We will regain 50% market share gradually: Maruti Suzuki CEO

In a Q&A, Hisahi Takeuchi also explains why the company won't be able to launch its first EV in the affordable segment

India’s largest carmaker, Maruti Suzuki, has a new captain in the boardroom. Hisahi Takeuchi takes charge at a moment when the company is going through a structural change where it is revamping its product planning to arrest the slide in market share and after years of shying away from EV, electric mobility, it has committed to its first electric vehicle by 2025. In his first media interaction, Takeuchi explains to Arindam Majumder, the reason behind the slide in market share, why he thinks regaining 50 per cent market share is possible and why the company will not be able to launch its first EV product in the affordable segment. Edited excerpts:

The Indian auto industry is passing through a transition. What do you think are the most important challenges in front of Maruti Suzuki ?

The most important business agenda currently is to secure the necessary electronic components or semiconductors. This, I think, is the singular biggest challenge in front of the company now. Because we have a back order of almost 2, 70,000 units- this is equivalent to almost 2.5 months of our domestic sales.

So even if we don’t take new orders now, 2.5 months of backlog is guaranteed. So this is a huge task for us where we have to produce new volumes and simultaneously clear the back orders.

How are you trying to tackle that considering the shortage isn’t going away anytime soon?

We are working together with our parent company, Suzuki Motors Corporation (SMC) head office. Generally, we only communicated with our Tier 1 suppliers who used to source the semiconductor chips, but now together with SMC we have opened direct communication with chip makers. We are placing bulk orders by giving them a long-term projection of our requirement and not just for three or six months.

Over the past few years, Maruti’s market share which was over 50 percent has taken a hit. While some say, 50 percent was abnormal and not maintainable, what steps is the company taking to arrest the slide?

Last financial year, market share was 43.4 percent which a year before was 47.7. But our total sales including domestic and export saw a 13 percent increase. At the same time the industry has also grown by that proportion. So, while having the same total output, our domestic market share dropped, but simultaneously exports increased.

I would attribute it to the semiconductor shortage. We have different specifications for our exports. So, while chips used for export products were available more than those used in domestic products. Therefore, we couldn’t produce enough cars for the India market. So, naturally we produced more for export due to which it increased by 2.5 times.

Is weaker presence in the SUV segment, also a reason behind the decline in market share?

To maintain leadership in market share, we have to be present in every single segment. While small car presence for Maruti Suzuki is very strong, we have been a little behind in the SUV segment. We have a strategy where we will introduce multiple models in the SUV space and make a strong comeback.

So you think 50 percent market share is achievable under the current competitive scenario?

I think we will be able to regain 50 percent market share. Maybe not so quickly but gradually.

Maruti Suzuki has finally forayed into the electric vehicle bandwagon much later than your rivals. How are you planning to build up the EV business in India?

Our parent firm Suzuki has announced investment in Gujarat to manufacture EV and also to develop battery localization—that clearly indicates that we are serious about it and we are going to completely Make it in India.

Localisation will also help us to bring the cost of the final product down because battery cost is still very expensive. So without reigning in that cost, EV will be very expensive for the Indian market. While technology upgrade will bring the cost down but still the speed of that happening will be slow.

We believe that around 8-10 percent of the industry will transition to EV by 2030. While we will need to respond to that by introducing models, still 8-10 percent of the total passenger car market means it will be limited and small scale.

Few of your rivals have already taken a big step towards EV converting a significant portion of their product portfolio into EV. Do you think you will be at a disadvantage?

We have been doing comprehensive testing of EV in the Indian environment. As a greenfield project, to set up an EV and battery factory, it takes two to three years.

While EV is growing fast, it is still not that big that we are missing out. It’s more like an experimental situation right now.We should match the speed of the market growth irrespective of the competition step, and I think we are on the right track. I think 2025 is a good time for us to get into the market.

The government has heavily tilted towards EV for India’s transition to clean fuel. The incentives are primarily for EV. Do you think that is a right step or policymakers should focus on alternative fuels too?

India is one of the largest agricultural countries. So the fuel that originates from agricultural fuel like ethanol has a big opportunity in India to make environmentally friendly cars.

So, while EV is good, there are several different opportunities for another technology which has to be explored and utilised to make the environment better in the Indian market.

So are you talking to the government to give EV-like incentives for alternative fuels?

Recently the Performance Linked Incentive (PLI) scheme, the component scheme addresses components of flex and ethanol.

Will your first EV be in the mass market segment?

The EV market in near future will be limited for certain segments. I think in order to make it mass and affordable will need more time. 2025 is too soon for that. While technology will improve, I don’t think we will be able to introduce an affordable EV or small car by 2025. The size of the battery has to be smaller but a smaller battery will have range issues. So more charging stations will be required. So technology and infrastructure should also be ready for EV to become affordable.