Why Maruti Isn't Betting on EVs Yet

The Problem Statement The world is putting a lot of its hopes on EVs and EVs alone to solve the vehicular sector's emissions problems. But so far EVs have failed to meet these expectations through no fault of their own. You see, the idea for EVs is great. A car that runs on electricity and not on fuel. The problem? Execution, especially in India. EVs cannot be green if the energy used to power them comes from fossil fuels like coal. That's what is happening right now. 75% of EVs are being powered with dirty coal. And even if we suddenly manage to solve the energy problem, we still have the problem of charging anxiety. Many Indian users are afraid of their EVs running out of charge and being stranded on the road. And this fear is perfectly justified as charging infrastructure in India is not that great at the moment. Work is being done on this front as well, but until we do that, EV penetration in India is set to be low. Currently, EV penetration in India is only 0.8% and is set to grow to just 10%-15% by 2030. That number is too low to make a difference and reduce vehicular emissions right now. So, Maruti is taking a slightly different approach to solving this problem. It is going the hybrid way. What are Hybrids? Hybrids are a combination of the traditional ICE cars that run on fossil fuel and electric vehicles. But the EV batteries in hybrids are not charged by electricity. They are charged by kinetic energy. Huh? Basically, every time you hit the brakes, the kinetic energy (the energy created by this braking motion) is stored in the battery. Now, you must be thinking that, “Surely I don't brake enough to power kilometres worth of journey.” And you are right. Which is why these hybrid cars also have a traditional internal combustion engine which runs on fossil fuels. Because the engine and the battery pack work together, you use less fuel and thus release less emissions (a hybrid cuts emissions by 34%). A win for your wallet and a win for the environment. Now, obviously these vehicles are nowhere as clean and green as an EV. But Maruti believes that these hybrids could become the gateway for Indians to accept and love EVs. So, it has recently launched India's second strong hybrid car model: Grand Vitara (it also comes in a mild hybrid variant). Umm, too much vehicle jargon? Don't worry, ReadOn will simplify this as well. Like we said, hybrid cars run on both ICE (internal combustion engine) and battery pack. While a mild hybrid needs to use both these elements at the same time, a strong hybrid can function just on the electric battery pack for long periods. Now, all of this sounds great. But being the outlier comes with its own set of problems. Maruti's Problems Maruti is currently the market leader in the hybrid car segment. But most people believe (and probably rightly so) that vehicles, which produce one-third of all our emissions, need to be completely clean. So, Maruti will have to shift to EVs soon. And the company plans to do so at a later stage. But by then, it may be too late. Other vehicle makers could have then gotten a significant advantage over it. Plus, automakers like Tata are also setting up their own semiconductor plants, a move that is getting a lot of government support right now, giving them a major boost. What's more, right now EVs also get a tax benefit, with the government cutting the GST rate on EVs from 12% to 5%. This will also eat into the hybrid market, prohibiting its growth and impacting its stock price in Excel. All of these could pose major problems for Maruti. The company also sees immense potential in biofuels and CNG to reduce emissions, and in chasing these avenues it may lose out on the opportunity to make it big in the EV space. Though the legacy carmaker will probably carve out a market share for itself in the EV market as well, it will probably lose out on the chance to become a market leader.