Tata Motors, M&M match global counterparts in R&D spend

G Balachandar Chennai | Updated on January 16, 2018


As against an average of 1-2% of revenues by many, the automobile giants spend about 5%

Indian automotive giants Tata Motors and Mahindra & Mahindra are matching their global counterparts in putting money in research and development activities.

A quick look at their R&D spend revealed that against an average spend of 1-2 per cent of revenues on R&D by most of the Indian companies (outside of the pharma sector), both Tata Motors and Mahindra are investing about 5 per cent in future development activities, busting the a perception that Indian companies spend less on R&D. Hero MotoCorp has also been ramping up its R& D spend over the past two years.

Germany’s top auto giants Daimler, BMW and Volkswagen spend 5-6 per cent of their revenues on R&D every year.

“R&D expenses of Indian companies have gone up and in some cases equal global peers in terms of percentage of turnover. Reasons for this are many. For one, Indian consumers are more demanding than in the past and their aspirations regarding latest technologies must be catered to.

“Clearly, competition is constantly pushing the envelope in a quest for increased market shares which forces local players to respond,” said Wilfried Aulbur, Managing Partner, Roland Berger Strategy Consultants.

During 2015-16, Tata Motors’ R&D spend was 5.23 per cent of its revenue from operations (₹42,370 crore), but down from 6.07 per cent in the previous year. Its R&D spend has increased 2.1 per cent in 2004-05 to 3.29 per cent in 2009-10 and to 3.9 per cent in 2012-13.

Safety regulations drive

“Annual R&D investment at Tata Motors has more than doubled since 2010 and this reflects the development of a new portfolio of passenger cars as well as the increasing regulatory demands for emissions and safety across our entire business,” said a spokesperson of Tata Motors.

“As safety regulations become more stringent, we are introducing more and more features into our vehicles to assist drivers and protect in the case of accidents.

“The accelerated timelines for BS6 emissions are demanding a huge R&D effort over the next few years,” the spokesperson added. Also, in both commercial and passenger car space there has been intense competition through the entry of multinational brands in recent years which demands world-class standards in design, engineering and feature performance rather than national Indian market references. With bigger push on R&D, Tata Motors has reaped huge benefits — from its mini truck Tata Ace, which celebrated 10 years in 2015, to Nano and now to stylish hatchback Tiago. In CVs, its Prima range of trucks competes with the best brands in the world such as Daimler and Volvo.

Today over 4,500 engineers, designers and technicians work across the company’s R&D centres in India, UK, Italy and South Korea.

This is a growth of three times over the last nearly10 years. Tata has also been working on development of vehicles which run on alternate fuels such as LPG, CNG, bio-diesel, electric-traction and hydrogen. It is also making strong inroads into the electric hybrid bus segment.

Likewise is M&M’s commitment to research and product development capabilities. It spent 4.24 per cent of its revenues on R&D in 2015-16. Its investment in technology and product development has grown to about ₹1,900 crore in 2015-16 from ₹115 crore in 2005-06.

Its Mahindra Research Valley (MRV), a modern passenger and tractor R&D facility for automobiles and tractors near Chennai, is aggressively working on future technologies. This facility, which has over 1,500 engineers, has been the birthplace of Mahindra’s XUV500, TUV300, KUV100 and the feature-packed Arjun Novo & Yuvo tractors.

While Tata and Mahindra have upped their R&D ante, other Indian firms such as Ashok Leyland, Hero MotoCorp, Bajaj Auto and TVS Motor are still lagging behind and are spending just 2 per cent or less than the revenues.

Yet to catch up

“I do not see any across-the-board increase in R&D spend. I believe it continues to be less than 0.5–1 per cent of sales. Clearly, there are exceptions. Some companies spend on par with their global competitors and have sophisticated R&D,” Kumar Kandaswami, Senior Director of Deloitte, said.

Growing competition, changing technologies and regulations and evolving customer expectations are pushing the companies to take up R&D seriously.

Published on September 12, 2016

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor

You May Also Like