Robert Bosch GmbH's automotive division is on track to surpass the 30-billion-euro sales plateau for this first time this year. Doing so should help the German giant remain the world's biggest supplier based on sales. Bernd Bohr, head of Bosch's automotive division, discussed the company's future goals with Automotive News Europe Editor-in-Chief Harald Hamprecht.
Competing on multiple fronts
Bosch wants to defend its position as the world's biggest automotive supplier
Meet the boss
Since becoming chief executive of Robert Bosch GmbH's car parts division in 2003, Bernd Bohr has helped the German supplier maintain market leadership, despite tough competition from rivals Denso Corp. and Continental AG. The 55-year-old German national joined the supplier in 1983 as part of the operations scheduling team at the company's plant in Reutlingen, Germany. During his career at Bosch he has held top-level jobs overseeing production of anti-lock brakes, semiconductors and electronics. He was promoted to the company's board of management in 1999. Bohr has a doctorate in engineering from University of Aachen, Germany.
In 2000, more than 70 percent of the company's total revenue came for the automotive business. The goal is to reduce it to about 50 percent. This is not a matter of slowing down in vehicle technology. We want to expand our industrial technology, consumer goods and building technology divisions. The automotive area will continue to grow in absolute terms.
For 2011, we expect growth of at least 10 percent and thus would surpass the 30 billion-euro mark for vehicle technology for the first time. The drivers are mainly our products for environmental and accident protection. But there are negative signs, too.
We see that growth in China, the world's largest automotive market, won't be sky-high this year. Rising raw material prices and the growing volatility in the business are also challenges. I am not just talking about economic cycles. Their amplitude is simply greater than in the past. And the number of technological trends is greater than ever before.
We are in an eight-year strategic planning period and are striving each year for pre-tax earnings of 7 percent to 8 percent. Doing that allows us to finance solid growth and innovations.
We will spend more than 3.2 billion euros this year on research and development for the vehicle technology division. That will clearly put us over the industry average. But we are also competing on multiple fronts.
Our goal is not only to provide the mobility solutions for tomorrow and beyond but also to make driving in the here and now even cleaner and more comfortable.
We feel absolutely comfortable in this position and naturally wish to defend it. But there are no guarantees. The exchange rates for the euro, dollar and the yen strongly affect the rankings that the media compile, and success alone does not influence them. The fact that we are superbly positioned in the growth markets gives us confidence.
Europe continues to account for the largest share of our global automotive revenue. But the Asia-Pacific region is our largest growth market. Asia's share of revenue in vehicle technology has increased more than fourfold, from 6 percent to 26 percent in 12 years. And, revenue in the region has increased from 1 billion to 7.4 billion euros.
Growth in the vehicle technology division is primarily driven from the inside out. But that doesn't mean that we will pass up attractive opportunities.
We honestly have not imposed any upper limits. Even fairly large projects would not be a problem.
The number of employees in our vehicle technology division is expected to rise from 167,000 to 177,000 over the course of the year. The growth is especially taking place in the Asia-Pacific region.
We are in close proximity to our customers around the world. One-half the 26,000 engineers employed at the start of the year in research and development worked in Germany, but nearly one out of every three works in Asia. That's where 18 out of our 51 research and development centers are located.
No, the business will just slow down. We see that manufacturers must generally adapt to the new segment, regarding other sales networks and customized financing options, for example. Above all, we consider this to be a tremendous arena for learning and for the simplification of technology in established markets. And this segment will come. It is especially becoming a fascinating segment in China, less in the passenger car area than in mini-buses that will cost about $3,000. And if something must be done in Africa at some point, it will tend to be in the low-price segment.
All seven business segments will grow, since we expect 7 percent growth in global automotive production this year alone. Moreover, we see clear long-term growth factors.
We are making vehicle powertrains more efficient than ever with a wide variety of innovations. We will once again reduce fuel consumption in diesel and gasoline engines by at least 30 percent. We want to boost the sales figures for our diesel common-rail injection system by more than 10 percent a year through 2015. We want to triple sales of the gasoline direct-injection system by 2013. This year, we want to sell about 2.6 million units of our stop-start system, which reduces fuel consumption by 4 percent or more. That's twice as many as in 2010.
Yes, we continue to believe in the diesel's market success in the U.S. Our forecast for the U.S. market in 2015 is 10 percent.
No question, we've been pushed back, mainly due to the effects of the economic crisis. It has led to a stronger focus on development budgets at U.S. automakers. At the same time, high government subsidies have produced hype about electric vehicles, and it has absorbed development capacity. In the meantime, we have noted a return to technical and business realities and to balanced product planning. We are seeing equipment levels of about 30 percent where the diesel option is presented to U.S. customers.
That's correct for the car segment. But we see a clear opportunity for minibuses and small vans, especially in the agricultural area. Our diesel business is projected to grow 25 percent in China by 2017. And in India, we expect to double our common-rail volumes for cars between 2010 and 2014. The fuel quality, as a rule, is manageable.
Despite the potential for improvements in the efficiency of diesel and gasoline engines, we are working hard on this question as part of our multidisciplinary technological efforts. The reason is that the future belongs to electric drive. A case can be made that there will be an evolution to electric mobility. In the process, there will be a coexistence of internal combustion engines, hybrid vehicles and electric cars. The transition to electric mobility will take much more than a decade.
Electric and electronic components will increase from their current 40 percent share to 75 percent in the electric cars of the future. So it's increasingly likely that suppliers, including us, will end up with a fairly large share of the value creation chain and higher volumes. The industry is still in its orientation phase. Some automakers want to outsource a great deal, others want to build almost everything themselves.
It has become clear that suppliers are very likely to produce the power electronics and battery cell. The value creation for electric motors is split up in very different ways. Our joint venture, EM-motive, is a promising, new approach that we'll establish with Daimler this autumn after the authorities have given their approval.
This step would in fact be unusual for an existing, stable technology and for established value creation percentages. As I mentioned earlier: A new era is dawning, bringing new forms of cooperation. At the same time, the joint venture has a special feature: Bosch will be able to sell the products that were developed and manufactured jointly to manufacturers outside Daimler. All our customers will continue to see us as their capable partner. With sales to other OEMs and our broad range of products, we can especially exploit economies of scale. That's a crucial issue regarding the cost advantage of our products.
We expect that there will only be a handful of large battery suppliers worldwide after the necessary consolidation phase, and we will be one of them. SB LiMotive already has delivery contracts from a wide variety of manufacturers. Including those contracts, Bosch will supply electric-drive components to 12 automakers with more than 20 projects by 2013.
We are supplying the battery cells for the BMW i3. That is an important piece of business because the battery packs in electric vehicles are many times larger than in hybrid vehicles. For the most part, just 1 kilowatt hour of battery capacity is installed in a hybrid. It's 20 to 30 kilowatt hours for an electric car. Starting in 2012, SB LiMotive will have a cell production capacity of 600,000 kilowatt hours per year. That's enough to equip about 30,000 electric vehicles. In 2015, cell production will already be sufficient for six times as many electric cars.
Yes, a huge amount of battery capacity is needed. Taken together, the entire existing battery production capacity for consumer electronics worldwide would be barely enough for a million electric vehicles. If we already have 3 million electric cars on the road in 2020, you can see the huge industrial sector that is emerging.
An equipment rate of 10 percent for the fleet is needed just for reasonable traffic jam forecasting based on vehicle position data. That means the vehicle inventory and not just new registrations. The breakthrough will initially come with new telecommunication standards such as LTE, the generation after UMTS.
More bandwidth and a shorter latency period for establishing the communication. If every car has a GSM chip, we circumvent the problem of an expensive roadside infrastructure. I am certain that we'll see functionality in car-to-car communication start to debut by mid-decade. It doesn't necessarily have to be an intersection aide. It may instead be a warning about traffic backups and the capture of current road conditions in the vicinity of your car. The expansion of driver assistance systems is crucial for this. Over many years, we have invested in radar and video technology, and today we see gratifying trends in the market, especially in collision avoidance systems.
The next generations of the Mercedes A class and B class soon will get this kind of system as standard equipment. We are one of the suppliers. Something like this generates an impetus in the market and puts pressure on other automakers. I really believe that this model family will produce the breakthrough, as the Ford Scorpio did with standard ABS. And the beauty is that we aren't depriving anyone of driving pleasure. We are rather helping people with the routine activity of maintaining their following distance, which is not that demanding intellectually.