Suzuki and Honda aren’t sure India is ready for small EVs. Here’s why.

Suzuki launched its Vision e-sky at the ongoing Japan Mobility Show 2025 in Tokyo, an electric version of the traditional ‘kei-car’ or small car in the Japanese market. Honda meanwhile showcased its first prototype of a compact electric vehicle (EV), the Super-One. Both vehicles are expected to be launched in Japan by next year, followed by international markets.

While both companies revealed plans to launch new SUVs in the Indian market, including electric ones, they remained non-committal about launching hatchback electric cars in India. The main reason for their scepticism is the fact that the unit economics of such cars don’t make sense in India right now because of the relatively high prices of EVs.

This approach stands in stark contrast to that of Indian electric two-wheeler makers such as Ola Electric, Bajaj Auto and TVS, which focus on selling sub- ₹1 lakh scooters to mass-market consumers. This has helped increase the penetration of electric scooters in the overall scooter market to around 15% as of the end of FY25.

Battery dependence

Toshihiro Suzuki, chairman of Suzuki Motor Corporation, said on the sidelines of the Japan Mobility Show last week, "The small car segment is price-sensitive. We have to be careful about what technologies to introduce for small cars," adding that it would be difficult to introduce small electric cars in India at current prices. His commentary carries significant weight as Maruti Suzuki accounts for about 75% of India’s hatchback market.

Suzuki said battery technology, which has still not been localised effectively in India or Japan, remains the biggest hurdle to launching small EVs in India. "The question on batteries is whether it's going to be Indian technology or Japanese technology," he said, suggesting it would be difficult to rely on Chinese imports of lithium-ion batteries.

Currently, Chinese companies such as CATL, Gotion, Svolt and others dominate the EV battery market, while Indian and Japanese companies have a minimal presence. Batteries make up about 40% of an electric car's cost, so dependence on imports raises EV prices significantly.

Because of this and other factors, most electric cars in India right now are premium and mid-size SUVs as their customers are less price-sensitive.

Electric car sales stood at 107,000 in FY25, about 20% higher than the previous year. While a breakup by body type is not available, most electric cars sold in India are SUVs.

Tata and MG Motors are the only two automakers that sell hatchback EVs, but have only one model each, MG Comet and Tata Tiago, both priced under ₹10 lakh. Both companies derive most of their EV sales from SUVs such as Tata Punch EV and MG Windsor.

Honda did not respond to a question on whether it planned to introduce its small EV in India. Its product plan only mentions a Japan launch, followed by relevant Asian countries where there is demand for the vehicle.

Miles to go

Analysts believe small electric cars will eventually find their way into the Indian market once carmakers solve issues around range, charging infrastructure, charging times and, of course, price.

According to Harshvardhan Sharma, group head at Nomura Research Institute, the challenges to introducing small EVs in India are less about technology and more about economic viability. "In a price-sensitive segment, customers expect parity with petrol hatchbacks, but battery costs still form 35-40% of the vehicle cost, making entry-level EVs unviable without subsidies," he said. "On the supply side, original equipment manufacturers (OEMs) face limited scale economies and uncertain localisation pathways for key components like cells and battery packs."

Sharma added that mass-market buyers are also highly conscious of other factors such as range, availability of chargers, charging time and resale value, areas where compact EVs, designed primarily for urban use, still have perception and infrastructure gaps to bridge.

Charging anxiety weighs on Indian consumers' minds, Deloitte's 2025 Global Consumer Study said. It found that only about 8% want their next car to be an EVs, with fears around charging high on the list of concerns, despite the government working with companies to roll out 72,000 EV chargers across India in the next few years.

"That’s why most manufacturers are prioritising premium and mid-size EVs first, where margins and early-adopter profiles are more supportive. Once the ecosystem and cost structures stabilize, small EVs will naturally follow," Sharma said.

GST cut sparks debate

Debates on the development of small cars have picked up since the government decided to cut the tax on cars under four metres in September. Maruti Suzuki has guided for 10% growth in small car sales in FY27, which would mark a swift turnaround from a 13% decline in FY25.

Maruti's chairman RC Bhargava mentioned during the company's post-results earnings call that all automakers would have to rethink their product plans to accommodate small cars in future. "There are still a lot of people who want to buy small cars," he said. "Many carmakers will realise what the nature of the market is, and I expect at least some of them to revise their product mix."

However, Suzuki noted that small cars may first get clean-fuel technologies through compressed biogas (CBG) and compressed natural gas (CNG) as they offer better cost savings than their electric counterparts.