VDA’s 18th SME Day with 200 entrepreneurs – Electric mobility and digitization are opportunities – FAST2030 study sees global automotive market remaining on growth path
“In times of many new changing situations – political, economic and technological – policymakers are required more than ever to make Germany more competitive as an industrial location. This year the German automotive industry will produce 11.2 million passenger cars abroad, which for the first time will be twice the number of vehicles built at home. Three out of four cars we build here in Germany are destined for export. So growth, prosperity and employment are closely linked with free access to the markets. We therefore view with concern the increasing protectionist tendencies in important regions. In addition, the regulatory conditions in Germany must be improved. For example, we need responses to rising energy costs in Germany. And we need responses to the US tax reform, because it puts Germany and Europe at a regional disadvantage. It is good that the German coalition agreement places necessary investments in the infrastructure and key technologies, such as electric mobility, digitization and automated and connected driving, at the top of the agenda for this parliamentary session. Now this has to be realized rapidly and sustainably,” said Bernhard Mattes, President of the German Association of the Automotive Industry (VDA). He was speaking to around 200 entrepreneurs as the VDA’s 18th SME Day kicked off in Gravenbruch near Frankfurt am Main.
Mattes added that over recent years the German automotive industry had continually pushed up its sales worldwide. However, he said, the companies were by no means resting on the currently good economic situation. “They are investing heavily in new technologies – in powertrains just as in connected and automated driving. The German automotive supply industry in particular is in a position of strength owing to its consistent internationalization. This also creates the right conditions for tackling the new challenges in a competitive environment that is becoming tougher,” Mattes explained.
He drew attention to the results of the third study entitled “Future Automotive Industry Structure – FAST2030” conducted jointly by the consulting firm Oliver Wyman and the VDA, which was presented at the SME Day for the first time. It examines the most important technology trends and their impacts on the value chain, and shows how automotive suppliers can maintain their position even in turbulent times.
“The automotive industry remains on a path of growth,” Mattes said. According to the FAST2030 study, global production of passenger cars and light commercial vehicles, which totaled around 95 million units in 2017, would rise to 123 million by 2030 – an increase of around 30 percent. Automotive value-added would therefore also rise, adjusted for inflation, by 30 percent to over 1.1 trillion euros. However, this growth was associated with considerable structural changes – regional, technological and economic.
“In addition to ever stricter CO2 regulations, the drivers of this development are electric mobility, digitization, connected and automated driving, and new forms of urban mobility. Manufacturers and suppliers are already adapting to this,” Mattes stressed, adding that connected production in times of Industry 4.0 offered new opportunities and efficiency gains especially in production. However, the VDA President explained, electric mobility and automated and connected driving were forcing some suppliers to modify and extend their existing product portfolios. In the future, more and more software-driven, dynamic vehicle and power control systems would be required. With their rapid innovations, the German OEMs and suppliers were prepared to meet the new challenges.
According to the FAST2030 study, in the future the OEMs will position development, production and also their supplier base even more firmly in the growing sales markets, for instance in Asia. Makers of parts will be expected to follow suit. This will put above all small and medium-sized suppliers with an annual turnover not exceeding 50 million euros under pressure to become more international themselves.
The study predicts that in 2030 electric cars (BEVs) will make up about one quarter of the global passenger car market, while the proportion of hybrid vehicles will rise to 37 percent. Yet the pressure will not come solely from technical developments. Local procurement quotas of up to 80 or 90 percent depending on the manufacturer, and global platforms, will force automotive suppliers to be even more active in other countries if they are to remain in the business.
According to the study, in 2030 Europe will still account for 50 percent of all value-added (56 percent in 2017) and continue to dominate the premium segment, while China’s share of the premium segment will climb from 13 percent to 20 percent. So suppliers will have to adopt a more international orientation. Mattes emphasized, “Today’s success is no guarantee for tomorrow. Every individual company, large or small, will have to find technological responses to the challenges facing us.”
Mattes went on to say that the German automotive industry had consistently adapted to globalization and taken up a worldwide position. The vehicle makers had all developed their worldwide production networks: “And the suppliers have closely supported their customers on this path – in Europe, North and South America, and China,” he said. The associated questions, for example concerning the opportunities and risks of a global footprint, financing foreign investments, and cooperative schemes on new markets, had already been discussed at the VDA’s SME Days in previous years and today were more relevant than ever. “The challenge of becoming more international is now reinforced by electric mobility and connected and automated driving,” Mattes stated.
“Electric mobility is a game changer. Only a few years ago, battery-electric propulsion was seen as a niche product. But now we expect that in 2025, 15 to 25 percent of the global passenger car fleet will be electric. That is a very fast change for both large and small suppliers,” he said.
However, in line with its broad-based strategy, the German automotive industry was not putting all its eggs in one basket. “Alongside the alternative powertrains, we are continuing to optimize the internal combustion engine, and researching petroleum-independent e-fuels that represent an exciting option for climate-neutral mobility. And modern diesels are part of the solution, not part of the problem, because they have up to 25 percent lower consumption and up to 15 percent lower CO2 emissions per kilometer than comparable gasoline vehicles. That is a decisive advantage particularly for larger vehicles with high annual mileages, and from a climate-policy perspective,” Mattes underscored.
In Berlin and Brussels, he continued, the VDA was calling for all technologies to be regarded equally: “The best and most efficient type of powertrain should be the one to prevail. Policymakers should set realistic CO2 targets for passenger cars and commercial vehicles, which can be achieved by the companies and their employees without running into existential risks,” the VDA president said.
Arndt G. Kirchhoff, Managing Partner and CEO of Kirchhoff Automotive Holding GmbH & Co. KG and Chairman of the VDA’s SME Day, emphasized to the numerous participants, “The slogan of this year’s meeting of partners and managing directors of (often family-run) SMEs is ‘Agile, efficient and innovative: SMEs undergoing change.’ New technologies, innovative forms of mobility and topics that only a few years ago were niche subjects generate disruptive challenges for the automotive industry. The changes are coming through digitization, connectivity and automated driving in particular.”
Kirchhoff also sees these changes as opportunities: “In the face of sea-changes our industry has a clear advantage: it has more mid-sized firms than virtually any other sector. These enterprises, with their innovations and their creative and inventive spirit, along with their regional roots, stand for the global successes of our entire industry and for our country – agility, efficiency and a drive for innovation are the outstanding virtues of SMEs, enabling them to overcome the challenges.”
The topics discussed at the VDA’s 18th SME Day include the following questions: which technologies should SMEs be backing in order to prepare for the future? Can medium-sized companies with attractive working time models further enhance their quality as employers? How can the raw materials for future technologies be secured? The frank discussions between representatives of SMEs, and with manufacturers and major tier-1 suppliers, are a key feature of the SME Day. This year’s special guest on the subject of economic policy is Daniel Caspary, MEP and chairman of the CDU/CSU group in the European Parliament.