Like many long-established companies involved in the automotive industry, major Tier 1 supplier Continental has anticipated and is now experiencing a major shift in its business due to changes brought about by technology. Fast paced innovation in vehicle software and connectivity, autonomous driving and fuel efficiency mean that auto industry giants like Continental need to react faster than ever and are encountering tough challenges as well as new opportunities.
I recently sat down with Continental CEO Dr. Elmar Degenhart to discuss the company’s strategy for dealing with this new world of connected mobility, and how Continental is preparing to capitalize on the massive changes occurring in the industry.
Forbes: What is Continental’s vision for the future related to technology?
Elmar Degenhart: From my point of view, the vision of our company has a lot to do with our responsibilities and social obligations and it’s threefold. First of all, we have to develop more efficient powertrain solutions. We now have more than one billion light vehicles on the road in the world, and this number will go up to two billion by around 2040, which is good for the automotive industry. But if we don’t get these vehicles clean, we will to kill this planet environmentally. I believe we have the technology in the next 10 years to do this.
Second, we have 1.3 million traffic fatalities and 50 million injuries per year. We have the technology available which will allow us to put car accidents into the museum. It’s a big task of the automotive industry to push efforts to allow accident-free driving not only at the top with premium vehicles, but with all vehicles. That is the reason why autonomous driving is the fastest growing product sector in our company. By 2018 we will achieve 1.5 billion euro in sales in advanced driver assistance systems [ADAS], coming from zero only eight or nine years ago.
The third is connectivity and information from cars that can be used by other parties for the benefit of safety, efficiency and comfort. Driver assist systems allow us to only detect around the vehicle a maximum of 300 meters because the range of sensors is limited. But we have to look further ahead. We have to know what’s around the corner. We want to know where a pedestrian may be coming across the street, which we cannot see.
Forbes: How will these objectives be achieved?
Degenhart: Our eHorizon feature allows vehicles to give information more or less in real time that can be used by a car approaching a couple of seconds later. And with Connected Energy Management that helps save an additional three or four percent in fuel consumption. If you are approaching a traffic light your car can get information from the infrastructure so it knows if it makes sense to accelerate if it is still green or if you have no chance to get through because it will turn red. You will get advice via a voice or acoustic signal to step off the gas pedal. And we can shut off the engine with a coasting function, which also includes the capability to apply full regenerative braking so that we have not only saved fuel by not accelerating, but generate energy by applying the brake in the right time frame.
Forbes: We are moving from a hardware-defined environment in automotive to one in which software is playing an important role. How is Continental preparing for this?
Degenhart: We believe our opportunities in the service sector are a purely software-related business, compared to our established business model, which is hardware-based. So we came from a hardware model and moved into an also software model. The functionality we are talking about in terms of safety, efficiency and comfort, the intelligence behind it is software. The question of how we will be able to generate software will be decisive for the success of our company. We have about 24,000 engineers in our organization and about half of them have some kind of software background. So that’s why we decided, since we couldn’t grow organically enough our software competence and capacities, that we need a step function. One step is to take 1,000 to 2,000 additional engineers on board.
Forbes: You also acquired Elektrobit last year, which is essentially a software provider to the auto industry, even some of Continental’s competitors.
Degenhart: Elektrobit is a great organization and we don’t want to disturb their business model. They are doing business with OEMs and Tier 1 suppliers, and they should still be allowed to do this. We benefit because we have kind of a think tank which we can use.
Forbes: How does autonomous driving figure into Continental’s future business plans?
Degenhart: Driver assist systems which help to prevent accidents are the first step, since they provide the base for automatic driving functions, and distinguish between automatic and autonomous driving. Automatic driving, for us, is the driver is still in control of the car. One of the biggest challenges with autonomous driving will be to detect what the driver is doing and, depending on that, detecting the time that is necessary for the driver to take over again. So automatic and autonomous driving will come in steps, and by each step we will enhance functionalities.
Forbes: When do you expect fully self-driving cars to become available?
Degenhart: Fully automatic driving we believe will be possible in the range of 2025. This is a realistic estimate because we have to prepare the vehicles, the infrastructure and the connectivity. And that will take some time. The industry is very keen to do these steps in a very safe, robust, reliable manner because if we would come up with functionalities too early and see accidents because of malfunctioned systems, then the trust with [autonomous] vehicles would fade away very quickly. I believe sections of freeway will come first because the complexity level of the environment is much more limited than in a city, for example.
Forbes: Continental created an entirely new ITS business unit. Why was this necessary?
Degenhart: In 2014 Continental formed the Intelligent Transportation Systems business unit, headed by former Google self-driving car executive Seval Oz, to stakeout its position in this emerging space. ITS is a completely different business model and the ITS business unit has the freedom to do things differently than the rest of the organization. We started with a small crew and are approaching about 50 people. We are building up this business organically. We have the patience to give them time to start acquiring business use cases. We are also in contact with a lot of companies outside of the automotive industry, with transportation companies, for example, to establish use cases where we have great ideas. We also recognize that to be able to build competence fast enough we may have to acquire one or another company in a way that’s focused on bringing additional competence on board. ITS will be a multi-billion-dollar market in the future, and we want to have some share of it.
Originally published by Forbes.com