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Automobile R&D investments soar on new regulations & emerging technologies

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Business Standard
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Despite pressure on sales, automobile companies’ spending on research and development (R&D) grew in 2018-19 mainly owing to the regulations and the emergence of new technologies. An analysis of listed Indian automakers' (excluding Maruti) annual report for 2018-19 shows two-wheeler makers spend close to two per cent of their turnover on R&D, while other auto companies spend 3-5 per cent. Tata Motors and Mahindra top the table in R&D spending. Tata Motors increased its R&D spending by around 23 per cent in FY19 to Rs 2,965.25 crore from Rs 2,397.52 crore the previous financial year. Rajendra Petkar, chief technology officer (CTO), Tata Motors Ltd said the company last financial year utilised money for developing clean technology vehicles, and implementing mandatory safety features. "Last year, over Rs 1,200 crore was spent on BS VI. We are at the peak of development of BS VI and do not expect R&D spending to come down in this financial year," said Petkar. He also added that the company made substantial investments in clean and sustainable mass transportation and small commercial vehicles (CV) for last-mile connectivity. These investments focus on improving cost of ownership. Going forward, the company is looking to spend significantly on corporate average fuel economy (CAFE) regulation and electrification of mobility solutions. The increase in the R&D spend is driven by multiple factors, said Kaushik Madhavan, vice-president (Mobility Practice), Frost & Sullivan. "If you look at the commercial vehicle space, a majority of the R&D spend is happening either on emission complaince or for hybrids and electrification trends. The likes of Ashok Leyland spent heavily in the development of electric buses. They are even looking to leverage electric powertrain for trucks as well. In the last two years, original equipment manufacturers (OEMs) have spent on BS VI compliance. At the same time, some are spending more on their electrification initiative," he said. The country's second-largest CV maker Ashok Leyland's investment in R&D rose by around 46 per cent to Rs 658.13 crore (2.27 per cent of turnover) in 2018-19 from Rs 452.49 crore a year earlier. Investments into R&D could continue to grow in the near future on account of emerging technologies. Madhavan said: "Going forward I see safety and power train-related R&D investments increasing on the back of hybrid electrification and other technologies such as the automatic transmissions from CVs. It is in line with what is expected, although the actual amount may vary."

Author: Sustainability Outlook Desk