Maruti Suzuki's Bhargava Bats For Incentives On CNG To Ethanol-Blended Fuel Vehicles
While Bhargava agrees that the government's emphasis on new technologies is good, he says there is a need for clear policy.
India needs to offer clarity on incentives for ethanol-blending and using biogas and CNG as auto fuels as costly electric vehicles won’t be enough to drive adoption of cleaner mobility, according to Maruti Suzuki India Ltd.’s RC Bhargava.
“Electric vehicles are just one part of the multiple technologies we will need to reduce dependence on oil imports and slash carbon emissions,” said Bhargava, chairman at the nation’s largest carmaker, whose Japanese parent committed investments to develop EVs and batteries in India. “If we have to achieve these targets in the near term, just EVs aren’t enough,” Bhargava told BloombergQuint’s Niraj Shah.
Investment on research and development of alternative technologies, according to him, is not substantial, and it needs to be backed with “financials and human resources” to speed up adoption.
Even though EVs aren’t affordable for most customers in India, the bulk of incentives centre around them, he said. On the contrary, “there are no incentives for biogas or CNG-run vehicles”. “India has a huge potential in biogas. Where are the financials backing biogas? For CNG, why are tax rates the same as diesel and petrol?”
Till recently, Maruti Suzuki’s interest in EVs was muted. Peers like Tata Motors Ltd. and Mahindra & Mahindra Ltd. gained market share and committed investments. On March 19, Suzuki Motor Corp., the parent of Maruti Suzuki, announced to invest more than Rs 10,000 crore over five years on EVs and batteries.
Need ‘Clear Policy’ On Ethanol Blending
While Bhargava is upbeat on the government’s focus on ethanol blending, he sees the need for a “clear policy” around such technologies.
According to him, India needs to work out the right mix of alternative fuels for vehicles by the end of the decade. He cited the example of ethanol-blended fuels or flex fuels, where car manufacturers have to design new engines for a certain level of ethanol blend.
“If this switch makes engines costlier for the end consumer, something has to be done to make it affordable,” he said, pitching for incentives. “What would make a customer accept such a technology? Bulk of Indian customers don't have surplus income of any kind.”
Bhargava said it is “very difficult” to predict pricing pressure, a key concern for automakers over the past three years. “We have no idea when commodity pressures could ease, given what is happening in Europe. It is very difficult to also speak about the chip shortage.”
Read the edited excerpts from the interview here:
You have put out your thoughts in the last five-six days that India’s strategy should be different than the other nations on the EV front or the energy transition front. Can you tell us a bit about it?
RC Bhargava: I am absolutely clear that EV is one of the technologies which we have to use for reducing oil imports or reducing carbon monoxide and carbon dioxide in the air. If you are going to achieve these purposes in the near term, EV technology by itself will not be adequate. It has to be supplemented by the use of other technologies because EV technology today has not yet reached a point where it is appropriate in terms of reaching an affordable vehicle for customers in India with much lower incomes. That is, India as compared to Europe, America or even Japan has much lower income levels and the technology for EV which exists today does not create affordable variants for the bulk of Indian customers. Of course there will be category of Indian customers who will be able to buy EVs but a large percentage of Indian customers will not. Therefore, you need other technologies...
While EVs grab headlines, when one looks at the government initiatives, one can see quite a lot of focus. For example, Minister Gadkari’s constant reiteration on ethanol and flex fuel engines, the proliferation of CNG, and some moves on CBG as well. Has not the government moving at a reasonably strong pace?
RC Bhargava: Yes, certainly talking about alternate technologies, I believe we talk about trust, it also requires the supportive policies which makes technologies easier to form and for customers to accept. For example, the difference in taxation. If you look at all the incentive schemes, the bulk is centered around EVs. There are no incentives for other technologies. The amount which is being spent on research and development of technology of other products is not much.
You reckon at the very least, the first port of call should be even the tax slab changes and incentive schemes that could level out the playing field, so to say?
RC Bhargava: I am just saying that other technologies should also be adopted quickly, they have to be backed with financial and human resources... When we are talking of, let’s say, biogas, India has a huge potential for biogas. Where is the incentive for the schemes to promote it on a large scale? You are talking about CNG, tax slabs of CNG, it was exactly the same for the petrol and diesel cars, it was exactly the same technology and the tax rates, so where is the difference, other than the talk, what other incentives does the customer have? A customer accepts a technology which is advantageous to him personally. Most customers are not deciding on their technology use in their vehicles because of considerations of global and national requirements, they don’t get personal benefit. And if you look at that, which technology today other than EVs will give individual preferential advantage?
What is your sense on this whole ethanol blending and flex fuel percentages and how the country is moving around it? How soon would large-scale ethanol blending, in percentage terms, would be ushered in?
RC Bhargava: I don't know because I believe that we will have cars which will work on 100% ethanol, but if car manufacturers are going to design cars of any specific level of ethanol, then there must be a very clear totality of policy package which says, okay, you start developing engines for this type of technology and this is what we have to meet and these are the incentives which we can give to the buyer. An Indian customer, if you remember, does not have the capacity to buy. The bulk of Indian customers does not have too much surplus income of any kind. They have developed ethanol engines for 40 or 50% blending, which makes engines costlier, I don’t know, I have no idea of this technology, if it makes it costlier then something has to be done to make it affordable for the customers...
Ok, Mr. Bhargava, even if the government goes down the path of giving some incentives as well, do you reckon the flex fuel engines are at least 12 to 18 months away? Large percentage of blending, even if not 100% but maybe 20% blend of the fuel engine?
RC Bhargava: I don’t know because CNG is a very good option in India. If I were to buy CNG, I would buy gas if it was an option in India. While engines are blended, EVs for some people are a very good option. Somebody has to work out...
My questions are only because I keep on hearing every third week Minister Gadkari talk about how advanced a stage is this flex fuel policy is and how close are we to the same.
RC Bhargava: Minister is right in emphasising new technology. I think it is also necessary to have different technologies available. Somewhere it has to be a colloquial package we have to achieve, let’s say, 10 years from today... keeping into mind the customer probability factor, has to be a combination of policy mixed with technologies.
There was some talk by a market expert that just because Maruti is not talking about the EV space does not mean that that they are not doing something about the EV space. Now there is a big splash that has come in by your interview and by the investment that Suzuki announced in Gujarat. Can you tell us about the game plan you have in mind about how would you see your company's on to the transition path?
RC Bhargava: Our company for various technologies is dependent on Suzuki. We are a Suzuki company, by the way. So, they are developing EV technology and according to their plan and what they are planning to produce in India, whatever is produced in India, EVs in their Gujarat plants, we will sell it.
Can you tell how far we are and what proportions and what percentages?
RC Bhargava: It’s too early, it’s too early, we don’t know yet.
How is the largest car maker dealing with so many multiple challenges? Even if lockdowns are a the thing of the past, supply chain issues, semiconductor availability, tightening commodity costs are all hitting at the same time. How difficult has it been to contend with all of these and how long do you foresee, these will last, based on your conversations with suppliers and customers?
RC Bhargava: That requires a soothsayer! How commodity prices will shape up in the coming years, its very difficult to forecast, so if you want to go you have a war like situation in Europe. This semiconductors thing is a global thing and nobody in the world over is able to give a clear answer, as to when this shortage situation of semiconductors will disappear.
Uncertainty remains the name of the game, I presume.
RC Bhargava: The business always has certain uncertainties and I think the level of uncertainty has become little bit higher because of various things happening in the world.