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Business News/ Companies / News/  Maruti chief brushes aside concerns on Suzuki Motor's EV investment plans
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Maruti chief brushes aside concerns on Suzuki Motor's EV investment plans

In an interview with news agency PTI, Bhargava said all models produced at Suzuki Motor Gujarat, including EVs, would be ultimately sold by Maruti Suzuki India in the marketplace.

File Photo of RC Bhargava, chairman of Maruti Suzuki India (Bloomberg)Premium
File Photo of RC Bhargava, chairman of Maruti Suzuki India (Bloomberg)

Maruti Suzuki Chairman RC Bhargava on Thursday brushed aside concerns regarding Suzuki's electric vehicle investment plans, saying there was nothing in it against the interest of the company and its shareholders.

IiAS (Institutional Investor Advisory Services), a proxy advisory firm, has raised serious questions regarding the decision of the Suzuki Motor Corporation (SMC) to invest directly in the EV project instead of MSI doing it.

IiAS has noted in its report that the larger issue continues to be this inherent conflict of interest – between owning a 100% subsidiary and having a listed company in the same market.

Japan's Suzuki Motor plans to invest 10,440 crore billion ($1.37 billion) in its India factory to produce electric vehicles (EVs) and batteries. Suzuki Motor Gujarat Private will invest 3,100 crore by 2025 for increasing production capacity for battery EV manufacturing and 7,300 crore for construction of plant vehicle batteries.

Suzuki Motor Gujarat, a 100% subsidiary of Suzuki Motor, supplies cars exclusively to MSI.

In an interview with news agency PTI, Bhargava said all models produced at Suzuki Motor Gujarat, including EVs, would be ultimately sold by Maruti Suzuki India in the marketplace.

"This proxy firm had also come out against the establishment of the Suzuki Motor plant in Gujarat. The shareholders overwhelmingly rejected the advice of the proxy firm. The voting was overwhelmingly in favour of this project. What has happened now is just within that project only, there has been no new agreement," he said.

Suzuki Motor's investment an important step for Maruti Suzuki as this will allow it to enter the EV market. However, the company has been late to join the EV bandwagon and the competitors are way ahead in this area, said Santosh Meena, Head of Research, Swastika Investmart Ltd.

"The company hasn’t changed the timeline to launch the EV and still plans to launch EVs in 2025. Thus there won’t be an immediate impact on its earnings. Nevertheless, this will act as a catalyst to solidify its EV plans and reduce the EV-disruption overhang on the stock," Meena said.

"The company could be potentially impacted by both chip shortages as well as a rise in commodity-led raw material prices leading to downward sales volume as well as margins in the short to medium term. The company has been losing market share since 2019 due to a lack of new product launches, especially in the fast-growing UV segment. But the next 2 years look promising as the company will launch new products in the SUV segment and update its existing lineup of cars. The valuations are comfortable as the stock didn't perform for the last four years. Hence, we are neutral on Maruti Suzuki for the medium term but the long-term fundamentals are still intact."

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Published: 24 Mar 2022, 05:45 PM IST
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