Franz Fehrenbach, Chairman of the Bosch Board of Management," />

Mobility Solutions

In times of economic volatility: Bosch drives forward innovation in the automotive industry Franz Fehrenbach, Chairman of the Bosch Board of Management,

  • at the Frankfurt International Motor Show press conference, September 13, 2011
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  • September 13, 2011
  • Mobility Solutions
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press release

Ladies and gentlemen,

Two good years have passed for the automotive industry since the last time it presented its new products here in Frankfurt. Bosch Automotive Technology also remains on course for growth. And yet we are faced with a growing number of question marks: How long will the upswing in the automotive business last? What will be the impact of a slowdown in a country such as China, given the stabilizing effect it had during the most recent downturn? What are the risks inherent in the over-indebtedness of European countries and the United States? At the same time, our industry faces some huge challenges:

  • the tightening of fuel consumption and emissions standards,
  • the transition to electromobility,
  • the vision of accident-free driving
  • and not least the need to ensure that the car remains attractive for the internet generation.
All this shows that the automotive industry is going to have to take a number of critical decisions. I wish to discuss the paths Bosch will be taking. I consider two points to be most important:

  • In the short term, we will be well advised to react flexibly to economic volatility.
  • In the long term, however, we must be steadfast in helping shape the sector's major innovation projects.
It is precisely with regard to such projects that Bosch sees itself as a reliable partner for automakers – with 50 development centers in all of the world's major economic regions.

On track for growth: Bosch's business situation
But first of all let us consider the current economic and business situation. Fundamentally we are seeing a flattening off of growth following our steep recovery from the crisis. The business cycle passed its peak during the first quarter. But this does not mean collapse is imminent, and it certainly does not warrant hasty overreaction. It does, however, suggest a need to be vigilant. It is true that consolidation of the public finances in advanced economies with high levels of debt will be a drag on growth, and that emerging automotive markets too have recently experienced a slackening of growth. But the catching-up process will continue there for the rest of the year and beyond. And we are still expecting 5 percent growth in global automotive production this year.

Against this backdrop, Bosch's growth is likely to slow down slightly. It will, however, still amount to almost ten percent this year. So we remain confident that Bosch Group sales will top 50 billion euros in 2011, with a business volume in automotive technology of over 30 billion euros. This is also reflected in headcount. Over the course of this year, associate numbers will rise significantly – for the Bosch Group as a whole by 15,000 to some 300,000, and in the Automotive Technology business sector by 10,000 to around 177,000. And our commitment to investing considerable sums in our future is undiminished. In automotive technology alone, we will invest around 3.3 billion euros in research and development this year – upfront investment in helping to shape the fundamental restructuring of the automotive industry.

The challenge: more subcompact vehicles, but not less technology
Our main focus of attention is on the structural changes that our sector is seeing. Here are a few indications of what this means:

  • To begin with, it is clear that automotive production will continue to shift to Asia's emerging economies. These markets will remain dynamic, despite economic ups and downs. Let's not forget that, as things stand at present, India's vehicle density has only reached one-fiftieth of western Europe's, and China's one-fifteenth.
  • But as these markets catch up – and this is our second point – above all, small, low-price vehicles will predominate. As a result, over this decade, growth in the overall value of global vehicle production will lag behind growth in units produced.
  • But technological demands are growing – and that is our third point. Small, low-cost vehicles also have to be safe, clean, and economical. All of the world's major economic regions are seeing a tightening of emissions and fuel-consumption standards. What's more, the United Nations has proclaimed the Decade of Action for Road Safety. In this respect, Bosch's strategic imperative “Invented for life” is spot on. We are doing our utmost to make accident prevention and environmental protection affordable.
  • But continuing to develop existing technology is only half the challenge. We must simultaneously make sure we are ready for new technological departures – whether they come in the move from driver assistance to fully autonomous driving or in the transition to electromobility. This balancing act is the fourth – and biggest – challenge facing the automotive industry and consequently also Bosch.
But it is worth recognizing distinctions within the trend here. For instance, if we want to know the exact date a given number of electric cars will hit the road, a linear cost-benefit graph will be just as little use to us as a crystal ball. The answer depends to a great extent on government intervention, whether in the form of incentive schemes or of permit requirements for inner cities. We don't expect a major move in that direction until the middle of the next decade – in view of the high costs involved and the limited range of today's batteries. But it is conceivable that certain solutions will become accepted in certain applications well before then – for instance small e-vehicles for megacities. And we expect good opportunities to arise for the plug-in hybrid. These are vehicles whose battery can be charged simply from a wall socket. Their all-electric range is sufficient for day-to-day urban trips, and their supplemental diesel or gasoline engine makes greater distances possible.

Our opportunities: growth in Asia, growth through innovations
Turning that sort of solution into reality takes all kinds of systems expertise. This is expertise that Bosch has in good measure. We have a broad technical reach, and we have a local presence in all of the world's markets. Above all, we network our diversity – and that gives us the decisive extra edge we need to be a driver of change in the automotive industry. But what exactly are the solutions we offer?

First of all, our Automotive Technology business sector is making enormous strides to expand its activities in the Asian growth region. Despite the crisis, its sales have grown by half here since 2007. And by the end of this year, the region will be home to 10,000 of its global total of 29,000 engineers. It is here that it sells almost one in three of its diesel systems, and here that it will be making additional investments of some 1.5 billion euros between 2011 and 2013. In concrete terms, we have broken ground for a new plant in Chennai, India, which will produce small electric motors for use in wiper systems, for instance. In China – to mention just a few examples – we are significantly expanding our production capacity for the ABS antilock braking system and the ESP® anti-skid system. To this end, we have just opened an additional factory building at our Suzhou location for a further 1,200 associates – while in Chengdu a new plant will be built by 2013, where we intend to employ 1,000 associates. Furthermore, our planned purchase of Taiwan's Unipoint Group will strengthen our aftermarket business in Asia. And our growing presence is already something the region's car drivers can see for themselves: the one-thousandth Bosch Car Service in China opened this summer.

But developing products that satisfy local requirements is decisive. Only then will we be in a position to create the low-cost solutions that are so important in the Asian growth region. Our Parkpilot concept for the Chinese market is already a resounding success – and we are introducing a navigation system there in the coming weeks that is tailored to local requirements. Across all our business segments we are working to refine the cost-effectiveness of our products. Take driver assistance, for instance. Within three years, we were able to cut the cost of our radar sensors by half. Looking at diesel, we will increase the share of our injection systems that are fitted with cost-effective solenoid-valve injectors from just under 60 percent to almost 80 percent over the next five years. In this way we are encouraging the spread of technically sophisticated products in lower-cost vehicle classes.

Using a range of technical measures, we are in a position to reduce the fuel consumption of both diesel and gasoline engines by another third. One extremely important factor here is the turbocharging of downsized engines, which is an area our joint venture Bosch Mahle Turbo Systems is engaged in. These systems are not only helping to comply with the ever-tightening carbon dioxide emission standards for new vehicles in Europe and elsewhere. They are also contributing to the market success of our economical injection systems. As a result, we are planning to sell 7.2 million gasoline-injection systems in 2013 – three times as many as in 2010. Over the same period, sales of our common-rail diesel-injection systems are set to rise from nine million units per year to over twelve million units. The rising technical demands made of the car, as I have outlined through the structural changes in the sector, also play to the strengths of an innovative supplier such as Bosch. To us, developing ecologically sound technologies makes economic sense.

In the same way as environmental protection, accident prevention too has a doubly positive effect. First and foremost it saves lives, but at the same time it encourages sales of the technology that we have “Invented for life”. Driven by government requirements for newly registered vehicles, the safety systems which Bosch brought to market first are seeing rises in their worldwide installation rates between 2010 and 2015: for the ABS antilock braking system the rise is from 75 to just under 90 percent, for the ESP® anti-skid system it is from 40 to almost 60 percent. The opportunities for Bosch are clear. And in order to make the streets even safer, we have introduced the smallest motorcycle ABS on the market.

Developments are proceeding, and in the coming decades we will see the emergence of accident-free, autonomous driving. To begin with, this will be introduced in discrete situations, such as the automatic longitudinal and lateral vehicle guidance in stop-and-go traffic. Applications such as this will be gradually expanded to embrace higher speeds or more complex situations. Expanding driver assistance systems is decisive here. Bosch has dedicated more than 600 developers to this field. The road to autonomous driving is essentially comparable to the transition to electromobility – a topic with which over 800 developers are busy. In this way, Bosch is driving forward the technological developments that are absolutely central to the structural changes that the automotive industry is going through.

Bosch is now investing 400 million euros annually in powertrain electrification. In this we are making use of both the breadth and the depth of our systems expertise. This includes manufacturing our own power electronics. To produce our own power semiconductors, which in turn enables us to shape technology down to the smallest detail, we invested 600 million euros in our new wafer fab in Reutlingen. We are also working all-out on the lithium-ion battery with the aim of increasing range and reducing costs. At the end of 2010 in Ulsan, Korea, production of these components began at SB LiMotive, our joint venture with Samsung SDI. Finally, we are developing and manufacturing electric motors for electric vehicles. In this area, too, we have opted to take a cooperative approach in order to pool strengths. We are currently working to set up a joint venture with Daimler called EM-motive. Production is scheduled to begin in 2012 at our Hildesheim plant. By 2020 a total of one million electric motors should have rolled off the production line there, not only for Daimler but also for other customers. Bosch itself has already achieved a number of goals on the way to electromobility. By 2013 we will be delivering to almost 20 projects for 12 automakers – in addition to our own portfolio of products. Even if there is no immediate likelihood of electric cars flooding onto the streets, we have taken decisive early steps to prepare for an electric future. Bosch is famous for its long-term thinking. But that has never stopped us from acting quickly to get things done.

Dealing with tomorrow's traffic: our mobility solutions
So far, I have discussed the strategy that this company is employing to help shape the structural changes the automotive industry is going through, both economically and technologically. At the same time, we are paying just as much attention to a major change in society. It is not only the case that the car is changing: so too are people's perceptions of the car. In any case, vehicle networking is emerging as the decisive factor in purchasing decisions for the internet generation. This is reason enough for Bosch Automotive Technology to come up with internet-based mobility solutions. To give three examples:

  • First, we will set up a Web 2.0 driver portal before the end of this year. Users will be able to customize this portal, for instance by entering their vehicle details and their driving profiles into a digital check book. Among other things, this will simplify online contacts with repair garages. This sort of social media platform for driver information and service purposes has never been seen before.
  • Second, Bosch is participating in the German automotive industry's field trials for car-to-x communication, which are set to begin this fall in the area around Frankfurt. These will look at the networking of vehicles with each other and with the traffic infrastructure via a data radio link. This will give rise to functions that will bring us closer to our vision of accident-free driving, such as warnings of potential collisions delivered effectively in real time. For this purpose, Bosch is developing components that allow the test vehicles to exchange sensor data. This is an application for web 3.0, the internet of things and services.
  • Third, our e-mobility system in Singapore is testing an entire business model based on web 3.0. Trials began in June of this year. By the end of the year, around 40 charge points will have been installed across the city-state – and more are planned. The heart of the project is our service platform, which enables reservations to be made and drivers to locate available charge spots. This will give rise to an ecosystem in which energy suppliers, parking garage operators, and fleet managers can all take part. For drivers, the system couldn't be simpler: they pay a flat fee for electricity and service. Translated into euros, the cost is currently around 100 euros per month. This is a glimpse into the future of mobility.
But the internet is already getting into cars today, via infotainment devices such as smart phones. The question is: how can the car get onto the internet? This shift of perspective ought to determine the strategy for the automotive industry. As the car-to-x approach has already shown, vehicles are far more than data consumers. By gathering radar and video data on their surroundings, exchanging this data, and linking it with the engine and braking control functions, they are creating added value for drivers – for instance when cars further ahead in traffic warn of stretches of black ice. Which leaves the question of how drivers themselves can get onto the internet. The automotive industry needs to provide solutions in this regard too – solutions that go beyond mere connectivity with consumer-electronics devices. Our aim is to make the driver's seat a more attractive workplace and to ease drivers' workload. Bosch is developing innovative display and control systems, such as head-up displays that not only project navigation arrows onto the windshield, but place them almost directly onto the road.

A strong company: networked, international, long-term, reliable
Whether in the cockpit or under the hood, Bosch is working today for the road users of tomorrow. Three points sum up our strategic strengths in this pursuit:

  • First, our solutions demonstrate how a diverse company can network a variety of factors. We see again and again how separate developments in our technological domains end up supporting each other. This is another source of Bosch's industrial clout.
  • Second, the fact that we develop specific solutions for emerging economies and for industrialized countries shows that we understand what globalization means. We see internationality as being much more than simply having a presence in lots of countries. For us, it is reflected in the fruitful cooperation between our engineers based in all the world's major economic areas. This too is a source of added value for Bosch.
  • Third, our solutions are bridging the gap between the present and the future. We are continuing to refine ABS, ESP®, diesel systems, and gasoline systems – but we are already well on the way to making electric and autonomous driving a reality. We are seizing long-term growth opportunities without neglecting short-term ones.
In all that we do, we are adjusting to the increasing uncertainty in economic circumstances. Despite the volatility in business cycles, the automotive industry must press on with its major innovation projects. Partnerships for innovation between producers and suppliers have always depended on reliability. In an uncertain world, it becomes all the more important. At Bosch, it goes without saying. Our partners can rely on us.

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Curriculum Vitae Franz Fehrenbach

Curriculum Vitae Dr. Bernd Bohr

Curriculum Vitae Peter Tyroller

RF00130 - September 13, 2011

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