From the year 1886, when Karl Benz rolled out the world’s first Motor Wagon, to the year 2020, when the Kia Motors Telluride has been awarded the Most Innovative Vehicle (Design and Styling) of the year by ALG, innovation can be termed as the real fuel that has kept the automobile industry chugging — and plugging, in the age of electric vehicles. Innovation, and thus research and development, has always been more crucial to the automotive industry than it has been to most other sectors.
In 2018, automakers worldwide invested a staggering 125 billion USD in R&D, while the entire aerospace and defense industry globally spent less than 20 billion USD for the same purposes. In Europe, the automotive industry ranks first in terms of R&D expenditure, well ahead of sectors such as pharmaceuticals, biotechnology, aviation, and defense.
Why is R&D so crucial to the automobile industry?
Automobiles are no longer a mere mode of transport. They face an ever-increasing demand to serve a gamut of consumer needs, from in-house entertainment to sensing road-rage and responding with “Mood Bursts“. This, combined with the sine qua nons of increasing fuel efficiency, maintaining passenger safety, and providing cleaner alternatives to oil-based fuels, has made innovation particularly important in the automotive industry.
From the time when Volvo opened up the patent for the three-point seat belt for the whole world to use, to a time when autonomous driving and driving experiences enriched by the Internet of Things (IoT) have become the cutting edge of the industry, automotive companies have come a long way in researching and developing products aimed at redefining the consumer perception of automobiles.
Innovation, the real fuel for automakers:
Volkswagen, a very popular name in the automobile industry, spent a staggering 15 billion USD in R&D activities in the year 2018. At the same time, the brand witnessed the overwhelming success of all its 12 subsidiaries and earned a little over 250 billion USD, making it the wealthiest automobile manufacturer in the world. In terms of innovation, Volkswagen is one of the leading companies in the industry, holding high repute for their MQB modular design platform, which they share with several other manufacturers. Their Adaptive Chassis Control System is the benchmark that many automakers wish to reach in order to deliver class-leading ride comfort to their customers.
Another company that cannot be missed when speaking about innovation in the automobile industry is Tesla. From news-breaking products like the Cybertruck or the Roadster to commercial winners like the Model S or Model 3, Tesla has always ensured that it exceeds market expectations. While Volkswagen is a much older corporation with a bigger market share across the world, Tesla, is relatively new to the industry. Yet, interestingly, Tesla has to spend almost the same percentage of its total revenues in innovation as the former does in order to establish itself as a brand in the industry.
Such is the power of innovation in an industry containing 10 out of the top 50 highest spenders on R&D across the world for the year 2020. With joint expenditures amounting to a little over 50 billion USD, these companies promise to change automotive experience for their consumers and are constantly in pursuit of converting that expenditure into an investment — one that shall return more than mere monetary gains in the years to come.
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