Another Mahindra US-Market Effort Collapses

Back in May, when Mahindra took over the Indian EV city car firm REVA, we reckoned that the much-maligned (by Top Gear) G-Whiz would soon be sold from Mahindra’s dealer network, which was being developed by Global Motors. But with Mahindra’s deal to sell its diesel pickups through GV’s US dealer net in tatters, it seems that plans to sell REVAs in the US has hit a stumbling block. Syracuse, New York-based Bannon Automotive had made a $26.5m investment in local REVA production, an investment that was underscored by $7m in state grants and the promise of $52m in federal loans. Now Bannon is suing Mahindra, alleging that the Indian firm has broken its contract for US-based REVA production. Bannon reps tell syracuse.com

This material change in the representations made by Reva and Mahindra signaled the death of Bannon Automotive. Unfortunately, Mahindra/Reva did not deliver as promised. Accordingly, Bannon and its investors have been compelled to take legal action. Bannon will continue to try and follow through with the project as planned. We remain committed to bringing an affordable, U.S. manufactured electric vehicle to the American marketplace

Bannon says the Mahindra has not yet issued a license to produce REVA vehicles, although Mahindra did warn that it would delay the rollout of the REVA NXR until 2011 in order to polish that product. After all, Bannon had signed a deal with REVA last October, but delays to the NXR’s rollout date only to Mahindra’s takeover of the firm. Mahindra insists that its reason for delaying the issuance of a license to Bannon is due to the fact that the NXR is “still a work in progress,” while Bannon simply notes that its communications with REVA has been sporadic. If the facts of the matter are correctly reflected in syracuse.com’s write-up, it would seem that Bannon is pushing Mahindra to give it a license to produce a vehicle that is not yet ready for production… that would seem to make Mahindra the more responsible party in this dispute.

Meanwhile, as far as those government incentives are concerned,

Robert Simpson, president and CEO of Syracuse-based CenterState Corporation for Economic Opportunity, said none of the government benefits were paid to the project because they were contingent on Bannon obtaining a license from Reva and the investment of Bannon’s own money into the assembly plant.

Mahindra may be in the right to delay production of a vehicle developed by a company that doesn’t have the greatest reputation, but in the context of the Global Vehicles fiasco, Mahindra risks hurting its own reputation by backing out of its second US-Market partnership. Though we’re less worried about not being able to buy REVA city cars than Mahindra’s rugged diesel pickups, Mahindra is certainly not winning many friends among American automotive enthusiasts.