India's automotive sector is making significant strides in research and development (R&D), yet global competition remains formidable. A new report entitled "State of Industry R&D in India" by the Foundation for Advancing Science and Technology India, in collaboration with IIFL Securities, shows both impressive achievements and areas needing improvement.
The report highlights that India's automotive and components sector is a major player in global R&D, contributing to 40 per cent of the USD 31 billion spent on engineering and R&D. This sector accounts for eight per cent of India’s total R&D expenditure. The primary focus areas for R&D include emission compliance and advancements in electrification technologies.
Global firms outperform Indian firms in R&D intensity and the proportion of PhD employees by 3.1 times and 3.4 times, respectively. Ferrari N.V. leads globally with the highest R&D intensity at 15.2 per cent and the largest number of PhD employees as a proportion of total employees. Among Indian firms, Mahindra & Mahindra stands out with an R&D intensity of 5.7 per cent and the highest R&D expenditure, amounting to USD 335 million, which is more than 3.5 times that of Maruti Suzuki, the second highest Indian R&D spender.
In terms of patents and publications, global firms produced 29.8 times more patents per USD billion revenue and 1.6 times more publications per USD billion revenue compared to Indian firms. BYD leads globally in patents per USD billion revenue. TVS Motors displays an exceptional number of patents relative to revenue, ranking second globally and first among Indian firms with 2,548 patents, which is approximately 6.2 times that of Mahindra & Mahindra. Bosch has the highest number of publications per billion USD revenue among Indian firms and ranks second globally, with 2.4 times more publications per USD billion revenue than Tesla.
High-revenue cluster firms such as Mahindra & Mahindra, Hero MotoCorp and Maruti Suzuki show varying degrees of R&D intensity and PhD employee ratios. Bosch and TVS Motors, despite being in the low-revenue cluster, have significant achievements in publications per billion USD revenue.
"The report underscores the importance of continued investment in R&D to maintain and enhance India’s competitive position in the global automotive market," said a spokesperson from the Foundation for Advancing Science and Technology India. The findings indicate that while Indian firms are making progress, there is still a considerable gap compared to global leaders like Ferrari and BYD.
Implications and Future Outlook
The findings underscore the importance of continued investment in R&D to maintain and enhance India’s competitive position in the global automotive market. The Indian government’s initiatives, such as the National Automotive Testing and R&D Infrastructure Project (Natrip) and the Faster Adoption and Manufacturing of Electric Vehicles (Fame) scheme, are pivotal in driving this progress. The completion of phases I and II of the Fame scheme and the expected announcement of phase III with a Rs 10,000 crore outlay signal a strong commitment to advancing the sector.
Despite the positive strides, the report highlights areas where Indian firms lag behind their global counterparts. The gap in R&D intensity and the proportion of PhD employees suggests that Indian firms need to invest more in advanced research capabilities. Furthermore, the disparity in patent and publication outputs indicates the need for a stronger focus on innovation and intellectual property development.