KPIT among top engineering R&D plays as Motilal initiates coverage: Check out the rationale

Despite a recent slowdown in capex by western car makers, the long-term outlook remains robust, Motilal Oswal said in a note, as global mobility is accelerating the role of software in vehicles prompting it to initiate coverage on automotive engineering R&D (ER&D) players KPIT Tech, Tata Technologies and Tata Elxsi.

The note said ER&D specialists with 'domain depth, co-development, and global delivery' are well-poised to benefit from the tailwinds. "Despite the recent moderation in capex cycles among Western OEMs, the long-term outlook remains robust. Asian OEMs are pivoting toward hybrids and localized strategies, while global players are recognizing software as the key competitive frontier," the note said.

Motilal Oswal added that several Asian OEMs are 'pivoting' toward hybrids and more localised strategies, and global players are betting on software as the next 'competitive frontier'. All this, MOSL said, makes specialized engineering service players an attract longer term bets.

MOSL note said the shift is mobility has been towards CASE (connected, autonomous, shared, electric), which is accelerating the role of software in vehicles. As a result, OEMs are moving towards a centralized domain and preparing for software-defined vehicles (SDVs). Also, regulations world over are nudging automakers towards greener mobility, leading to electric powertrains.