The head of Schaeffler's automotive business, Matthias Zink, is impressed by how quickly China's domestic brands are improving. When it comes to electric vehicles and software, he thinks the Chinese are even quicker than their European rivals. Zink, who has led the German supplier's auto unit since 2017, believes that Schaeffler's work with Chinese brands in their home market will be beneficial as they expand aboard. He also sees the pros and cons when using artificial intelligence in production. He discussed these topics and more when he met with Automotive News Europe Correspondent Nathan Eddy during the IAA Mobility show in Munich in September. The conversation took place before the auto unit's parent company announced plans to buy EV component maker Vitesco.
Chinese brands are 'quicker than the Europeans,' Schaeffler exec says
The supplier's auto boss, Matthias Zink, is impressed by Chinese brands' improved quality and pace-setting software.
Meet the auto boss
Name: Matthias Zink
Title: Schaeffler CEO Automotive Technologies
Main challenge: Strengthening the supplier's portfolio of products for electric and electrified models.
How disruptive will the presence of Chinese brands be to the established automakers in Europe?
I have been to China twice this year, including at the Shanghai auto show. During my trips I have driven 17 or 18 cars along with our China team. My takeaway is that more than a few of those cars are on a European quality level. In terms of quality, appearance, precision and the technology, they are good cars. Secondly, when it comes to software, agility, infotainment, over the air functionality, understanding customers and offering the expected features, the Chinese are really doing well. When it comes to the speed of all the software and infotainment features that are actually making the difference, they are definitely there. In addition, the Chinese have a good foundation in EVs -- and they are quicker than the Europeans.
How does the growth of Chinese automakers in Europe benefit Schaeffler?
We have a strong presence in China with the domestic automakers, including the ones that are entering or planning to enter Europe. We have good access to them and good customer relationships with them in China. Usually, those automakers are happy to have an established supplier when going global. This was the same when other Asian brands did this 20 or 30 years ago. It's always good to have a connection to a familiar global supplier when going abroad. That is what we are so we can benefit from that. Will the rollout of the Chinese automakers in Europe be very quick? I don't know. But there is a serious attempt to come to Europe.
Schaeffler is making big investments in e-mobility production capabilities. Where are these investments being made and why is this so important?
We say it's not only innovation in the product functionality, but also about innovation in the production technology or production engineering. We have always had a very wide scope on production. If you look at e-motor production, we knew that if we wanted to be competitive and innovative in that market -- because there are so many kinds of e-motors needed -- we must invest massively, to the tune of more than 500 million euro in new and expanded production capacity for e-motors by 2026. It's a global initiative, which means investment in Europe, Eastern Europe, China and the U.S.
How are AI and automation technologies changing your business?
If they are applied in the right mode AI and digitalization in particular in production offer great opportunities. But if you don't apply those tools consciously, you can be misled or even lose efficiency. I saw a nice example in one of our factories in China where digitalization and artificial intelligence for program planning were installed and that was simply overwhelming. Take stamping of components or measuring and matching parts through the aid of AI. There are a lot of efficiency gains in those methods. There are processes where earlier you would have had to interrupt the production process with paperwork and so on, but with these very simple AI-aided processes you can target significant efficiency gains.
How do you build supply chain resiliency?
Now more than ever we have to see how robust our facilities are and how robust our suppliers' facilities are to determine, for example, whether we will need double sourcing for components; what is the supplier's reactiveness and even knowing whether the supplier has insurance. There are so many things to be checked. We have a long way to go because there is no one-size-fits-all solution to make our supply chain resilient. We take our lessons from everything that has happened and we try to anticipate things, but it's really a big task given there are always things that are unexpected. Who would have thought there would be a war in Europe? So, we do the best we can.
There is tension between the EU and the United States when it comes to approaches for luring and encouraging investment in green tech—subsidies, tax breaks, relaxed regulation. What can the two sides learn from each other?
In Europe I would like to see in fewer regulations and rules. They are not a long-term way to get things going. I really appreciate the U.S. giving firms the entrepreneurial freedom to just go for it. That's what we would need here in Europe. The U.S. doesn't need a Green Deal because the global discussion is evident as it relates to the climate change challenge. If you ask me what from the U.S. I would apply in Europe it would be fewer regulation schemes to give technical competition a better chance, with a target to achieve something. But I would not regulate everything. I would not ban combustion engines and so on. I would offer a target but would leave the technology open.
What are your thoughts on 2023 IAA Mobility show as the automotive industry continues to confront disruptive change?
I would like to see how the IAA further develops. It has transformed into IAA Mobility, meaning that it is no longer just concerned with automobiles but with mobility as a concept. You also see for the first time so many Chinese brands here on the exhibition grounds, for example BYD, which is right next to us. That is new. Where does the German auto industry or the European auto industry stand in comparison with the global competition? In my conversations at IAA there is also a lot of interest about the speed with which e-mobility is evolving, which of the automakers are making these transitions in-house and to what extent this is being left up to the suppliers, and how much room there is for innovation on both sides.