Using Change as an Opportunity
We are in the process of a profound transformation. It influences every aspect of our business: products, processes, business models and structures. This presents us with major challenges, but mostly, great opportunities.Dr. Elmar Degenhart, Chairman of the Continental Executive Board
Transformation means change. The process of changing from our current status to our desired status in the future is not primarily a question of exchanging or replacing existing modes of working, but of responding to current economic and social dynamics. The word "transformation" comes from the Latin “transformare” (to shape), and above all, is about constantly evolving, responding to opportunities and risks and taking new paths.
A Society in Flux
Environmental organizations and the climate change movement “Fridays for Future” have led to a shift in thinking about mobility in our society. Every Friday, people all over the world are on the streets, protesting for effective climate protection. The issue poses great challenges for society: While mobility is indispensable for economic development and social life, it also needs to become more sustainable, safer and more comfortable.
Alternatives are already in vogue: Car sharing is booming, especially in major cities. And "Car to Share” schemes are on the rise in rural areas too. In station-based car-sharing, customers pick up a vehicle at a station in their vicinity and return it to the same station after their journey. In “Free-Floating” schemes, the car can be left at the destination, where the next customer can then locate it via a cell phone. At the beginning of this year, the total number of car-sharing vehicles in Germany came to 25,400, which is an increase of more than 25 percent compared to the previous year. At present, around 2.3 million customers are registered with the currently 226 providers, with a total of 45 new providers added over the past year. Sharing models are available not only for cars, but also for bicycles, e-bikes, electric scooters and scooters. As a result, urban traffic now offers a colorful range of mobility options for every need.
Proponents hope that this development will have a significant positive impact on the environment and traffic, even though electric vehicles in car-sharing fleets are still the exception at present. The breakthrough, according to traffic experts, will only come with the advent of autonomous cars. After all, these could be even more efficient and environmentally friendly, as well as more profitable.
The Future of Mobility: A Free Ride for the CUbE
The first autonomous shuttle buses with electric drives are already on the road, although usually only in delimited areas such as airports or on company premises. But the technology for driverless taxis is on the rise: With the development platform known as CUbE (Continental Urban mobility Experience), Continental is currently testing the technology for future robo-taxis. The aim is to research the driverless transportation of people. Just as you do for a normal taxi, you simply order a CUbE by using an app. Customers can reserve a seat. While you are waiting, you can track the shuttle's journey to you on your smartphone. A personalized welcome message will then greet you when the shuttle arrives – so far, so good. The difference between this and a classic taxi is, of course, that the autonomous taxi will roll up without a driver, and it's completely electric. Also on board: Continental Technology, which is already in use in pilot projects. The major advantage of autonomous shuttle vehicles is that they are constantly on the road and therefore don't need a parking space – a solution for the growing parking problem in cities.
Large numbers of these autonomous vehicles could change road traffic in the long term, making it much more flowing, more environmentally friendly, more efficient and, most importantly, safer in the future. For Dr. Andree Hohm, head of the self-driving car project at Continental, the advantages are obvious: “It is clearly more intelligent to operate driverless vehicles as continuously as possible instead of countless private cars, which, on average, are parked for 23 hours a day, taking up space which could be used for parks and playgrounds, for example.”
New Approaches to Mobility
To work, to the gym, to the shops, to the cinema, to friends – we are constantly on the move. Individual mobility is a basic human need. What is more, we often don't have a choice, having a job often involves being mobile and flexible. In rural areas, smaller supermarkets continue to close and for many people large supermarkets can only be reached by being mobile. Using a car is often our first choice, although a change in our mindset is currently taking place in society. As a result, car traffic is becoming less and less important in the mobility of the future. Not only bicycle traffic and sharing models are increasing rapidly, but also the use of public transport. Researchers expect fewer and fewer routes to be covered by cars in the future. The share of car driving in major cities is set to fall from 51 to 46 percent, while bicycle use is expected to increase by 18 percent and public transport by around six percent. Commuters, in particular, are currently looking for alternatives.
However, poor connectivity or excessively high ticket prices prevent many people from using public transport more extensively. This means that currently 43 percent of public transport users want to switch to a different form of transport. The Global Mobility Index shows how densely a city’s public transport network is developed and how much public transport costs. Berlin is very far ahead – people have fewer cars than in other major cities and use public transport. Nevertheless, we still need to consider how to make public transport even more attractive and appealing worldwide. Local, regional and national needs for individual mobility are very different.
An Entire Industry Is Facing New Challenges
Changes in how we move are affecting the automotive industry in particular. The pressure for change will only increase: In an era of growing digitalization, more stringent CO2 values and an electric revolution, the automotive industry is facing new challenges. The combustion engine is being replaced by the electric motor. Who will actively shape the transformation process and who will fall by the wayside will be determined by an ability to adapt to the current changes in good time.
In addition, there is an undeniable uncertainty among consumers: Around five percent fewer cars than 2018 were sold worldwide in the first half of 2019. Since the start of the year, German automobile manufacturers have recorded declining sales of more than 20 percent in the U.S.A. and China. The economy is expecting further falls declines this year as well. The global corona epidemic is significantly increasing this tendency.
The Automotive Industry Has to Move Fast – But There Is Still Time to Act
Car companies no longer have a lot of time for change: the year 2020 marks a turning point for the industry – particularly in terms of legislation. From 2021, more stringent EU limit values for the CO2 emissions of new cars will apply. On average, the new car fleet of every manufacturer in Europe must not emit more than 95 grams of CO2 per kilometer. Otherwise, fines of 95 euros per additional gram and vehicle are likely to be payable. The German government will reinvest the revenue from the CO2 pricing in climate protection measures or return it to its citizens in the form of relief elsewhere.
Taking Off into the Future
This year, most companies are starting major e-car offensives. After all, electric cars in Germany have not as yet achieved a breakthrough in the mass market compared with other European countries, such as Sweden or Norway, despite the increasing number of registrations. In order to achieve the goals of the federal government’s climate protection program, 7 to 10 million electric cars must be on the roads in Germany by 2030. Although there are currently around 24,000 public charging points in Germany – almost 50 percent more than in the previous year – there are still a lot of gaps in the charging network. In order to counteract this, around 50,000 new public charging points are to be created in the next two years to make electric cars compatible with everyday life, and to ensure they can be easily charged in multi-story car parks, underground car parks and at the workplace. Thanks to the introduction of higher purchase premiums of up to 6,000 euros, the federal government wants to make the acquisition of electric cars more attractive.
Suppliers such as Continental make significant contributions to a healthy mobility ecosystem that also offers ecological, economic, social and climate protection.Dr. Elmar Degenhart, Chairman of the Continental Executive Board
A Time of Change
Transformation is a challenge, even for large suppliers such as Continental. Where diesel and gasoline power transmission technology used to be the primary focus, Continental is now coming to grips almost exclusively with topics of the future, such as assisted, automated and connected driving, the realization of new vehicle architectures and connecting cars to new, high-performance computers, software and data based on intelligent products made of plastic, rubber or electronics, and business with industrial and end customers.
In November last year, Continental started a global structural program „Transformation 2019-2029“ to accelerate the technology changeover. The aim is to strengthen the company’s competitiveness in the long term. The switch to electro mobility is leading to adjustments and phasing out of production at individual locations worldwide. Ongoing digitalization in the field of display and operating technologies is bringing about a change in the focus of production. Profitable growth areas such as autonomous and networked driving are moving to the forefront, as are services for mobility customers, the tire business and industrial and end-user business. Cars are slowly developing into smartphones on wheels, which are being equipped with an increasing number of driver assistance systems, until they are able to drive autonomously. All of this is changing the automotive industry fundamentally: the factories, the workforce, the processes and the products.
Supplier Industry in Upheaval
Since October 2019, the fully independent Powertrain division has been working under the name “Vitesco Technologies.” The young, attractive company is a trailblazing pioneer in the field of electronics and electrification, ideally positioned to benefit from the trend towards e-mobility and the growth prospects associated with this transformation. For example, Vitesco Technologies recently also managed to secure a major order from a European vehicle manufacturer for the delivery of innovative electric heating elements for diesel catalysts. This EMICAT brand e-catalyst technology will be used in two of the manufacturer's 48-volt hybrid van models. Start of production for the multi-million contract is scheduled for the end of 2022. The innovative electrical heated catalyst is used to ensure the emission safety of vehicles in accordance with the planned Euro 7 emissions standard. The aim is to substantially reduce the limit values for nitrogen oxides. For Euro 6, these are currently still at 80 mg and 60 mg per kilometer. With Euro 7, only a value of 35 to even just 20 mg of nitrogen oxide per kilometer could be permitted. This is a major obstacle for car manufacturers, which can only be overcome thanks to innovations in the field of alternative drive technologies. The e-catalyst developed by Vitesco Technologies is a form of smart electrification for combustion engines.
Drawing New Strength
The structural program is Continental’s response to global decline in the automotive production, the disruptive technology changeover in powertrain technologies and the ever-accelerating digitalization of products and business processes. All this will lead to a reorganization of the business. In order to take staff from the old world into the new, our focus is primarily on qualification programs. The expansion of the internal labor market, extended qualification measures and local partnerships are designed to prepare employees for the new challenges. This goes hand in hand with a strengthening of the corporate culture. Continental’s corporate values, increasingly decentralized decision-making responsibilities and the future-oriented qualification of staff are among the key elements.
2020 is becoming the year of transition for our structural transformation. Our structural program and our new organizational structure will lead to tangible progress in the medium term.Dr. Elmar Degenhart, Chairman of the Continental Executive Board
Qualification for Change
In July 2019, Continental founded the „Institute of Technology and Transformation“ (CITT) in order to enable its staff to receive qualified education and further training. The primary task of the new institute is to oversee the qualification of all employees in Germany. You will have the opportunity of participating in an IHK-certified training program that offers tailor-made training, seminars and training courses for targeted qualifications. The aim is to offer staff long-term career prospects and greater employment opportunities.
“As electrification and digitalization become more widespread, simple tasks are being replaced by more complex tasks that require training or further education. These are far-reaching changes that are affecting an entire industry. Qualification is therefore only a question of devising a sensible way of sharing the burden: lawmakers, social partners and companies must all work together,” explains Dr. Ariane Reinhart, Continental Executive Board member for Human Relations. “Staff also have to play their part. Our institute provides the framework conditions needed for self-development and maximizing the employability of staff.”
Best Possible Support for Staff in the Transformation Process
Change always means change: adaptation to new events, requirements and developments. The fact is that the German car manufacturers are experiencing the greatest upheaval in their history. However, the automotive industry is crisis-tested, and has already gained enough experience through exceptional pressures. It is now important to actively drive the transformation process in which the entire automotive industry currently finds itself. Our ability to adapt is great, which means that self-challenging times can be used to increase competitiveness and to reposition ourselves on the market. Wolfgang Schäfer, Continental’s CFO, also agrees: “The economic environment will continue to be challenging in 2020.” And it’s good to know that “Continental has set itself up early and in good time,”says Dr. Elmar Degenhart.
You can find the current Annual Report on the major developments in the company here.