EV euphoria revs up biz for IT cos
Total outsourcing work in engineering services space to India may double in next 5 yrs from current $4-bn level as connected, shared mobility & EVs in the automotive space take a strong foothold
- Entry of corporate giants such as Tesla, Google, Amazon, Apple into the EV space
- There's a lot of disruption created for the traditional players
- Given the cost pressure, they're outsourcing many works to Indian engg service providers
- Established players increasing R&D spend on EV space
The automotive outsourcing market is traditionally dominated by European companies. However, this trend is changing as companies undertake outsourcing, as part of strategic cost initiatives, to Indian engg service firms
Bengaluru: Indian engineering services companies are on a sweet spot as adoption of electric vehicles (EVs) gain traction across the world including India. Experts said that automotive sector, which is the largest segment in the engineering services outsourcing space, is facing a lot of disruption led by EVs and all established players are increasing their R&D spend to have a good product lineup in this space. However, cost factors are prompting these automobile companies to outsource much of this R&D work to engineering services companies, which is likely to benefit Indian engineering services providers.
Tier-I IT firms like Tata Consultancy Services (TCS), Infosys, Wipro, HCL Technologies, Tech Mahindra have a good automotive practice. In fact, one of the largest deals last year was the collaboration between Wipro-Marelli in the automotive engineering space. Among pure-play engineering services firms, L&T Technology Services (LTTS), KPIT, Tata Elxsi, Tata Technologies are already bagging many projects in the EV space due to theirniche service offerings.
"With the entry of corporate giants such as Tesla, Google, Amazon, Apple into the EV space, there is a lot of disruption created for the traditional players. Therefore, established players are gearing of their R&D spend on EV space. Given the cost pressure faced by the automotive industry globally, they are outsourcing many work to Indian service providers, which was not the case earlier," said Pareekh Jain, an engineering services sector expert & founder of Pareekh Consulting.
In India also, Ola and Ather Energy are already changing the landscape of EV scooter market. Given this disruption, all Indian automotive firms including Tata, Maruti, Hero, Bajaj among others are raising their R&D spend on EVs.
"Currently, the total outsourcing work worth around $3 billion-$4 billion comes to India. This is likely to double in the next five years as connected, shared mobility & EVs in the automotive space take strong foothold," said Jain.
According to experts, the automotive outsourcing market is traditionally dominated by European companies. However, this trend is changing as companies undertake outsourcing as part of strategic cost initiatives.
"Outsourcing is increasing and within outsourcing, offshoring is also rising. So, Indian companies are getting a better share of this pie. As EV has the largest share within the automotive outsourcing space, those Indian companies with sound EV practice are likely to benefit from this demand for testing, customization-related projects," said another expert.
Of late, all automotive products- be it cars or two wheelers or three wheelers- are witnessing larger electronic components embedded with software. This has been driving the growth for Indian IT firm in recent years. With EV adoption rising, the growth graph is likely to increase further.