, has that in anyway impacted brand India in terms of because the unions are up in arms and it has become a big political issue now?

A: It is very unfortunate, obviously but to be honest I think the public, I just got here yesterday but my general sense is that it has been handle very well by Ta ta's and that everybody recognises that they may regret deed of effort and that there are some externalities which are causing these.

I don't think there is anyone here who is accusing Tata of not living up to promises. So, these are just the vicissitude of the business. Some business workout, some businesses unfortunately are threatened by external development. So, I don't think this is going to have any long-term impact on brand India at all.

Q: You like talking about this and lot of us acknowledge the fact that how rapidly the world is changing. The kind of role technology is playing. Only time will tell the impact 3D printing for instance is going to have so in that sense theview is that even a regulations will have to keep a pace with these changing times. So, while you also said at the start of the interview that reforms take time but in India the impression is that even the very obvious takes a lot of time. To give you the example of the goods and service ta x (GST) a bill that was again campaigned by the previous government but seems now it is again run into rough weather. Is there a feeling somewhere that politics is perhaps failing businesses in India?

A: This question as you know has been asked since a beginning of the regime change over. Ironically, for being despite being a regime in which is being led by a master communicator Prime Minister Modi I believe they have done a poor job of communicating their many success. There are many small successes which are all adding up to give us the recovery that we are anticipating. I wish there was somebody who could help them publicise what they have done in smaller areas which are adding up to a major lots of drops of the water in this bucket.

Let us take crop insurance, now we are looking at farmers and their plight. Why isn't anyone looking at the fact that crop insurance could make a tremendous difference to the well being of these farmers? If you look at the way in which the government has handed the public saving rates being brought down. It was very clear if you talk to any bankers and I am sure you did that it was not simply the Reserve Bank of India (RBI) that could help them bring rates down, their public saving rates have to be brought down and that was a politically difficult bullet to bite. They did that and they did it very well after one day of objections they have created a mechanism which will allow the calibration of rates in a much more dynamic manner.

That is going to lead to a much more vigorous and reactive interest rate environment. Why aren't these things being talked about? The fact that there is much greatertransparency at the top for companies like us and I have not gone to Delhi, I don't have to go to Delhi anymore. So, to my thinking things have changed dramatically some big moves have stilled to be done. If they will come but this government needs to do a better job of publicising the many things it has done right now.

Q: Last time you said that how public trust in businesses is at a low and that was perhaps a trigger for Mahindra Rise also as a campaign and as a vision for your group. Especially at a time when you see large corporate houses defaulting on their loans and of course there is one person who has been pretty much absconding right now, does that concern you because you are looked upon as the conscious keeper of India Inc and in that sense does that worry you that incidents like these is further going to sully the image of India Inc and there will be negative externalities?

A: You have asked me this question by putting me on the spot and putting me on the pedestal I don't really want to belong to.

Q: Many of your Twitter followers they like the way you engage with them.

A: When you talk about defaulters as you know the Reserve Bank of India governor himself has made a very clear statement that not all defaulters are wilful. You have to remember that one of th e biggest problems or threats to entrepreneurship in India is that there is a very severe cost of failure. We need that bankruptcy law which the Finance Minister is promising. I would like to urge him to bring it into play much quicker. You have got to realise that entrepreneurs not all of them succeed. Media focuses on the winners, there are many losers out there. We should not in any way ostracize the losers. If somebody has legitimately taken a risk, somebody has lost for external reasons or even due to bad implementation, that is fine. That is what business is, you need winners and losers.

There is no economy in which you aregoing to get only winners. My only fear about the current environment is that if you begin to condemn and vilify all losers in business you are once again going to get back to that old mentality, where my daughter cannot marry him a businessman because he might fail. We had come to a point where people have begun to value risk taking. I just hope that this environment does not in any way discourage risk taking. There are legitimate business people who will go into a project and may not succeed. We must not condemn them.

Source: It's a no-brainer for car aggregators to move to e-cars:Mahindra