INDIA SET TO PLAY A KEY ROLE IN GLOBAL AUTOMOTIVE R&D

Innovation, research and development in India are fast becoming buzzwords for the global automotive industry. But is India doing enough to capitalise on this positive mindset? The emergence of hybrid and electric vehicles, connected and autonomous cars, digital technologies as well as increasingly stringent emission and safety regulations are driving global R&D activities. Vehicle manufacturers are looking to stay ahead of the curve by investing in new technologies and coming up with innovations. Given India’s vast engineering skills and massive worker talent, can the country essay a key role in the future of automotive R&D?

The world of automotive is at a crucial juncture in its development. Technologies spanning artificial intelligence and smart manufacturing are transforming the kind of products we can deliver to solve customer and production challenges. India has become an R&D hotbed and in keeping with the latest global R&D trend and the country is now a preferred destination for automotive R&D.

The automotive sector, with its focus on creating differentiated offerings for global markets and appetite for investment, is an attractive industry. However, while cost arbitrage continues to be a key driver for R&D globalisation, there is a pressing need for the Indian MNC R&D companies to take on big technology bets to drive innovation

from here. Indian Automotive industry has seen a healthy year on year growth of 11.3% over AprilDecember, 2017. However the volatile regulatory environment has been a stiff challenge for the industry. By 2017, it also became apparent that technology change will hit the industry a lot sooner than initially expected.

Safety and fuel efficiency became central issues with expected changes in regulations. The shift to BS-VI from BS-IV by 2020 is the steepest challenge for the industry. In this environment, the automotive industry is looking at the upcoming budget with hope and expectations. In line with its own announced priorities, the Government could focus on 3 elements to enable the automotive industry: Support for R&D, Clean vehicle technologies and Promote Safety.

ICE-powered vehicles consist of more than 20,000 parts, while EVs feature only approximately 7,000 components, what has enormous impact on changes in operations of the motor industry and hence sub-suppliers who are being forced to switch to production that contributes to electrification of vehicles.

The government’s support for the R&D sector in India is all set to witness some robust growth in the coming years. According to a study by the management consulting firm Zinnov, engineering and R&D market in India is estimated to grow at a CAGR of 14% to reach US$ 42 billion by 2020. The research ecosystem in India presents a significant opportunity for multinational corporations across the world due to its intellectual capital available in the country. The Indian engineers working across the globe highlight the highly-trained manpower available at competitive costs. Consequently, several MNCs have shifted or are shifting their research and development (R&D) base to India. These R&D bases either develop products to serve the local market or help the parent company overseas deliver new generation of products faster to the markets across the world. To sustain this transformation, Indian policy makers increasingly recognize the need for continuing economic reforms, new public investments in the nation’s infrastructure, and new policy initiatives and institutions to encourage innovation, expand the skills and knowledge base of its population, and facilitate entrepreneurship.

The rapid shift in technology is putting a lot of pressure on the industry. It needs to invest heavily on research and development and get access to technology. The Government has initiated the phase-out of additional weighted R&D deduction from 200% in FY2017 to 100% by FY2020. However given the rapid impact of technology the Government may consider reinstating the 200% weighted deduction of R&D investments at least until 2020. This will provide additional resources to the industry to prepare for the massive technology change.

The Government may also consider further investments in automotive testing, validation and safety. The small and medium enterprises (SMEs) are expected to struggle due to the technology shifts. Government could consider a technology access fund to help SMEs get access to advanced automotive technologies including – E-vehicles, safety, electronics and connected vehicles.

India’s low-cost and highly talented pool of workforce is the key differentiator between India and western countries. India adds 6000 PhDs, 200,000 engineers, 300,000 non-engineering postgraduates, and 2,100,000 other graduates to its workforce annually. The business language used is english, which creates a comfortable environment for foreign firms to

set up their base in the country. The cost of hiring a researcher in India is one-fifth of that in the US. Annual salary of a senior engineer in the US is in the range of USD150,000–200,000, while it is about USD30,000–40,000 in India. Moreover, Indian graduates work for longer hours than their US and German counterparts.

India has highly acclaimed educational institutes such as the Indian Institutes of Technology (IITs), Indian Institutes of Management (IIMs) and Indian Institute of Science (IISc). Most of these institutes conduct R&D in collaboration with central and state governments as well as industry players on a regular basis. These institutes, with highly qualified academicians and a set of talented students, can help propel India to become a global R&D hub.

The sheer size of the market makes India a strategic location for large foreign firms to expand their operations. With the Indian consumers having varying product preferences when compared to developed nations, it becomes imperative for these companies to set up their local R&D centres to cater to the local market. It also reduces product development costs and helps the company in achieving a faster time to the market.

India is transforming into a global R&D hub for the automotive and auto components sectors as most auto giants are setting up R&D centres in the country. The country offers several key advantages to global auto majors: Lower R&D costs, availability of skilled human capital, and a potentially large domestic market that justifies the investment. Having established itself as a small car hub, India is now becoming a formidable choice for performing R&D activities. The focus on R&D has further scope for expansion in the country over the next decade.

Tata Motors is making a difference in the market through its increased focus on vehicle design. According to Pratap Bose, Head of Design, Tata Motors, “Now, we are moving to the next phase of Impact Design, which is called ‘Impact 2.0’ in which our new Harrier is designed under the Omega platform and it will be followed by our first product on our Alpha platform. These platforms give us more flexibility to come up with products faster and in different types, sizes and segments.” One of the leading tyre manufacturers in India, Apollo Tyres is setting up a new design studio at its Global R&D facility in Chennai. The new studio will help the firm to visualise using various digital platforms and bring in better solutions. Incorporated in 1972, Apollo is now the 11th biggest tyre manufacturer in the world. The company markets its products under 2 brands; Apollo and Vredestein. These products are available across the globe through a vast network of branded, exclusive and multi-product outlets.

The France-based global automotive supplier, Valeo, is planning to increase its members in R&D in India by 2023. This will make it one of the largest R&D centres of the group under one roof. Valeo, as an automotive supplier is partner to all automakers worldwide. As a technology company, Valeo proposes innovative products and systems that contribute to the reduction of CO2 emissions and to the development of intuitive driving. The group employs 111,600 people in 33 countries and has 184 production plants, 55 R&D centres and 15 distribution platforms. In India, the company was established in 1997 and has 7 manufacturing facilities including 4 in Chennai and one each in Pune, Sanand and Noida.

Steelbird International, manufacturers of filters and rubber components, has come up with a better performing filter, charged with the improved dust holding capacity. Competing with the global R&D standards, Steelbird’s innovative filter will hold double the amount of dust it held before. As a result, the service interval of the filter has been doubled. The product is being tested in Germany and will come to the market in January.