Wissmann: Digitization brings wide range of opportunities for German suppliers
“The latest business figures have put German suppliers in a good mood. Since the beginning of the year their earnings have shown a modest increase. According to the current statistics, the regular workforce at the companies in the supply industry is still above the 300,000 mark,” said Matthias Wissmann, President of the German Association of the Automotive Industry (VDA). He was speaking to 200 high-ranking guests at the VDA’s 17th SME Day in Gravenbruch, near Frankfurt am Main. He stressed that “The suppliers account for 75 percent of value creation, and also for the majority of innovations. Drivers of innovation, such as the development of alternative powertrains and connected and automated driving, further enhance the importance of value creation by the suppliers.”
These good prospects are juxtaposed with huge challenges. “During the process of globalization, the German companies must develop not only product innovations but also internationalization strategies for satisfying the customers’ wishes around the world,” Wissmann said. “Political uncertainties on key vehicle markets and the immense technological changes in the field of digitization and electric mobility also mean that the suppliers face central entrepreneurial investment decisions.”
The event was opened by Horst Binnig, CEO of Rheinmetall Automotive AG, Gunnar Herrmann, Chairman of the management board at Ford of Europe, and Arndt G. Kirchhoff, Managing Partner and CEO of Kirchhoff Holding GmbH & Co. KG and VDA Vice-president and chairman of the VDA’s Committee for Small and Medium-Sized Companies. The speakers included Jens Spahn, Member of the German Bundestag (MdB) and Parliamentary State Secretary to the Federal Minister of Finance.
Wissmann commented on the agenda of this year’s SME Day – entitled “Changes in the automotive industry – digitization in SMEs” – saying, “Digitization opens up a wide range of opportunities for German suppliers. The data that a car generates are created in control units from suppliers. Furthermore, intelligent connectivity between production, logistics and development can leverage efficiency potentials. They make the already very efficient supply chain even better – offering potentials for everyone.”
Wissmann drew attention to the tough international competitive conditions, under which the suppliers have to keep on proving themselves. The competition is huge, particularly in digitization, Wissmann explained, owing to new players from Silicon Valley, for instance. The main areas of innovation for the German supply firms were therefore the development of alternative powertrain components, along with the electronics, sensor systems and software development. “We must not underestimate the vast number of lines of code that are already present in a car, and in every control unit. The German suppliers have a great deal of experience here. And a car never operates solely with software. It is the interplay of smart algorithms with high-quality electronics and mechanics that makes a high-quality car,” the VDA president declared.
The industry showed tremendous drive to innovate, Wissmann stated, adding, “Today the German suppliers are already world champions in patents in the area of connected and automated driving. The German vehicle industry accounts for 58 percent of all such patents issued anywhere in the world since 2010. Among the suppliers, Germany actually accounts for a good 82 percent of global patents.”
In addition, the German OEMs and suppliers are making huge efforts to help alternative powertrains achieve a breakthrough. In the period up to 2020 a total of another 40 billion euros will be invested with this aim. “Electric mobility is being ramped up,” Wissmann said. “In ten years, 15 to 25 percent of new passenger car registrations worldwide could be of e-vehicles.”
This offers considerable potentials to the German suppliers in developing innovative components for electric mobility and exploiting new business models. “This development is progressing step by step, because the classical combustion engine is not going to be replaced overnight. Of course the companies that have special expertise in internal combustion engines today did not begin preparing for the change yesterday,” Wissmann underscored.
With a view to Britain’s departure from the EU, Wissmann finished by saying, “The German automotive industry has 100 production facilities in Britain, and most of them are production plants of German supply companies. Brexit will not pass the firms by unnoticed. Any new trade barriers will therefore have immediate, tangible effects on the production sites in this country.” He also stressed that “From the viewpoint of the German automotive industry, everything possible must be done to maintain the hitherto unhindered exchange of goods and services between the UK and the other EU countries. But a clear priority exists: the 27 EU Member States must stand together.”
Arndt G. Kirchhoff, Managing Partner and CEO of Kirchhoff Holding GmbH & Co. KG and chairman of the VDA’s Committee for Small and Medium-Sized Companies, emphasized: “Connectivity and digitization will bring massive changes to familiar business models in the automotive sector. The new digital markets are fundamentally different than the established markets: in the future the competition for data and the data interfaces will have a more decisive influence than ever before on market shares and market successes. All aspects of this topic have considerable effects on the automotive industry through new mobility services, connected cars and automated driving, or in production. In the past, the medium-sized supply firms in particular were the drivers of innovation in our sector. To continue in this role we need to identify specific points for action, which we are discussing intensively at the SME Day.”
Gunnar Herrmann, Chairman of the management board at Ford of Europe:
“The world is evolving very rapidly and megatrends will change future mobility requirements. The automotive industry – and Ford – are facing one of the greatest changes in their history. Innovations form the basis for future mobility solutions on the path to becoming vehicle and mobility providers. These innovations are developed in cooperation with selected external partners, companies and scientific institutes, and implemented in cooperation based on trust, following the principle of ‘You are what you do’.”
The significance that the newly created NEO Team will have in his company’s process of change, and in the elaboration of forward-looking mobility topics, was highlighted by Horst Binnig, CEO of Rheinmetall Automotive AG: “As managers we are all used to swiftly taking the best decisions we can. In times of fake news and post-truth statements – and I would even want to say despite factual statements and simultaneous pressure to innovate – it is becoming more and more difficult to make the right decisions. We require new perspectives and clear analyses for the right decision. Our NEO Team will catalyze this process.”
Jens Spahn, MdB and Parliamentary State Secretary to the Minister of Finance: “Our ‘Silicon Valleys’ are in Sauerland, the Upper Palatinate and the Swabian Alb region. These areas produce innovative technology that is in demand worldwide. We have to encourage this entrepreneurial spirit to grow because it guarantees our continuing success in the future.”