A new study published by research firm HfS Research predicts that the reported faster growth of Tesla and other companies disrupting the automotive sector may prove to be a boon for Indian engineering and research & development – ER&D – service providers.
The disruption to the business model and increased focus on ER&D fuelled by companies such as Tesla, Uber, Lyft, Grab and Ola in the automotive space are likely to lead to a “windfall of deals” in the sector over the next two-three years.
Companies such as TCS, HCL Technologies, Infosys, L&T Technology Services, Tata Technologies and others are expected to see the emergence of automotive as the biggest contributor in ER&D services. This segment broadly provides solutions for connected cars to smart factories of tomorrow, which includes embedded systems, internet of things, product engineering.
Pareekh Jain, senior vice-president, engineering services, at HfS Research said of the research that:
“We predict there will be few big deals ($50 million+) in automotive in next two to three years. Factors such as technology change (existing car models to autonomous cars, electric vehicles, or connected cars), high R&D spending, business model disruption, and entry of technology companies will push automotive sector to partner with ER&D service providers.”
Early this month, TCS bagged a large deal from French carmaker PSA, which aims to bring in smart cars in the Indian market in a couple of years.
Telecom is currently the biggest taker of ER&D services, a $24-billion industry of which India’s share is estimated at $154 billion. A sharp rise in the number of deals during the past 12 months has turned automotive as the largest contributor in the number of deals, noted the HfS Research report.
While automotive firms typically spend about 3-7% of their revenue on R&D, Tesla, the electric vehicle major, spends about 17% of its revenue on R&D, the report noted. This shows how these companies will increase focus on R&D spending to compete in new technologies with companies such as Tesla.