The Maruti Suzuki India Ltd stock made another high of ₹14,895 on the NSE on Thursday after it finally entered the electric car manufacturing race. While some of the gains may have been in anticipation of the inauguration of its electric vehicle plant in Gujarat, the stock has rallied by 14% since 14 August on potential cuts in the goods and services tax rates.
Electric passenger vehicle sales contributed only about 3% of total car sales in India in the June quarter (Q1 of FY26), as per Society of Indian Automobile Manufacturers data on dispatches from factories to dealers.
So, despite the low penetration in India, why is the EV plant an important milestone for Maruti? The EV plant is the first one for both Maruti and its Japanese parent company Suzuki Motor Corp.
The plant is proposed to be the global hub for manufacturing electric cars to be sold in over 100 countries including Japan. The export potential is huge.
Maruti plans to launch four EVs by FY31. It aims to export at least 750,000 cars by FY31 as against 330,000 units in FY25. This means an almost 15% CAGR in exports. The plant has the initial capacity to produce 250,000 EVs annually, which can be expanded based on demand.
Maruti will produce 67,000 E-Vitara cars in FY26, mainly for export. This alone should lead to an almost 20% year-on-year growth in exports, leaving room for an upside surprise in analyst estimates. Maruti’s Q1 exports surged 37% year-on-year as the industry posted a 2% decline.
Even in the domestic market, passenger car sales fell 1.4% in Q1, but electric car sales were up a robust 75%, albeit on a lower base. Maruti does not have a presence in the Indian EV market, although it makes traditional hybrid cars under the brands ‘Invicto’ and ‘Grand Vitara (Alpha +, Zeta +).’
Concessional GST
From the customer affordability perspective, it makes sense for Maruti to shift to EVs from hybrids. Hybrid vehicles currently face a base 28% GST plus a 15% compensation cess, while EVs have a concessional 5% GST with no additional cess.
Hybrid cars are taxed as much as petrol or diesel vehicles as they essentially use the fuel for driving as well as battery charging, unless it is a plug-in hybrid. Plug-in hybrids are more like EVs as they can be plugged in to charge the battery without using conventional fuel.
There are also benefits under the FAME (Faster Adoption and Manufacturing of Electric Vehicles) scheme. While the EV launch helps Maruti in plugging the gap in its car portfolio, it also calms the nerves of investors who were worried about the company losing out to rivals such as Hyundai Motor India Ltd, which already have EV cars.
Does it mean Maruti will rerate further vis-à-vis Hyundai? Both stocks currently trade at 17.5x each based on EV/Ebitda, as per Motilal Oswal Financial Services’ FY27 estimates.
Note that Hyundai India’s parent has a presence in two separate entities including Kia cars, raising conflict of interest concerns. On the other hand, Maruti is Suzuki’s only entity in India and now having completed its product portfolio with EVs, it could become an investor favourite.
