Mahindra pulls the plug on electric car sales in UK

By Carolyn Cohn and Aditi Shah

LONDON/NEW DELHI (Reuters) - Mahindra & Mahindra has stopped selling electric cars in the United Kingdom due to weak sales and is winding up sales operations there, according to a document seen by Reuters, in a new setback to the Indian automaker's global ambitions.

Mahindra's decision comes less than a year after it launched the e2o car in a market it considered a launchpad for selling electric cars in European countries like Norway, Sweden and the Netherlands.

"The level of e2o sales achieved is at an untenable level for us to maintain the investment required, hence our decision to cease trading at Mahindra UK with immediate effect," Mahindra said in a letter dated April 10, addressed to one of its buyers in the country.

"Immediately post Brexit, the e2o has not met the desired sales targets as per the plans for the UK market," a Mahindra spokesman said in an emailed response, without explaining how Britain's decision to leave the European Union hurt sales.

"We'll reconsider the UK market at an opportune time," he said, adding that electric vehicles are poised for a take-off in India and Mahindra will focus on its home market.

The move is a new setback for the company, part of the $17 billion Mahindra group, which struggled to enter the United States a decade ago despite spending about $100 million on launch plans.

More recently, it was forced to stop selling pick-up trucks and sport-utility vehicles in Brazil in 2015 due to a sluggish economy and changes in local regulation.

The automaker, however, continues to expand in other places. Its South Korean arm Ssangyong Motor is considering manufacturing in China, where import duties are high, and could make a decision by mid-2017.

CANCELLING ORDERS

Mahindra, in the letter, said it has stopped the sale of all e2o cars in Britain with immediate effect, cancelled all pending orders and is buying back cars from existing customers at the price they paid for it.

"It is with great sadness that we have had to make this decision, but ultimately the level of interest in the vehicle and the extremely low volume of sales has left us with no alternative," it said.

Mahindra did not comment on its investment in the UK or the number of cars it has sold in the country.

While Mahindra blames Brexit for its performance, car sales in the UK have continued to rise despite forecasts that demand would be hit by Britain's decision to leave the European Union.

UK car sales hit a record high of 2.69 million vehicles in 2016, industry data showed. Of this, alternative fuel models, primarily plug-in hybrid and electric cars, made up a little over 3 percent but are growing faster than conventional cars.

In April 2016, Mahindra launched two variants of the e2o car in the UK at a starting price of 12,995 pounds ($16,793). Buyers could test drive the cars at a handful of locations, but the vehicles were only sold online and not through dealerships.

Dubbed as India's Tesla, Mahindra sells the e2o in its home market and in the neighbouring countries of Nepal and Bhutan. Like in the UK, Mahindra has struggled to significantly ramp up sales of electric cars in India in part because of the lack of charging stations and low buyer interest.

(Writing by Aditi Shah; Additional reporting by Costas Pitas LONDON; Editing by Euan Rocha/Randy Fabi/Susan Fenton)