Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Opinion / Online-views/  Electric cars could breach Maruti Suzuki fortress
BackBack

Electric cars could breach Maruti Suzuki fortress

Maruti Suzuki's scepticism about green technology seems wrong-headed as reports suggest reform of the GST levy will provide a colossal incentive for electric cars: they'll be taxed at 12%

PM Narendra Modi’s think-tank Niti Aayog in May published a detailed plan showing that the country could get electric up to 44% of all vehicles by that date. Photo: MintPremium
PM Narendra Modi’s think-tank Niti Aayog in May published a detailed plan showing that the country could get electric up to 44% of all vehicles by that date. Photo: Mint

Sydney: Is there a force in the world that can stop Maruti Suzuki India Ltd.?

In the space of a few months, India’s dominant carmaker has seen off two of the world’s biggest automobile companies and tempted another into a sort-of-alliance where it holds most of the cards.

In May, General Motors Co. announced it would scrap a $1 billion investment in the country and halt sales of Chevrolet models there. Then Thursday, Volkswagen AG called off an alliance with Tata Motors Ltd. after concluding that “the strategic benefits for both parties are below the threshold levels."

Toyota Motor Corp. is following a different strategy, announcing an alliance with Maruti’s controlling shareholder Suzuki Motor Corp. that appears intended to trade its technological and R&D expertise for exposure to the Indian company’s volumes.

Maruti Suzuki market share

It’s easy to see why invaders are wary of tangling with chairman R.C. Bhargava’s armies. Maruti Suzuki has 47% of India’s auto market to itself. Its advantages in supply chain, brand recognition, distribution and service are second to none. Add in Hyundai Motor Co. and Mahindra & Mahindra Ltd., and north of 70% of sales are sewn up between three brands.

Breaking into that sort of market can be phenomenally challenging. Coca-Cola Co. and PepsiCo Inc. have dominated the soft-drinks business for the best part of a century without suffering serious threats to their position. Detroit’s big three carved up the American auto market for decades until the Japanese invasion of the 1960s and 1970s.

Those stories hold a glimmer of hope for Maruti’s would-be rivals, though. The classic business-school lesson on entering captive markets is to target the incumbents’ weaknesses, not their strengths.

When Alfred Sloan’s GM wanted to take on Henry Ford’s Model T, it didn’t attempt to compete on price but instead offered myriad models, updated annually, to combat the stolid uniformity of the leader. Pepsi eroded Coke’s market share in the post-war US by targeting African-American consumers, who were ignored in Coca-Cola’s advertising. Japanese carmakers broke into North America by offering not bracing performance, but affordable reliability.

To be sure, there are few gaps in Maruti’s formidable defences right now. It dominates every major size class in India with the exception of utility vehicles, where Mahindra is equally powerful.

Electric cars, however, may be able to breach this wall.

Aided by the choking smog of its major cities and government regulation — always a driver of technological change in the auto industry — India’s fledgling electric vehicle market could be on the verge of rapid change.

While you’d be lucky to see any electric vehicles on India’s roads at present, political support for energy minister Piyush Goyal’s target of an all-electric fleet by 2030 is gathering momentum. Prime Minister Narendra Modi’s think-tank Niti Aayog in May published a detailed plan showing that the country could get electric up to 44% of all vehicles by that date.

Reports over the past week suggest reform of the GST levy will provide a colossal incentive for electric cars: They’ll be taxed at 12%, compared with 43% on hybrids.

Against that backdrop, Maruti Suzuki’s open scepticism about the technology seems wrong-headed. Electric cars won’t sell and people will wind up buying the hybrids on which Maruti is betting, the Economic Times quoted Bhargava as saying in June. Goyal’s 2030 target doesn’t seem realistic and it’s not clear how it would be achieved, Mint quoted chief executive officer Kenichi Ayukawa saying the previous month, days after Niti Aayog’s 134-page report was released.

Bhargava and Ayukawa seem to be putting Maruti Suzuki’s money where their mouths are, too. Ten months on from the first announcement of a Toyota-Suzuki alliance, there are few signs that Indian hunger for Japanese green technology is causing the relationship to blossom. Maruti isn’t getting involved in the Suzuki-Toyota-Denso Corp. consortium building a ¥20 billion ($183 million) lithium-ion battery plant in India. When Toyota last week announced an equity investment in one of Japan’s smaller carmakers, it wasn’t Suzuki but Mazda Motor Corp. that won the dowry.

It would take guts to bet against Maruti Suzuki, but New Delhi’s push to decarbonize the country’s roads is advancing apace. Hyundai, at least, is taking notice, with plans to sell more fully electric designs in India on the back of the planned tax changes.

When mighty companies are brought low, it’s typically because they’ve left a flank undefended. On electric vehicles, Maruti Suzuki is still looking the other way. Would-be challengers ought to seize their moment. Bloomberg

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 11 Aug 2017, 03:04 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App