Mumbai: Japanese carmakers Toyota Motor Corp. and Suzuki Motor Corp. on Friday signed an in-principle agreement to consider a joint structure for the introduction of electric cars in India in 2020.
The agreement is the result of one signed on 6 February by the two Japanese auto makers to begin cementing a business partnership in developing environment-friendly vehicles, automobile safety and mutual supply of products and components.
Under the agreement, Suzuki will manufacture electric cars for India and supply some units to Toyota with technical support from the latter, said a statement by Suzuki, the parent of India’s largest carmaker Maruti Suzuki India Ltd.
In addition, both companies plan to incentivize the acceptance of electric vehicles in India by conducting studies on car charging stations, training of technicians, and systems for the disposal of electric car batteries.
The agreement comes as the Indian government pushes vehicle manufacturers to switch from diesel and petrol engines to environment-friendly alternatives. The government has set a 2030 deadline for India to move to an all-electric fleet of passenger vehicles.
Suzuki’s tie-up with Toyota signals that the Indian automobile market is set for a wave of disruption as vehicle makers take heed of a government warning that they have no option but to abandon diesel and petrol.
The government is seeking both to reduce air pollution in the cities and cut its oil import bill, which, according to one estimate, could double to $300 billion by 2030.
“Looking at the pollution levels in certain cities, the government is likely to push the EV agenda even harder. Therefore, traditional transportation will create a lot of trouble for India. OEMs (original equipment manufacturers) should capitalize on the situation,” said Abdul Majeed, a partner at PricewaterhouseCoopers.
Suzuki also plans to procure electric motors and other major components from Indian companies in a boost to the government’s Make in India initiative, the company statement said. This would control costs, a deal-breaker for electric vehicles at the moment.
In September, the Japanese company announced plans to construct a lithium-ion battery plant at its wholly owned Hansalpur plant in Gujarat.
The lithium-ion battery accounts for almost 50% of an electric car’s cost; its high cost is a factor discouraging other manufacturers from taking the EV route.
Suzuki has also leveraged the expertise of Japanese compatriots Denso Corp. and Toshiba Corp. to manufacture lithium-ion batteries.
Maruti Suzuki accounts for more than 55% of its revenues and is the passenger vehicle market leader, with a market share of over 50%. It does not presently sell an EV in India.
Earlier this month, chief executive officer Toshihiro Suzuki had said, “As the industry shifts towards EVs, when it comes to India, our volumes are so large that I worry that we could be caught flat-footed if there was a sudden shift towards electrification.”