In a bid to scale up the penetration of affordable electric three-wheelers and small commercial vehicles (SCV), World Bank arm IFC is investing Rs 600 crore in a new last-mile mobility company wholly owned by Mahindra and Mahindra (M&M). The firm will be a newly incorporated company (NewCo).
This is IFC’s first investment in an Indian EV manufacturer and the first in electric three-wheelers globally. It will be in the form of compulsory convertible instruments at a valuation of up to Rs 6,020 crore. The Rs 600 crore investments will give IFC an ownership of 9.97-13.64 per cent in the NewCo.
NewCo will house the last-mile mobility division, including three wheelers (Alfa, Treo, Zor) and four-wheeler SCV (Jeeto). IFC’s financing will help scale up electric mobility in last-mile connectivity--passenger and cargo segments--while enabling the development and manufacture of new generation products in this space, M&M said on Wednesday.
Rajesh Jejurikar, Executive Director and CEO (Auto & Farm Sector), M&M, said, "The last-mile mobility business presents a tremendous opportunity, both in terms of electrification and growth. Being the market leaders in this segment, we have an opportunity to drive higher EV penetration in this segment and provide a more sustainable as well as profitable option to microentrepreneurs. We are excited about leveraging the World Bank Group’s expertise in the EV sector to create a viable ecosystem with robust environmental and social practices, as well as build knowledge, innovation, and capacity.”
“Through this partnership with M&M, we aim to leverage private sector innovation and technology to accelerate the transition to EVs and help strengthen India’s e-mobility ecosystem,” said Carsten Mueller, IFC’s Regional Industry Director for Manufacturing, Agribusiness and Services, Asia.
“Green and sustainable transportation will be critical in the fight against climate change, and EVs provide exciting solutions to reduce greenhouse-gas emissions, while curbing air and noise pollution and benefiting entrepreneurs and communities everywhere.”
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Decarbonising the transport sector, which contributes about 13 percent of the country’s greenhouse-gas (GHG) emissions, can help substantially reduce the impacts related to GHG emissions and other air pollutants, IFC said in a statement.
“This is vital given that India has committed to reducing its emissions profile by 45 percent by 2030, and simultaneously aims to achieve 80 percent EV penetration for two-and three-wheelers, 70 percent for commercial vehicles, and 30 percent for private cars,” it added.
Anish Shah, MD & CEO, M&M, said that with the electrification of the last mile mobility business at scale, we will move a step further in our commitment to being ‘Planet Positive’ by 2040.
Hector Gomez Ang, IFC’s Regional Director for South Asia said, “With transport being the fastest-growing contributor to climate change, it is no longer a question of whether electric vehicles should be adopted at scale, but rather how quickly,”
He said, India is the largest three-wheeler market globally, and this investment marks a significant step towards scaled domestic production of electric vehicles catering to this segment, as well as small commercial vehicles.
While growing e-commerce activity and urbanization in India are driving a significant increase in last mile transportation, electric two- and three-wheelers can potentially lead the transport sector’s clean energy transition. “This investment should send a signal of confidence regarding the prospect of such vehicles in India, enabling improved connectivity and logistics for passengers and goods, creating green jobs and driving the Indian economy,” IFC said.
M&M noted that electric vehicles enable vibration and noise free operations, generate higher earnings for drivers and enable micro entrepreneurship. The business will further generate employment for women, driving equality and inclusion while bolstering India’s climate action agenda.
Khaitan & Co. is the legal advisor to M&M and Cyril Amarchand Mangaldas is the legal advisor to IFC for the transaction.