In this era of disruption, running a business on projections from the past could turn out to be like driving by looking in the rear-view mirror. Global investors seem to spy a future of electric vehicles (EVs). A spike last week in the market value of Elon Musk’s electric car company Tesla has sparked speculation over not whether but when it will zoom past Toyota as the world’s most valuable auto major. In India, while Mahindra, Tata Motors, Hyundai, MG Motors and others have unveiled EVs, our top carmaker Maruti Suzuki has declared that the domestic market is not ready to switch away from fossil fuel guzzlers. At the 2018 Auto Expo, it had whet expectations of an electric Wagon-R by 2020. After a test run of imported samples, however, its launch was dropped. The company had its Futuro-E concept car to flaunt at the Expo this year, but also words that were greeted with dismay. Its managing director and chief executive Kenichi Ayukawa said that would-be buyers of EVs were put off by the inadequacy of charging stations and the high price of such vehicles, among other issues, and so it would have no model to offer for a while yet.
Ayukawa did have a point. The batteries that power EVs are still too expensive. In a market whose majority are highly sensitive to the cost of car ownership, doubts over how long a battery will last have also got in the way, both in terms of distance covered on a single charge and its need for replacement. Suzuki and its ally Toyota want to smoothen the transition to EVs by first selling anxiety-free hybrid cars, which use a dynamo-charged battery to help spin the wheels and stretch the fuel farther. This seems to be what a three-way joint venture they have with Denso for a battery plant in Gujarat is geared for. And this is not the stance just of Japanese companies. Ratan Tata of the Tata group has also advocated hybrids as a bridge technology. From a consumer perspective, that would make sense. We need to ease the path for EV adoption in large volumes.
The government’s EV policy push, driven by its commitment to reduce carbon emissions as well as to cut its oil import bill, while admirable, may need to be moderated by market reality. Yet, all car-makers need to accelerate their EV development efforts, lest they get left in the dust by those ahead in this emerging arena. Apart from climate-change imperatives, Tesla’s success could lead a surge of capital into the race, which could speed up the approach of an inflexion point after which EVs rapidly expand their share of traffic worldwide. India would need a bestseller of an EV model, tried and tested, before bulk switchovers begin. To reduce costs, the NITI Aayog has reportedly drawn up a proposal to set up 10 subsidized battery factories, but relying on state aid may not be advisable. If alliances need to be struck with low-cost Chinese battery suppliers, so be it. Maruti Suzuki, which rolls out every second car sold in the country, appears at risk of lagging behind others as they ascend the industry’s evolution curve. Auto majors should floor the pedal on their EV game while they still have time. With latent demand rising to the surface, especially among millennials, the first to put out an affordable fossil fuel-free car might hit a jackpot.