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How Deccan Triangle is fuelling auto research

Ever since India became a major automobile market, global manufacturers have flocked to the country in the hope of riding the boom in the demand for cars and sports utility vehicles with products that click with local buyers. And when it comes to setting up research and design centres, one particular place holds a special appeal for them.

The Deccan Triangle, or the area comprising Chennai, Bangaluru, Hyderabad and Pune, has seen interest from nearly half of the top 500 global R&D spenders. In all, 225 manufacturers have set up their innovation centres in the region, with Ford, Royal Enfield and Apollo Tyres becoming the latest entrants. The three companies collectively plan to invest over Rs 3,000 crore in their R&D centres over the next two years. Of the major global automobile names, only Porsche and Rolls-Royce do not have a presence in India.

From a large pool of talented engineers to draw from to good infrastructure connectivity, several factors have worked in the Deccan Triangle’s favour. “In the last 7 to 10 years, a number of multi-national companies have set up R&D centres in India to cater to both domestic and export markets,” says Raman CV, executive director (engineering), Maruti Suzuki India.

The primary aim of these innovation centres has been to help in the rapid localisation of products — something that is of the utmost importance in the country’s extremely price-sensitive market. In the process, their work has resulted in the transfer of knowledge to Indian companies.

“These R&D centres are consistently bringing in domain experts from mature markets, training the talent pool here, equipping them with the necessary skill sets and imbibing a strong process culture,” says N Saravanan, senior vice-president (product development), Ashok Leyland.

Maruti Suzuki India is one company that has benefited the most from this. While it started its journey of in-house engineering capability and model development in 2000 by redesigning old cars such as the Zen, Alto and WagonR, the bulk of the design work was carried out in collaboration with its parent, Suzuki Motor Corporation. From 2003 onwards, Maruti Suzuki started to train its engineers at Suzuki Motors and initiated co-design work with its parent for the Swift. After co-designing a number of other cars, including the Baleno, Ciaz and S Cross, the company is now ready to take the lead. It was the lead developer for the Vitarra Brezza and now plans to invest over Rs 2,000 crore to set up a research and design centre in the region, though its main plants are located in the north.

The growing confidence of the innovation hubs in India is visible elsewhere too. “Earlier it was more low-end CAD (computer-aided design) work that was done at the innovation centres in India. However, now emission and crash & safety regulations are driving technology in current and new platforms,” says Rajan Wadhera, president & chief executive, Mahindra Research Valley, the research hub of Mahindra & Mahindra in Chennai.

A big pull
Foreign players are drawn by the cost advantages that the region offers and the easy availability of talent. Besides, India is a market with a lot of upside in the days to come. The car-to-people ratio in the country is still under 20. This means there is still a huge market for cars that is waiting to be tapped and those with R&D centres to customise their products to suit local tastes stand a higher chance of success than others.

“India has great demographic advantages with its large constituency of middle class people and excellent technical knowledge. Lower cost of human resource is another attraction, and these advantages project India as one of the best grounds for investment in automobile manufacturing facilities and R&D capabilities,” says PK Mohamed, chief advisor (R&D), Apollo Tyres.

The appeal of the Deccan Triangle is easy to see. Chennai, Pune and Bengaluru have traditionally been the hub for original equipment manufacturers. “This is one of the major reasons why we are seeing a spurt in R&D in the area. These areas have a strong ecosystem fuelled by skilled engineers, vast and young talent pool, educational institutions and a tech-savvy population,” says HV Chandrakant, president, TVS Motor. The two-wheeler major, which employees around 600 people, invested almost Rs 220 crore on R&D last year.

Of the 66 automobile manufacturers present in the country, more than half are located in Tamil Nadu. The rest are scattered around Maharashtra (32 per cent), followed by Karnataka (13.6 per cent), Rajasthan (9.1 per cent), Uttarakhand (7.6 per cent), Uttar Pradesh (6.1 per cent) and Gujarat (6.1 per cent).

IT power
The fact that Chennai and Bengaluru are also IT hubs acts as an added advantage. Automobile research relies heavily on information technology with nearly 50 per cent of vehicle systems being supported by electronic control unit. As the region is rich in IT talent, this means companies don’t have to look far to meet their hiring requirements.

This is also the reason why Hyderabad is emerging as a strong centre in the region. “Because of its ITES focus and proximity to Chennai and Pune, companies prefer Hyderabad to set up their new centres. From a cost point of view too it scores over other centres,” says Rakesh Batra, partner and national leader (automotive sector), EY.  

Mohamed believes Tamil Nadu, Karnataka and Andhra Pradesh are also more proactive in attracting foreign companies with their favourable land policies and tax sops on offer. Not surprisingly then, it is not just automobile companies that are keen to set up their R&D centres in the region but also other players in telecom, infrastructure and wind power are increasingly picking the Deccan Triangle for their innovation centres.