The chief executive officer of Japanese automaker Suzuki Motor Corp. on Thursday warned of a serious downside risk to the company’s Indian unit, Maruti Suzuki India Ltd, from a policy-induced push to electric vehicles (EVs) in the country.
“As the industry shifts towards EVs, when it comes to India, our volumes are so large that I worry that we could be caught flat-footed if there was a sudden shift towards electrification," Toshihiro Suzuki, who is also a director on the board of India’s largest carmaker, said in Tokyo.
Suzuki’s comment signals that the Indian automobile market is likely to witness a wave of disruption as the government determinedly pushes environment-friendly alternatives to diesel- and petrol-fuelled vehicles. Implicitly, the company has also signalled its intent to undertake a course correction in its product strategy.
India has outlined an ambitious plan to move to an all-electric fleet by 2030, which will enable it to reduce its carbon footprint.
Suzuki Motor owns 56.2% of Maruti and generates the bulk of its revenue from the Indian partnership, which has a market value of around $30 billion, higher than Suzuki’s $20.5 billion. At the moment, Maruti lags local rivals such as Mahindra & Mahindra Ltd and Tata Motors Ltd, who have taken a lead in the EV space, largely due to their decade-old focus on such technologies.
A paucity of EV technology at Maruti, which is also one of the largest supplier of cars to the central and state governments and other agencies, was evident in October when the Indian government gave out contracts to Tata and Mahindra for 500 EVs of a total of 10,000 that it eventually plans to source; Maruti did not even participate in the bidding.
Maruti has been dependent on Suzuki for technologies ever since it formed the joint venture to sell cars in India in 1983 and that will continue (at least for newer technologies) even as its full-fledged research and development centre in Rohtak became functional earlier this year.
“Suzuki has been working on electric vehicles...," R.C. Bhargava, chairman of the local unit, said on 27 October.
According to Bhargava, Suzuki is banking on an alliance with automobile giant Toyota Motor Corp. to generate the technology to support EVs.
“Hopefully by the time we do that (make electric vehicles), Suzuki and Toyota will come to some kind of settlement in terms of how that agreement is going to be implemented and if that includes EV technology then that will also become available," Bhargava said.
For sure, Maruti is as crucial as ever in Suzuki’s scheme of things and that was acknowledged on Thursday when the company also said that it now expects a full-year operating profit of 300 billion yen ($2.6 billion), up from the previous forecast of 240 billion yen. This is driven by growing sales in India, where Maruti sold 19% more cars in the September quarter over the year-ago period.
Suzuki has claimed that it will eventually begin manufacturing EVs.
“When electric cars become large numbers in this country, Maruti will be the leader. We intend to remain the leader," Bhargava said.
In April, Suzuki said that it will form a joint venture with two Japanese firms, Denso Corp. and Toshiba Corp., to produce lithium-ion batteries for EVs in India. The broad outlines of an agreement between Suzuki and Toyota also include cooperation in hybrid and electric technologies.
“The talks in Japan are still going on but that is 6,000km away from here. So, we do not know!" Bhargava said.
“But getting EV technology is not the criteria for determining market share. That’s the important (thing) that I want to say," he said.
On Thursday, Maruti’s stock fell 0.24% to Rs8,215.30 while the BSE’s benchmark Sensex edged down 0.08% to 33,573.22 points.
Reuters contributed to this story.