Why low cost tops lightweight on priority list for EV shift

Austria-based Benteler Group is a key global supplier of metal automotive parts, including suspension and engine components. But the company is positioning itself as a mobility partner that can help automakers looking to build in a smarter, more low-cost manner. To promote that, Benteler took a prominent stand at the 2023 Consumer Electronics Show in Las Vegas, using the annual tech event to showcase an autonomous people-moving pod. Benteler’s EV systems subsidiary, Holon, created the vehicle in partnership with Pininfarina, Intel’s Mobileye assisted driving unit and mobility provider Beep. Benteler CEO Ralf Göttel discussed that project with Automotive News Europe Correspondent Nick Gibbs and also explained why lightweighting is not the top priority for automakers transitioning to electric cars.

The autonomous pod that Benteler subsidiary Holon showed at CES appears a long way from your core business. How does the Holon Mover fit within Benteler?

Part of our mission is to make mobility lighter, safer and more sustainable. We don't perceive ourselves as a maker of, say, knuckles for axles. We are in the mobility sector, and we see a tremendous need for these vehicles, which are quite complex. But we have experience in the electric platform, which we developed five years ago, And, we also make modular assemblies for automakers, mainly chassis assemblies, combining different partners. So, for us it was a logical field to enter, while for traditional automakers or bus makers the initial volumes for these vehicles are not large enough to create interest.

How sizeable are the modular assemblies you build for automakers?

In Brazil for BMW, we assemble the entire powertrain, including the engines. Most of the time it's front corner modules or rear axle assemblies with the brake discs and so on. An example for the future is complete rear suspension assemblies, including electric motors.

Does the Mover use the electric platform you showed at the 2020 CES?

There are elements of the platform included, but it's not the same. The Mover is really tailored to the needs of the fleet provider. For example, the batteries are above the chassis so the floor can be very low, allowing a ramp for wheelchairs.

Chinese carmaker Evergrande was planning to use your electric platform, but then it started to struggle. Where did the technology end up?

Elements of the platform are in serial production such as the electric rear axle. We also assemble the battery trays from that platform for large automotive suppliers. So, bits and pieces. But the entire platform I would say is the core branding of the established automakers.

Does Benteler maker the e-axle in-house?

We just assemble them. We make the electrically driven axles, but the electric motors, for example, come from somewhere else.

What are your customers’ top concerns as they move to electric? Is lightweighting most important or is it simplicity that want most?

Lightweight is not a dominant concern anymore because of energy recuperation and other techniques. What is most important now is scalability, which is a direct cost. They look for standard applications that we can spread around to multiple customers. That way they have the economies of scale through us. Automakers transitioning to EVs want to benefit from our serial production experience. For example, we were the first in production with battery trays for the BMW i3 and Renault Zoe.

Why is lightweight no longer a leading concern?

It's still a concern. But the money you are willing to invest in lightweight is not as high as before because the total vehicle cost is currently the biggest challenge, in particular with smaller cars. These cars [EVs] are still not affordable in the A- and B-segments.

Does that mean you would share a suspension part across multiple automaker?

Exactly. The Mover illustrates this. It’s designed to be able to customize the interior, but the core component will be always the same. So, we can provide a lower price point because we shared the base components over multiple applications. That's the overall concept.

Benteler makes exhaust systems and camshafts. How much of your overall business comes from combustion engines?

It is about 5 percent. We are significantly ramping down capacities in Europe. At the same time, we don't see the same necessity in South America, Mexico or China. Combustion engines have a longer life in those markets. In Brazil, automakers are going more toward flex fuels and want to increase the [sugar cane] ethanol content up to 100 percent. That is their way of becoming CO2 neutral. So, I would say there won’t be just one winning technology, no matter what Brussels, Berlin or Paris wants.

Is Benteler considering spinning off or selling that part of the business?

We will shrink it in Europe. The good news is that the core manufacturing technologies in our exhaust business -- metal processing such as bending and welding -- are universal. For example, in an engine line in Warburg, Germany, we now make prototypes for electric motor driveshafts. We are converting our traditional engine exhaust portfolio into new applications such as battery cooling plates.

In terms of your content in electric vehicles, is it going up in value?

Compared to what we supply to vehicles today and what we will supply in five years, it's about 30-to 35 percent more measured in dollars per car.

Where is the biggest increase coming from?

Battery storage systems.

Based on forward contracts, are you seeing an interest from automakers in moving to battery swapping?

Not among the top 10 automakers. For them, the battery is the natural replacement of the powertrain, and they want to keep this at the heart of their DNA. Otherwise, they would move more and more to toward becoming a Foxconn [which makes the iPhone for Apple and plans to make cars in the U.S. for American EV maker Fisker]. Also, there are liability questions. If you have a really universal battery pack there are too many lawyers who will question who is guilty if the car’s safety is compromised.

In terms of your geographic spread, half your business is currently in Europe. Will that change going forward?

The fastest growing market for us is Asia, which is China and India. They are just building more cars relative to the rest of the world. In Europe we only grow through additional content. The European market will never recover to the good old days. The largest market in Europe that could theoretically absorb more cars was Russia, but this is now stopped. Europe’s car penetration is around 580 per 1,000 people, so it is saturated. Europe also won’t export the same amount of cars. In the U.S., the Inflation Reduction Act will lead to more localization of car production.

Do you do you think that Europe needs its own version of the IRA?

Yes. When you talk about energy, raw materials or others, it wouldn’t be wise to think the markets will handle it by itself.

Are you talking about a subsidy?

Whatever you call it – an incentive, subsidy, industry strategy – it’s something to ensure that value creation remains or still takes place in Europe. Otherwise, we could have super unbalanced trade.

What is your current standing in China, business-wise?

We have three joint ventures as well as wholly owned companies. This is really a business decision, not a political decision. We are non-critical. It's difficult to phrase it. We are not a mom-and-pop outfit, but we are also not high-tech, military business value where you probably need to be a bit more careful.

How is the company being affected by the rise in energy prices?

We have seen a significant increase. In Germany we paid 2.5 times as much for energy in 2022 as we did in 2021. In some countries it’s five to seven times more than before. It's not such a concern for us that Europe is significantly more expensive than the United States. It’s not going to lead to a shift of production between continents. But within Europe, it's a big problem. The unbalanced energy costs in different countries in Europe will lead to a significant advantage or disadvantage depending on the country.  

Can you pass on these costs to your customers?

We worked hard last year to pass this through and we while couldn’t achieve 100 percent we were largely successful.

Were you still profitable in 2022 despite the higher energy costs?

Yes. The problem is more long term. This is not so much of a problem for Benteler because we can produce in Germany, the Czech Republic and Spain or Norway. For some smaller companies that lack our international footprint, this is the biggest threat. You can perhaps pass though energy cost increases to the automakers for the next two years, but long-term sourcing decision will depend heavily on local energy costs.

What are the big energy bills for?

We are large consumer of natural gas which we use for heating activities such as producing hot-formed, high-strength steel. We also have painting lines [that run on gas]. Gas is really a quite important factor for us.

Are you confident those prices will come down in 2023?

We currently see stabilization and a small reduction. The general recession or cooling down of the economy has greatly relieved this. But, of course, the biggest influencing factor is the conflict between Russia and Ukraine. We are also looking at renewable energy sources. We have equipped roofs at our facilities with solar panels and our largest production location, in Paderborn, Germany, where we make steel, we will have direct access to a huge wind park.