Competition is getting more serious in the Indian market, says Maruti’s CEO, Hisashi Takeuchi

Sports utility vehicles (SUV), which displaced all competing body types in unequivocally establishing its credentials as the car to own, will be the go-to models for Maruti Suzuki as India’s biggest carmaker seeks to reclaim a 50% share of unit sales in the country. Newly appointed
CEO Hisashi Takeuchi tells
Sharmistha Mukherjee that demand remains resilient, giving Maruti sufficient confidence to introduce new models that will help claw back lost market share. Edited excerpts:

Even as demand in the passenger vehicle segment is recovering, multiple challenges have surfaced – from high input costs to shortage of semiconductors. What is your impression of demand in the market?
I came to India last year in the middle of the second Covid wave. And after that, it looked like the situation was getting better. Now, we are experiencing this semiconductor shortage. So, I really feel that business is not so easy. But one thing I realized when I came to India is that it has big potential – not only for us (automobiles), but also for everything. I think the market for cars will grow further.

When you say business is not so easy, do you also factor in the competitive pressures that you now face as opposed to earlier?
Competition is getting more serious in the Indian market. This is quite natural because there is growth potential. More and more OEMs will try and challenge this market. I think this is a good thing for India as far as these products are made in India. It’s then that we (can) generate more business, the industry will become bigger and create more employment. And we have to compete. We need to take the fight back and we also need to bring in competitive products at affordable prices. I feel comfortable that we can now come back and take market share back and increase volumes once again.

Would you be able to recover lost market share this fiscal year?
We saw a 3% growth in passenger car wholesales in India, where the total market grew by 13%. So, the total market grew more than our volumes; our market share went down. But our total output including export, if compared to previous year, increased 13%. So our total wholesale, including exports, had almost similar growth rate as the Indian automotive industry. So why is that happening in the case of Maruti Suzuki? Specific components are limited for the domestic market, while the same components with different specs for exports were available last year. So, for exports we produced more, international demand was also strong. Domestic volume was restricted and we could not sell as many cars as we wanted to because of the semiconductor situation.

Can you regain the 50% share Maruti Suzuki had in the Indian market?

I don’t think we can do it in one day or very quickly. I think it can be done only gradually, recovering back to 50% is our target. Right now, we have a huge backorder – nearly 270,000 units, which is almost 2.5 months of sales for the domestic market. So it is a big task for us to keep producing cars. In addition to that, we have to produce 2.5 months of sales volumes, which is a very challenging target. But if the supply of components gets better, the demand side is strong. I think we can sell more cars in the domestic market. This would help us increase our market share.

There are concerns though about the company’s limited presence in the SUV segment…

SUVs represent 40% of the total market. We are aiming to maintain our leadership position in the Indian market and we’d like to achieve 50% market share in future. Although we are very strong in the small car segment, where we enjoy much more than 50% market share, without success in SUV it is not impossible to reach 50% of total market share. So, we have a plan on how to come back to this SUV market in the coming year or two.

Tata Motors and Mahindra have got a head-start in EVs…
Some companies have already introduced EVs in India. But I don’t think it’s too late because for EVs to become popular will take more time. Now it’s growing fast but still total sales are very limited, infrastructure is still very limited. So I think we are in time for EVs to become popular.

Given your expertise, can we expect a small electric car from Maruti Suzuki?
We would like to introduce EV technology in a small car, which is very cost effective, affordable and accessible to everybody. But to do this, I think we have to wait for technology to become less expensive. If we try to make the (electric) car less expensive, then maybe we can reduce the battery. But then you have to have infrastructure everywhere. Quick chargers have to be available so that there are no queues. But still that sort of environment is not there, which means you have to put bigger batteries into the car. Then the price of the car goes up. Then, maybe, it still is not the time for very small cars right now.

Maruti Suzuki wants to sell reasonable volumes once it introduces an electric car. What kind of pricing do you think will make it accessible to the masses?
It is expected that EV sales will become nearly 10% of the total market by 2030. So, even in 2030, it’s only 10%. By 2030, I believe technology will be developed. With technology improvement, I think we’ll be able to supply less expensive EV. Right now maybe it is not so affordable.

I think penetrating into the small car segment will take more time than other segments.

Suzuki recently announced an investment of Rs 10,440 crore to build capacity for EVs and batteries. Does that imply EV manufacturing will be limited to Gujarat going ahead?
Suzuki Motor Corp is making the investment because SMG is a 100% subsidiary. But that does not mean Maruti Suzuki is not interested in investing in EVs. Once EV penetration becomes 30-40% of the total market, then definitely we have to start making EVs in all of our factories.

This EV we are going to introduce before 2025 is a strategic product for Suzuki. We are not just thinking of introducing this EV in the Indian market but we are also thinking of exporting this model. The Gujarat factory is in a good location and close to the port. EVs are very heavy and it is more cost effective to make and export from Gujarat. The battery plant is also close to the manufacturing site.

Which are the other technologies you would also look at going ahead to cut emissions?
EV is one of the solutions to improve the environmental issues. We need to try to employ all sorts of potential technologies that are good for the environment. The government is pushing CNG, for example, because it emits less CO2 compared to petrol. The government is also looking at ethanol, which originates from agricultural products. So those are the potential good technologies we can make the best use of and contribute to improving CO2 issues in India. Even fuel cells have good potential but for the future, not right away.

Maruti Suzuki has been seeing strong demand for CNG. But CNG prices are also seeing a sharp uptick.

I believe that both CNG and petrol prices have gone up. But the gap (in prices) has not changed so much. That means people utilizing CNG still are able to enjoy this gap and better fuel efficiency.

But overall, do you believe the rise in fuel prices will impact the industry?

If the sharp increase continues then it may have some impact on the demand of cars in India. But generally speaking, we still feel the demand is reasonably strong.

How do you see the relationship with Toyota evolving?
We are strong in small cars and have a wide range of products. In EVs, they (Toyota) are the biggest patent holder among all the OEMs in the world. In hybrids too, they are probably one of the best in the industry. So, by doing joint collaboration and joint projects, we have a huge opportunity to access hybrid and electric vehicle technology. This is a big benefit for Maruti Suzuki, and all the projects we are working on with Toyota are approved and authorized by our board. I can tell you that it’s a profitable business for both of us. I think the collaboration is going very well.

Given the pace at which SUVs are growing, do you think small cars will gradually lose their relevance in the market?
The motorcycle market now is declining but still it is much bigger than the car market. These motorcycle owners are potential small car buyers. If the small car is not there, then the conversion from motorcycle to car will not be so easy. With small cars, which are less expensive and affordable, instead of motorcycles people can enjoy driving cars. My personal goal is to try to give this joy of mobility because to own a motorcar is to have the freedom to go anywhere, anytime. Small cars must stay in India as an affordable option. Of all people in India, only 3% own a passenger vehicle right now.