TaMo revs up R&D spend in ‘brand of choice’ quest

G Balachandar Chennai | Updated on August 19, 2020

Tata Motors’ Nexon electric SUV   -  PAUL NORONHA

FY20 outgo hits record 7% of revenues; investment mainly on BS-VI upgrades, meeting safety norms, new technology

Aiming to become the most aspirational auto brand by 2024, Tata Motors is investing heavily in research and development. In 2019-20, the auto giant spent a record 7 per cent of its standalone revenues on R&D.

While the company’s average R&D spend has increased by about 20 per cent per annum over the past three-four years (much of it on upgrades for BS-VI compliance), FY20 was significant for the technology spend. Its R&D outgo was ₹3,097 crore, or 7.05 per cent of standalone revenues.

“The bulk of the R&D spend in FY20 was towards upgrading our entire portfolio of products across commercial and passenger vehicles to meet BS-VI emission norms, on new product development, and for making our vehicles safer by meeting global standards (GNCAP),” Rajendra Petkar, Chief Technology Officer, Tata Motors, told BusinessLine.

The company focussed on advancing new CESS (connected, electric, shared and safe) technologies, and also invested in expanding capacity even while pruning costs. It has already launched electric variants of select cars.

“A new product strategy, with a higher focus on R&D spend, has enabled Tata Motors introduce impressive cars and SUVs loaded with all the latest safety, infotainment and tech features. As a result, Tata Motors now has a refreshed set of products in the market and has completely phased out its legacy passenger vehicle models,” said Suraj Ghosh, Principal Analyst — Powertrain Forecasts, IHS Markit.

Safety rankings

Though Tata Motors still needs a stronger focus on the marketing front, it offers more cars with top safety ratings. The company’s new premium hatchback, Altroz, has secured the highest 5 Star safety ranking, while its compact SUV Nexon already carries this ranking. Some of its other models too have good safety ratings.

After Tata, only Mahindra & Mahindra among auto companies,puts more money into R &D (6.3 per cent of revenues in FY20). “Global majors spend significantly higher money on R&D when compared with Indian carmakers. For example, in 2019, Volkswagen and Toyota spent about $14 billion and $10 billion, respectively. Whereas Indian carmakers’ spent about $400-700 million in the same period,” said Ghosh. Typically, the spend is about 3 per cent as target markets, geographical presence and compliance pressures are less.

“Over the years, we have invested smartly and strategically in R&D in line with the market dynamics. We intend to continue with a similar calibrated approach to consistently develop and offer our customers the best-in-class vehicles,” said Petkar.

Published on August 19, 2020

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