Thursday, September 29, 2022

Maruti Suzuki’s electric vehicle dream: Can it replicate ICE success?

Date:

Despite being the largest car brand in India, Maruti Suzuki is yet to plunge into the electric vehicle pool. While the other car brands are advancing in the segment at a fast pace, what could be the impact of Maruti Suzuki’s slow pace?

Maruti Suzuki is undeniably the champion of the Indian passenger car market with its fleet of small cars. Now with the emergence of electric vehicles, the number one carmaker in India is aiming to grab the pole position in this segment and replicate its success with ICE vehicles. However, with Maruti Suzuki yet to join the bandwagon, the automaker has lost the first-mover advantage.

Tata Motors has already grabbed the pole position in the Indian electric car market with its successful Nexon EV, followed by the Tigor EV. While other new entrants such as MG Motor and BYD have already introduced their respective electric cars in India, despite being an old dog, Maruti Suzuki is still taking the wait-and-watch strategy for the market to ripe. The automaker appears to be waiting for the right moment, for infrastructure and regulations to fall in place.

Speaking about Maruti Suzuki’s electric vehicle strategy the company’s chairman RC Bhargava indicated that it would like to sell EVs on a large scale when it starts its journey in this segment. ‘If I start selling EVs I would like to sell maybe 10,000 EVs in a month or something like that,” said Bhargava. This indicates the sentiment of the company, which currently sells around 120,000 units of ICE vehicles every month. It aims to replicate a similar success story in the electric vehicle segment as well.

Maruti Suzuki building the ecosystem

Maruti Suzuki has been focusing on making its electric vehicle strategy waterproof before entering into series production. The automaker has already set a target for 2025 and has some major plans. The company has announced that over the next few years, it will pump in Rs 10,400 crores for developing the EV ecosystem in Gujarat. Maruti Suzuki will invest Rs 3,100 crores into a new plant to crank out electric vehicles, while it will also spend Rs 3,700 crores to manufacture electric vehicle batteries.

With this two-pronged strategy, Maruti Suzuki aims to be self-sufficient in terms of its battery sourcing. This also indicates the point that Maruti Suzuki would like to keep its EV pricing aggressively affordable for the buyers compared to other OEMs, just as it does with its ICE vehicles.

Battery costs currently make up nearly 50 per cent of an electric vehicle’s cost. Electric vehicle batteries are made from rare earth materials like lithium. Added to that is the cost of R&D in order to make sure the technology works properly and efficiently. Also, the manufacturer requires to build the EV battery at scale and at the same time has to keep its cost low. For all of these to be done at an optimum level, a company needs to invest a serious amount of money. This is what Suzuki is aiming to do now to fuel Maruti Suzuki’s electric vehicle ambition.

Being and knowing Indian: Added advantage for Maruti Suzuki

No other carmaker in the country knows the Indian psych better than Maruti Suzuki. The automaker knows that almost 80 per cent of the Indian car buyers focus their resources on the sub-10 lakh priced category while purchasing a new vehicle. Keeping this psych in mind, attracting the average Indian consumer to choose an EV over an ICE vehicle, the key has to be pricing. Besides affordable pricing, some other factors such as visibly lower operational cost, and satisfactory resale value among others can attract Indian buyers to electric vehicles.

Mahindra e2O is the only electric car in India till date, which was priced below Rs 10 lakh. However, due to several factors against it, the practical and small electric hatchback couldn’t perform as it was expected. It was quite like a Tata Nano story with a Mahindra badge. Maruti Suzuki on the other hand knows the Indian passenger car market better than any other car brand in the country. It is also very clever when it comes to pricing, product positioning and understanding the average Indian consumer’s sentiment. Considering all that, Maruti Suzuki is expected to step into the electric vehicle segment with an added advantage.

A homegrown challenger

There is no confusion that despite delaying its electric vehicle project, Maruti Suzuki is aiming to be at the pole position with a sizeable chunk of the Indian EV market, once it starts its journey there. However, it would face a tough challenge from its homegrown competitor Tata Motors. The Indian auto major that has taken a lead in the Indian electric car market sold a total of 3,324 units in the FY2022, recording a staggering 331% growth in the passenger electric vehicle segment. It has been posting an increasing number of sales every consecutive month.

So, by the time Maruti Suzuki gets up to speed in 2025, it could become a laggard in an industry, where Tata Motors dominates. In fact, Tata Motors has its own plans to invest Rs 15,000 crores, coupled with 10 electric vehicle launches. This early mover advantage trickles down to everything else Tata Group has built over the years. Tata Power has gone on to set up over 1,000 electric vehicle charging points across 180 cities in India. Tata Chemicals aids in lithium-ion cell production. Tata AutoComp assembles battery packs. Also, Tata recently raised $1 billion just to finance its newly formed electric vehicle subsidiary. In a nutshell, Tata Motors is the EV juggernaut.

Maruti story or Suzuki story?

When it comes to the electric vehicle development projects, Maruti Suzuki is not the one that is making the investment as of now. Instead, Japanese auto company Suzuki Motors has set up a separate subsidiary called Suzuki Motors Gujarat (SMG) is the one making the investments in the project. SMG is the one that is building the whole thing. This translates to the situation that whenever SMG starts production, it’ll likely transfer the cars to Maruti Suzuki at a cost. Maruti Suzuki will likely mark it up sell it and fill the coffer with the difference.

This whole arrangement may sound like a pretty neat agreement, but what if the partnership goes sour? Remember Hero and Honda partnership in India? In such a situation, things won’t be rosy at all. This is still speculation and we have to wait and watch how Maruti Suzuki goes about its electric vehicle business.

Only time will tell the tale of whether Maruti Suzuki would be able to upstage incumbents and become the top player in the Indian electric car market.

Also read: Fire on ICE and electric vehicles

Team AFT
Team AFThttps://autofintechs.com
The jack of all trades behind the Autofintechs.com

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