Balancing Efficiency and Innovation in R&D Operations in Automotive Sector

Piyush Arora, MD and CEO of Škoda Auto Volkswagen India, recently shared his insights with Industry Outlook on how R&D teams are navigating the complexities of data integration while maintaining operational efficiency in India's evolving market. He also discussed the challenges R&D teams face in accelerating development cycles as India transitions to electric mobility and more.

As India transitions to electric mobility, R&D teams face pressure for faster development cycles. How are they balancing innovation with efficiency?

The automotive industry is undergoing a significant transformation, not only in India but globally as well. The pace of change that research and development teams must now embrace is vastly different from before. Reflecting on the changes taking place, they are multifaceted.

First and foremost, there is a strong focus on alternate propulsion systems. Like many others, the Volkswagen Group is prioritizing electrification as a key alternative. However, beyond electrification, we are also exploring opportunities to optimize our existing internal combustion engine (ICE) business, while simultaneously considering hybrid vehicles and other alternative fuels.

Another critical area of focus is digital transformation, which is reshaping the automotive landscape. Vehicles are becoming increasingly connected, moving toward self-driving capabilities. Connectivity not -only enhances vehicle safety but also unlocks new opportunities in infotainment, telematics, and value-added services for customers. Customer expectations in these areas are evolving at an unprecedented pace.

This digital transformation is also driving the third major shift: mobility is evolving into a service. In the automotive industry, the conventional product development cycles were primarily hardware-driven, focusing on vehicle dynamics, body strength, and safety. However, the focus is now shifting toward digital transformation, making cars more user-friendly, particularly in terms of user interfaces. This includes the integration of central domain controllers into vehicles, which enable better control and pave the way for software-driven vehicles.

These are the skill sets that will be increasingly required in the automotive R&D space going forward. India has made significant progress in this area, and Indian engineers, along with the numerous global competence centres emerging in the country, are supporting these initiatives. Many global OEMs and component suppliers are focusing on research and development to create connected and more sustainable mobility solutions. These are the key focus areas for the industry, and we are actively engaged in similar work at our Škoda Auto Volkswagen India - Technology Centre Pune, India.

Additionally, the integration of supplier innovations into product development cycles is becoming the norm. In the past, automotive companies or OEMs typically handled most of the development work internally. Now, there is a greater emphasis on integrating modules developed by suppliers who possess specialized expertise. For OEMs, the challenge lies in effectively integrating these modules into the final product to deliver the benefits customers are seeking.

With connected vehicle systems becoming increasingly complex, how are R&D teams managing data integration without sacrificing operational efficiency in India’s market?

Cars are becoming more connected and moving toward autonomous driving from the initial ADAS levels at this point to perhaps more advanced systems in the future. Additionally, the multiple sensors in the car, which are collecting data points, must process this data in real time to achieve the desired safety outcomes, performance goals, or comfort levels you aim for. Real-time diagnostics is something you can achieve by collecting and analysing this data, and seamless integration through a central domain controller will also facilitate over-the-air updates, allowing for upgrades to be brought into the car.

All these advancements are turning the automotive industry into something akin to a moving computer, where you can deliver much more value-added services to customers. The user experience is improving significantly, and from this perspective, we in India, with our technical center, are highly focused on customer-centric innovations that are relevant to Indian customers. While the requirements of Indian customers are not vastly different from globally evolving trends, the demographic of India and the affinity of Indian customers toward technology mean they often expect more from products compared to customers in Western markets. Our local technical center helps us bring innovations that meet the expectations of the local market.

Localization of electric vehicle components is key in India. How are R&D teams balancing innovation with cost-effective, localized manufacturing solutions?

We are constantly enhancing our localization by strengthening our local supplier network and optimizing costs. Over the last 5 to 7 years, challenges like COVID, semiconductor shortages, and geopolitical shifts have disrupted supply chains across the manufacturing industry, particularly in automotive. These challenges have taught global players to de-link and de-risk their supply chains, bringing them closer to the market and manufacturing hubs. We have already taken steps in this direction by increasing localization and leveraging the Indian ecosystem for product development. Our suppliers are integrated into our product development cycle, working with us throughout the product lifecycle. This approach, which we’ve applied to ICE vehicles, will also extend to BEV vehicles.

The supplier ecosystem in India is developing rapidly, supported by government incentives for manufacturing, not just for OEMs but also for electric vehicle component manufacturers. This helps us de-link our supply chain from specific geographies and allows us to leverage India’s frugal innovation and cost-effective solutions. These factors enable us to develop products that are more competitive for Indian customers. While we’ve already achieved a high degree of localization for ICE vehicles, we are adopting a similar strategy for electric vehicle components. This will happen in stages as the Indian EV component industry evolves. Considering that electric four-wheelers currently have only 2-3% market penetration in India, it will take time for the industry to become fully self-sufficient in terms of locally manufactured components and de-linked supply chains. However, our focus remains on bringing the best-suited technology to the Indian market, developed and produced in collaboration with Indian supplier partners.

Sustainability is crucial in automotive R&D. How are Indian R&D teams integrating eco-friendly materials, such as recycled composites, while maintaining production efficiency and profitability?

Sustainability for us as a Group, and also in India, is part of our strategic pillar. We strive in all our value chains to bring in sustainability while offering vehicles that are safe, fuel-efficient, and moving towards zero tailpipe emissions. At the same time, we aim to make them more environmentally responsible. There are multiple ways of achieving this from a product offering point of view, but we see sustainability more holistically. We want to integrate these measures into our complete value chains.

For instance, we are trying to make all our manufacturing plants run on green energy. We have already achieved this with one of our plants in Chhatrapati Sambhajinagar (formerly Aurangabad), which is running on 100% green energy. At the same time, we are also working towards ensuring that by the turn of the decade, our manufacturing plant in Pune also runs on 100% green energy. Currently, it operates on almost 30% green energy. Apart from that, initiatives like zero waste to landfill, becoming water-positive, and planting more trees are some of the other steps we are taking to make our value chain sustainable.

Additionally, we are integrating our value chain partners, whether they are upstream or downstream, including both suppliers and dealers, into an initiative where we are collaborating more closely with the CII to participate in the drive towards sustainability.

To conclude, where do you see the sector in the next decade? What key trends will shape the sector in the future?

The transformation is leading the automotive industry right now towards value-added services. While COVID has taught us that as well that individual mobility is here to stay and is going to be the preferred way of transportation, more and more mobility-as-a-service will evolve. Whether it is autonomous driving or the way people utilize transportation services, this is one trend that is definitely going to evolve.

Apart from that, connected vehicles and more sustainable vehicles will emerge, and sustainability will come, from zero tailpipe emissions. Today, the world has evolved more in the direction of electrification. So, if you look carefully, there will be connected electrification taking place in the automotive industry. At the same time, mobility-as-a-service is going to evolve. As people spend more and more time traveling, they want cars to become increasingly comfortable, luxurious, and sometimes even to the extent that they can do their daily work while moving from one location to another.

These are the trends we see evolving. Premiumization, even in the small car segment, is another factor we are already seeing today, and this is just the beginning. That trend will take it to a very high and different level altogether.