Larsen & Toubro bets on $1.5 bn return from push to electric vehicles

By Alex Gabriel Simon

Larsen & Toubro Ltd.’s engineering services arm is ramping up investments in self-driving and electric vehicle technologies, betting on India’s appeal as a source of expertise for global manufacturers looking to expand in the field.

L&T Technology Services Ltd., whose customers include BMW AG and Airbus SE, wants to accelerate growth after recording sales of $1 billion in the year through March, Chief Executive Officer Amit Chadha said in an interview. The company, an affiliate of India’s biggest construction conglomerate, now envisages a revenue run-rate of $1.5 billion in the next two years, he said.

The company has set up design and engineering facilities for autonomous and EV technologies in India’s Bengaluru, Munich, and Peoria, Illinois, over the past three years to get closer to vehicle makers. While its customers in the tech, telecom and construction industries grapple with a slowing economy and higher rate of inflation, makers of next-generation vehicles are benefiting from a shift from older technologies to more environmentally friendly options.

“We are scaling up,” Chadha said. “A significant part of our growth is now coming from electric autonomous vehicles — not just cars, but buses, track and hybrid aircrafts as well.”

The company has ramped up hiring of specialized engineers who can help clients design more efficient battery management systems and EV chargers. It also develops artificial intelligence systems that can help autonomous vehicles self-learn to identify objects on the road.

Global companies have long relied on India’s talent for basic technology outsourcing, and the country is also emerging as a powerhouse in more advanced tasks. It’s now a leader in engineering research and development outsourcing, with its $40 billion market accounting for a third of the global total, according to a KPMG report.

Still, the South Asian nation won’t be immune to global headwinds, according to Apurva Prasad, vice president at HDFC Securities. “If the global R&D spends come down, it is bound to reduce demand for engineering services,” he said.

Apart from the bet on the transport segment, L&T Technology Services is investing in areas such as medtech, 5G and sustainability, Chadha said. “The biggest risk that I lose my sleep over is the risk of being irrelevant in the world of technology,” he said. “As long we stay relevant, you will continue to see growth.”