India's Third Giant Leap

This Leap Could Potentially Generate Gains
Far Bigger than Anything We Have Seen in Our Lifetimes

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Has Maruti Erred in Choosing Hybrids over EVs?

Nov 24, 2022

Has Maruti Erred in Choosing Hybrids over EVs

Over the weekend, I was reading a blog by my favourite author, Morgan Housel. I came across an interesting conversation which the author's friend had with Warren Buffett during the backdrop of 2008 global financial crisis.

The author's friend was driving around Omaha with Buffett in late 2009. The global economy was crippled at this point, and Omaha was no exception. Stores were closed and business shut down.

The authors friend asked Buffett, 'It's so bad right now. How does the economy ever bounce back from this?'

Buffett replied with a question of his own, 'Do you know what the best-selling candy bar was in 1962?'

'No', his friend replied.

'Snickers,' said Buffett. 'And do you know what the best-selling candy bar is today?', asked Buffett.

'No', his friend replied.

'Snickers,' said Buffett.

And that was the end of conversation.

Here's the take away from this simple conversation.

Focusing on what's never going to change is more important than trying to anticipate how something might change.

While its important to understand and predict how technology is going to alter our lives, isn't it equally important to focus on things which will never be replaced?

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When we talk about change, EV is at the top of the list.

I'm sure, you must have read countless articles written about why EVs are the next billion-dollar opportunity and the best EV stocks to buy in India.

So, this time, let me play the devils advocate and try to figure out why is India's largest car maker Maruti Suzuki not jumping the EV bandwagon.

Tata Motors is in the news almost every month with refreshes and new EV launches. On the other hand, Maruti is going the hybrid way with its new launch Maruti Suzuki Grand Vitarra.

Tata Motors is the undisputed market leader in the passenger EV space. Maruti doesn't have even a single EV product. Its first EV will be launched in 2024-25.

So, this is the billion dollar question...

Is Maruti Behind the Curve in the EV Race?

To answer this question, let's look at the numbers.

Apart from factors such as lack of charging infrastructure, I've analysed the cost dynamics of owning an EV in the table below.

CNG v/s EV: CNG is the Clear Winner

Ex Showroom Price (Mumbai) Tigor CNG Tigor EV
Price (Rs) 9,60,000 14,50,000*
Mileage 27 kms/kg 7.4km/kwh
CNG/Electricity cost Rs 72/kg 1 unit = Rs 7**
Per km cost 2.7 0.9
Running per day (kms) 50 50
Annual Running (kms) 18,000 18,000
Annual Running cost (Rs) 48,000 17,027
Source: Equitymaster, Note: * EV cost in some states would be lesser on account of subsidies
** Electricity cost as an average of Residential and Commercial prices in Mumbai

EV is an Unviable Option v/s CNG

Purchase cost recovery Years
CNG over EVs 16
Source: Equitymaster

It will take 16 years to recover the incremental cost of purchasing an EV.

Practically it doesn't make sense choosing an EV over a CNG car. I've not even considered the replacement cost of EV batteries.

It looks like Maruti's focus on targeting the growth of CNG segment is right.

CNGs contribution to the total passenger car industry stood at 8.5% in FY22. But CNG cars contributed to 17% of the total domestic sales for Maruti in the same period.

After all, majority of CNG cars are small cars which account for 40-45% of total industry volumes. The important statistic here is that Maruti's market share in the small car segment is above 70%.

Isn't that a smart move to target the small car segment, where you are the market leader, in which the share in CNG fuel is increasing?

But there is a catch here...

The way the industry is shaping up, the share of small cars is going down and the share of SUVs are rising.

In the SUV segment, Maruti has launched hybrid technology which is battery plus petrol as opposed to its competitor Tata Nexon which is a pure EV.

The cost dynamics here are in favour of EVs.

EVs are a Better Choice than Hybrids

Car Nexon EV Maruti Suzuki Grand Vitarra Strong Hybrid
Price (Rs) 20,00,000 19,00,000
Mileage 7.4km/kwh 21 kms/litre
Cost of Petrol/ Electricity 1 unit= Rs 7 106/litre
Per Km cost 0.9 5.0
Running per day (kms) 50 50
Annual Running (kms) 18,000 18,000
Annual Running cost (Rs) 17,027 90,857
Source: Equitymaster

Time to Recover Incremental EV Cost Over a Hybrid

Purchase cost recovery Years
EV over Hybrid 1.4
Source: Equitymaster

While it takes 1.4 years to recover incremental cost of electric vehicle, the cost savings on using an EV are huge post the initial cost recovery. EVs cost only 20% to run compared to a hybrid as can be seen in our calculation.

I've not included the battery replacement cost for an EV which in my view is Rs 0.5-0.6 m as of today. The reason is the replacement is going to happen after 5 years, and by then, the cost of battery would be drastically lower than what it is today.

Also, most vehicle owners replace their vehicles after 6-7 years.

So, to conclude...


EVs > Hybrid

Where does Maruti stand in the EV v/s CNG v/s Hybrid race?

Maruti is the leader in the hatchback segment which accounts for 45% of total car volumes. Thus the company's strategy in targeting CNG fuel and not electric vehicle makes sense. Market leadership along with favourable cost dynamics works for Maruti.


If we exclude the battery replacement aspect, it makes more sense to buy EVs than hybrids.

However, this argument gets diluted when we talk about the lack of EV infrastructure. This is because often convenience precedes cost.

Also, Maruti's plan of using hybrids as a bridge between combustion engines and electric vehicles could work as the ecosystem takes time to evolve.

I guess not having a first mover advantage could work, as is evident in the two-wheeler sector.

What do you think dear reader? Is Maruti on the right track by taking the hybrid approach and going slow in EVs?

Share your views here.

Aditya Vora
Research Analyst, Hidden Treasure

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3 Responses to "Has Maruti Erred in Choosing Hybrids over EVs?"

Pradeep Kumar Nair

Nov 29, 2022

Historically, when it comes to new technologies companies that claimed to have the First Mover Advantage on any new technology have miserably failed or became also-rans.. Its the companies that are typical Fast Followers who come to dominate the market... and this cycle has repeated ad nauseum for decades..In fact Steve Jobs is quoted in his biography for making this point emphatically

WHile I would love Tata Motors to be successful in the long , their leadership is not guranteed. History is against them. In fact their leadership will soon be threatened.. the likely long term winners are going to be companies that figure out all the mistakes that are currently happening and introduce a product and ecosystem combine which will get the majority of customers , rather than the few today

In my mind Maruti's move to Hybrids for certain types of customers and EVs in the future for other segments is likely to be a winner


Pankaj Mahidhar

Nov 24, 2022

Yes. There are many reasons to think so. CNG is also a fossil fuel, maybe a little cleaner. The cost is rising and would keep rising so the economic advantage would keep narrowing. CNG filling infrastructure may not be enough even after so many years and it takes a lot of time for vehicles to fill up. EV rise infrastructure will rise faster than CNG as CNG can't be filled at home but EV can be charged at home and very soon most societies would set up charging infrastructures in parking spaces with adequate safety features built in.

The cost of EV are higher than they should be as demand is more than production and companies are charging more than fair price under the garb of high battery prices is my thought. If Maruti would have joined the band wagon with a small EV with right prices it would have tilted the economies of scale in favour of the manufacturer and the customer. The automotive industry in on the trend of jacking prices up for any reason they can find often cosmetic changes due to high demand.

Coming to cost comparisons, you should try to add the environmental impact of ICE and other fossil fuel models versus the EV and the difference should drop to a good extent. The world is struggling to find ways to fight climate change. Although automotive sector may not be the only spoilsport in global warming but does have a significant impact after thermal energy.


Krishnamoorthy Rao

Nov 24, 2022

This cost of procurement and running of CNG based passenger vehicles vs EVs is flawed. One needs to include the maintenance cost. The CNG vehicles are just like diesel or petrol engine based vehicles and comprise of huge number of components and hence the maintenance cost is very high compared to the EVs. vehicles are simple.

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