| | India: The New R&D Hub For Automotive Industry
Global car majors have been ramping up investments in India to cater to growing domestic demand. India’s emerging economy with high growth traction, is witnessing a faster growth in vehicle ownership and duration of travel. The automotive market is heavily dependent on their innovation quotient to meet the demands. India is in a good position to attract more investments from the auto companies already present here. In the past decade, BMW, Beiqi Foton Motor Co. Ltd, General Motors Co., Honda Motor Co. Ltd, Maruti Suzuki India Ltd, Mercedes-Benz, Renault–Nissan Alliance and Volvo Group have set up R&D centres in India. They moved to India to tap the country’s engineering base and cost advantage.
As part of MAKE IN INDIA initiative, government will be setting up NATRiP (National Automotive Testing and R&D Infrastructure Project) centres. It is one of the most significant initiatives in automotive sector, represents a unique joining of hands between the Government of India, a number of State Governments and Indian Automotive Industry to create a state of the art Testing, Validation and R&D infrastructure in the country.
R&D can be broadly divided into three kinds of activities: fundamental research, designing and engineering a new vehicle model, and development (which includes testing and number crunching). There is a strong potential for growth in areas such as engineering analytics and significant talent located in the ‘Deccan Triangle’ region – encompassing Pune, Bangalore, Chennai and Hyderabad – India is poised to become an auto R&D hub. In particular, 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 globalization, there is a pressing need for Indian MNC R&D companies to take on big technology bets to drive innovation from here.
So, the flow of knowledge and expertise is mutual and augurs well for the industry.
Make in India and cars
I recently visited the Make in Inda website and noticed some interesting stats regarding automobiles in India.
• Seventh-largest producer in the world with an average annual production of 17.5 Million vehicles.
• 4th largest automotive market by volume, by 2015.
• 4 large auto manufacturing hubs across the country.
• 7% of the country’s GDP by volume.
• 6 Million-plus vehicles to be sold annually, by 2020.
• By 2015, India is expected to be the fourth largest automotive market by volume in the world.
• Over the next 20 years, India will be a part of the big global automotive triumvirate.
• Tractor sales in the country are expected to grow at CAGR of 8-9% in the next five years, upping India’s market potential for international brands.
• Two-wheeler production has grown from 8.5 Million units annually to 15.9 Million units in the last seven years. Significant opportunities exist in rural markets.
• India’s car market has the potential to grow to 6+ Millions units annually by 2020.
• The emergence of large automotive clusters in the country: Delhi-Gurgaon-Faridabad in the north, Mumbai-Pune-Nashik- Aurangabad in the west, Chennai-Bengaluru-Hosur in the south and Jamshedpur-Kolkata in the east.
• Global car majors have been ramping up investments in India to cater to growing domestic demand. These manufacturers plan to leverage India’s competitive advantage to set up export-oriented production hubs.
• An R&D hub: strong support from the government in the setting up of NATRiP centres. Private players such as Hyundai, Suzuki, GM are keen to set up an R&D base in India.
• Tata Nano is a sterling example of Indian frugal engineering and is being positioned as a mobilizer of the young generation.
• Electric cars are likely to be a sizeable market segment in the coming decade.
The industry has some serious growth potential and I am happy to learn about these stats. What are some of your thoughts? How will this kind of investment benefit you as a car owner or an automobile indistry professional?
The govt. has also allowed for 100% FDI in this sector, which should boost investment. Looking forward to what the future holds. Please share your thoughts, ideas or critiques.