Innovation is the name of the game for automotive companies

Innovation is the mantra for global automakers with new mobility challenges emerging from urbanisation and changing demographics.

“Automotive companies have started looking at alternative ways to drive innovation,” said Wilfried Aulbur, Managing Partner India and Chairman Middle East, at Roland Berger.

“At a time when industry is facing massive disruptions due to rapid changes in mobility, autonomous driving, electric vehicles and digitalisation, R&D and strategy departments in the automotive domain find it useful to be clued into these developments,” he added, in an email interaction.

While Indian companies like Mahindra & Mahindra and Bharat Forge are institutionalising innovation, multinational R&D centres are leveraging the ecosystem to innovate for an integral part of their global innovation network.

India hosts a number of R&D centres, which either serve the local market or help the parent automaker develop next-generation innovative products and introduce them faster in markets overseas. Bosch, for instance, will invest around ₹770 crore in its manufacturing facilities in Bidadi (Karnataka), Nashik and R&D technology centre in Bengaluru. This centre is the largest outside Germany and has evolved from a cost-arbitrage opportunity to a unit that drives global technology design, development and delivery.

An earlier analysis by Roland Berger had noted that the Robert Bosch Engineering and Business Solutions has become a global standard for other centres. It is the largest engineering services captive in India, which developed the engine management system for the Tata Nano. Incidentally, Tata Motors is planning to set up innovation centres globally to be ‘future ready’ and is ready with its first in Silicon Valley. Mahindra & Mahindra recently bagged the ‘Innovator for the Year’ award at a recent event. Some of its success stories highlighted by the Roland Berger study were the Jeeto and e2o electric car.

Automakers are now upping the ante and offshoring jobs to low-cost countries. Ford, Toyota, Volkswagen, Daimler, BMW and many others have opened R&D and engineering facilities in China while many subsidiaries of European OEMs have followed suit in India. “Mercedes-Benz built up R&D labs in Silicon Valley in an effort to be close to rapid innovations. Other research labs in Russia or Japan were intended to be more like ‘research antenna’ i.e. outposts that closely monitor innovation activities in key geographies,” said Aulbur.

In his view, Chinese R&D centres are mostly the result of “focused government policies” that drive local R&D as a part and parcel of “enabling access to the lucrative Chinese market”. On the other hand, those in India started out as opportunities to leverage labour cost advantages and reduce turnaround times. “Meanwhile, they have graduated to providing significant input from a capability and patenting angle,” said Aulbur.

The Mercedes-Benz R&D centre in Bengaluru, for instance, boasts of nearly 200 patent applications per year. As he explained, emerging market OEMs have accessed European styling labs, either via mergers and acquisitions or greenfield approaches, to be close to the tastes and lifestyles of an important global customer group.

“In addition, many Asian automotive players (predominantly Indian, Chinese and Japanese suppliers) have used a presence in Europe to tap into the academia-industry ecosystems that the Netherlands, Sweden or Germany provide,” said Aulbur.

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