British aid money will fund electric cars in India after one of the biggest ever investments from the Foreign Office’s overseas development arm.
British International Investment, a government fund that backs foreign businesses, has put $250m into a $9bn project run by Indian car maker Mahindra & Mahindra. The new venture, part of Mahindra & Mahindra, will develop battery-powered sports utility cars for the Indian market and for export.
The deal leaves UK taxpayers with 4.8% of the venture, according to Reuters.
Mahindra will also invest $250m in the project, which will create 8,000 jobs. The Indian firm has a research center in Oxfordshire which could provide designs for the new vehicles.
Mahindra forecasts that up to 30pc of its SUVs will be electric in five years’ time, and it will present the first designs by September.
Nick O’Donohoe, chief executive of BII, said: “The acceleration of EV development in India will be critical to supporting the country in reaching its emission targets as well as improving air quality in many urban areas.
“Mahindra will play a central role in the decarbonization of the automotive industry in India and elsewhere.”
About three quarters of the money BII invests comes from profits on prior investments, with the government supplying the rest.
BII was formed from Colonial Development Corporation, which was reformed last year amid criticism it was prioritizing profit over development.
Announcing the re-launch, Foreign Secretary Liz Truss said the BII would provide “reliable and honest sources of finance” to “free-market democracies” and help build “a network of liberty across the world.” BII focuses on investing across the Caribbean, Asia and Africa.
The Mahindra deal is part of BII’s mandate to support net zero projects. About three quarters of India’s electricity comes from coal power generation, but BII is investing in clean energy in India as the country aims to slash carbon emissions to net zero by 2070.
Mahindra started out as a steel trading company in 1945 and branched out into making off-road vehicles in 1954, assembling a licensed version of the Jeep CJ, the civilian version of the US army staple, before designing its down SUVs and offroaders.
It bought the iconic motorcycle brand BSA in 2016 and relaunched it with a new model earlier this year, the Gold Star, which was designed in the UK and built in India.
BII plans to make the first tranche of its investment in the Mahindra venture by 2023, with the remainder being paid in 2024. BII has invested in more than 1,300 businesses and holds stakes worth £7.7bn in total.
