As head of future solutions at the core Interior Division of Continental, Ralf Lenninger looks at the big trends that are not only reshaping the car business but also are redefining the roles that traditional automotive supplier groups such as Continental need to play.
The transformation of the auto industry is forcing suppliers to be in more direct contact with end consumers, the veteran automotive supplier executive says. That’s because automakers are increasingly turning to suppliers to help them best meet rapidly changing customer demands.
“Nowadays it’s hard for automakers to keep track of all the new technology developments,” Lenninger says. “They are coming to us to see which new technologies will be available and what the end-consumer will pay for.”
In an interview at the CES technology show in Las Vegas, Lenninger, who has degrees in electrical and engineering and telecommunication engineering, spoke about the automotive technologies that still need work, the impact of Tesla on the industry and the changing relationship between automakers, suppliers and the high-tech companies in Silicon Valley.
“We have learnt from them that not every function in the car needs years of testing.”
Arjen Bongard: If you look at the auto industry from 30,000 feet, what has changed?
Ralf Lenninger: The development of cars used to be in the hands of the automotive industry. We would control it. But now society is telling us what to produce. Cars have to take into account the number of traffic fatalities, NOx and CO² emissions, noise, etc. Society is telling us it wants clean mobility, adapted to today’s requirements. In the past the car changed the world, but now the world is changing the car.
But “society” is very diverse.
We have 7 billion people and there are 7 billion expectations that have to be met. The variety in demand for mobility is much bigger than before. It’s a good thing that there are all these new solutions such as ride sharing and car sharing. In the past you only had two solutions: buy a car or take a bus. Now you can have whatever you like. The smartphone enabled this change. You can only build a service like Uber with a smartphone.
Where are we now in the transformation?
We’re in the middle of it, but sometimes we don’t see it because the changes are taking place with small steps. But look at the tens of millions of Uber rides each day and Didi’s 25 million or so in China. Or look at the millions of bike sharing and bike rentals there. And bicycle lanes are popping up in cities like London and Munich. Nobody uses a car anymore in Munich.
When you look at the traditional players in the industry – automakers and suppliers – who is making the transformation happen?
The auto industry has always operated on the Lego principle. Suppliers build the Lego bricks and auto manufacturers make something with them. But the roles are changing. Automakers used to design a new model and tell suppliers which bricks they needed. Today, it’s hard for an automaker to keep track of all the new technology developments. So they’re coming to us and say ‘We would like to build a car; please tell me which Lego bricks will be available in a couple of years.’ That’s a new responsibility we suppliers are not used to. We have to make up our minds what kind of technology the end customer will pay for. We have good insights there, because we talk to so many automotive brands.
As you plot the future direction of the company, what are the priorities and what are the biggest issues you deal with?
The first one hasn’t changed, which is that we have to do our utmost to be great in quality and productivity. Without quality you do not get any orders and without productivity you don’t make any money. Then there’s the need to innovate in a well-balanced manner. You can kill a company by doing too much innovation and you can kill it by not doing enough. We need to decide where to invest and we need to learn where the customer journey is going, what value the end-customer looks for and what society wants from us as an industry. It’s important to make both the end-consumer and society as a whole happy.
Is there a conflict between the two?
Sometimes there is. Some customers would like a fully loaded premium car with an 8 cylinder engine, while society is looking for low emissions. The solution is compromise. Life is full of compromises.
In which areas of technology do you still see a further need for improvement?
We needed more processing power, but semiconductor makers have solved that problem from a technology point of view. Cost-wise, we’re not quite there yet. The power is there, but now we need to get the cost down. The second area where work still needs to be done is software. The algorithms used for artificial intelligence are relatively old and haven’t changed much in the past five years. And we don’t have the data libraries we need. We’re on the way to building these. The next phase is that we have to decide whether we need a new architecture for the car or whether high-performanc computing (HPC) actually is the new architecture.
And several auto industry executives are telling us that lidar, which offers the sensing capability needed in driverless cars, is still too expensive. As a maker of lidar systems, what is Continental’s response?
The technology is ready and the prototypes have been built. We even have our first, admittedly stil small, order. The cost is still a little bit of a challenge but the technology is a must-have.
Is the auto industry changing more rapidly than you had expected a few years ago?
It’s moving faster, but not because of us, but because we have to. Look at Volkswagen Group’s projection that, by 2025, it will build 3 million electric cars a year. It’s because society demands it and that determines the pace. You can compare it with Europe’s eCall automatic emergency warning system. If if had been up to the auto industry, do you think every new car in Europe would have had eCall today?
So regulatory pressure is a major driver of change?
We’re driven by regulatory pressure and pressure from new market entrants. The impact that Tesla has had on the market is really impressive. You wouldn’t have seen all this electric-car activity if Tesla hadn’t started to build EVs.
Why is Tesla still the only serious new player in the EV market?
I see two reasons for that. Tesla was first to market with its electric car and Elon Musk is doing a great marketing and communication job. There are actually a lot of companies operating in a very similar manner to Tesla. Faraday Future and Byton are two of them. They recruited many experts from the auto industry. But you need a name associated with the company and everyone knows Elon Musk. It’s very normal in new markets that you have some wins, some losses, some successes. It’s all great for consumers, who used to have only old brands such as Ford, GM, Toyota, Honda, BMW or VW. In future, they will have a lot more choice.
With driverless cars likely to come to market in coming decades, do you believe that the increased safety of these vehicles will allow the industry to make them lighter so that they use less fuel or electricity?
The standard view is that you can reduce weight by 30% and, thus, save roughly the same amount on fuel. But it won’t happen as long as you have a mix of autonomous and old cars on the road. That’s because the accidents would be caused by these older cars. In the ultimate scenario, where you have only fully autonomous vehicles, you can take out most of the security and safety systems.
As head of Continental’s Intelligent Transportation Systems (ITS) division until recently, you spent a lot of time in Silicon Valley. How has the relationship between automotive companies and the high-tech industry evolved?
Five years ago, when I would come to Silicon Valley, people didn’t have a clue what Continental was. And people there didn’t understand why we were taking so long to develop technologies and why we made things so complicated. We, at the same time, felt that tech companies never produced a product that was perfect. The business models were very different. In the Valley, you don’t invest but you place bets. That’s because, in consumer products, there’s a high risk that the consumer won’t buy the product, but if he responds positively, you earn a lot of money. In our business, you never placed bets. Today, there’s a better mutual understanding and we respect each other more. The tech industry understands that you cannot play with prototypes when human lives are involved. And we are learning that not every function in the car needs years of testing.