3rd ICAI 2024

International Conference on Automotive Industry 2024

Mladá Boleslav, Czech Republic

Dabetic, Rodic and Vujanic (2019) mention that the automotive industry is an investment intensive sector when it comes to R&D investments. Their research was conducted on the 5 largest automotive companies. In our research, which summarizes the entire automotive industry, we found that R&D spending has a small share in the total invested capital of these companies, which can be seen in Figure 3. These expenditures reduce the return on invested capital, but only by about 2% at most. This implies that these expenditures do not have a high share in the total invested capital in the automotive industry.

Figure 3: Influence of R&D on ROIC

Source: authors’ calculations We can also ask whether the level of investment is related to growth, i.e. whether firms that invest more also grow more. We can see the relationship between median investment rate and median sales growth in Figure 4. It is clear that firms that have a higher investment rate do not automatically have higher growth, but we can also see that firms that invest very little (20% or less; including R&D expenses) have very low growth. Thus, the ideal investment rate for growth cannot be easily set and growth depends on several factors at once, but the investment rate can be one of these factors.

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