G-Wiz manufacturer pledges to launch one new model a year

As the UK government outlines new plans to support the growth of electric cars in the UK, BusinessGreen.com met up with Chetan Maini, chief technology officer of Indian electric car maker Reva, the company behind the already iconic G-Wiz.

BusinessGreen.com: How did Reva come about?
Chetan Maini: When I was at the University of Michigan in 1990 I had a chance to be part of a solar electric car race. We raced from Florida to Michigan, and our university team came first. General Motors then sponsored us in the 2,000-mile World Solar Challenge from Darwin to Adelaide in Australia.

We were just a bunch of kids from college, but we came third in the world, right behind Honda. That seemed very exciting to me. If you could cross a continent with solar energy, this technology had to have a great future.

My focus at that time was on India, on the kind of pollution I’d seen growing up, and this offered a solution.

We used to all talk about building electric cars when we graduated. The father of one of my friends, Lon Bell, liked our ideas so much he set up a company. So I ended up at a startup in the early 1990s called Amerigon, developing core electric vehicle technologies. I took a break and did grad school in electrical and mechanical engineering, and then came back to the company in 1994. My father [Sudarshan Maini] who had started his own engineering business in India in 1973, happened to be in the US when I was there and he and Lon got together, and they became the founders of Reva in 1994.

We then spent seven years in development before launching the Reva car in India, in 2001.

BG: That's quite a long lead up.
CM: We spent five years on the core technology, then we built 40 prototypes, and tested them for a million kilometres. So it was a seven year cycle for the first generation. Fortunately, subsequent generations are quicker. The first one is when you learn the most.

Everyone knows how to build the brakes and the bodies and the chassis. The tough part is, how do you get the electronic and electrical systems to work, how do you make it cost-effective, and how do you make it reliable and efficient enough? We also have some unique flexible manufacturing processes that help us hit price-performance targets that are superior to most. Long-term, for any green technology to be successful, you can't expect customers to pay a premium.

BG: At abount £9,500, the G-Wiz still seems quite pricey for what is a very small car. Is there an area where cost will come down with scale? Will the cost of batteries fall?
CM: The G-Wiz does work out cheaper than a conventional small car over five years, but I think there will be a tendency to separate the car from the energy use over time. We will sell the car without the battery and then give consumers options. For example, today's G-Wiz has lead-acid batteries, but is compatible with lithium-ion, so there will be the option to upgrade.

We also need innovative financing mechanisms. Changing perceptions is difficult, but it's worked well in mobile phones, where the cost of hardware and calls are divided up in different ways.

We're also going to be testing battery leasing shortly, not in London but in some other markets, and we believe that long-term that is really the way to go. Not everyone is going to want 100-mile range - if you drive in the city and do 20 miles a day, you might want to pay less and have only a 50-mile range.

BG: Do you have plans to launch larger cars?
CM: We will be launching one new model a year - that's part of our business strategy for expansion. You will see new cars, and the current cars will be upgraded.

BG: You launched in India and shortly after in the UK. Was that always the plan?
CM: The plan was to launch in Bangalore and one market internationally. London was ideal: you drive on the same side of the road, it was easy to communicate in English, and there was a lot of positive legislation - the Congestion Charge had just come in, for example. So we said, let's try to understand these two markets and then expand. So of the 2,800 cars we have on the road today, more than 1,800 are in these two cities. We are in 20 countries – 10 where we are selling and 10 test marketing. Spreading ourselves too thin initially would have created issues.

BG: The Indian car market and the UK car market must be very different. How did you balance the conflicting requirements?
CM: It was a very tricky area. When we launched in the UK we made more than 130 changes to the car. This was in 2003. We did testing of 16 cars for a year before we launched. So we did differentiate for a while, but today both models are very similar because in India, the people who are buying it are really second-car buyers: technology-oriented, fairly environment-oriented people who want plenty of features in the car. So 80 per cent of our buyers want the highest spec.

Over time, we will see different features and aesthetics to match the different markets because their requirements are going to be different. And we have enough flexibility to do that. We will see that next year.

BG: Will your approach scale to larger volumes of cars, and the support, parts and servicing they will require? Or will you need hundreds of millions of dollars of further investment to scale up?
CM: What we've done is to try to use technology to help us scale differently. Conventional manufacturing needs hundreds of thousands of cars to break even and complex assembly lines. We have unique ways of manufacturing the car which brings down break-even and investment. The second aspect is, since we have built a host of technologies over the last 10 years – we have spent more than $50m getting to this point – we've created modular concepts that can be reused in different platforms. And this allows us to be more capital efficient as we go forward.

Our current plant has a capacity of 6,000 vehicles [annually], our new plant will be up and running by the middle of next year and will have a capacity of 30,000 vehicles. So we are investing to raise production.

We're also looking at unique ways to service cars, for example by using electronic diagnostic capabilities. As there are a lot fewer moving parts [than conventional cars] we are able to service 80 per cent of cars at your home or work – you cannot do that for regular cars.

[UK distributor GoinGreen is] also selling cars online in London and we will do the same in other countries.

All these unique ways of working are enabled by technology and allow us to lower the cost structures significantly. We don't have to scale up using the conventional models followed by car manufacturers.

There is also an Indian advantage in the country's strong research and development capabilities. In an electric car, 50 per cent of your material costs are batteries and electronics, so when you look at the amount of electronics and software involved that R&D capability is a great advantage [that should help us lower costs]. We can have the highest skill level at a cost that is significantly less [than in the US or Europe], which lowers development costs.

BG: So your production capacity is about to increase? You’ve taken seven years to get 2,300 cars on the road, and now you plan to build 30,000 or more per year?
CM: Yes. The last six or seven years have allowed us to get a product, develop the core technologies, put together a global supply chain, get the manufacturing right, test the market and understand the unique after-sales model. We have a strong management team and 100-plus people in R&D to gear us up for the next generation of products.

So we are moving away from the initial phases of understanding all this. Now we understand the markets and know what consumers want. This has allowed us to secure capital for the next phase.

BG: Do you think that potential customers, looking at what seems an unsophisticated vehicle on the surface, are underestimating the scale of Reva’s commitment?
CM: Our whole focus has been on the technology, and you're right, people just see the product. But the underlying layer is, do you have the technologies that can make a green car affordable? The other parts are much simpler. Meeting safety requirements, airbags, styling - these are easy things because everyone knows how to do them. Getting core technology patents is different. We've got 50 million kilometres of electric car consumer data - more than any car company in the world. That has allowed us to understand how cars run in Norway at minus 20 degrees or in Delhi at 45 Celsius. How batteries perform, how consumers use their cars, how energy comes back when you press the brake pedal in London compared with Norway - we get all this data back. So that means we are in a position to launch a generation-three car when a lot of companies are launching generation one.

BG: The big car makers have traditionally seen pure electric cars as not worth bothering about, but that attitude seems to be changing. Do you worry about competition?
CM: If you look at history, when New Orleans was the shipping capital of the US, they laughed at the railroads. A hundred years later it happened again when the car took over from rail. Nobody can see the shift coming when they're on the inside. But energy security and pollution are going to be the challenges faced by society in the next ten years. Any solution that starts to address this in a commercially viable way will have huge success. That's a fundamental that's not going to change.

The rate at which the market shifts could vary depending on oil prices, but there are a huge number of consumers who want to be green if they don't have to pay a premium. And governments are planning very strong regulations, so I think that automakers are seeing this.

Toyota has had success with its hybrid technology, and other makers have seen that the Prius has been a great image-builder. But the volumes for electric cars are initially going to be much lower, and with the investments you have to make in this business, from the big makers' perspective it doesn't give you any initial payoff. So I don't know how they are going to react, especially in today's recessionary market where everyone is trying to conserve cash. Are they still looking at how they need to be five years from now, or are they trying to save the next quarter?

I'm not sure what's going to happen, but I've never seen so much interest in electric cars. It will be a niche for them, an insurance policy in case things really change. But at Reva we live breathe and dream electric cars. We don't have any other product lines - we've got to make it happen.

BG: What sort of legislative backing would you like to see?
CM: We are at a nascent stage for this technology and nascent technologies need support. If there was a long-term favourable policy, you would see investments come in that would make the difference. A good example is what happened in China. In 1999, there were 40,000 electric two-wheelers in China. The government said that by the 2008 Olympics, it needed to change certain parts of the transport system. It put in a $100m fund, put policies in place, such as banning petrol mopeds, but not electric scooters, in parts of city centres, and last year there were 15 million electric scooters in China. With that volume, the scooters became so inexpensive that even in areas where there is no regulatory requirement, 70 per cent choose electric. It struck a long-term policy.

London made a positive step by exempting electric cars from the Congestion Charge, with the result that almost every electric vehicle maker looked at London as a showcase. But it is losing that advantage, because now lots of countries are putting incentives in place. If London were to build on its lead, by putting money into recharging infrastructure, say, it could make the UK the centre. There would be secondary benefits in investments. There would be technology players, industry and design. The auto industry in the UK could see a big push, because there will be a big market.

Long-term policies make people invest, and investment is necessary for success. If policies change too frequently, consumers also are put off. But if incentives are done right, you can eventually let the market take over.

Delhi recently put a very small tax on diesel and put that money into an ambient air quality fund. This fund subsidises electric cars through purchase tax rebates. It's a polluter-pays policy, a cross-subsidisation that doesn't cost the government at all. I think such forward-thinking policies, which allow people to understand the societal benefits and costs of commuting, really help consumers to take the right decisions.

We believe we have a product that can exist on its own merits, but incentives would help to create the infrastructure that would make it easier to own - to be able to recharge the car at the shops, or at work.