Innovation in the automotive supplier industry
"It's a big job"
CLEPA - the European Association of Automotive Suppliers - is the voice of the EU automotive supplier industry, linking the sector to policy makers. In the interview, Sigrid de Vries, CLEPA Secretary General, and Dr. Thomas Schiller, Deloitte Managing Partner Clients & Industries, are talking about the importance of innovation for shaping the future of mobility and the main trends as well as challenges transforming the supplier industry.
Innovation is the magic word of the digital age. What significance do innovations have in the automotive supplier industry?
Dr. Thomas Schiller: Innovations are primarily referring to connectivity, autonomous driving, mobility and electrification. These are the big challenges, especially in the automotive industry. So far, up to 80 percent of the added value of a vehicle comes from the supplier industry. It is hard to imagine the supplier industry will contribute less to the innovation issues. However, new forms of partnerships and new players will be established in the system.
What are the current trends in the automotive supplier industry to create innovation, and in what areas do you expect the most important developments in the near future?
Sigrid de Vries: The biggest trends of the industry today are about reducing the environmental impact, meaning decarbonization and clean air, as well as about digitalization, meaning connectivity and automation of the vehicles on the road. These are huge drivers of change and they require a lot of innovation to happen.
Our challenge today is to manage the transition to a safe, smart and sustainable mobility in an ambitious and realistic way. As CLEPA, the European Association of Automotive Suppliers, we see that a number of targets have been set by society: by 2050 we aim for zero carbon emissions and clean air, but also for zero casualties caused by traffic on the roads.
In addition to that, we strive for highly connected and automated transport. And we want Europe to remain competitive and leading the world in technology. That requires essential framework conditions in the form of policy and regulation, but also high levels of investment and high levels of innovation. Of course it’s in the DNA of the automotive supply industry to deliver, but nevertheless it’s a big job!
Not everyone thinks that innovations are always good. For example, the current Automotive Consumer Study by Deloitte has revealed a perception gap among the target group with regard to perceived safety when driving autonomously. What possibilities do you see for increasing the acceptance of such innovations?
Dr. Thomas Schiller: That’s right, there is a temporal and a regional gradient. Two years ago, consumers preferred to trust OEMs to develop connectivity and security – at least more than high-tech companies. That has changed. In general, German consumers are more critical, US citizens and especially Asians are far more open. However, all consumers have one thing in common: They have higher levels of confidence in the high tech companies to make progress in autonomous driving. I see two reasons for this:
1) ‘Dieselgate’ has been accompanied by a huge loss of trust, especially among German customers – far more than in other countries.
2) With their test drives for autonomous vehicles and their connectivity solutions, the high-tech companies have generated more publicity and accomplished more than the OEMs – at least as perceived by the public. OEMs have rather worked in the background.
The CLEPA Innovation Award categories cover a broad field – in which of the categories did you find it most difficult to make a decision this year?
Sigrid de Vries: There were over sixty entries to the competition, and they are spread fairly well over all of the categories. The categories cover very well where the efforts in terms of innovation are required: Environment, safety, connectivity, automation and also cooperation. The jury had quite a hard time making a selection because the entries were of a very high level. We are happy that we also had entries from small and mid-sized companies (SMEs). We find that very important as SMEs are playing an important role for achieving the required levels of excellence and deep specialization.
Cooperation and joint ecosystems are more and more important for the innovative ability of companies. The importance of start-ups for large corporations is growing accordingly. How is the European automotive industry meeting these relatively new challenges so far?
Dr. Thomas Schiller: Almost all OEMs and Tier 1s now have their own dedicated teams that screen start-ups. Above all, BMW have even set up their own funds with iVentures. Suppliers are very aggressive in buying startups. The challenge, however, lies in internalizing the innovations into the companies and in keeping up the innovative culture of the acquired companies. That’s not easy.
Where would you like to see further improvements in cooperation with the automotive industry?
Sigrid de Vries: There are rapid developments with regard to the needs of the market, of the costumer, of the client. Suppliers need to be at the top of their game to understand what the end-consumer really needs in order to be able to support and advise the OEMs with their product offerings and to bring to market the vehicles that in the end will be sold. Therefore, cooperation is essential, that is why we have a category in our awards competition focusing cooperation.
In the future, we will increasingly see different kinds of partnerships and cooperation. The more traditional vertical supply chain is enriched by new participants and an eco-system of partners. What will stay is the early stage co-operation from the first design and idea, to thinking the manufacturing process through. What also always needs to be looked at, is how the vehicle at the end of its life is being dismantled and recycled again. This very complex and long cycle needs to be taken into account and requires cooperation.
Which recent innovation in the automotive industry did you find most important, and which innovation did you see as a game changer?
Dr. Thomas Schiller: E-mobility is of course the outstanding topic with high pressure for innovation by the regulator. In the long term, customer behavior regarding autonomous driving, mobile services and sharing culture will certainly change the industry massively. This will require less vehicle sales and more fleet management for OEMs. As a recent Deloitte study shows, the total cost of ownership of the vehicle is also crucial, with the optimization of the construction as well as financing, operation and maintenance of the vehicles along the life cycle. This will have a massive impact on the entire automotive industry including the supplier industry.
What possibilities do you see for improving the framework conditions for innovations?
Sigrid de Vries: It would be wise of the European Union to even more focus, consolidate and cooperate in their EU funded research projects; many of the R&D programs are still nationally oriented. There is big potential in bringing funding priorities together. This needs to be focused even more in view of the increasing competition coming from the US, from China and also from Japan: They have an easier job, because it’s one government, one authority making the priority choices. In the EU you always have a complicated setup with all the member states. Innovation will be making the difference when it comes to European growth and competitiveness. That’s why it needs to be top on policy makers’ priority lists.