Project Reva - FDI Entry

REVA Drives into

Global Markets

Presented By:Abhishek Kapoor

Anshuman Dikshit

Manish Katyan

Niren Chaudhary

Rajul Srivastava

Agenda

• About the Company

• About the Products

• Country Analysis for DFI

– China

– South Africa

– Brazil

In 1990, Chetan Maini and some friends from the university of Michigan built the Sunrunner, a solar powered car for the 'World Solar Challenge' - a seven day, 3000 km long race accross the Australian continent.

The Sunrunner, on a budget of $1 million, finished third, beating many auto majors.Travelling across the continent solely on solar energy, sparked the idea that the future of the automotive industry lay in renewable energy.

About The CompanyReva Electric Car Company

• Indo-US JV in Bangalore, India

• Core Business– Electric Vehicles and Mobility Solutions

• Energy Management,

• Fast Charge

• Telematics

– Technology Licensing

– Licensed Manufacturing and Distribution

• 24 countries – 3000 vehicles – 70 M km

• Licensed EV technology to GM, India

About The ProductREVA – A New Beginning

• Electric Vehicles under brand REVA

City InterCity

Seating Capacity 2 Adults

2 Children

4 Adults 4 Adults 2 Adults

Range /charge 80 km (50 mi) 80 km (50 mi) 160 km (100 mi) 200 km (125 mi)

Maximum Speed 80 kmph (50 mph) 80 kmph (50 mph) 104 kmph (65 mph) 130 kmph (80 mph)

Charging Time 100% in 8 hrs

80% in 2.5 hrs

8 hrs

1.5 hrs - fast charge

Battery Type Lead Acid

(Li-ion optional)

Lead Acid Lithium ion

Phosphate

Lithium ion

Phosphate

Length 3.28 m 3.28 m

KerbWeight 665 kg

About The ProductReva – A New Beginning

• Innovative Features

– REViveTM

• Telematic access to onboard Energy Mgmt System

– Integrated Regenerative Braking

• Energy released during braking to recharge batteries

– “Boost” switch

• 40% extra torque for improved acceleration

Why To Go Outside?

• Indian market not yet ready– High initial price– No ecosystem for charging

• Strong IPR– Reva is in leader position

• Global market ready– Awareness – Affordability – Huge market – Economies of scale

CHINA

ChinaSociety

• Large market

– Very large population base (1B plus)

– Great purchasing power

– 15-64 years is 72% of the population

– 15% of the population is middle top 10% in earnings

• Competition is fierce in China

– About 10 highly competitive firms in market

ChinaEconomy

• Infrastructure and Available Technologies– Second largest road network in the world and

expanding

• Investment to continue in future as well• IPR protection weak

– Loose copy-right laws and their enforcement

• Capital Market– Less developed capital market

• Aims at efficient capital allocation

– Is under tight supervision– Not very conducive to private enterprise

ChinaPolicy

• Government is committed to promoting electric technology in automotives

• Plans to turn China into leading electric technology producer

ChinaAdvantages

• Competitive advantage(s)– Socio-cultural compatibility between India and

China is high

– GM enjoys tremendous brand equity in China, Reva will benefit from this

– China is heavily dependent upon oil imports, electric car makes sense

• Strategic Importance– Very important because of large base and growth

rate of about 8%

ChinaRisks

• Politically very stable• Natural risk probability is moderate• Low security threats barring north-east regions of

Xingjian and TibetBUT • Government intervention very high• Legal risk is low, but justice is quick and crude• Relations with India are cold, Indian firms may be

at disadvantage• Exit barriers are high

SOUTH AFRICA

South AfricaSociety

• Population: 44 million– Aged 15-64 years: 65%– Population growth rate: -0.31%– Literacy: 86%

• High unemployment (30%) & social imbalance – 1 out of 80 accountants are black– Low skills level: 250,000 vacancies cannot be filled because of lack of

qualified candidates– high crime rate

• Aids epidemic (5 million, highest in the world)– Fast loosing youngest, fittest and most talented people– Excess mortality rate resulting in lower life expectancy, high infant

mortality and death rate, lower population and growth rate and change in distribution of population by age and sex

– Devastating social lost

South AfricaEconomy

• Government’s economic policy is fiscally conservative but pragmatic, focusing on targeting inflation and liberalizing trade as a means to increase job growth household income

• GDP (PPP): $500 billion– GDP growth rate 3%: Just enough to keep where you are– Hit recession in 2009

• Well-developed financial, legal, communication, energy &transport system– Stock exchange among 10 largest in the world– Modern road and rail infrastructure supporting efficient distribution of

goods across major urban centers

• Weaker growth in lower South Africa– High unemployment rate, poverty and lack of economic

empowerment among disadvantaged group (legacy of apartheid era)

South AfricaPolicy

• Strong currency (Rand) – Low inflation level, Lower interest rate– Cheaper to imports and finance => rise in productivity– Export hit => export industries shedding labor

• Redistribution to address socio-economic inequalities – Black economic empowerment is a key but controversial policy of the government– A black business class has been created in record time and thousands of blacks

have been hired as civil servants and appointed to boards of private and state-owned firm

– Growing resentment at the emergence of a new elite, which includes former freedom fighters who have used their political connections to accumulate huge wealth.

• Since 2000, South African employers have had to contribute 1% of an employee's salary to his or her training.

• No restriction on extent or type of foreign investment• 2010 Industrial Policy Action Plan focuses on few sectors including automotive

green and energy-saving industries

South AfricaRisks

• Standard & Poors: Stable Rating – Government implemented sensible fiscal policies and brought spending under

control– Decreased deficit and external debts– Reserve Bank: independent and committed to lower inflation– Privatization program encouraging FDI

• Fitch: Positive rating– Sound macroeconomic policies contributing to public finance– Debt in local currency => Less vulnerable to volatile exchange rate– Significant decrease in external debt

• Concerns of S&P and Fitch– Huge socio-economic inequalities– Threat of Aids– High level of unemployment– Modest economic growth rate– Low saving levels => less investments

BRAZIL

BrazilSociety

• Good market size– Population 192M, 45% Class C ($450-745 annual)– Credit card penetration 40%– Population growth rate low – 1%

• Inequality high between regions– West vs. East and South East

• Domestic car sales grew by 28% during 2007-08 – Export also expected to grow at 6%

• Suspicious towards free trade • Enjoy luxuries of life

BrazilEconomy

• Good purchasing power - $10555 PPP (77th)• Stable business environment now• Exit barriers high

– Hence partnerships better than 100% FDI

• Capital market stable now– Base interest rates still high – 9% approx

• Resources in plenty– Minerals, commodities, water, – new oil sources but costly (deep sea) at 40$ per barrel

• Investment low at 20% of GDP (30% rec) – On transport improvement 0.1% only (5% rec)

• 3rd largest road network but only 12% asphalt covered• Olympics in 2014 and World cup in 2016 to contribute

BrazilPolicy

• Tough taxation – Informal economy 40% (India – 22%)

• HR policies tough. Hiring / Firing difficult.

• Tax benefit to green auto

• Reforms being pushed aggressively – Election close and may impact

• Past has been turbulent (700% inflation decade ago)

– World’s largest IPO floated in Brazil (Santander Bank)

BrazilAdvantages

• Entry to a large market - South America– Strategically important

• Ecosystem to grow– Fiat already announced entry

• @35000 USD

• Through local partnerships with Cemig and Itaipu

• Environment stable– Political, economic, social, capital

• Strong government support for reforms

BrazilRisk

• No ownership / operations risk

• Moderate political risk

– Election may halt the pace of reforms

• Exit barriers very high

• Transfer risks high

• Legal system almost defunct

COMPARISON

BRAZIL is the Winner!

BRAZIL China South Africa

Market Very Good Very Good Moderate

Economy Stable & Growing

Growing fast Stagnant

Infrastructure Improving Very good Very good

Risks HR & Taxation Govt Controls IPR Theft

Social & Political

Advantages High High Moderate

Strategy

• Partnership

– To mitigate risks

• Find out suitable partners

• Price

– Below Fiat (35000 USD)

– Close to New Reva in EU (20000 USD)

• Branding

– Trendy with green fuel

THANKS