Author: Malini Goyal
Publication: India Today
Date: December 8, 2003
Introduction: Low costs and availability
of skilled manpower are driving Indian and MNC auto companies to set up
R&D facilities in the country. Can automotive research replicate Indian's
success in software?
Three years ago, on a long weekend,
Maruti Udyog Managing Director Jagdish Khattar and his think tank spent
almost an entire morning looking at their bestseller Zen. It was still
a looker and mentioned in the right circles for its genteel European styling.
But it was getting flanked by hot new competitors like the Santro from
the Hyundai stable and the Indica from Telco (now Tata Motors). Clearly,
Maruti needed to rewrite the ZEN of marketshare. The market apparently
found the Zen a bit too effete. For car afficionados the world over, the
car may well be a she but a feminine look is not what they look for. Ergo,
30 engineers with a budget of Rs 35 crore set a 30-month deadline for a
sex change.
On November 27, Maruti delivered
the male sibling of the Zen. Conceived and fertilised in Indian labs, the
male-look car is targeted at 25-35 year olds and is expected to push sales
up from a sedentary 5,000 cars to 6,500 per month immediately. Connoisseurs
may point out that the pedigree-engine and chassis design-remain Japanese.
True, but Maruti has come a long way from the days when even nut and bolt
designs came from Japan. "By 2007, Maruti will build cars for the Asian
market in its r&d centre in India from scratch," says a proud Khattar.
It is not just Maruti which has
hit the design track. Almost every MNC on Indian roads, be it General Motors,
DaimlerChrysler, Hyundai, Fiat or Ford, has or is considering setting up
R&D facilities here. Earlier this month, GM India inaugurated an automotive
research lab-one of 12 across the world-at Bangalore. It will collaborate
with the company's research centre in Michigan, US, for high- value R&D.
The hub, which is expected to employ 300 people and entails an investment
of $60 million (Rs 276 crore), will conduct exploratory research in math-based
tools, vehicle development and automotive electronics. Says Aditya Vij,
president and managing director, GM India: "India is an emerging market
in Asia and it is essential for us to grow our R&D capability as part
of the overall expansion of our presence in the region." In Chennai, Hyundai
Motors India has begun work on its new R&D facility. Having declared
India as the global hub for its compact cars, the company is beefing up
its r&d centre to be able to do all work related to facelift and model
changes for the Santro in Chennai.
One of the main reasons for this
flurry of R&D activity in India is the low development costs. Compared
with the global norm, it costs as low as 20 per cent to develop or engineer
new products in India. What began as minor adaptations to suit Indian driving
conditions-stronger suspensions to withstand the bumpy roads and more powerful
air conditioners to beat the scorching heat-is getting more complex as
auto majors become comfortable in India. Keen on getting into the volume
game, an Indian R&D facility will help MNCs churn out cars closer to
the Indian consumer's needs and demands. Also, with India fast acquiring
the tastes of a mature market, frequent upgrades and variants have become
the norm to perk up sales. In the five years since it was launched, the
Indica has already seen one major upgrade and seven variants.
There are other reasons why this
is happening now. The Indian market has transformed considerably. Not only
is it a high volume market for small cars-indeed many, including Maruti,
Tata Motors and Hyundai believe it will be the global hub for small and
mid-size cars-but even in B and C segments, the ownership cycle of a model
has dropped sharply from 8-10 years a few years ago to just under five
years now.
In such a scenario, low costs will
be a crucial factor. Arindam Bhattacharya, vice- president, Boston Consulting
Group, says, "The Indian engineering mindset is geared to maximise functionality
at lowest costs given the price sensitive nature of the Indian market."
Not to forget that discerning customers
and strict emission norms have pushed companies to introduce their latest
models in the country, making Indian R&D and production facilities
relevant for India as well as the international market. Says Hormazd Sorabjee,
editor, Autocar India: "Locating their R&D facilities here gives car
companies an obvious competitive advantage in the Indian market."
It is on the two-wheeler track that
Indian engineers proved their point. By delivering the Victor for TVS Motors
and the Pulsar for Bajaj Auto they proved sceptics wrong. The MNCs have
learnt two lessons after landing here in the early 1990s: that the Indian
skill set delivers cost advantages. The Indica project, for instance, cost
just around Rs 1,700 crore (or under $300 million) whereas it would have
cost five times that abroad. mncs have also learnt that Indian skills deliver
quality tuned to the market. Proof of which is the success of Indica which
has sold over 2.8 lakh units since its launch in 1998. What's more, armed
with the scale that it has built on the Indica platform, Tata Motors has
launched the Indigo sedan and is now threatening to deliver the cheapest
car in India for around Rs 1 lakh. The confidence clearly stems from its
ability to deliver products at costs lower than its competitors.
Ditto with Mahindra & Mahindra
(M&M). Thanks to its success on the Bolero platform, M&M engineers
acquired cost efficiencies and confidence to embark on the most ambitious
project: an Indian SUV. Pitted against Toyota's Qualis, the Scorpio was
developed at a project cost of Rs 600 crore and has proven the ability
of Indian designers to deliver looks, power and affordability. Says Pawan
Goenka, coo, automotive division, M&M: "Besides the low cost advantage,
the in-house R&D centre gives us the flexibility and the advantage
to respond to the market needs faster and better."
Typically the world over, it is
volumes that determine investment, be it on plants or on R&D. However,
India has proved to be an exception. DaimlerChrysler set up its R&D
facility here in 1996, hiring Indian techies for high-end research to develop
software for its super luxury cars. Martin Scherk, head of business strategy,
DaimlerChrysler Research & Technology India, speaks for most auto majors
when he says, "We depend heavily on India's technical expertise to make
our cars perform and satisfy our customers. Our R&D centre here gives
us the edge."
At the higher end of the market,
it is not just size or indeed performance that matters. Indian techies
and engineers are enabling auto majors to produce cars that are intelligent
and who come equipped with chips and sensors that controls virtually every
function like air conditioning, de-fogging, speed control and defect detection.
In a sense, Indian engineers are delivering not just cutting-edge technology
but cutting-edge features that help auto majors overtake other players
on the autobahn.
