Pol­icy-in­duced push for e-ve­hi­cles poses risks for Maruti Suzuki

Mint Asia ST - - News - BAY MRIT R AJ

The

chief ex­ec­u­tive of­fi­cer of Ja­panese au­tomaker Suzuki Mo­tor Corp. has warned of a se­ri­ous down­side risk to the com­pany’s In­dian unit, Maruti Suzuki In­dia Ltd, from a pol­icy-in­duced push to elec­tric ve­hi­cles (EVS) in the coun­try.

“As the in­dus­try shifts to­wards EVS, when it comes to In­dia, our vol­umes are so large that I worry that we could be caught flat-footed if there was a sud­den shift to­wards elec­tri­fi­ca­tion,” Toshi­hiro Suzuki, who is also a di­rec­tor on the board of In­dia’s largest car­maker, said in Tokyo.

Suzuki’s com­ment sig­nals that the In­dian au­to­mo­bile mar­ket is likely to wit­ness a wave of dis­rup­tion as the gov­ern­ment de­ter­minedly pushes en­vi­ron­ment-friendly al­ter­na­tives to diesel- and petrol-fu­elled ve­hi­cles. Im­plic­itly, the com­pany has also sig­nalled its in­tent to un­der­take a course cor­rec­tion in its prod­uct strat­egy.

In­dia has out­lined an am­bi­tious plan to move to an all-elec­tric fleet by 2030, which will en­able it to re­duce its car­bon foot­print.

Suzuki Mo­tor owns 56.2% of Maruti and gen­er­ates the bulk of its rev­enue from the In­dian part­ner­ship, which has a mar­ket value of around $30 bil­lion, higher than Suzuki’s $20.5 bil­lion. At the mo­ment, Maruti lags lo­cal ri­vals such as Mahin­dra & Mahin­dra Ltd and Tata Mo­tors Ltd, who have taken a lead in the EV space, largely due to their decade-old fo­cus on such tech­nolo­gies.

A paucity of EV tech­nol­ogy at Maruti, which is also one of the largest sup­plier of cars to the cen­tral and state gov­ern­ments and other agen­cies, was ev­i­dent in Oc­to­ber when the In­dian gov­ern­ment gave out con­tracts to Tata and Mahin­dra for 500 EVS of a to­tal of 10,000 that it even­tu­ally plans to source; Maruti did not even par­tic­i­pate in the bid­ding.

Maruti has been de­pen­dent on Suzuki for tech­nolo­gies ever since it formed the joint ven­ture to sell cars in In­dia in 1983 and that will con­tinue (at least for newer tech­nolo­gies) even as its full-fledged re­search and de­vel­op­ment cen­tre in Ro­htak be­came func­tional ear­lier this year.

“Suzuki has been work­ing on elec­tric ve­hi­cles...,” R.C. Bhar­gava, chair­man of the lo­cal unit, said on 27 Oc­to­ber.

Ac­cord­ing to Bhar­gava, Suzuki is bank­ing on an al­liance with au­to­mo­bile gi­ant Toy­ota Mo­tor Corp. to gen­er­ate the tech­nol­ogy to sup­port EVS. “Hope­fully by the time we do that (make elec­tric ve­hi­cles), Suzuki and Toy­ota will come to some kind of set­tle­ment in terms of how that agree­ment is go­ing to be im­ple­mented and if that in­cludes EV tech­nol­ogy then that will also be­come avail­able,” Bhar­gava said.

For sure, Maruti is as cru­cial as ever in Suzuki’s scheme of things and that was ac­knowl­edged on Thurs­day when the com­pany also said that it now ex­pects a full-year oper­at­ing profit of 300 bil­lion yen ($2.6 bil­lion), up from the pre­vi­ous fore­cast of 240 bil­lion yen. This is driven by grow­ing sales in In­dia, where Maruti sold 19% more cars in the Septem­ber quar­ter over the year-ago pe­riod.

Suzuki has claimed that it will even­tu­ally be­gin man­u­fac­tur­ing EVS.

“When elec­tric cars be­come large num­bers in this coun­try, Maruti will be the leader. We in­tend to re­main the leader,” Bhar­gava said.

Reuters con­trib­uted to this story.

REUTERS

Prod­uct strat­egy: Toshi­hiro Suzuki, CEO of Suzuki Mo­tor Corp.

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