Way things are shaping up, diesel is not for the long term
Maruti Suzuki India, which has the most alternative fuel options — petrol, diesel, hybrid and CNG among the universe of passenger car makers, says diesel will not be an option in the long term. As the BS-VI emission norms kick in, the price of a hybrid vehicle and the one that runs on diesel will be much similar, while the petrol hybrid will score on fuel-efficiency and will be environment-friendly. RC Bhargava, Chairman, Maruti Suzuki India, in an exclusive interview with BusinessLine, also said the government norm that restricts the royalty payment to two per cent and insists on the nod of minority shareholders every year will also translate into a huge compliance cost for the company. Edited excerpts.
How has the transition been towards BS-VI ?
BS-VI was in the works. So, it had to come. There was no reason why a market as big as India should not have safety and environmental technology, which is already available. But, keep in mind CNG is the biggest source of reduction in pollution today. CNG vehicles are already in use: they have customer acceptance and technology is not an issue…but nobody talks about CNG. Only now, some things have started around CNG, such as the government announcing plans for 10,000 outlets (dispensing CNG) by 2030. So, I think they are finally accepting that CNG has to be promoted, and they have to become conscious about the value of CNG for transportation.
What is the future of diesel vehicles, especially for Maruti since you have so many alternative fuel options?
Diesel is not a fuel for the long-term forpassenger vehicles. The reason is, with BS-VI, the cost of a diesel car will become the same as a petrol car with a hybrid system. Today, a diesel car is ₹1.10 lakh or a bit more expensive than a petrol car (of similar variant). But, with BS-VI, the difference will become almost ₹2.5 lakh when compared with purchase of a petrol car.
Hybrid petrol will not go more than ₹2.5 lakh, so it will be similar. Diesel gives around 25 per cent higher fuel efficiency than petrol, but with hybrid, it gives around 30 per cent higher. So, actually a petrol car will be marginally fuel efficient than a diesel car. Environmentally also, it will be better than a diesel car.
So, to me at this stage, diesel, as a fuel, is going to die out in the long term.
What is the update on Suzuki-Toyota collaboration? Who will make the electric vehicle from that collaboration?
Toyota has hybrid technology and that technology becomes available to Suzuki, which in turn will be made available to India. EV, at the moment, is being done by Suzuki . They have made some cars which we are testing on roads here. But, how many customers would buy that is the big question, because ultimately somebody has to buy it. The bigger cars will probably have Toyota technology. But again, volume is the problem. The question for EVs is also where is the availability of electricity? Where is the distribution system, because loads will become much heavier. Each car requires 2-3 kilowatt load with three-phase power. Where are you going to improve? The problem is cost and infrastructure.
The Toyota-Suzuki collaboration also will sell cars at each other’s outlets? Would the latest Toyota Camry hybrid be sold through Maruti’s outlets? Are the timings decided?
I don’t know what the date is. We will be providing cars to Toyota – Baleno to start with; it will be badged as a Toyota car with some changes and sold through Toyota dealerships. For Corolla that will be a little later not so soon.
There are talks of shifting the Gurugram plant. Have you been offered any land by the Haryana government?
We have said that we have to shift, because the plant is now in the middle of congested habitation. People built homes all over the place, and they complained saying ‘your trucks and movement of materials with vehicles create huge disturbance’. And, Gurugram has now put all kinds of restrictions with vehicles moving out and in. So what are our options other than shifting the plant…things can’t be improved, so we have to shift. And, while shifting, I have to look at what happens to my workers. We have some 20,000-22,000 workers of all types. What do I do with them? If I take the plant 200 km away, what happens to the employee? He can’t move that far. That is why we are looking for a site where it will be possible for the workers to also come…may be within 30-40 km, which will still be possible. I have my vendors in that area, and again, if I move far, it is not suitable to them. We were offered a land at Sohna, but there was a soil problem. The water table is very low there and high on salt content, so we had to give up. Otherwise, distance-wise, it was the best.
Do you see any impact of the new SEBI norms where they talk about two per cent royalty payment with a nod from minority shareholders too?
We have been stressing that it is not appropriate at all. The problem really is that you have two groups of technology companies. One group is FMCG, food processing and such things, where the R&D, sales and technology cost is very small . How much research can happen in food processing or FMCG or such things? Then you have the other companies…automotive, pharma, IT…where the R&D expenditure is much higher. You need to change models every few years, adopt new technology for safety and emission…right now electric is happening…so its much higher. We did a study, and found globally, the standard of these technology industries is five per cent. So two per cent is not possible anywhere in a number of industries. My suggestion to the government is – have two groups of royalty – one for those industries where you think the requirements of technology and R&D are within two per cent. And, one where we need to have higher technology. Why one size fits all? Not unreasonable. But, let’s see what they decide.
But, what if the government doesn’t agree?
Then we have to take it…we don’t have any option. It will be a waste of lot of time and money, because our shareholders are all over the world. So, we need to take a trip to meet all the shareholders and tell them what’s happening to take their nod. And, this has to happen every year and it will mean a huge compliance cost.
The current Managing Director Kenichi Ayukawa’s tenure is ending in March. Who will be the next MD and why not an Indian after Jagdish Khattar yet?
That is not in my hands. Japan decides. The problem is, India is a subsidiary office, and Suzuki has to incorporate the results in their sheets. They have to inform their shareholders from time to time. It requires a system where they can get fully on what’s happening in India. A Japanese official makes it much easier in communication and understanding, unless we have an Indian guy who can communicate all the time in Japanese because language is an issue. That is one reason. And, confidence also matters – how do I make sure that my company is running okay? For Suzuki’s shareholders in Japan, the Indian operation is more important than the Japanese operation, in terms of their survival. For marketing and sales, there is an Indian who does everything, but Suzuki has to keep the Japanese shareholders happy. So, I don’t think we will get an Indian MD. And, there is one thing that Ayukawa has done — he has adjusted to Indian conditions very well. That is why he stayed on for so long (he got an extension last year). I don’t think Suzuki will ever find somebody like him.