M&M Finds Tata Motors’ Electric Vehicle Bid Price ‘Hard To Comprehend’

Having matched the lowest bid to supply a third of first 500 electric sedans the government wants to buy, Mahindra & Mahindra Ltd. said it doesn't understand how Tata Motors Ltd. arrived at its pricing.

“I must admit that we find this price somewhat hard to comprehend. We have been making electric vehicles for some time and are therefore very well aware of the prices that are prevailing for subsystems that go in,” M&M's Managing Director Pawan Goenka said in a conference call with journalists. “But yes, this is a very good bid in terms of price by the L1 (lowest) bidder. I don't know the basis on which this price has been bid.”

Tata Motors quoted Rs 11.2 lakh per car including the Goods and Services Tax. M&M, the second lowest bidder, had quoted 20 percent more. India's largest utility vehicle maker shaved off Rs 2.3 lakh each for the 150 cars it will supply in the first phase of a 10,000-vehicle order by the state-owned Energy Efficiency Services Ltd.

The order is the government's first push toward making all vehicles electric by 2030 to cut reliance on imported fossil fuels and curb emissions. Crude oil is the largest contributor to India's import bill and adds to trade deficit.

The government said in a notification on September 29 that Tata Motors had won the entire contract to supply 10,000 vehicles—500 in the first phase by November-end and the rest later. A second EESL notification yesterday said M&M had matched Tata Motors' price and agreed to supply 30 percent of the units in the first phase.

“I think somehow, everyone went into a fast-forward mode and declared that the lowest bidder (Tata Motors) has been given the 10,000-vehicle order,” said Goenka.

The decision to supply 150 electric Veritos to EESL will bring down revenue originally sought by M&M by as much as Rs 3.45 crore. Goenka said M&M didn't want to be left behind. “We don't want to be not part of the race, and therefore we have taken what would have come to us as 30 percent L2 bidder. Second, we want to see electric vehicles succeed in India.”

Also Read: M&M's Electric Vehicles Bet: Sound Strategy Or Leap Of Faith?

What Next?

M&M is expanding its electric vehicle production capacity and is developing new technology. It plans to invest as much as Rs 600 crore over the next three years on it.

It has not yet decided whether to participate in the second phase of the electric car tender. Goenka said M&M will have the option to match the lowest price to supply an additional 4,750 vehicles. The automaker will now try to reduce the cost of electric Verito, he said.

It's in talks with battery makers outside India as a change in technology is expected to lower costs of M&M's electric vehicles by around 20 percent. This will only take place two years from now, Goenka said.