In a bid to scale up electric three-wheelers and small commercial vehicles (SCVs) that are more affordable, IFC is investing INR 600 crores in a new last mile mobility (LMM) company – a wholly owned subsidiary of Mahindra & Mahindra that will be a newly incorporated (NewCo). A game-changer for microentrepreneurs in India, the funding will transform lives by boosting their income and paving the way for the auto industry’s seamless shift from fossil fuel to electric vehicles (EVs).
IFC’s first investment in an EV manufacturer in the country and the first in electric three-wheelers globally will be in the form of compulsory convertible instruments at a valuation of up to INR 6,020 crores. The INR 600 crores investment will result in ownership of between 9.97% to 13.64% for IFC in 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 manufacturing of new-generation products in this space. Electric vehicles enable vibration and noise-free operations, generate higher earnings for drivers, and enable microentrepreneurship. The business will further generate employment for women, driving equality and inclusion while bolstering India’s climate action agenda.
Anish Shah, MD & CEO, of Mahindra & Mahindra, said, “We are delighted to have IFC as a partner in our last mile mobility journey. Decarbonizing the transport sector is crucial to achieving the climate goals that India has set for herself. IFC, with its focus on sustainability and boosting prosperity, is an ideal partner for us. With the electrification of the last mile mobility business at scale, we will move a step further in our commitment to be ‘Planet Positive’ by 2040. This also presents a tremendous opportunity for growth for micro and women entrepreneurs.”
“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,” said Hector Gomez Ang, IFC’s Regional Director for South Asia. “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. By supporting a leading market player, IFC hopes to encourage other large automotive manufacturers to follow suit, driving EV adoption across India and helping the government deliver on its climate targets.”
While transport remains key to India’s growth, it poses the twin challenge of heavy reliance on oil imports and severe air pollution. Decarbonizing 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. 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.
Rajesh Jejurikar, Executive Director and CEO (Auto & Farm Sector), Mahindra & Mahindra, 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 Mahindra & Mahindra, 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.”
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.
Khaitan & Co. are legal advisors to Mahindra & Mahindra and Cyril Amarchand Mangaldas are legal advisors to IFC for the transaction.