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India's Maruti Suzuki commits to building electric cars

Chairman cites "work in progress," eyes tech from parent's partnership with Toyota

Customers check out the Baleno hatchback at a Nexa showroom near Mumbai. (Photo by Takafumi Hotta)

NEW DELHI -- With India declaring that all vehicles sold in the country will be powered by electricity by 2030, Maruti Suzuki India is set on tapping this ambitious shift by beginning domestic production and promoting hybrids during the transition period.

"Electric cars will come. We will make electric cars. I can't give you a date just now, because it's all very much a work in progress," Chairman R.C. Bhargava told reporters Friday while announcing July-September earnings.

Maruti Suzuki India Chairman R.C. Bhargava, second from right, says India's auto industry performed well despite concerns over the new goods and service tax. (Photo by Kiran Sharma).

Bhargava noted that the outlines of an agreement signed by parent Suzuki Motor with Japanese compatriot Toyota Motor include hybrid and electric technologies.

"I believe the talks in Japan are still going on," he said. "What happens at these talks 6,000km away from here we don't know, but Toyota certainly has a lot of electric technology."

"Suzuki will give their technology if we start making electric vehicles," Bhargava continued. "Hopefully by the time we do that, Suzuki and Toyota will come to some kind of settlement. Suzuki will get the technology [from Toyota] -- and because this company is a Suzuki company, that [technology] automatically comes here."

But he noted that electric cars cannot grab 100% of sales overnight from virtually no presence in the country right now.

"Other cars will continue to sell," the chairman said. "During that period, it would be better to sell as many hybrids as possible to reduce fuel consumption and [pollution]."

The number of hybrid cars and their growth rate depend heavily on future decisions by the government regarding the Goods and Services Tax rate and any tax on these cars, Bhargava said.

Hybrid autos attract 43% tax under India's GST rolled out July 1, up from around 30% earlier. Though the highest GST rate is 28%, these cars have been slapped with an additional 15% levy.

"A hybrid car as compared to a conventional car is a superior product, because it gives better fuel consumption and mileage [and] less pollution," Bhargava said.

Maruti Suzuki India already sells mild hybrids with the Ciaz and Ertiga, and will continue to manufacture them, he said. Bhargava does not regard technology as a problem in this segment, noting that Suzuki is in talks with Toyota, which has "excellent" hybrid technology.

"While moving to electric vehicles, it doesn't mean that there will be no sale of nonelectric cars," he said.

India imports around 80% of its crude oil, and the government's move toward electric vehicles would not only reduce its import bill but also help control pollution.

Bhargava called the July-September quarter -- the first period after the GST rollout -- a good one for automobile sales because the industry grew by over 13%. Despite concerns over the GST's impact on the industry, growth in the sector was particularly high.

"I don't think this much growth was seen in any of the quarters recently," he said. "During [April-June] it was 4.4%," he said.

Bhargava said his company "will grow in double digits" for the full year.

Net sales for July-September totaled 214.4 billion rupees ($3.3 billion), up 21.8% on the year, aided by popular models such as compact sport utility vehicle Vitara Brezza and the Baleno hatchback.

Net profit grew just 3.4% to 24.8 billion rupees. The company's filing cited "lower nonoperating income as the yields on investments were lower compared to last year," while a rise in commodity prices, advertising expenses and effective tax rates also hindered the bottom line.

The automaker sold 492,118 vehicles during the quarter, up 17.6% from the year-ago period.

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