Maruti’s managing director, Kenichi Ayukawa, said in an interview that the high cost of electric vehicles and inadequate charging infrastructure pose major challenges to selling such vehicles in India.
He said Maruti’s customer base mostly comprises people looking to buy affordable small and mid-segment vehicles, and buyers of such products are not so eager to purchase an electric vehicle, which is costlier than a petrol or diesel vehicle.
“We have to watch the customers and when they want that kind of a product, then we have to offer that kind of an offering. We cannot find that kind of a requirement at this moment. But we have to prepare ourselves," Ayukawa said.
Maruti on Wednesday showcased its Futuro-e electric vehicle concept at Auto Expo 2020. This was the second consecutive edition of the biennial show where the company has unveiled a concept electric vehicle. Maruti is, however, yet to introduce an electric vehicle.
Despite leading the domestic auto market, Suzuki Motor Corp.’s most profitable unit has been left behind by the likes of Hyundai Motor Co., Mahindra and Mahindra Ltd, Tata Motors Ltd and new entrant MG Motor India Pvt. Ltd in introducing electric vehicles.
Hyundai launched its first long-range electric sport utility vehicle, Kona, in 2019. MG Motor, owned by China’s SAIC Motor Corp., joined the race in January with the launch of ZS electric vehicle. Both the vehicles are assembled in India from completely knocked- down kits.
Maruti has been the undisputed leader in the compact car market and most of its customers are first-time buyers based in metros and tier I cities. Such buyers generally tend to look for fuel-efficient and affordable vehicles.
“I absolutely say that electric vehicles will come after a few years and we have to prepare for it anytime customers expect. By that, I mean our customers and not anyone else," Ayukawa said. “It’s still not easy to use due to lack of charging space. How are they going to use it? Those kinds of preparations we have to do."
In 2018, Maruti announced that it has begun testing 50 electric vehicles based on its popular Wagon R hatchback. The company has also commissioned an internal survey to gauge customer expectations for electric vehicles.
Unlike the South Koreans and Chinese, Japanese companies such as Suzuki have been lobbying the Indian government for hybrid-electric vehicles, compared to a fully battery-run electric vehicle.
Maruti is also betting big on compressed natural gas-based vehicles instead of diesel engine models. Last year, the company announced it would stop selling diesel cars from 1 April 2020 in line with the implementation of stringent Bharat Stage-VI emission norms.
Maruti is expected to introduce the petrol version of its Vitara Brezza compact sport utility vehicle and an upgraded version of its Ignis hatchback at the Auto Expo.
The New Delhi-based carmaker is also lobbying for a reduction in goods and services tax on hybrid and CNG vehicles from the existing rate of 28% plus cess.
The Indian automobile industry has seen a sharp fall in demand in the last one year as a result of the prevailing economic slowdown and transition to new safety and emission norms. The slowdown began in the aftermath of the bankruptcy of Infrastructure Leasing and Financial Services Ltd, which led to a liquidity crunch among non-bank lenders.
Local sales of Maruti Suzuki fell 18.6% during April-December 2019 to 1.06 million vehicles from a year earlier. In comparison, the domestic auto industry clocked a 16.4% drop to 2.11 million vehicles.
“This (fiscal) year we will be down by 15-20% and it is not easy to make a comeback. Next year (vehicle sales) may be a little bit better than this year. After a 15% drop, it is not easy to make a comeback within a year. Maybe, if there is some significant change in trends, then we have a chance," Ayukawa said.
To improve access to finance options for its customers and dealers, Maruti has been negotiating with banks and has signed agreements with the Federal Bank and Bank of Baroda. This followed banks tightening credit disbursal norms for non-bank lenders and other businesses to clamp down on rising bad loans. This caused a liquidity shortage in the market, which led to a slowdown in vehicle sales.
“One of the reasons (of the slowdown) is that the financial system is not mature in India. Last year, the banks and the financial companies were not giving loans to the customer and sometime they would ask double the sum for down payment. In that kind of a situation, we cannot encourage the customer to buy the car. So, NBFCs couldn’t get supply of money from the banks and they cannot serve the rural areas. It is gradually improving but it will take its time," Ayukawa said.