Leader as challenger: What does Maruti's EV onslaught mean for Tata Motors?

"We will have at least six models and will start from the premium end, maybe with a sports utility vehicle," says R C Bhargava, Chairman, Maruti Suzuki India

At Maruti Suzuki India’s annual general meeting in August 2021, shareholders wanted to know the company’s plans for the electric vehicles (EV) market. R C Bhargava, the chairman, said India’s largest passenger vehicles maker would enter EVs when it was “feasible to sell them in reasonable numbers” without “making losses”.

At that time, three companies had already entered the fray. Was Maruti going to drag its feet on EVs just as it had on the question of ad­opting diesel as a fuel and launching sports utility vehicles (SUVs), ceding crucial head starts to rivals? Maruti seemed to be betting more on hybrids, in conjunction with its global partner, Toyota, which has blazed the hybrid trail.

Maruti’s shareholders can bre­athe easy now. The company has set a target of up to 20 per cent of its sales being electric by the year 2030. Given its huge volumes, that translates into half a million EVs.
 

Starting 2025, Maruti will launch six EV models by 2030-31. It will continue to push for hybrids and alternative fuels, such as ethanol and biogas. But electric is now a strategic imperative. It may not be a coincidence that Toyota has raised its investments in electric.
 

“We will have at least six models and will start from the premium end, maybe with an SUV,” Bhargava told Business Standard in an interview last week.
 

Still, electric is not going to be a cakewalk for Maruti. Tata Motors is the early mover in the segment and has cornered 72 per cent of the market, having launched the Tiago, the country’s first mass-market electric car priced below Rs. 10 lakh. It plans to have at least 10 electric cars in its stable by 2030.
 

EVs, says Tata Motors, already constitute nearly 15 per cent of its sales and sees this rising to 25 per cent in 2027 and 50 per cent in 2030, the year in which Maruti’s best-case scenario is 20 per cent of its sales being electric.
 

Tata’s group chairman, N Chandrasekaran, says there is no reason why his passenger vehicles company cannot sell a million EVs a year by 2030 — twice the volume Bhargava envisions for Maruti — if the charging infrastructure keeps pace.
 

Close on Tata’s heels is its Ind­ian compatriot, Mahindra and Ma­h­indra, whose XUV400 has seen an impressive lift-off. Chinese-owned MG Motor has made a dent with its MG ZS, and its new offering, MG Comet, is gaining ground.
 

On the more expensive side, South Korea’s Hyundai has launched its second EV, the Ioniq 5, and its sister company, Kia, has used the same platform to launch the EV6. Hyundai has revamped its mobility strategy and aims to launch five EV models by 2032.
 

In Maruti’s favour is the fact that these are still the early days for EVs in India. Tata Motors’ 72 per cent share is of a market that saw a mere 48,000 vehicles sold in the first half of this year, about 2 per cent of all passenger vehicles sold.
 

The prospects, though, are enticing. The ratio of electric to total passenger vehicle sales in the country is projected to rise from just 1 per cent in 2022 to 19 per cent in 2030.
 

“Currently, there are very few models in the market for electric cars and even the sub-Rs. 10 lakh cars have small volumes. There is very little choice for customers. We think this scenario will change in the next three years,” says Bhargava. But Maruti is not the only one that would be eyeing these prospects.
 

Hyundai Motor India’s managing director, Unsoo Kim, says he wants to be the number one EV player in India. The EV transformation in India, he says, has exceeded expectations and the conversion to electric will be faster than even in the United States.
 

But Kim, like everyone else, has to negotiate the odds.
 

S&P Global says moving fast into EV production erodes margins, as sales volumes are still low, research and development costs are high, and significant investment is needed to upgrade production platforms dedicated to EVs. That is why many Chinese EV companies are in the red, though China is a world leader in EVs.
 

Though the Indian government is pushing electric, Maruti hopes it will give the same tax treatment to hybrids as to EVs. For now, the com­pany is putting together a supply chain that will help it control cost and quality. The charging infrastructure, too, needs to grow manifold.
 

Battery production and costs need to come under control. Batteries account for 30 to 40 per cent of the cost of electric cars.
 

Tata Group recently announ­ced it would put up a battery plant. Hy­u­n­dai says it might look for a joint venture with a battery company.
 

Suzuki Motor Corporation, Mar­uti’s parent, is putting up a lit­hium-ion battery plant on its own with an investment of Rs. 7,300 crore.
 

“We will have enough demand of our own to use its entire supply,” says Bhargava.
 

That statement is not to be taken lightly. Remember what happened to the diesel and SUV markets when Maruti, a late entrant, upended it.