has the largest royalty
bill in the industry and spent around Rs 3,800 crore on this account in FY20, equivalent to 5 per cent of its net sales. It is followed by Honda
Motorcycle & Scooters, which spent Rs 1,252 crore on royalties.
Union Commerce Minister Piyush Goyal last week asked multinationals to reduce royalty
payments to curb the forex outgo and promote domestic manufacturing and product development.
such as Tata Motors, Mahindra & Mahindra, Hero MotoCorp, Bajaj Auto, and TVS Motors spend large sums on research and development as they try to catch up with the MNCs. In FY20, the country’s six home-grown automakers
together spent around Rs 6,000 crore on R&D, equivalent to nearly 3.4 per cent of their net sales.
“Access to latest technologies is critical for India’s rapid economic development. Royalty payments must be viewed as a facilitator as long as they are within a reasonable range and globally competitive,” said the spokesperson for Toyota
Kirloskar Motors. Indian subsidiaries of global auto makers accounted for nearly two-thirds of all automotive exports. According to the data from Capitaline, Ford
India tops the charts with exports worth Rs 16,700 crore in FY19, accounting for 70 per cent of its revenues. In comparison the company spent Rs 564 on royalty and technical fees in the year.
is followed by Hyundai
Motors India, which exported vehicles worth Rs 12,000 crore in FY19, accounting for 28 per cent of its revenues. Against this the company spent Rs 1,132 crore on royalties and technical fees. Two-wheeler maker Bajaj Auto
is the country’s third largest automotive exporter and exports accounted for nearly 40 per cent of its net sales in FY20.
Rahul Mishra, Principal, Kearney is of the view that there has to be a mechanism in place to increase local technology and intellectual property development.
“After the push on local manufacturing, we need to strengthen local research & development (R&D) capabilities. There have been incentives to promote local R&D but now may be an opportunity to drive a shift as it involves a long term economic interest and is a step towards making the country self dependent,” says Mishra.
Having said that, no action should be a knee-jerk as it causes more disruption and there has to be clearly defined timeline and a sunset clause before taking any decision, he added.
An executive at a global automaker said: “We buy technology from various sources across the globe. We pay for it but the risk we take as a company is assimilating the technology into one cohesive whole and selling it in the marketplace.”