“Most of the R&D is targeted at developing products which foreign companies find difficult to even conceive of,” says Rajat Dhawan, partner at consulting firm McKinsey & Co., who consults on the automotive sector. “India is a good testing ground and then later they (the companies) export it,” he adds.
Typically, made-in-India vehicles are sold on the plank of price as India has cost advantages over other major vehicle-producing regions such as the US, Japan and Europe.
Frugal engineering, or low-cost engineering, is the new buzzword as companies and their suppliers adopt practices such as total productive maintenance, aimed at increasing productivity by effectively using machinery and equipment, and lean manufacturing, which tries to cut down on unnecessary processes among other things.
As the auto component industry struggles to cope with the rapid growth in automobile sales, it is increasingly looking at such practices for maintaining quality.
The Confederation of Indian Industry, an industry lobby, is introducing a programme on lean manufacturing and hopes to run projects with as many as 200 companies in three years.
However, even as they try to become technologically self-reliant, Indian auto companies are entering into alliances with other companies to speed their development along.
Thus, Bajaj is tying up with Renault SA for help in its small-car venture, Mahindra has tied up with Renault for passenger cars and Ashok Leyland has allied with Japan’s Hino Motor Co. for some aspects of engine design. Tata Motors acquired South Korean truck maker Daewoo Commercial Vehicle Co., and has a minority stake in Spanish bus maker Hispano Carrocera SA—both deals were partly, if not entirely, motivated by the desire to access technology.
“To get a car door to shut like it must shut is not easy,” Rajiv Bajaj, managing director of Bajaj Auto Ltd, had said in a recent interview with Mint, referring to his company’s partnership with Renault.
Although India boasts of one of the world’s largest pools of engineers, all companies point to human resources as the biggest stumbling block in expanding their R&D programmes.
“I have only 200 engineers” says Bajaj’s Kumar. “If I find 1,000 of them, I’ll employ all of them.”
Some companies have tried to solve this problem partially by poaching expatriates from US and Japanese companies. Arun Jaura, vice-president of R&D at Mahindra, V. Sumantran, former head of research at Tata Motors and now a consultant with Ashok Leyland, and many others have spent at least a decade in the research departments of the world’s biggest car makers. More often that not, it has been these people who have spearheaded projects to develop new products.
Still, analysts such as Dhawan believe that Indian firms have some way to go before they are able to compete effectively in the global arena. The R&D spends of Indian companies are comparable with 3-4.5% of revenues for American companies such as General Motors Corp., while some Japanese firms such as Nissan Motor Co. spend up to 10% of their revenues in research.
“They have a road to travel,” says Dhawan, referring to Indian auto firms. “The next game is to develop products which can be sold in developed markets such as Europe.”
ravi.k@livemint.com