After years of neglect, domestic two-wheeler companies are shoring up their research and development (R&D) in the wake of intensifying competition triggered by global players.
A quick look at the R&D spending of Indian two-wheeler firms reveals a stronger thrust being given on design and development. Companies such as TVS Motor, Bajaj Auto and Hero MotoCorp are all spending more on R&D now. Though their R&D spending hasn’t increased dramatically it is better compared to the past.
“Clearly, the sector is new to the R&D game in India. There may be some exceptions up to a point. But, on the whole, the global players have the scale, skills and most importantly, processes that put them at significant advantage at this time. Therefore, it is incumbent upon the Indian companies to achieve maturity in these areas at a rapid pace,” Kumar Kandaswami, senior director, Deloitte India, says.
While Japanese firms spend 5-6 per cent of their revenues on R&D, Indian companies’ R&D expenditure was always at one per cent or even lower. However, it is now hovering around 1-2 per cent and is likely to go up in the coming years as Indian firms embrace R&D and innovation wholeheartedly to grow. Mr. Kandaswami feels that R&D focus is absolutely important for two-wheeler firms to fight global majors and stay afloat. “The foreign brands are making significant progress and seem to be dominating some product categories or markets. As they gain experience, they will spread their distribution and product range — the only way to fight them in the market would be to have a pipeline of exciting launches. Further, on some of the products push down the life-cycle cost of ownership — both of which will require superior R&D,” he adds.
But he also admits that there is fair amount of focus on R&D on the part of Indian companies. While R&D is one part, the whole New Product Development (NPD) process is where Indian companies have to build strength.
TVS Motor leads
Among the Indian two-wheeler firms, TVS Motor Company currently leads the R&D table, followed by Bajaj Auto and Hero. TVS Motor's R&D spend has increased as the company has been working on new engine platforms to roll out many new products for a strong comeback. The company spent 1.79 per cent of its revenues on R&D in 2012-13, up from 1.68 per cent in the previous year.
“ Over the last five years, the automobile market has evolved and with an increasing demand for technologically superior products, the number of new projects that we are working on has doubled. Manpower has also gone up proportionately increasing by around 40 per cent or so,” says Vinay Harne, President - NPI, TVS Motor Company. “Our strong focus on R&D capabilities has enabled us to bring out products that compete with global players in countries where we do business.," he adds.
For Bajaj Auto, strong in-house R&D capabilities have come in handy to launch vehicles with higher fuel efficiency and performance. Its R&D spend has increased to 1.2 per cent (of the total sales) in 2012-13 from 0.8 per cent in 2011-12. Bajaj’s Triple Spark Technology for the Pulsar family has won accolades. “Our strategy of differentiation is possible only due to in-house capability of developing engines and bikes. The highly successful platforms of Pulsar and Discover are complete in-house developments,” says K Srinivas, President - motorcycle business, Bajaj Auto.
Bajaj claims undisputed leadership position in the sports segment with Pulsar (with 47 % share) and is a strong challenger in the mileage segment with Discover (18 % share).
Global design partners
Though Hero MotoCorp's R&D spend was below one per cent in 2012-13, the largest Indian two-wheeler brand has embarked on a slew of initiatives on the R&D front ever since its separation from a joint venture with Honda.
While it has planned to invest more in R&D, the company has global design and technology firms as partners now to develop next generation two-wheelers.
Hero is also setting up a world-class technology and integrated R&D Centre at Jaipur with a host of facilities such as innovation labs for component design, engine and vehicle testing, test tracks and vehicle simulation unit, among others.
Last but not least
Meanwhile, Mahindra Two Wheelers, latest entrant, has also set up an exclusive R&D centre in Pune to develop engines for its two-wheeler range, while Mahindra Research Valley, Mahindra’s group’s automobile R&D facility near Chennai, would also provide a big support. “Overall, Indian players remain focused on development of new technology — both vehicle side and engine side besides financial investments in global firms in last few years to further strengthen their design and engineering capabilities. Also, Indian players are investing to produce and export vehicles that are compliant with applicable standards in overseas markets — for instance: ethanol mix fuel and flexi-fuel vehicles for the Brazilian market,” points out Subrata Ray, senior vice president – corporate ratings, Icra. Though global OEMs have superior design and technological capabilities, emerging strong eco-system for design and development in India should come in handy for the Indian brands to try and match the prowess of global players in the coming years.