Japanese Carmakers Hesitate on Small EVs for India, Citing Cost and Tech Hurdles

Japanese car giants Suzuki Motor Corporation and Honda are strategically introducing compact electric vehicles (EVs) in their home market, Japan, with models like Suzuki's Vision e-sky and Honda's Super-One slated for launch next year. However, both companies appear hesitant to bring these small EVs to India. The primary reason is the challenging unit economics for such vehicles in India's price-sensitive small-car segment. High battery costs, which constitute about 40% of an EV's price, and the lack of localized battery technology are major hurdles. Most current EV sales in India are dominated by more premium SUVs, as their buyers are less price-sensitive. This approach differs significantly from Indian electric two-wheeler manufacturers like Ola Electric and Bajaj Auto, which have successfully captured market share by offering affordable products.

**Impact** This news indicates a potential delay in the widespread availability of affordable small electric cars in India. It suggests that the Indian auto market's EV transition might continue to be led by premium segments or electric two-wheelers in the near term, while manufacturers focus on alternative clean fuels like CNG for smaller conventional cars. Investor sentiment towards companies heavily invested in the small car segment might see caution. Impact Rating: 7/10

**Heading** Difficult Terms: **Kei-car:** A category of small, compact vehicles in Japan with specific restrictions on size, engine displacement, and power. **Unit economics:** The revenue and costs directly associated with producing and selling one unit of a product. For cars, it refers to the profitability of each vehicle sold. **Penetration:** The extent to which a product or service is adopted or used by its potential market. **Localised:** Manufacturing or producing components or products within a specific country or region rather than importing them. **OEMs (Original Equipment Manufacturers):** Companies that manufacture parts or components which are then supplied to other manufacturers for use in their final products. **GST (Goods and Services Tax):** A consumption tax levied on the supply of goods and services in India. **CBG (Compressed Biogas):** Biogas that has been purified and compressed to a quality similar to natural gas, suitable for use as fuel. **CNG (Compressed Natural Gas):** Natural gas that has been compressed to a high pressure, commonly used as a fuel for vehicles. **EV (Electric Vehicle):** A vehicle powered by one or more electric motors, using energy stored in rechargeable batteries.