Call it foresight or smart business decisions, right investments at the right times have helped Tier 1 major Continental address the prevailing slowdown in the automotive industry with aplomb
The company has its order books full; it is making fresh investments in products and manufacturing and it continues to hire engineers in a market that is witnessing its slowest growth in recent times. Auto Tech Review takes an in-depth look at Continental India’s current market position.
The automotive industry globally has been witness to a bit of a churn in the last couple of years, primarily due to regulatory push by governments aimed at conserving further deterioration of the ecology due to the emissions of harmful vehicular emissions. This has led to technological transformations at a magnitude not seen in the past.
The Indian automotive industry, thanks to the government’s directive to switch to BS 6 emission norms directly from BS IV, meant it had to leapfrog one complete stage of emission regulations in less than three years. The industry clearly was faced with a humongous challenge, but the government’s insistence meant it was left with little choice. The fact that the industry has actually been able to deliver BS 6-compliance well ahead of the April 1, 2020 deadline talks highly of the industry’s technological and innovation capabilities.
As if meeting the emission regulation wasn’t enough, the industry is also faced with the challenges of meeting CAFÉ norms as well as RDE norms over the next three years. Add to that the shift it needs to make towards cleaner propulsion alternatives, primarily electrification. All of these, in concurrence with weakening of other factors such as finance availability and slowing economy, have led to a protracted slowdown that has forced many industry players to restrategise their businesses, and one that threatens to continue for a few more quarters at least.
Yet there are many industry players that continue to find and create opportunities amidst such difficult times. One fine example is Continental India, a leading diversified Tier 1 major, which continues to innovate and deliver products and technologies suited to the Indian market.
Prashanth Doreswamy, Managing Director, Continental Automotive India & Country Head, Continental Group India, accepted there were some initial hiccups, but right investments by the company in India at the right times, have ensured the company continued to deliver businesses, both domestically as well as globally. The company has its order books full; it continues to make fresh investments in products and manufacturing, and expansion of its R&D facilities – including hiring new engineers – continues unabated.
Stringent regulations in markets world over will make combustion technology unaffordable around 2040, the company has predicted. Keeping that in mind, Continental has forecast the last generation of combustion engines will go into production around 2030. By that measure, the technology that will hit the market at the beginning of 2030 will start to be developed around 2025, and by 2045, combustion technology will be completely phased out.
Dr Elmer Degenhart, CEO & Chairman of the Executive Board, Continental has been one of the most vocal advocates of carbon-free mobility for several years. Addressing journalists during the company’s last TechShow event in Hanover in July last year, he predicted that mobility would ideally be carbon free for all forms of transportation – cars, trucks and buses – in another three decades from now. The character of this transformation will be disruptionary, he had said, as the industry replaces combustion technologies with electric technologies. E-mobility, clearly, would see rapid acceptance and adoption in the next few decades, largely driven by regulations.
The transformations have also led the company to take some harsh decisions – particularly in Europe and the US – including deep restructuring of its businesses, potential job cuts and factory closures. Restructuring includes the company’s decision to divide itself into three distinct business units catering to rubber technologies, automotive technologies and powertrain, which is now called Vitesco. Factory closures have been announced in Roding and Limbach-Oberfrohna in Germany; Pisa in Italy as well as plants in Newport News, Virginia and Henderson, North Carolina in the US by 2024. Unconfirmed reports in the media state this could potentially impact jobs of 20,000 employees globally.
While the weakening global demand, after a decade of almost constant growth, has forced Continental to take some desperate measures in Europe and the US, the Indian business has remained largely insulated. The impact of technology changes may not be so dramatic in India, as it is expected to be in the more mature markets globally. Electrification, for example, has been pegged to breach 30 % market penetration by 2030, but that’s a tall ask considering the current share of around 0.3 % only.
Sales for the company in India were below budgets in 2019, Doreswamy said, and 2020 doesn’t look too promising either. Nonetheless, the company has been able to conserve cash through different means over the last year or so, and that has put it in a position from where it can emerge much stronger.
Currently, Continental operates 18 plants in the country spread across major automotive hubs catering to their key customers. The technology company has always believed in the philosophy of ‘in the market, for the market’, and localisation has been a compelling proposition in India. Despite the Indian market not delivering to its potential – sales projections have dropped significantly – Continental continues to bet big on India.
The headquarters have maintained the long-term perspective for India, and have not held back any investments, even during these trying times. In March 2020, the company is scheduled to inaugurate two new greenfield facilities in Pune, while the Bengaluru facility has been expanded as well. One of the new plants is for powertrain in Talegaon, and that will be under the Vitesco brand. The other manufacturing unit is coming up in Kesurdi, near Pune, for surface solutions, essentially an alternative for leather as well as solutions for cockpit and door trims. On the engineering side, Continental continues to expand its engineering team, with plans to add 3,000 plus engineers to its existing force of 4,000 engineers over the next two years.
Doreswamy said Continental still continues to believe in India, and is looking at growing both its manufacturing and engineering footprint as well as capabilities.
POCKETS OF OPPORTUNITY
While solutions for conventional vehicles continue to be pursued, Continental is developing technologies aimed to address future opportunities. We look at a few such areas:
The plant for surface solutions is an important addition to Continental’s portfolio in India. During the ground breaking of the plant in December 2018, the company had announced the facility will be spread over 12,000 sq m, and will have an initial annual capacity of 5 mn sq m. Doreswamy said, to start with, production capacity at the plant will be 200,000 sq m. The plant is coming up on a four-hectare plot, at a cost of about € 22 mn or Rs 1,800 cr, and will manufacture the Acella Eco artificial leather that is a high quality replacement for real leather.
A sizeable portion of the production in this facility will be localised, but initial production will get raw material from Germany. Doreswamy is excited about the large opportunity this interiors business offers Continental India. The plant, which will also make materials for door trims, cockpit and dashboard, will be a hub for surface solutions across the ASEAN market.
Continental has a sizeable market share for anti-lock braking system (ABS) both in the two-wheeler and four-wheeler segments, and have started to see a bit of traction on electronic stability control (ESC) as well. The company has localised the production of ESC, and claims to have a first-mover advantage. The regulation for ESC as well as emergency brake assist (EBA) is expected to come in around 2022 and 2023, and once mandated, Continental would have a huge advantage over its competitors.
ESC will also complement driver assistance functions – an area Continental has started to see a bit of traction in recent times. Continental is currently in talks with three to four OEMs on some of these features. Once ESC gets implemented, Doreswamy is sure there’ll be a bunch of assisted functions that could get added, including EBA. He agrees the company might have to develop the EBA somewhat differently to suit the traffic conditions in India. Blind spot detection and lane assistance are some of the other functions Continental expects to be mandated in the Indian market in the next few years.
A first-of-its-kind technology, the Transparent Hood increases driver safety and convenience by allowing the driver to see the ground view immediately in front of them, while driving. The technology allows the driver to see obstacles and terrain that would otherwise be obstructed from the driver’s view. The technology is based on Continental’s Surround View system, consisting of four cameras and a control unit that delivers images to the vehicle’s display. An intelligent image processing algorithm reconstructs the image below the vehicle and inserts this image exactly into the surround view displayed to the driver. This Continental technology has been used by Jaguar land Rover.
Airbags and airbag control units are undergoing changes as well. A basic airbag system, for instance, has four firing loops and controllers. Manufacturers are now asking for eight to 12 firing loops, indicating the addition of more airbags into their vehicles. Continental has already received programmes slated for 2022 and beyond, said Doreswamy.
The company has also won projects from a few customers for electric park brakes (EPB). Continental, in fact, is the only company to have the calliper-mounted solution, as well as the drum-mounted EPB. Most of the advanced countries have moved to the calliper-mounted solution, while the Indian market continues to demand the drum-mounted EPB, primarily due to the cost factor.
Occupant Safety Monitor (OcSM)
One of the fascinating new developments at Continental is the Occupant Safety Monitor (OcSM), which is capable of estimating the posture of the occupants inside the vehicle to dynamically adapt airbag deployment strategies. The OcSM creates a complex sensor fusion model by extracting information of suitable sensors, such as camera, data from a seat sensor system, etc. That helps spontaneous calculation of deployment strategies for the restraint systems for each individual occupant. In case of an accident, the restraint systems will be activated specifically to the occupants’ condition and situation. This passive safety technology is likely to be introduced in vehicles around 2023.
There is a general trend in the industry towards larger displays, and Doreswamy sees a significant shift from analogue to full digital clusters. Continental is currently working with a couple of OEMs on a 10.5-inch digital cluster, which requires a lot of critical software development. On two-wheelers, there is traction on TFT clusters. Although expensive, Continental expects the interest for 5-inch TFT clusters to grow considerably. Then, there is a new promising area of digital keys, and one can expect the roll-out of this technology in India shortly. Continental is presently in talks with a couple of OEMs and aggregators in India for the introduction of the digital key.
In the two-wheeler domain, Continental supplies electronic fuel injection (EFI) systems, TFT clusters, ABS, catalytic filters, injectors, fuel supply units and wheel speed sensors. The company is currently engaged in talks for advanced rider assistance systems (ARAS), especially around the areas of lane departure warning or radar-based lighting solutions. These discussions, however, will take at least two to three years to mature, Doreswamy said. Further, enhancements in ABS, like curved braking, has already started and will shortly be available in the market.
In-Car Application Server (ICAS1)
Continental has developed a new server concept in cooperation with Elektrobit, its wholly-owned subsidiary that supplies embedded and connected software products and services for the automotive industry. Among other benefits, the in-car application server (ICAS1) concept offers a host of vehicle connectivity features such as the ability to install new functions and safety updates in the vehicle via a wireless connection. With ICAS1, Continental is making the vehicle an integral part of the Internet of Everything. The high computing power of the new server architecture will help fully electric and fully connected vehicles stay up to date easier and faster, says the company.
Volkswagen is the first manufacturer to use the ICAS1 for its ID. vehicle models, which are based on the modular electric drive matrix (MEB). The server architecture includes functions such as range-optimised route planning as well as locating charging stations. Additionally, it offers a seamless connection to mobile services and data.
The rising share of electronics content as well as functions in vehicles has made it necessary for OEMs to move from the body control modules (BCM) to integrated body controllers (IBC), and Continental is eyeing a considerable amount of business in this area. The other interesting area for Doreswamy is that of battery management systems (BMS), although the Continental has no expertise in this area yet but is working on developing these systems. BMS is a new area for Continental, and so is EPB. He recognises the opportunities these two areas bring in, and confirmed the company will continue to build capabilities therein.
For the future, Doreswamy is focussed on three key aspects – increase the content per vehicle, increase volumes and address regulations with the right technology and products. In doing so, he recognises the challenge will continue to be to make these solutions affordable for the Indian market, while keeping the value intact. As a company, Continental has got enough products to penetrate the Indian market and address volumes, he said. The big opportunity for Doreswamy is to increase the content per vehicle – doubling the content per vehicle, would lead to doubling its turnover. That, hence, is a key focus area for the company.
Assessing the market, he said the industry should see a turnaround starting Q3 CY2020. Notwithstanding the factors that impacted business in 2019 – elections, BS 6-related transition or even contradictory statements from the government – Doreswamy believes the basic parameters of the sector are settling down, although credit continues to be a challenge. While the industry finds its way back to growth, Doreswamy hopes the government brings in the scrappage policy sooner as that would create demand in the market.
TEXT: Deepangshu Dev Sarmah