Electric Vehicles have caught the world by a storm - both new players like Tesla and older ones like Volkswagen and Hyundai have been finding it hard to keep up with demand.
While EVs come with better packed technology and are better for the environment, the demand push also comes form inherently monetary factors like lower operating costs and government subsidies.
Given the higher buying price of these vehicles, India, which is a very price-sensitive market has been a late entrant in this wave. This acts as an initial barrier despite the fact that operating costs for EVs are at a fraction of combustion-engine cars.
Two-wheeler sales have sky-rocketed in the last year, but the four-wheeler market is still a little behind. But let’s not get it wrong, it’s catching up, and fast.
Take Tata Motors for example, with a slew of product launches, it has a 85% market share in the four-wheeler EV market right now. And it’s rather unusual to not see Maruti leading this trend, especially given the fact that it has ruled every segment in the car market.
Where is Maruti Suzuki?
Maruti Suzuki, because of inaction seemed to have a firm stance that the Indian market is not yet ready to embrace the change.
But then it announced an investment of Rs. 10,400 crore in a Gujarat plant to make EV batteries. This plant is expected to be fully operational by 2025 according to the management.
Now, as it stands, Maruti Suzuki is planning to launch an EV in 2025. Why so late?
The price barrier
Maruti Suzuki has been holding back primarily because the cost is just too high at the moment. The company has stated that it wants its electric vehicles to be affordable enough to acquire market share.
Maruti success historically can be attributed to multiple factors - product innovation, durability, segmentation, fuel efficiency, service network, branding, etc. But price has been one of the major success points for Maruti.
Price being a major criteria, it comes as no surprise that Maruti is focusing on this aspect. The company claims that producing an electric vehicle for less than ten lakh rupees is still a challenge.
The biggest reason for this, according to the CEO and MD of the company is the cost of the battery. And then it makes perfect sense how it is focusing on putting up a battery plant in India first.
The battery battle
The high cost of electric vehicles in India, particularly in the four-wheeler segment, has been one of the main deal-breakers for the sector. This is due to a variety of factors. One of them, as Takeuchi (CEO & MD of Maturity Suzuki) points out, is the expense of the battery.
The Tata Tigor EV is the cheapest electric four-wheeler available in India today. It has a starting price of Rs. 12.24 lakh in India (ex-showroom).
The cost of a battery inside an electric vehicle now accounts for 40–50% of the vehicle's overall production cost. Metals including lithium, cobalt, nickel, and manganese are used in the battery pack of an EV, which is made up of lithium-ion cells. The main issue with these raw resources is that they are less easily available and frequently restricted to certain geographical areas, making them more expensive.
The new electric vehicle battery plant in Gujarat is a step towards addressing this problem. Localisation will definitely help reduce cost of production of the battery. Maruti believes that the increasing demand for EV is good, as it plans to enter the market a little late but with help of localisation and hence at a lower cost.
The other problem after price, is charging infrastructure. As of now, India simply does not have the charging infrastructure to reliably shift to an EV. The network of EV charging stations and battery swap stations required to refuel EV’s reliably while on the road is referred to as charging infrastructure.
As a result, India's adoption of electric vehicles is limited by a vast gap in infrastructure and a scarcity of charging stations.
Potential electric vehicle buyers are facing "range anxiety" due to a lack of adequate charging infrastructure. The main issue is that an electric vehicle's charge will not last until it arrives at its destination.
To alleviate range anxiety, we must establish a large network of charging infrastructure, improve battery capacity at a cost-effective price, and develop time-saving battery-swapping technologies.
But this is a chicken-and-egg problem. Infrastructure coming before enough vehicles isn't viable for those setting up the infrastructure, and range anxiety will remain till infrastructure reaches satisfactory levels.
Chicken-and-egg problems like these usually do get resolved gradually as both the chicken and egg increase in number, assisting each other over time.
Strike when the iron is hot?
All this being true, Maruti is not reluctant to change. It just might be a little late. It did plan to release a model of an electric WagonR in 2020 but ultimately decided against it due to lack of infrastructure and government support.
But now big changes are coming. Suzuki Motors recently announced that it will build a new factory in India to make EV batteries, with an aim to have the plant up and running in 2025 or 2026.
The Japanese automaker intends to invest a total of around Rs. 10,000 crore on the new plant, and to increase production of electric vehicles in India. Just weeks after this announcement Maruti started putting in place the building blocks with dedicated teams for EV’s and digitalisation.
Maruti Suzuki has restructured its organisation by forming a dedicated team for Electric and connected vehicles called as “New Mobility Division” to enable a sharper focus. The new division will help India’s largest car maker give more concerted focus to make up for the lost time and regain the confidence of core customers. Maruti plans to launch its first EV model by 2025.
Maruti Suzuki's creation of a new vertical supported by the investment in a new plant, demonstrates that the company recognises the emergence of electric vehicles as a key pillar for the future, and that it needs to sharpen its focus if it wants to maintain its market leadership in the cleaner electrified world, which it has held for more than two decades.