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“Customer experience within the German automotive industry” interview with Mr. Peter Hopfinger

How is the relationship between manufacturers/suppliers and consumers within the German automotive industry changing?

As more OEMs compete in a stagnating market, pressure will be created across the whole value chain. The purchasing functions of the OEMs will as in the past generate much of this pressure in expectation that the suppliers of all tiers will be able to reduce cost while maintaining or even improving quality by adoption of more efficient manufacturing procedures and logistics efficiency.

The traditional consumer base who has valued vehicles as a status symbol will gradually die out. An already apparent trend with urban millennial and post millennial generations is the negation of the motor vehicle as a status symbol. These customer sectors have a completely different approach to mobility, using an approach driven by the availability of networked offers, which include car sharing/ rental, public transport, bicycles etc. An increasing ecological awareness across all customer sectors will add to this. The trend of urbanization of populations will be a compounding factor.

The German market, home market to the majority of premium players in the global automotive sector, will become more competitive than it already is, forcing the OEMs to optimize marketing/ sales and after sales service offerings. The approach adopted by the OEMs towards e-mobility in the after sales and service sectors will be a critical success factor. The current network for charging EVs will not be sufficient taking extrapolated growth and improvement of battery performance into account.

Connective technology is starting to enter the automotive arena. What is the outlook for in-car connectivity in terms of consumer attitudes and satisfaction?

Connective technology is already more widespread than many buyers of 2015 model year vehicles realize. This trend will strengthen with the launching of the first vehicles with full automated driving capability for motorway driving in around 2020. This trend will be further strengthened in the following decade to 2030. The seamless functioning of handheld devices and motor vehicles will bring about the introduction of new generations of both hardware and software to answer an increasing demand for ease of handling, intuitive driving, reliability and above all safety. This combination of hand held devices and motor vehicles will have a reverse positive effect on the reliability of hand held devices as we currently experience them with often questionable functional stability.

A key success factor in customer experience in this new seamless world is reliability and intuitive operation. Customer attitude and satisfaction will be driven by a wider complex of factors, spread between instant satisfaction (click and immediate response), long term performance, reliability and safety.

The first show room experience when acquiring a new vehicle will remain highly important when making a purchase/ lease decision. The overall decision process itself will be based on a combination of online and showroom impacts. In the case of vehicles, the drive which TESLA is making to market EVs solely using the internet with a low number of ‘keynote’ stores in city centers is a questionable approach to this challenge.

“Customer loyalty to automotive brands reached a 10-year high during the first quarter of 2015, according to analysis from IHS Automotive, a global provider of critical information and insight to the automotive industry and part of IHS Inc. “Michelle Culver, Marketwatch, quoting IHS Automotive

In your opinion, what drives customer loyalty within the automotive industry?

One of the major factors to influence customer loyalty is often laid before the potential customer has reached the age to acquire a new car. Marketing targeted at a generation who learn to operate hand held devices in early infancy but who are not yet in a position to acquire a new vehicle will become more important. Once a customer buys/ leases a vehicle it will be the traditional factors of design, performance and reliability that will keep the customer tied to the brand. A further factor will be seamless compliance between vehicles, the environment and interfaced devices. Not only the millennials and post millennials will appreciate this; an increasing number of ‘digital immigrants’ or ‘silver surfers’ will be equally influenced by these factors.

With the increase of players in both premium and non-premium sectors, marketing and sales activities will need further refinement to reflect this expansion of complexity.

What challenges does the German automotive industry face in keeping the consumer of tomorrow satisfied?

The entry of new OEMs together with the introduction and acceptance of e-mobility will cause considerable changes and increase overall competition in the German market. The new OEMs in the German market will be focused mainly on e-mobility. The changes in attitude to ownership and use of motor vehicles will demand diverse paradigm shifts in marketing, sales and after sales. The prevalence of automated and networked vehicles will place strong demand on functionality, reliability and safety.

This trend is, in effect, an extension of a trend which began at the beginning of the millennium, when OEMs began to offer wide ranges of derivatives or niche models based on common and modular architecture. All these changes, above all the blending of functionality between handheld devices and vehicles, will expand and change factors on which satisfaction in the motor industry has depended on for decades. Functionality and reliability will be supplemented by the demand for immediate and flexible satisfaction of demands on functionality, much in the fashion that ‘apps’ are now changing the way we access information and functions. The more traditional OEMs will be forced by a pincer action of changing client base and new competition to ‘think outside the box’ to find new ways of satisfying the demand of both the urban millennial and the customers who live in more widespread rural areas.

“Fourth Industrial Revolution” interview with Tamas Horvath

In the next few years, how does the future of Industry 4.0 look?

Based on current estimation 10.9 billion Euro will be invested in the Industry 4.0. This significant investment clearly shows that we have reached another milestone in the evolution of industry.
The vision behind the 4.0 concept is based on two major pillars, namely the smart factory – where the manufacturing factories are going to change from centralized control to flexible, self-operating plants – and the so-called global factory – where production networks are going to be established without geological borders.

Personally I think that in case of Industry 4.0 we are talking about a step-by-step transformation, rather than a sudden change. This transformation impacts the whole value chain – communication, planning, production and logistics. In the upcoming few years the major focus is still on M2M communication and softwares.

Relevant industry players allocate significant resources in industrial software developments. To give one example, an industrial giant like Siemens spends 50% of R&D budget on softwares. Roughly 17.000 out of the total 30.000 R&D staffing are SW developers.

Besides internal developments, companies make alliances and joint projects, and, moreover, clusters have been established for Industry 4.0 to gather resources, expertise and knowledge.

Still, there are challenges that we will continue to face until we reach the state of the total integration. Security of the system, data management, safety and communication platforms are the biggest barriers that the key players of the industry have been working on in order to be able to take the next steps towards full integration of cyber-physical systems within and across factories.

What are the three main driving forces of change behind Industry 4.0?

In the industry of the future, the product will become an information carrier and steer its own way through the production process, thus creating intelligent production.

I see the following main driving forces:

Flexible production, customization and cost efficiency even for small series, thus enabling them to combine the individual-tailored product with the benefits of scaled mass production. This means that the future factory is capable of meeting specific customer requirements within a short period of time and without without any significant losses.

Effective logistics: Impressive development and big scale automatization can be foreseen in logistics as well. Connecting the logistics systems among the manufacturing factories and their suppliers provides major synchronization potential, huge cost saving and better capacity-to-demand ratios. Looking at longer horizon autonomous transport, automatized inventory systems will further improve the efficiency of the supply chain.

Predictive maintenance: Whoever worked in manufacturing knows how painful the impact an unplanned down time has on business. It is not only the shut-down time, but indirectly such loss can lead to losing a customer or even market share.

In the concept of 4.0 all manufacturing components have an individual IP address. With the support of sensors and intelligent softwares, a safety network can be created. Such monitoring systems detect the changes of parameters and inform the operators about the necessity of maintenance or even advise preventive repairing work. This leads to higher reliability and output.

All the above mentioned items lead to one major goal, namely to enhance competitiveness.

Many in the industry are turning to technological advancements such as artificial intelligence, 3D printing and smart factory manufacturing, to propel their aggressive business goals. How will these digital tools transform consumer demand as we move forward?

Digital tools at the end of the day have one ultimate goal, namely to satisfy the user. All connected solutions have to focus on the users and their problems. The above mentioned digital tools take the customers’ wishes as the base during the development phase.

Developing specific algorithms, huge data bases and the possibility to process them or the availability of powerful IT systems make the artificial intelligence a focus sector for the industry players with an estimated 20% annual growth rate in upcoming years. Out of the broad category of AI, I would highlight the autonomous robots as key, offering more flexibility, adaptability and mobility.

The other technological advancement, which was mentioned in the question, is the 3D printing.

In my point of view, the transformation – even the pace of the transformation – of the business objective of 3D printing is a key factor in understanding how the latest innovations will shape consumer demand. 3D printing had been designed and used to make prototypes, to shorten product development cycles and support the work of R&D. Currently, it has shifted towards mass production, offering lower material waste, production time and eliminating molds.

In the end, all the functions and solutions provided by the above mentioned technological advancements need to aim to serve the users in a way, which makes the users’ life safer and more convenient.

From the consumer perspective I would highlight the usability. Due to productivity and efficiency in our current environment, users need to have comprehensive understanding and broad responsibility. The users main expectation would be visualized, easy-to-use, intelligent tools, which make their daily work efficient.

“Industry 4.0 Future Outlook – Promises and Challenges” with Mr. Willem Bulthuis

There is much talk about Industry 4.0 in Germany. Why is this?

The manufacturing industry is a key driver for the German economy. Therefore, any debate of the future competitiveness of this sector deserves and receives much attention. Discussions about highly automated factories trigger concerns about employment, while on the other hand reports about 3-D Printing and other new technologies ignite speculations about the future of manufacturing and logistics as we know it.

The concept of Industry 4.0 has been promoted in Germany since 2012 by Professor Kagermann and others, as a wake-up call to the well-established German manufacturing industry.  A key element of this vision is the strongly increasing (digital) networking between machines, between factories and between companies in the value chain. Also, the vision of more intelligent, possibly autonomous, manufacturing processes, in which the unfinished product itself ultimately steers the production process, has been part of the concept. The latter element has been often described as the “batch-size 1” promise of Industry 4.0, enabling really individual products to be produced in a factory.

In the meantime, it is broadly accepted that not only the production industry, but practically every business sector will be heavily impacted by what is now generally called “Digitization of Industries”.  The digitization of the Media Industry, which started already in the 1980´s with the music CD and, later, the Internet, was relatively straightforward as the “product” itself can be digitized (think MP3 music).

The digitization of the manufacturing industry, however, can only address the monitoring and steering of processes – the product itself remains physical in the end, even when considering 3D Printing. Although we can learn much from understanding what happened to the media industry, the digitization of manufacturing will have its own characteristics.

In the next few years, how does the impact of Industry 4.0 look within the German market?

Much is happening already in a less-observed production industry – agriculture. “Precision agriculture”, levering satellite or drone-based sensors, Big Data analytics, autonomous machines and supply chain integration, is already used to reduce cost and environmental impact while increasing yield.

In regards to manufacturing, we are seeing brand-new pilot or demonstration factories that give us a glimpse of the future factory floor. However, as the machines in existing manufacturing plants have a very long lifespan, new digital steering technologies have to work together with existing machines. Therefore, much of Industry 4.0 will happen as a rather evolutionary process.

We will probably see more revolutionary change in business models and value chains. Digitalization, including the deployment of “Big Data” and ubiquitous sensors, can substantially impact topics like logistics, remote servicing and the tracking of products and their usage through their life cycle. Also in supply chain management and outsourcing, we might see more short-term impact of digitalization.

If we consider the impact of internet-based “platforms” like Uber and Airbnb for matching supply and demand in their respective markets, we can imagine what might happen in industrial ecosystems. Such internet brokerage platforms tend to become rather powerful, due to their scale and networking effect. They therefore can take over part of the value that traditionally was allocated to the owners of physical assets like cars and spare beds – or, in our industry, factories or machines.

It might take a while before there is an “Uber for the steel industry”, an “Airbnb for spare manufacturing capacity” or an “iTunes for 3D-Printable spare parts”.  But it they arrive, they will move fast and most likely not stem from traditional German manufacturing companies.

Let´s also consider which trends that affected the media industry, in conjunction with societal changes, could also impact the manufacturing industry. An example is the shift from product ownership to service: consumers don´t buy music but subscribe to an online music library, young city dwellers don´t buy cars but use a car sharing service. In the B2B world, we see similar trends: building management companies don´t buy (LED) lightbulbs but subscribe to a lighting service, mechanics workshops don´t buy compressors but “hot air” on a pay-per-use basis.

When Industry 4.0 allows us to produce “smarter” products, this raises the question whether products produced in our factories are still relevant after leaving the factory. If they are part of a subscription service rather than bought by the end-user, they can and should be tracked and re-collected at the end-of-life for recycling, especially of rare materials. If they can be remotely monitored, serviced and updated, a substantial part of the lifetime value is created after production. Thus the relationship of the manufacturer with their products can expand substantially.

What advantage does Industry 4.0 have for small and medium companies in Germany?

Generally speaking, Industry 4.0 promises to allow for optimization between cost and flexibility. In order to reap the full benefits, we have to consider “integral cost”, as especially aspects like logistics, maintenance and service during the product lifespan, as well as recycling, should be included.

Flexibility can manifest itself in many ways, like being able to adapt production lines to rapidly changing demand and small batch sizes. In this context the notion of “batch-size 1” can be realized at different levels: from configuring standard building blocks (like when ordering a car) and personalizing software functions (like some PC manufacturers offer) to a fully individualized piece of hardware (as 3D-Printing enables). To what extent customers are willing to pay for individualization is, however, an open question.

When increased flexibility is combined with better digital interfaces between players in the manufacturing ecosystem, it can become easier to outsource activities or to fill free capacity with small batches. This could help smaller manufacturers. However, if big internet platforms bring supply and demand together efficiently, this might create substantial price pressure, as has happened in other market sectors already.

Whether Industry 4.0 will help smaller companies in Germany to deal with the expected shortage of qualified works, is also an open question. In general, digitization reduces the need for knowledge workers more than for factory workers. Robots could reduce the need for factory workers, but outside of heavy, dangerous, or monotonous tasks, human workers are often still more suitable and especially more flexible. Finally, the monitoring and steering of smart factories will require specialized staff – which is scarce.

How can German manufacturers get ready for Industry 4.0?

Established manufacturers should actively think “out-of-the-box” about how business models in their industry might change, what key assets they own and what their sustainable added value in the new business models could be – likely something different than what has made them successful until now. It is important to consider all functions and business processes integrally, as new business models are likely to impact several.

It can be helpful to start by focusing on the changing expectations of end-users and understanding what happened to totally unrelated industries that are already “digitized”. We should keep in mind that paradigm shifts often come from outside industry – so looking at what competitors and partners are doing is not sufficient.

As Industry 4.0 is largely based on smart usage of data, it is often said that “data is the new currency” – data can be highly valuable. Therefore, each company should consider what data it has or could collect, from its machines, business processes, products (in the field), customers and partners, and for whom it could be valuable. Such data should be actively collected and protected, and business models for monetization are to be developed.

Legal and regulatory aspects must be considered, also their international differences. Unlike common belief, there is no concept like legal “data ownership”. Especially when establishing digital communication with value chain partners or machine suppliers, it must be clearly defined who has what access and what rights to use certain data, also taking privacy (of factory workers) into account.

Last but not least, any Industry 4.0 implementation should be based on a solid IT-Security concept. The risks of industrial espionage and sabotage through cyberattacks are substantially increasing with digitalization of business processes. With the proper technical and organizational measures in place, this can be managed. However, this must be planned in advance, as is described in the White Paper “Managing security, safety and privacy in Smart Factories” edited by Dr. Florian von Baum and Willem Bulthuis and available on

Industry 4.0 is clearly a broad and complex topic, and there are no “one-size-fits-all” answers to the many questions manufacturers are facing. For many companies that want to take the digital future in their own hands, it is not realistic to develop in-house expertise and insights sufficiently fast.  External experts or Digital Advisory Boards therefore can be a good first step to develop a solid understanding of what the future might bring. The tough decisions, though, can´t be outsourced.

What cutting-edge technologies will impact the industrials sector in 2015?

There are many cutting-edge technologies that we are beginning to hear about that will affect the industrials sector beyond this year. In 2015, we are seeing several major trends that are dramatically impacting the sector including the internet of things, 3D Printing, Robotics and LEDs. While none of these things should be new to any of us, they are unquestionably causing more disruption and impact in 2015 than ever before.

The first cutting edge technology changing the industrials sector in 2015 is the Internet of Things, or IoT, by creating connected or smart environments for many different types of buildings and infrastructure. While the idea of having devices linked together is nothing new, the IoT has created the ability to do this with less capital, and with a simpler interface. While there is still a long way to go, connected buildings arguably became viral because of several factors including devices being addressed by individuals, cloud based capabilities and the interconnectivity of devices. Individually addressing devices is important in personal space within a larger shared area, such as a large open office. For instance, now everyone can individually address their lighting needs without having to adjust the full common area; each light can be individually addressed. Being able to connect these devices to the cloud allows for endless content capabilities. Finally, interconnectivity has been critical to improve the user experience; a single device or app can control HVAC, lighting, security, safety and many other things.  IoT now provides indoor connectivity, outdoor connectivity, retail connectivity and city connectivity.

Next, 3D printing is becoming more and more widely adopted in many industries and the possibilities are limitless in terms of what other industries this technology will disrupt. In fact, it is hard to find an industry not impacted by this technology. The use of 3D printing is common in expected industries like electronics and automotive, and there are many unusual applications beginning to use 3D printing. For instance, a 3D gun has already been printed. Often, military equipment can be customized and replacement parts must be made quickly. Utilizing 3D printing will catch on in this industry shortly. Furthermore, 3D printing can be done in zero-gravity; there are now plans to begin using the technology on the International Space Station for printing tools, parts and other items. In common industries, 3D printing is widely used for product development and it is beginning to be used to replace manufacturing where it makes sense. There are many advantages to 3D printing over traditional manufacturing, the most important being its environmental impact; traditional manufacturing is often wasteful and dirty, while 3D printing can lessen the waste and carbon emissions. As the technology continues to speed up the process in a less expensive manner, we will see 3D printing as one of the most common manufacturing processes.

Next, when you consider the impact of IoT and 3D printing on the industrials sector, it is hard not to also look at robotics at the same time. In manufacturing, robotics can be the brains that utilize the core competencies of the previous two technologies with additional manufacturing benefits. Robotics are now utilizing more sensors, such as vision and force-sensing, to work with more delicate components, increase accuracy and ultimately drive down manufacturing costs. Robots, utilizing IoT technology, are now being programmed and monitored remotely. Being able to monitor remotely not only allows a facility to avoid any manufacturing shutdowns, but also enables the ability to monitor and improve efficiencies. Finally, the overall cost of robotics has dramatically decreased, providing further opportunity for industries to take advantage of this disruptive technology.

Finally, LEDs are completely transforming lighting as we know it. LED lighting now has shifted from ‘good enough’ for the early adopters, to performance and price points allowing for mass adoption. They are not only changing the performance and efficiency of lighting, but changing complete infrastructures. In the past when a high intensity discharge streetlight burned out, a truck would come along and replace the bulb that failed. It would not be unheard of to replace that HID lamp two or three times a year, sometimes more often. Now, the cost of an LED replacement, coupled with the enormous energy savings and the quality of light, the return on investment is down to one year, even less in certain cases.  Now LEDs are the choice for retrofitting, and the retrofit is now removing the antiquated screw-based fixture from the streetlight pole and replacing it with an integrated LED fixture.  This trend is not only catching on in exterior lighting, but industrial lighting and commercial lighting, while residential lighting is not far behind.

Beyond general lighting, LEDs are making an impact on other niche markets. LED penetration in automotive lighting is growing dramatically. Additionally LEDs are providing much needed light, both visible and invisible, ultraviolet light in industrial automation because of their robustness and longevity compared to traditional light sources. LEDs are also gaining tremendous market share in horticulture and agriculture applications. With LEDs, you can now grow most plants, including food bearing, indoors throughout the entire year. You can now tune the spectrum of your light to positively affect livestock moods, therefore increasing the throughput of the farms production. The applications for LEDs are growing daily and penetrating markets never before thought of.

Generally speaking, the cutting-edge technologies impacting the industrial sector can be looked at from a different perspective to see the true reasons why they are disruptive. Each of these technologies have blurred the lines of what the sector is and who is part of the value chain. LED light sources now have more in common with televisions than they do with incandescent or halogen lights. Tech giants have tried to bypass the traditional supply chain to treat it as an electronics appliance. This will continue to evolve as non-traditional manufacturers and applications continue to emerge because of LEDs. The same hold true for connected devices, 3D printing and robotics. Apple and Google will quickly gain tremendous footholds in the IoT realm by converting the value proposition in the software instead of the hardware. They are beginning to blur the lines between the industrials sector and the technology sector. We will continue to see each of these technologies grow exponentially through the rest of the year and into the future.

What trends and challenges will the Automotive LED lighting market face in 2015?

To many, LED’s are the hot topic of the moment where lighting is concerned. Given the hype that has surrounded them in recent years, it is still surprising how little they have actually penetrated the automotive lighting market. So happily, in an age where growth is all too scarce, the LED trend is still very much an upward one.

Passenger Car Lighting
Safety and comfort are the cornerstones for every vehicle. As a result, reliability has always been a key item where lighting on a car is concerned. The long life of LED lamps was initially attractive, however, low brightness and high cost meant that they were generally restricted to use in dashboards. Nowadays, LED solutions are smaller, brighter, more efficient, last longer and cost less. They already provide smaller day-time running lights and fog lights that deliver superior performance for less energy, which in turn requires less battery power and smaller cables. Weighing less than their traditional counterparts, they contribute to more fuel efficiency and a greener vehicle. Designers have been able to unleash their creativity by using multiple small sources in place of one larger point source. (Think of creative brake light designs that look like eyes.) LEDs can be individually addressed allowing for multiple functionality. For example, some of the brake lights can change color or form a pattern depending on whether the vehicle is stationary, turning or driving normally.
The front of the car has also seen technological advances in recent years and the smaller size allows for better aerodynamics and energy efficiency. But because an LED headlamp is made up of multiple small light sources that can be individually addressed, the beam can be more precisely controlled. This means that for the first time, we have adaptive lighting which can turn the shape of the beam as you turn a corner; allowing you to see more in the turn. This adaptive ability will be a big trend in 2015.
Exciting as that is, already the use of lasers for headlamps are being touted as the next big thing. On the horizon too are Organic LEDs. OLEDs can be made in any shape, giving designers the freedom to create uniformly lit panels that clearly differentiate the particular brand. But even more exciting is that they can be flexible; allowing them to conform to the shape of the vehicle.
Lighting will continue to feature more prominently in the overall design of the exterior of the vehicle and brands/models will be recognizable by these signature looks. Who would have thought that you would recognize a car at night just by the shape of its brake lights?

LED Interior Lighting For Passenger Cars
Here, the focus is on style, personalization and ambiance. Whether purely functional, or design-oriented; LEDs in car interiors provide efficient and stylish light which can be addressed, dimmed or personalized in ways never before possible with traditional lighting.
Just as each ignition key can adjust the seat and mirrors automatically, LED lighting opens up completely new styling opportunities to illuminate interiors in different colors and levels of brightness. Lighting in the foot well or door panel can automatically turn on and aid entry into the vehicle for those with mobility issues. Luminous ceiling panels can mimic the sky and help the driver feel ‘fresher’ on rainy days or during long journeys. The interior of the car can be zoned so that it is optimally set for tasks such as driving, reading a book, or watching movies in the back. The fun element can also be addressed with LEDs; lighting can change with the choice of music or soundtrack from a movie. A green interior for St Patrick’s Day or orange for Halloween anyone?
Sensors are another trend. A simple daylight sensor could gradually dim dashboard lights while increasing headlamp brightness. Or imagine a bio-sensing steering wheel that could measure your vital statistics and flash a light alert if it thought you might be falling asleep at the wheel. One of the biggest challenges here is knowing when to stop. What should development dollars be spent on? What will consumers be willing to pay for?

Truck Lighting
Trucks must withstand enormous loads, for long periods, often driven in poor conditions. Daily professional use means that high performance solutions with a long life are required. Again, LEDs are being used in more and more areas of the vehicle, resulting in less down time and maintenance costs, lower power consumption and less weight. This amounts to huge savings in fuel consumption.
The use of ‘off road’ LED lamps improves recognition of signs, obstacles and hazards. Since these are much brighter, more efficient, more mobile and weigh less than their traditional counterparts, more are being bought and used. This is also true for emergency and other service-type vehicles. So the trend will be an increase in both value and volume in the short term.
Coupled with advancements in interactive streetlights that decrease light output when vehicles are not in the vicinity, the trend to increase efficiency and reduce energy consumption will continue.

LED Interior Lighting for Trucks
Professional truck drivers travel formidable distances night and day. LED Interior lighting for commercial vehicles could be adapted to help drivers’ natural bio-rhythms. Using light to suppress melatonin production and make drivers feel more awake, hazards and obstacles could be detected more quickly; improving safety and concentration on long journeys. However, the possible long term effects of altering natural rhythms are unknown and further study is needed. In the meantime, the technology could be used to simply wake the driver more naturally – with light – rather than an annoying alarm clock.
Given the amount of time spent in the cab, personalization of the interior is a trend which is enjoying a growth spurt thanks to all things electronic. Interior designers will be challenged to find the right balance between cost efficiency and providing a ‘template’ of built-in options that will allow the occupant to stamp their own personality on the interior.

LED Innovation
Traditional light sources didn’t change much over decades. LED lamps continue to rapidly improve in terms of cost, efficiency, quality, life and color. Their use in the automotive sector will deliver energy and maintenance savings, allow unique vehicle designs, personalization of interiors and contribute to better road safety. Designers will be challenged to keep pace with the technology so that products are not obsolete before the cars hit the showroom.

What is the perspective for the electric vehicle market over the next 3 years?

The market introduction of electric vehicles (EV) requires preparing the product environment. Electricity networks need to be upgraded, public charging stations installed and electricity charging services should be offered to EV users.

The imminent growth of the EV share in the car market implies technical and commercial challenges. The electricity grid will suffer from the impact of EV stock growth. To minimise this negative consequence, it is crucial to prepare the grid integration of EVs. Charge management, vehicle-to-infrastructure and vehicle-to-grid are some of the solutions that are planned or that already exist. ICT will play a critical role to allow and optimise the implementation of such innovative solutions. Also, sustainable business models need to be conceived to ensure the deployment of an effective EV environment, which represents one the main challenges.

However, the most relevant technological barriers affecting the EV market deployment have been overcome during the last years. Current charging infrastructure and electricity grids can manage the EV loading process, allowing the use of vehicle batteries as a big distributed storage to balance the generation and load-fluctuation. Batteries can charge power when renewable energies are present in the grid and feed it back into the grid later or take into account electricity tariffs. Furthermore, electric vehicles help the energy industry optimise the load management of their grids.

From the vehicle standpoint, current EV architecture and technology optimise energy management, allowing users to drive more than one hundred kilometres and satisfying their needs as about half drive less than 50 km per day. The EV market share is thus increasing due to the absence of technical barriers and the availability of new models. And even more importantly, hybrid EV models are being gradually replaced by pluggable hybrid models.

On the commercial side, EV manufacturers offer one-stop shopping, which includes EVs, battery renting, charging wall box installation, electricity supply and access to public charging infrastructure.

Nevertheless, business models are not yet sustainable for most of the stakeholders, in particular for EV service providers. This is mostly the result of the low EV market share, currently less than 1%. Also, EV grid integration is in a premature state of commercial deployment and there are very few charging management services on the market. Most of the installed public charging stations can be remotely operated and some of them can perform discharging (V2G) but these services are not implemented, again, due to the low EV stock barrier.

Since the electric vehicle come-back in the 2010s, governments have been promoting policies to stimulate and encourage the purchase and use of EVs. This has a positive impact on EV sales with sustained growth. As the technology is ready and matches the users’ needs, it is now only a matter of time for the last EV barriers to be overcome: a sustainable business model and the reduction of costs. Both are intimately related and have a direct impact on EV attractiveness.

To conclude, the electro-mobility market represents opportunities of high potential for the car industry, ICT and service providers. Alliances with traditional transport sector stakeholders are a viable strategy for improving innovation in the sector. Although the market today remains small for sustainable business models, we should expect the market to grow in the next years with a rise in the number of EVs and the appearance of innovative business models that will increase their attractiveness.

What are the top opportunities and challenges faced by automotive suppliers?

Most people, who are not from the sector, cannot imagine the complexity existing behind a product like a car passenger. Many relate the word complexity to the several technologies employed. That is true but there is more, something bigger than the technologies: the organizational machine which regards many parties.

The main actor is surely the car maker. They involve and pull in its mechanism, directly and indirectly, 1st suppliers, 2nd tier suppliers, service providers, external designers, external consultants, logistic companies etc.

Each of these actors plays a key role, but some are innovators whilst others are followers. The difference between an innovator and a follower is crucial: it means being out of the crowd or being jammed in the heart of the war on cost effectiveness.

All the automotive participants in the development and production of a car model or platform (basically the same car but different “skins”) have their own characteristics and all can be considered suppliers, but for the sake of this article let’s just refer to the suppliers of the direct components (tier 1 and tier 2).

The answer to the question in the title is apparently easy: as an innovator you will just have opportunities. But what does being an innovator mean? What does innovation mean for a supplier player in the automotive industry?

We may say that the best 2nd tiers are those who are manufacturing processes innovators. They supply components, single parts that are delivered to the 1st supplier, to become parts of modules or systems. Their parts have to be the cheapest, and that means that their manufacturing processes have to be the fastest and, if they want to compete with the fast growing countries, their processes should have the minimum employment of manpower. These suppliers are normally capital intensive, and the luckiest are involved by the 1st tiers in the co-design process, so they can work using the so-called design for the manufacturing practice. This last factor is important for cost reduction and control, since making the manufacturing easy helps to be competitive regarding the transformation, also regarding the hidden costs that arise later for the quality problems during the series production.

The 2nd tiers have to catch the opportunities given by the difficulty in managing the sophisticated manufacturing processes. Even in the production of “simple” parts, their technologies drain capital and their human resources should be capable enough to convince the 1st tier to approve the simplicity.

The 1st tiers are normally less reactive in approving engineering changes. They often say that nothing can be changed because the component is part of a system that has been designed by the car maker.

I would say that there are more challenges and threats than opportunities for a 2nd tier. Aside from the capabilities of top management (normally the sole entrepreneur) in attracting the talented engineers (design for manufacturing and decision on the manufacturing processes) and in dealing with the financial institutions (capital intensive assets), the future of the 2nd tiers is influenced by the volume of the 1st tier supplier. The most frequent cause of bankruptcy of the 2nd tier is represented by the planned volume (n. of parts produced per year) that is not met.

The 1st tier supplier has other kinds of problems. It is required by the car maker to localize its production sites near the car assembly plants. It is also required to come up with new proposals to innovate the product continuously, better performance and cheaper. Their investments are relatively safe since their agreement with the car makers are with the clause “take or pay”.

This kind of organization is normally a system and module developers and its plants are pre-assembling the lines. They are big, global organizations. As they influence the business of the tier 2, their business is directly influenced by the car maker. The biggest mistake they may make is to have unbalanced business with one customer. There are much more product innovation capabilities, and therefore, for a tier 1 independent than those linked to a single customer or under the control of the same customer.

We might say that, in general, innovation is the secret to maintain the current opportunities and to win the challenges for the future.

Based on my experience, working as car maker, first tier and second tier supplier, I strongly believe that the 2nd tier has to innovate its manufacturing processes and the 1st tier has to be proactive with product innovation; but these are only prerequisite, it’s 50% of the job to survive. We have to remember that both are dependent on the main customer.

Thinking out of the box, we may say that the main customer is not the car maker. The car industry supplier should understand the trend in order to secure its business for the long-term. The main customer is the consumer, the driver that choses the model at the dealer’s. If it is true that the 2nd tier depends on the 1st tier and this depends on the car maker, all 3 depend on the final consumer.

Now, provided the prerequisite of the innovation, the answer might be: the automotive suppliers should simply get opportunities by serving the best car sellers.

And which kind of cars will the people buy in the future? What will people want? Are we so sure that we will still wish to own cars?

In the most civilized countries, the car is considered an obsolete concept. People consider the car just a vehicle for transportation. It is no longer considered a status object, it is simply considered an expense which one hopes to avoid, or at least reduce.  It is different in fast-growing or developing countries; the car is indeed still something to show.

The suppliers should make strategic decisions for the medium and long term. For the medium term they should follow the car makers that are well positioned in the premium segments and with good reputation brands, the best sellers in the Asian markets (opportunity). For the long term, they should look at the past, when the car was invented, and follow the one or those that are really reinventing the car for the future (challenge).

They should remember a basic concept for the relatively short term: the business opportunities are where the GDP grows. It grows with the investments in the infrastructures and in mass production, where the car industry plays a fundamental role. The Asian countries are nowadays the most representative countries where the Governments plays a Keynesian role, supporting both sectors.

Regarding challenges for the future, the supplier should be more wary of those who are not consistent with the volumes, with unsuccessful platform projects, or those who sell an electric motor on a traditional chassis or even alternative fuels for the internal combustion engine.

In reality, the car has never been invented, it has just been a continuous development of the coach, when the horses were replaced with steam and then an internal combustion engine. I feel that many car makers are doing the same regarding the electric vehicle. In my opinion, the only car maker that has had the right vision and the courage to develop a completely truly new car concept around the electric motor and the batteries is BMW with the iProject. BMW has developed a complete project, including the dedicated assembling plant. That is vision. The challenge of the suppliers is to monitor these kind of initiatives and to try to understand whether the vision may meet ‘what people want’.

The electrical car is still considered a challenge but, since the car already is and will be a more anachronistic object compared to public transportation, I’m sure that no other technologies will be considered other than electrical power.

The vehicle will be simpler, lighter and more equipped with telecommunication technologies. It is not excluded that the car of the future will be made by Google/Samsung rather than by the current players. The car is and will be a mix of assembled components and the suppliers with the right vision will continue to play a fundamental role in the future.

The consumers of the fast growing and emerging markets will achieve the same Western needs in around 20-25 years. A second round of M&A between the car makers will characterize the end of the next twenties. The 1st tier car industry suppliers will be represented by just a few big organizations as well. The successful 1st tier suppliers will be more similar to multi-technologies and divisional companies, such as Bosch, Siemens, Panasonic and Samsung. The 2nd tiers will continue to be specialized and increasingly concentrated in the low cost countries, besides the producers of the manufacturing processes.

What are the top 3 opportunities and challenges in the Smart Building industry over the next 1-3 years?

Smart Buildings can present real opportunities to save natural resources, reduce harmful and hazardous emissions and improve living, working and leisure environments. For these to be effective, there are real challenges to overcome.  Robust, affordable and functional Intelligent Systems need to be identified and installed.

Design and construction communities around the world have been talking about Intelligent and Smart Buildings for many years. Some like to talk about wiser and smarter buildings but consideration must be given to both the challenges and opportunities that exist as we try to improve our building stock. These challenges and opportunities are not restricted to new development.  There is also scope to improve existing ‘Intelligent’ Buildings that are equipped with controls and sensors.  Such systems frequently need to be fine-tuned to the way a building actually responds.

It is important to consider Smart Buildings as part of a bigger system. A Smart Building with Smart Meters can be connected to a Smart Grid that then helps create a Smart City.

Smart Buildings are not that smart if they increase the maintenance of the building. Equally, they must not limit the flexibility of the occupied space. A building can be defined as ‘smart’ if it reduces maintenance, for example, by making it easier to clean. It can also be ‘smart’ if it learns from the way occupiers use the building.

Most definitions of a Smart Building relate to the controls systems and how the building can optimise energy use. Such narrow definitions need to be extended to embrace all use of resources and also need to cover the construction of the building and the resources needed to make the building ‘smart’ in the first place.

A Smart Building should proactively monitor energy consumption and detect if excessive heating and cooling are happening. Controls can be linked to a security system that can then only supply services to occupied spaces. The control of water systems and the introduction of fresh air should be based on demand control. Smart Buildings can really benefit from being linked to Smart Energy Grids that provide a better use of shared resources; helping to create Smart Communication Systems. Much of the hardware needed to make this happen is now much more affordable. What was once just a dream can now be implemented using actuators, sensors and the computer power that now exists.

The three key goals are to save material usage, create a cleaner environment and provide more productive built environments.

  • Save natural resources by becoming more efficient (doing more with less)
  • Reduce harmful and hazardous emissions to air, earth and water (be clean)
  • Improve living, working and leisure environments

 The three key challenges are to ensure systems are robust, affordable and functional:

  • Robust – systems need to be reliable and maintainable
  • Affordable – systems should pay for themselves through savings on utility bills within an acceptable lifecycle
  • Functional – systems should create the required comfort conditions with optimal use of resources

In essence, when planning a Smart Building, better building performance should be the key, with more comfortable and productive work spaces as the desired outcome. 

What are the top 3 trends that will shape globally the aerospace and defense industry in the coming year?

The Aerospace Industry has faced huge challenges on a worldwide level mainly due to economic and environment pressure changes. This scenario is creating some new trends and opening opportunities to the main Players to search for innovations and development of new technologies.

One of these trends is the Carbon emission reduction for the entire aircraft production chain, specially for the engine design. This policy was set by IATA (International Air Transport Association) which has recently established a new index of Carbon reduction for Aerospace Industry and drives fuel efficiency improvement in 1,5% per year until 2020.

In this way some aviation companies have already been looking for alternative fuels (“green fuels”) to replace the current aviation kerosene. This allows the dependency reduction of the fossil fuel which has also high volatility due to oil price. Among Bio-fuels it is possible to highlight the biokerosene extracted from sugar cane. This new fuel has already been tested on an experimental flight in the EMBRAER E195 aircraft from Azul Airlines in July 2012 in Brazil using a fuel mixture of 50% biokerosene and 50% aviation kerosene. This preliminary test revealed that by filling jets with biokerosene might be able to reduce up to 80% carbon emissions in the atmosphere.

Another trend of Aerospace segment is to develop innovative processes so as to mitigate failure risk. Large investment on incorrect technologies in a highly competitive industry can impact the financials and profit of the companies. For example, the automation (or even robotization!) of big parts of the aircraft, like fuselage, wing or command surfaces that requires a complex structural assembly, brings a substantial gain and savings to the business. On this route, it was recently announced by GKN Aerospace, in partnership with Bombardier, a successful try-out of an automated manufacturing process of the wing box assembly, which according to them should reduce the current time cycle assembly up to 30%. It is worth mentioning this technology has been developed to fit different structural assemblies (hybrid) what would also generate savings in the tooling manufacturing.

The global market has also signaled to the growth of LCC (Low Cost Carrier) airlines specially driven by the emerging markets, such as Asia, Latin America, Middle East and lesser extent Africa, due to the rising economic power of these regions. This growth has generated greater competition between the airline companies challenging the business and its profitability. So the industry is faced with the challenge to make more efficient airplanes, loaded with new technologies and less cost and maintenance time than the current ones.

Thus, the Aerospace industry as a whole has been moving towards not only to maintain its constant evolution, but also to reinvent itself. Surely soon we will be surprised with others technological innovations that will be created from this fantastic industry!

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