Why Maruti Suzuki isn’t betting on EVs yet

If everything had gone favourably and as per the original plan, Maruti Suzuki would have launched its first electric vehicle (EV) in 2020. That hasn’t happened yet though EV development efforts by the OEM are learnt to be on.

Even as some OEMs have launched EVs in the market, big- volume player Maruti Suzuki has a different view and strategy. Shashank Srivastava, executive director— marketing and sales, Maruti Suzuki, doesn’t see a case for introducing an EV yet because, “you can’t make a definitive change to the environment without actually having the volume, without a practical, sustainable large-scale project of EVs. And I think that’s where the situation is at the moment in India.” Srivastava was speaking in a panel discussion to take stock of the Indian auto industry’s current status, hosted recently by Autocar Professional.     

Though the business environment may not be conducive for EVs today, Srivastava believes the industry will eventually migrate to EVs. “The question is, how fast, how soon? I think it all depends on the development of the battery technology which would help reduce the acquisition cost of EVs,” he says. Maruti Suzuki, which offers a ‘smart hybrid’ system as a variant for some of its models, is betting on the hybrid technology proposition to facilitate a smooth transition to fully electric vehicles. “I think the road to electrification, EVs in India will be through hybridisation. I think that’s another area where the government needs to look at to support, because a lot of these powertrain components are common between the plug-in hybrids and EVs,” says Srivastava, while adding that the hybridisation strategy and due government support will help in localising EV-related technologies, and could also help India to be competitive as an export base for EVs.

ICE and EV price parity
On the speed of the industry’s transition to EVs, a strong inflection point will be reached when the powertrain cost of an EV and an ICE vehicle will be at par. It is estimated that in USA, Europe, the cost of an ICE powertrain stands at $ 8,000-9,000 as against $16,000 for an EV powertrain. With new regulations, primarily emission norms, pushing up the cost of an ICE vehicle, and softening of battery prices at the same time, the EV industry can expect a better drive in the coming years.

Srivastava says, once the parity is achieved, “then there will be no real economic logic (to not shift to EVs) because the running cost of EVs is lesser”. With governments increasingly promoting EV adoption, the case will get stronger for EVs. However, the goalpost for the price parity seems to have moved. “About six years ago, the projection was that this point of inflection will be reached in 2023. But today people are saying that this point of inflection will reach five or six years down the line,” says Srivastava. The current charging infrastructure network is also seen as a hurdle. And especially for Maruti Suzuki, the EV game gets more challenging as the propensity to pay the premium for tailpipe- emission-free vehicles is much lower in its core segment of compact cars. 

The alternate fuel bet
Critical volumes in the EV market and EVs from Maruti Suzuki both are still some time away. So, what the PV market leader is betting on is the alternate fuel of CNG. That segment of the market is on the rise, primarily because of favourable economics. Rising diesel and petrol prices are also making it favourable for CNG-run vehicles. Srivastava points out that during the April-December 2020 period, when the passenger vehicle market dipped by around 17 percent, the CNG vehicle segment posted a healthy growth of 25 percent. Among the players offering CNG models, the bet on it from Maruti would be more as the CNG variants also have to make up for the volume gap created by the OEM’s exit from the diesel segment since April 1, 2020, the kick-off date for the BSVI emission regime. Till about two years ago, nearly a fourth of Maruti Suzuki’s volumes came from diesel variants of its models. As the industry witnesses diminishing demand for diesel vehicles, Srivastava says the CNG variants have managed to “almost” cover the void in Maruti Suzuki’s sales. “CNG is pretty good, and our extension of portfolio did help there. So, I would say more or less we have covered,” says Srivastava. During April 2020-January 2021, Maruti Suzuki sold 110,350 CNG vehicles, which translates into 11 percent of its total sales. CNG vehicle sales for the company is expected to touch 140,000 units in FY2021. Srivastava points out that the share of diesel in the overall PV market now stands at 17 percent, down from the peak of 70 percent around six years ago. However, Maruti Suzuki is “watching the situation” of the diesel PV market, particularly in the SUV segment. The share of diesel in the compact SUV market stands at around 30 percent, and a little higher in the midsize SUV segment. A stark contrast to the diesel’s market share figures of 0.5 to 2 percent in the other car segments. PTI reported in December 2020 quoting sources that Maruti Suzuki has initiated the process of upgrading its Manesar plant to churn out BS VI diesel engines for the Vitara Brezza SUV and the Ertiga MPV to start with, by the festive season of this year.  If the re-entry happens it will be in line with what the OEM’s chairman R C Bhargava told Autocar Professional on April 25, 2019, the day he had announced the company’s decision to exit the diesel vehicle market by March 31, 2019. "It (presence in the diesel segment) will depend on customer acceptability. It will be the customer's choice, not the OEM's choice,” Bhargava had said then.

Though the economics for daily usage is in favour of petrol or CNG for a lion’s share of the industry’s customer base, Srivastava believes “there may be some people for whom economic logic is not a criteria.” Most of such customers would be in the SUV and MPV segments. That’s where an upgraded version of Maruti Suzuki’s four-cylinder 1.5-litre diesel engine would come handy. The engine in its BS IV version was put in duty in the Ciaz and the Ertiga.

Maruti Suzuki’s fuel strategy would revolve around petrol, CNG, hybrid and diesel likely. Of them CNG and hybrid will see some more focus, before EVs enter the portfolio. The key reason would be the projected industry growth, and its composition, till 2030. It is projected that by the turn of this decade, India will be producing 70 million cars, of which 63-64 million will be ICE. “What do you do about those vehicles? Do you not do anything about emission? Yes, you do. So, what is the solution? One of course is alternate fuels, like CNG. Second is hybrid,” says Srivastava.

Under Maruti Suzuki’s ‘Mission Green Million’ that it announced at Auto Expo 2020, the OEM had shared its goal to sell a million units of vehicles with green technologies within a couple of years. Though an EV model or two could be contributors, CNG and hybrid will be the lead drivers in the OEM’s drive towards greener mobility.

This feature was first published in Autocar Professional's February 15, 2021 issue.