India's auto sector to face R&D budget crunch by 2026: Report

India's auto sector faces R&D budget constraints by 2026 due to Chinese competition and slow BEV sales, a report states. OEMs are now prioritizing existing models, deferring or cancelling new platform development programmes.

Passenger Vehicle OEMs Face R&D Squeeze

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.

Shift Towards Existing Models

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."

Commercial Vehicle Segment Shows Resilience

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)

(Except for the headline, this story has not been edited by Asianet Newsable English staff and is published from a syndicated feed.)