New Delhi/Chennai: Indian automobile companies are spending more on research and development (R&D) as they seek to become self-reliant in technology and boost sales in both local and international markets.
R&D expenses of six auto companies of Indian origin increased 70% to Rs1,384 crore in fiscal 2007 compared with Rs443 crore in fiscal 2004. The average R&D spend as a percentage of net sales has increased to 2.34% from 1.47% during this period. Sales grew 49% in the same period.
The six companies are Tata Motors Ltd, India’s largest truck maker, Mahindra & Mahindra Ltd, the country’s largest utility vehicle maker, Bajaj Auto Ltd, TVS Motor Co. Ltd, Eicher Ltd and Ashok Leyland Ltd. The other important auto companies operating in the country, such as Maruti Udyog Ltd, General Motors India Pvt. Ltd, Ford India Pvt. Ltd and Hyundai Motor India Ltd, are local arms of multinational corporations and can draw on the R&D work done by their parents, although most also spend some money on R&D in India.
The Indian companies, however, have to do it all themselves.
For Mahindra & Mahindra Ltd, which built India’s first indigenously designed sports utility vehicle, the Scorpio, in-house technology development has grown from a need to service price-conscious customers. TVS Motors scaled up R&D after it split with partner Suzuki Motor Co., and had to develop new products to defend its market share in an intensely competitive market.
“In 2005, TVS Motors did not have a bike to sell,” says Venu Srinivasan, chairman and managing director of TVS. “The company recruited and assembled a team of 160 engineers. They were mandated to bring global quality products,” he says.
TVS, which ploughs 3% of its revenues into research every year, plans to introduce as many as nine products in the next eight months. TVS ended 2006-07 with revenues of Rs3,854 crore.
Others such as Tata Motors, which developed the country’s first indigenous car, and Bajaj Auto, India’s second largest two-wheeler maker, are attempting to create new segments. Tata is working on a Rs1 lakh car, reportedly to be the cheapest car in the world, and Bajaj recently unveiled a new fuel-efficient technology at a lower price.
“It’s like standing on borrowed legs if you don’t have your own technology,” says S. Ravi Kumar, vice-president, business development, at Bajaj Auto. “How can you (then) aspire to be a world player?”
Tapping the export market is a logical end for most local R&D initiatives. Automobile exports from India have crossed one million units in 2006-07 from 629,887 units in 2004-05, as Indian companies aspire to sell more in newer markets to insulate themselves from downturns in the local market. Some companies such as Bajaj and TVS have built assembly units in South-East Asia to make locally designed motorcycles.