Market Dynamics in a Global Automotive Supplier Industry...worldwide Market Growth (Mrd. €) of Advanced Driver Assistance Systems All comfort and safety vehicle control, dri ver

Division Chassis & SafetyDr. Ralf Cramer

1 © Continental AG

Market Dynamics in a Global Automotive Supplier Industry

Dr. Ralf CramerContinental AG

Davos, 18th. Jan. 2013


2 © Continental AG

Since 1871 with headquarters in Hanover, Germany

Sales of €30.5 billion

163,788 employees worldwide

269 locations in 46 countries

One of the top 5 in the automotive supplier industry

21%

19%

20%

28%12%

Continental CorporationOverview 2011

Tires*

Chassis & Safety

Powertrain

Interior

*pro formaStatus: December 31, 2011

ContiTech

Sales by division in %


3 © Continental AG

Continental MegatrendsDoing more…

for safe mobility.

for intelligent driving. for global mobility.

for clean power.


4 © Continental AG

Chassis & Safety Division 5 Strong Business Units and Product Portfolio

ElectronicBrake Systems

HydraulicBrake Systems

Passive Safety & Sensorics ADAS Chassis

Components

Hydraulic electronic control units (HECU)- ABS- ESC

Software functions- Adaptive cruise control- Regenerative brake

system- Active front steering- Hill start assist, hill

descent control- Deflation detection

system- Hydraulic brake assist- Trailer stability assist

Calipers and discsDrum brakesBrake hosesBoostersTandem master cylindersElectric parking brakesWasher SystemsBrake pressure regulatorsElectric vacuum pumps

Wheel speed sensorsEngine/transmission speed and position sensorsChassis sensorsSensor clustersAirbag control unitsCrash sensorsSatellite for Electric VehiclesPedestrian protectionOccupant classification systems (OCS)

Driver assistance systems- Radar- Lidar- Camera

Chassis Electronics Electronic Components(1st tier customer)Suspension Systems

2011 Worldwide Sales: 6,5 Bn.€, Employees: 32.665


5 © Continental AG

Globalization: Automotive Market Development in the Last 5 YearsHigh Volatility with Increasing Share in Asia

* Source: Continental AG

0

10

20

30

40

50

60

70

80

90

2008 2009 2010 2011 2012FC

Mio. Units

Asia

Nafta

Europe

RoW

43%

19%

32%

51%

19%

24%

Light Vehicle Volume Development Worldwide 2008 – 2012


6 © Continental AG

0

2.000

4.000

6.000

8.000

10.000

12.000

14.000

16.000

18.000

20.000

Brazil Russia India China

Forecast in 2007

2012FC

How we Predicted the BRIC Market Development 5 Years agoThe Growth in China is far Beyond the Forecast

BRIC Light Vehicle Volume in 2012Forecast in 2007vs. 2012FCK Units

+14%-10%

-2%

+74%

* Source: Continental AG


7 © Continental AG

The Forecast in the Conference on 21. 01. 2005The Real Development in China is much faster than the Forecast 7 Years ago

* Source: China Association of Automobile Manufactures

0,4

2,07 2,34

3,254,44

5,075,71

18,26 18,4219,25

+8,26

0

2

4

6

8

10

12

14

16

18

20

1985 2000 2001 2002 2003 2004 2005 2010 2011 2012FC

Total Vehicle Volume Development in China 1985 – 2012 Mio. Units

10Forecast in

2005 for 2010

Actual 2010

Actual

Forecast

Share ofpassenger car: 45%

Share ofpassenger car: 68%


8 © Continental AG

China Automotive Market Experienced Turbulent Growth in last Years Growth Mainly Driven by Economic Development and also Stimulus Package

20%

5%

48%

31%

3%6%

0%

10%

20%

30%

40%

50%

0

4

8

12

16

20

2007 2008 2009 2010 2011 2012FC

Source: IHS

Light VehiclesMio. Units

Growth RateYoY %

2020 2050

?StimulusPackage

Economic Crisis


9 © Continental AG

Further Development of China Automotive Market Positive Demand Factors should Overcome the Negative Impacts

Macro economy growthIncrease disposable incomeLow vehicle densityFurther extension of infrastructureStrong growth in small citiesIncentives for EV&HEV

Insufficient infrastructure Restriction in big citiesIncreasing operating costIncreasing oil prices Increasing environmental issuesCompetitiveness of COEMs


10 © Continental AG

0

100

200

300

400

500

600

2006 2007 2008 2009 2010 2011 2012

Rapid Increase of China Automotive Market Provides Growth OpportunitiesChinese Local OEMs Prefer German Production Lines – Example GWM

Source: http://auto.sohu.comIHS

K u

nits



Chassis & Safety Division Footprint in AsiaWe are Aiming to Further Increase the Sales Share in Asia to >33% by 2016

Shanghai

Test centerMonbetsu

Technical centerJiading

Test center Asahi

Test centerHeihe

Technical centerYokohama

Technical centerBangalore

Cheongwon Icheon

Changchun

Seoul

3 Technical Centers4 R&D Locations 3 Test Tracks

11 Production LocationsRoW75% Asia

25%

Sales by region in % 2011

RoW<67% Asia

>33%

Sales by region in % 2016



0

5.000.000

10.000.000

15.000.000

20.000.000

25.000.000

30.000.000

0

5.000.000

10.000.000

15.000.000

20.000.000

25.000.000

30.000.000

Comparison China vs. India: Automotive MarketIndia will take longer Time than Expected to be the Next China

Source: IHS, www.autonews.com

units units

B-Segment

C-Segment

Light Vehicle Volume Development

Best Selling Cars 2012 YTD Oct

Maruti Suzuki AltoSelling Price: 3.500 – 4.200 €

Maruti Suzuki SwiftSelling Price: 6.400 – 9.700 €

FAW-VW JettaSelling Price: 9.400 – 11.000 €

SGM Buick ExcelleSelling Price: 10.000 – 15.000 €



Comparison China vs. India: Infrastructure & Safety Technologies India will take longer Time than Expected to be the Next China

0%

20%

40%

60%

80%

100%

2013 2014 2015 2016 2017

India*

China

Airbag Installation Rate Development

0%

20%

40%

60%

80%

100%

2010 2011 2012 2013 2014 2015 2016 2017

India

China

* Prerequisite: Legislation?

?

EBS Installation Rate Development

Mumbai Shanghai



Technology Generates Growth Opportunities The Vision of Accident-Free Driving (Vision Zero)

We are convinced that innovative technologies will make it possible to one day drive a car without any accidents – in all vehicle categories and markets of this world.

1954 201019901970 19801960 2000

ESC

SafetyTechnology

ABS

Airbag

ADAS

Car Safety Technology vs. Traffic Fatalities Development in GermanyN

umbe

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raffi

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in T

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ands

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in M

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Seat Belt

0

5

10

15

20

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World Wide Market Growth (Mrd. €) of Advanced Driver Assistance

0,0

2,0

4,0

6,0

8,0

10,0

12,0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

CAGR* (’10 -’20): 33 %

* Market estimation of Continental

worldwide Market Growth (Mrd. €)of Advanced Driver Assistance Systems

All comfort and safety vehicle control, driver warning and information systems applying surrounding sensors except short range distance monitoring systems based on ultrasonic sensors

Market Definition:

- Market Growth including Fitment rate increase- Legislation - Consumer Ratings (Euro NCAP, NHTSA)- Additional Functions (360°, rear viewing)

ADAS Drivers

Technology Generates Growth Opportunities Example ADAS



Production Systems Classification

Product Variants

Cycle Time

Capacity

Prod

uctiv

ity

Flex

ibili

ty

high

low

high

low

low

high

low

high

Manual Assembly

Hybrid Assembly

Automated Assembly

source: B. Lotter

Investment



Production Systems ClassificationExamples at Continental



Production Systems ClassificationLowest Cost Production India vs. Full Automation Frankfurt



Process-Technology for highest Competitiveness Surface Mount Technology => AOI Inspection of QFP



Process-Technology for highest Competitiveness Laser Welding Technology in Valve Production



Thailand Flood

Uncertain and Unpredictable Times need Highest Agility In all Areas of the Company

Vehicle Volumes (LVPF in mn) Raw Material Price (e.g. Rare Earth)

Currency Fluctuation (Eur/USD) Political Risks/Environmental Accidents

North AfricaIran, N. Korea

Japan Earthquake, Tsunami, Nuclear disaster

0

20

40

60

80

2008 2009 2010 2011 2012FC

Asia

Nafta

Europe

?

?

USD/kg Nd Export*

*Source: www.asianmetal.com

? ?



Unpredictable Economy Cycles are the Rule!Require Highest Agility to be well Prepared Against Market Dynamics

We never know the future but we have to be better prepared!

Preparation for Growth Cost Cutting Stabilization Preparation for Growth with

Highest Agility

?

?

2005 2008 2012FC2006 2007 2009 2010 2011

?

?

Sal

es

2013ff



Value Creation

Technology Leadership

Business Agility

Customer Satisfaction

Supply chain, Project management, Product quality, etc.

Innovation & Development process, etc.

Growth in New Markets, with New Products

Business Agility: To find the Right Balance will make the DifferenceSuccess Factor for C&S Division & for the Production Systems Suppliers

„Business Agility is the capability to optimize the balance between (1) Customer Satisfaction, (2) Technology

Leadership and (3) Value Creationin a dynamic business environment“.



Drivers and Challenges For Production Systems Suppliers

Globalization- global OEM footprint and worldwide platforms are forcing competition- automotive suppliers are following OEM footprints- regional requirements in emerging markets (BRIC) => adaptation of equipment

Agility in Volatile Markets- strong volatility in customer volumes (strong increases fast decreases)- lean production systems needed with short realization timings- high flexibility & scalability of production equipment

Standardization- high standardization of equipment needed (relocations, maintenance, …)- worldwide quality demands independent from production system- increasing demands towards locally sourced equipment (India, China)



RequirementsFor Production Systems Suppliers

Planning Phase- Evaluation and standardization of key-processes and machine designs- Close cooperation with suppliers (key-suppliers), closed loop => design - Financial requirements: investment, automation vs. labor depending, spending

Industrialization phase- Easy installation process, plug & play, modularity and scalability- Know-how transfer from central planning IE / lead plant / equipment supplier

to production locations

Training & Coaching phase- Intensive training before SOP (e.g. at supplier shopfloor during release)- Training of troubleshooting, maintenance, quality engineering- Training of product specific processes / on the job training

Production phase- Regularly process audits (defined by IE & supplier)- Clearly defined support process (e.g. 24/7 hotline, fast reaction timings, …)



Global OpportunitiesThinking Global and Acting Local



Thank You for Your Attention

Documents

Market Dynamics in a Global Automotive Supplier Industry...worldwide Market Growth (Mrd. €) of Advanced Driver Assistance Systems All comfort and safety vehicle control, dri ver