India’s Mahindra Enters Racing, but With Eye on Tesla

Formula E on the streets of Miami
Formula E on the streets of Miami

At first blush, Mahindra & Mahindra Ltd. and the FIA’s Formula E racing series are strange bedfellows.

Mahindra is India’s biggest sport-utility seller and best known in the U.S. for its small tractors. It also has a big IT business in the U.S., a startup scooter company, and a stable of other businesses.

Formula E race cars are among the most progressive machines on any racetrack in the world. In a series that began late last year, drivers from 10 teams—including powerhouses like Audi AG, Renault SA and Andretti Autosport—race high-performance electric cars for an hour at a 140 mph top speed; they need to finish without running out of battery power.

Mahindra is one of the first auto makers to have invested millions into participating in the series. The move is less about racking up victories, and more about preparing to take a big step in a higher-stakes game. In the race to create a more viable global electric-car market, Mahindra wants to be the low-cost answer to Tesla Motors Inc.

Mahindra’s $10,000 e2o is the only pure battery-operated car built in India, a nation with big electric-vehicle ambitions that has been slow to initiate incentives to accelerate demand. This summer, Mahindra will launch the city car in London, with hopes that the subcompact is a launchpad to mature markets that have been hard to crack with Indian vehicles carrying conventional powertrains.

“Mahindra is eager to become a global brand," Pawan Goenka, the company’s longtime automotive chief, said during an interview before the latest Formula E race here Saturday. “If we were to do it through electric vehicles, it may be an easier thing than to come through the mainstream."

The move to mature markets will be challenging and could be costly. Mr. Goenka has had lackluster support from the Indian government and there is little local competition, so he needs Formula E to help him navigate potential potholes.

Regulations in the U.K., for instance, likely require significantly more safety equipment, and that will add performance-sapping weight and cost to a car meant to appeal to both the conscience and the pocketbook.

A broad swath of companies—ranging from General Motors Co. to China’s BYD Co. Ltd—are betting on electric cars as a way to broaden appeal, meet regulations or enter new markets. The number of auto makers offering viable electric cars by 2020 is expected to balloon, but there is no guarantee demand will follow.

Mahindra’s e2o is modest, with a 50-mph top speed and room for four passengers. Smaller than a Ford Fiesta, the car can travel 75 miles on a five-hour charge, 9 miles shy of Nissan Motor Co.’s much pricier, and roomier, Leaf. Mahindra has been working on electrics for two decades, but its ambitions were jump-started when it purchased control of REVA Electric Car Co. in 2010.

A trip down to pit row illustrates why the e2o’s maker is eager to race with the big boys. It is also a reminder of how far the auto maker and its rivals have to go before electric cars are viable for the mass market.

Dilbagh Gill, a former driver now running Mahindra’s racing effort, stood next to two of the team’s cars a couple of hours before the race as crew members made final preparations. The most important task was charging batteries that, when fully charged, could power an iPhone for 270 years, according to Mr. Gill.

On the track, however, the batteries last 30 minutes. Each driver has two cars, swapping machines at the race’s midpoint.

“If you’re too aggressive, you’re going to run out of battery juice too soon," Mr. Goenka said. “And if you’re not aggressive enough, then you won’t win the race."

In Mr. Goenka’s view, the race in the marketplace is a battle of cost. Producing Mahindra’s e2o, he says, costs $3,000 to $3,500 more than a similar conventional car, and the premium needs to fall by two-thirds.

“I believe the customer would be willing to pay $1,000 or so," he said. Auto makers must be able to drop prices to a point where government subsidies aren’t driving the market.

“Subsidies cannot last forever," he said. Companies like Mahindra, which sell the bulk of its cars in emerging markets, have a jump on building lower-cost cars, and Mr. Goenka said this is a unique advantage.

Joining the FIA’s Formula E circuit also helps because Mahindra can share in the significant investment the race series is making in electric-vehicle technology. That kind of collaboration has been lacking in India, which introduces an incentive for electric vehicles on April 1, the first of its kind in India.

Mr. Goenka said Indian policy makers “have started with small budgetary allocation but have a rather large master plan." Regulators aim for four million to five million electric vehicles, including two-wheelers, by around the turn of the decade.

“India probably needs electric vehicles more than any other country." Dependence on foreign oil and pollution are two reasons for the nation to go electric, he said.

For now, Mahindra’s effort in its home market is stuck in the slow lane, reflecting struggles Nissan and GM have experienced in sustaining consistent demand. Mahindra sells about 75 e2os per month in India.

John D. Stoll/wsj.com

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