Maruti Suzuki EV investment buzz: Outlook on shares

Maruti Suzuki, India's largest car-maker, has announced that it is going to invest more than Rs 10,000 core for local manufacturing of electric vehicles and batteries.  All the other major carmakers have already entered the space or have announced their plan. Maruti Suzuki made its first major EV plan announced in a bid to align itself with a national strategy to reduce oil dependence and cut debilitating air pollution in big cities.

What are the updates?

• Maruti Suzuki is locally going to build EVs and batteries in Gujarat from 2025. The first electric vehicle under Maruti will debut in 2021.
• The investment will come from Japan's Suzuki Motors. Suzuki Motors holds a majority stake in Maruti Suzuki. The company plans to invest around Rs 10,400 crore in EVs and battery manufacturing.
• Suzuki Motor Corporation's wholly-owned Suzuki Motor Gujarat Pvt Ltd (SMG) will invest Rs 7,300 crore for the construction of a battery plant near SMG’s automobile manufacturing unit by 2026. 
• SMG will invest another Rs 3,100 crore for ramping up production capacity for EVs by 2025.
• Maruti Suzuki Toyotsu, a joint venture between Toyota Tsusho and Suzuki for vehicle dismantling and scrapping, will also make a Rs 45 crore investment for the plant.
• The first launch could be an electric SUV, and the cost will be around Rs 20 lakh.
• The company has reportedly tested an electric WagonR but has decided against launching due to high cost. 

How should investors look at the news?

The first electric vehicle by Maruti is more than two years away. Hence, investors won't see any major increase in the revenue or profits for upcoming quarters. However, this was much-awaited news for Maruti Suzuki investors, and it will keep the sentiment positive. Further, it is to be noted that the Rs 10,000 crore investment shows Suzuki’s long-term commitment towards EV manufacturing in India. This will also help in bringing down the cost of EVs in India.

Brokerage radar

According to global brokerage firm UBS, the major investment should allay concerns about Maruti Suzuki's EV preparedness. The brokerage firm has maintained its 'buy' rating on shares of Maruti Suzuki with a target price of Rs 10,300.  

JM Financial has given a ‘Buy’ rating for the stock with a target price of Rs 9,500. The brokerage firm believes with five back-to-back products including Ertiga, Ciaz, Brezza, Baleno, and S-Cross, and a success ratio of well over 80%, the company is expected to do well. Anand Rathi has a BUY call on Maruti Suzuki India with a target price of Rs 8,500. 

Maruti Suzuki shares were trading 1.3% lower at Rs 7,665 on NSE.