Indian Automakers under pressure to scale up R&D

Indian auto companies are under going pressure to spend significant amounts on R&D and new product launches as customers’ interest cannot be sustained unless companies launch new products. This has become necessary for the auto companies to face tough competition against global rivals such as Honda, Toyota or General Motors (GM). The total expenditure of the local auto companies on R&D as a percentage of sales are low compared to global players which are looking to attract consumers with superior product innovations and cheaper, compact models. At the 10th Auto Expo Toyota showcased Etios, Volkswagen launched its Polo while GM launched Beat, all cars designed specially for Indian market.

Against these launches Indian companies were far behind and except for Tata Motors’ Nano, few Indian models have managed to catch the world’s eye. Abdul Majeed, auto practice leader, PwC commented on this that only those auto  makers would be differentiated who spend on R&D and who addressed issues of the automotive industry which include climate change. Toyota maintained its R&D budget at $9 billion despite the drop in revenue from $262 billion in 2007 to $209 billion in 2008. Similarly, GM maintained its R&D costs $8 billion in spite of revenues declining from $180 billion in 2007 to 149 billion in 2008.

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