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Engineering Revolution

Engineering Revolution

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.

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