Over the years, the IT and software industry has emerged as a flag-bearer of brand India. The country’s Engineering, Research & Development (ER&D) sector has a chance to script a similar story as the automobile gets increasingly software-defined. In the USD 36 billion Indian ER&D market, the share of automotive is at about 20%. “The automotive share will at least reach 30% in the next five years”, says Siva Polimetla, Head – ER&D, NASSCOM, the industry association for India’s technology sector.
The growth is being led mainly by software engineering and fuelled by the global CASE (Connected, Autonomous, Shared mobility, Electrification) megatrends. According to an industry report, ER&D spend in the automotive sector stands at about USD 150 billion, and is expected to reach USD 200 billion by 2025.
With the rising trend of software content in a vehicle, the share of hardware cost in a car is set to dip. “The expectation is that by 2025, about 40% of the automobile cost will be software,” says R V Narasimham, SVP and Global Head, Integrated Engineering Solutions, Tech Mahindra.
As the automobile gets redefined by the megatrends, there’s also a growth in the efforts of OEMs and Tier 1 suppliers to set up technology centres, or ramp up capacity in the existing ones, in India. Daimler, Renault-Nissan, and Stellantis are among the global OEMs which have chosen India to establish technology centres to develop solutions for applications globally. Much of the expansion strategy is driven by the growing number of software-driven technologies in a vehicle.
Renault-Nissan Technology and Business Centre India (RNTBCI), for example, plans to ramp up its engineering team of 8,000 members soon. RNTBCI’s managing director Debashis Neogi views that the industry’s growing adoption of or dependence on software is also driven by factors that are outside the vehicle.
Stellantis, which has three technology centres in India, plans to earn an incremental revenue of around Euro 20 billion from its software- driven vehicles in a few years from now. It’s also targeting 34 million monetizable connected cars by 2030. Its Hyderabad tech centre which mainly works on Artificial Intelligence and software technologies will have a key role to play in realising both the plans.
It is estimated that in the coming years as much as 30% of an OEM’s revenue could come from services. The trend for OEMs gradually is towards adding services and monetising them. Renault-Nissan Alliance is one among them. “Software plays a major role in on-board technologies like CASE, and also in off-board services. So software will really play a big role in product development, but also services around the car,” says Neogi.
In technologies like CASE, and services related to the car, both on board and off board, and in product development software plays a major role. According to industry experts, 30% of the revenue of a car company will come from services.
Engineering and design services provider Tata Technologies is among the companies ramping up its workforce to also tap the growing opportunities in the automotive space. Its team strength crossed the 10,000 mark for the first time a few days ago.
As industry borders get blurred, Sriram Lakshminarayanan, President and CTO, Tata Technologies, expects the same to happen on the technology side. According to him, “The industry is going to look at ER&D skills and digital skills and IT skills. So when you talk about skills that are needed for the future and skillset scale, I don’t think there is a better country than India that is positioned to do this.”
Along with the technological disruption in the vehicle, there’s also a trend of the product life cycle getting shorter. Gone are the days of full vehicle programme development in 4 or 5 years. The challenge thrown in now is to do it in less than 2 years. “Now, for that to happen, the fundamental DNA itself needs to change, right where in which it is becoming more and more an ecosystem play,” says Lakhsminarayanan.
The challenges
Engineers of technology centres in India until recently were not engaged in such crucial assignments. But there’s now a trend of engaging them in full scale projects. And that is also leading to a talent crunch. There’s a need for policies and initiatives by both the government and the industry players to address this challenge.
The skill gap challenge aside, India will also have to grow the talent pool to meet the growing demand. The overall ER&D talent pool is about 1 million people This makes India the third largest R&D destination in headcount. According to NASSCOM, the demand is going to rise by another one million in the next five years.
“Today, the supply is about 600,000 and around another half million talent is to be aligned to the industry needs. I think that is what we are working with the companies (to address),” says Polimetla. About 70% of the talent demand, he says, is for embedded, full stack technologies, and digital integration, including digital engineering.
Another challenge is for engineers to enhance the software productivity, which is learnt to be affecting the time-to-market plans of OEMs. “The lines of code in an automobile have grown from a few thousands to a few millions. But the big challenge is that productivity has not increased in line with that,” says Narasimham. According to him, adopting some of the best practices in applications and driving the productivity curve of the software industry could help.
As technology disruptions take place, and the automotive industry becomes increasingly software-defined, standardisation of interfaces, and collaborative mode of working on new technologies become important. “One of the key elements that we are working with the government is for an innovation supercluster for mobility and a couple of other sectors. So this will help the industries to come together and solve the industry-level challenges.” says Polimetla.
To realise the Indian ER&D industry’s strong potential, both the Central and State Governments could help in meeting some of the challenges and needs. Karnataka became the first state to roll out an ER&D Policy in 2021. Taking a cue from the State level EV policies, there could be a case for more state governments to roll out policies which could help India to establish itself as a global ER&D powerhouse.
