Current tech doesn't enable production of small e-cars: Maruti chairman

R C Bhargava, Maruti Suzuki Chairman
Maruti Suzuki announced yet another month of drop in sales on Thursday after June quarter net profit slipped by 27 per cent. Chairman R C Bhargava talks about the reasons for the slump and challenges for e-cars in an interview  with Surajeet Das Gupta. Edited excerpts:

Your sales have been falling month-on-month and there is stress on profitability. You had said the slowdown would be corrected after the elections, yet it goes on. What is the reason?

It is a real surprise, as there is nothing in the government’s policy that will stop customers from buying a car. We are checking data on whether the same trend is there in discretionary consumer spending across sectors like FMCG and brown goods. I am on the board of Dabur, and they seem to have grown by 10 per cent.

Both first-time buyers and those looking for replacements are deferring purchases. We can only guess what's on their minds. Maybe they are expecting carmakers to go for a fire sale and offer huge discounts on BSIV cars, as no such car can be registered from April 1, 2020, when the BSVI emission norms kick in. Or, consumers feel they should wait, as low-cost e-cars are round the corner and they will have a lot of choice.

How far has Maruti responded to the government’s aggressive electric vehicle (EV) push, especially on small cars that comprise the majority of the market?

The fact is that the current battery tech does not enable producing an electric small car. Such a car will require range and meet customer expectations, like charging time and affordability. I expect in 5-8 years there will be a significant breakthrough — like solid state lithium batteries or batteries made of other material. Also, in terms of charging infra, unlike two-wheelers, you need three-phase power to charge a car at home. The question is how many customers have it at home.

Banks are tightening inventory financing and that will have an impact on your dealers. Is it a right move?

There is some justification for what banks have done. There have been a lot of defaults because dealers took money for working capital but diverted it elsewhere. If 22 per cent of our dealers have done this, it is clearly widespread. We have suggested dealers sign an affidavit stating they will take working capital loans from one bank, so the company and the lender can monitor in a better way. monitoring has been lax but we have asked our field force they should get deeper into the financial management of the dealers. Without this, you cannot be a global company. It has been a big learning.

But do you think banks have been harsh?

Banks should realise that a majority of the dealers have not defaulted. The action needs to be customised. Don’t punish the honest ones by imposing 50 per cent collateral before lending to all. If someone is guilty, we will cancel his dealership and appoint a new one. 

Does sales fall impact employment?

Of course, there is bound to be a downstream impact on the number of jobs that each car generates. We have started laying-off temporary workers, but there has been no action on permanent workers. The Gujarat plant is working at much lower capacity than we had envisaged. Also, you must remember that the auto industry is a large contributor of taxes — that will go down, too.

Maruti said it would be launching an e-car in 2020.

Yes, but the sales target we were looking at before the GST (goods and services tax) reduction is not more than 5,000, and that is very small. Though I cannot tell you the price now, I don’t think the EV (WagonR) will be less than Rs 10 lakh. Even the electric battery for this will have to be imported. Our target audience for the product is car aggregators. We are not even looking at individual car buyers. Even if I price it at Rs 8 lakh, tell me how many individuals would buy it?

But your firm is setting up an e-battery factory in a JV. What will it be for? Incentives are being offered to those who set up mega battery plants here.

Our capacity is very small, I think something that can power 10,000-200,000 cars and is meant for use in our hybrid cars, which require a different battery chemical composition from an EV. Why should a firm put in big money in setting up a mass lithium battery plant when it knows tech might change in the next few years? Without making batteries in India, how can you have mass-scale EVs?

So, where do you think e-cars will make a beginning in India?

It will be the big cars. And, we don’t have any. So, Suzuki and Toyota are working on some e-cars. Selling big e-cars makes sense — the owners don’t live in flats, so they have infra to charge at home. The impact of the GST reduction is more pronounced on big cars than in small.

Many say we have to quicken the EV adoption because of the growing pollution.

Reports by IIT-Kanpur and TERI have shown that cars contribute to only 2-3 per cent of the pollution. In Delhi, it is the sand that contributes most to the pollution. But the focus seems to be always on cars as the big polluters. Though with Bharat Stage VI, their share will come down even more.

Are you looking at any cost-cutting measures?

There is only that much you can do in cost cutting, and that the lack of demand is reflected in our financials clearly. Demand has to pick up.

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