Market Trends of India Engineering Research And Development (ER&D) Services Industry
Rising Demand of Engineering Research and Development Services in Automotive
- The demand for engineering research and development (ER&D) services in the Indian automotive sector is witnessing significant growth, driven by various factors, including technological advancements, regulatory changes, and evolving consumer preferences. Also, the shift towards electric vehicles (EVs), connected cars, and autonomous driving technologies has created a need for extensive R&D services.
- With the rising demand, Indian companies are increasing their investments in EV platform development, refining battery technologies, and incorporating cutting-edge telematics and connectivity features. Industry giants such as Tata Motors and Mahindra & Mahindra are at the forefront, spearheading the drive for sustainable automotive solutions, targeting both local and global markets. This surge is prompting automakers to enhance their Engineering R&D efforts, crafting models tailored to these evolving preferences.
- Over the years, the Indian automotive sector has grown. As per the report by SIAM India, after a decline in sales volume of two-wheelers across India in 2021, the market witnessed growth in 2023, and the volume stood at around 19.5 million across India at the end of fiscal year 2023. Such growing demand for two-wheelers in the country has driven the demand for new engineering research and development services in India, which is driving the overall market.
- Moreover, as the demand grows, the Indian automotive sector is witnessing substantial investments and collaborations aimed at enhancing R&D capabilities. Global automotive giants and Indian companies are entering partnerships to leverage each other's strengths. For instance, in January 2024, Valeo announced its manufacturing, aftermarket, and R&D center in Tamil Nadu. The company's Global Technical Center in Chennai, functioning as a main hub for research and innovation, unites more than 3,700 top engineering professionals from various regions of India.
- Consumer preferences are shifting towards SUVs and premium vehicles, reshaping the automotive R&D landscape. Today's buyers seek vehicles that blend comfort, advanced features, and top-notch performance. This surge in demand is prompting automakers to ramp up their engineering R&D investments, focusing on crafting models that meet these evolving preferences. The SUV segment is poised for substantial growth, fueled by the rising appeal of versatile, rugged vehicles that can seamlessly navigate both city streets and off-road terrains.
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Rising Number of Engineering Research and Development Service Centers in Tier 1 Cities
- The demand for engineering research and development (ER&D) services in tier 1 cities in India is experiencing substantial growth due to several key factors, including the concentration of talent, favorable business environments, and robust infrastructure. Tier 1 cities such as Bengaluru, Hyderabad, Chennai, Mumbai, Pune, and the Delhi-NCR region host a significant proportion of India's highly skilled workforce. These cities produce a large number of engineering graduates annually, creating a vast talent pool for ER&D services.
- Tier 1 cities offer a conducive business environment with advanced infrastructure, numerous tech parks, and specialized economic zones that support ER&D activities. These cities are also home to many global capability centers (GCCs), which have evolved from back-office operations to centers of innovation and digital transformation. GCCs in tier 1 cities focus on developing new digital capabilities, automation, and AI-driven solutions, driving the demand for ER&D services.
- According to a report by World Population Review, there are eight largest cities in India by population. In 2023, Delhi was the largest city in terms of the number of inhabitants. The capital city was estimated to house nearly 33 million people, followed by Mumbai, Kolkata, and others. With the growing population in these cities, many companies look forward to opening their ER&D centers in tier 1 cities.
- For instance, in May 2024, Honda's research and development arm for motorcycles and power products in India, Honda R&D (India) Private Limited (HRID), unveiled its new Solution R&D Center in Bengaluru, Karnataka. The center's primary goal is to spearhead Honda's ambition of achieving carbon neutrality across its products and corporate operations by 2050. Honda is actively striving to transition a significant portion of its product lineup to utilize carbon-neutral power sources.
