Chinese competition, slower EV adoption to keep India's auto R&D spending under pressure: Kotak
New Delhi, August 6
India's automotive sector is likely to face R&D budget constraints in Calendar Year 2026, with spending expected to remain muted over the next few quarters amid intensified Chinese competition, according to a report by Kotak Institutional Equities.
It says, "Automotive OEMs (Original Equipment Manufacturers) are prioritizing investments in existing platforms and models to counter increased competitive intensity from Chinese OEMs amid a more gradual increase in BEV (Battery Electric Vehicles) sales mix."
In the automotive sector, R&D spends continued to remain under pressure due to industry dynamics, as industrial and utilities clients are heavily investing in Information Technology (IT)-Operational Technology (OT) convergence and tech modernisation initiatives to improve efficiency and asset utilization.
"These companies are beneficiaries of the surge in datacenter-related investments globally with flow-through benefits across the value chain," it said.
Furthermore, automotive OEMs are shifting their focus towards existing vehicle platforms and models as they respond to intensifying competition from Chinese manufacturers and a slower-than-anticipated transition to battery electric vehicles.
"Automotive OEMs are prioritizing investments in existing platforms and models to counter increased competitive intensity from Chinese OEMs amid a more gradual increase in BEV sales mix," it said.
The report added that investments are being channelled into body engineering, value analysis and homologation, benefiting companies with stronger exposure to mechanical engineering services. At the same time, it said, "New platform development programs have either been deferred or cancelled.".
In contrast, the commercial vehicle and off-highway equipment segment continues to remain resilient, supported by sustained investments in alternative powertrains and autonomous technologies.
These investments are expected to remain healthy over the next three to four quarters, although the segment typically experiences deeper business cycles and lower R&D spending than the passenger vehicle market.
"These spends are likely to remain healthy over the next 3-4 quarters. However, we note that business cycles are deeper and R&D spends are significantly lower than passenger cars," it said.
— ANI
Reader Comments
Not surprised. Our automakers are playing catch-up, and instead of innovating, they are just tweaking existing models. Meanwhile, the world has moved on to electric, connected, autonomous vehicles. We are stuck in the past with a "jugaad" mindset.
The government needs to step in and create incentives for R&D in EVs. Otherwise, we will always be dependent on foreign tech. Atmanirbhar Bharat should mean not just manufacturing but also innovation. We are lagging in battery tech and software.
Kotak is spot on. The pressure from Chinese OEMs is real, but our own industry is also to blame. We have been too conservative, waiting for the perfect time to enter the EV market. That time has passed. Now we need to step up or get left behind. 😬
It's not just about EVs. Even in the internal combustion engine space, we need to invest in cleaner technologies. The focus on existing platforms is a short-term measure that won't help us in the long run. Commercial vehicles might be doing fine now, but the future is electric.
Interesting to see how this impacts our IT and engineering services companies. If auto OEMs cut back on new platform development, companies like Tata Elxsi and KPIT will feel the heat. They need to diversify into other sectors like those mentioned in the report – data centers and IT-OT convergence.
We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.