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No distractions, please! Smart cars can be overwhelming
p. 18
Noblesse obligeGoodwood—where petticoats and historic race cars mix
p. 4
Dr. Christian Malorny, Head Global Automotive, A.T. Kearney“New is always exciting”
p. 6
China: New rules Action plan for long-term success in China’s auto market
motiveVol. 9Auto
P H OTO G R A P H Y, P I CT U R E C R E D I TSAudio Mobil Elektronik (p. 17)Borgward (p. 22)Byton (p. 22)Dr. Arno Lamminger (p. 17)Gudrun Muschalla (p. 2, 18, 19)Nio (p. 2 – 3, 21)plainpicture / Arne Landwehr (p. 2, 9)Shutterstock (p. 6 – 7, 9, 10, 12, 15, 16, 20, 21, 23)Toyota (p. 24)Volkswagen (p. 8)
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Automotive Vol. 9
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A.T. Kearney
A. T. Kearney’s Global Partner Team Automotive
Stephan Krubasik EMEA
Eugenio Prieto EMEA
A. T. Kearney’s Global Partner Team Automotive
» The true strength of this firm, as in any organization, lies in the
fact that we are all different. «Andrew Thomas Kearney (1892 – 1962)
Michael RömerEMEA
… and more to come
Mark EssleAmericas
Ole Kahrs EMEA
Violetka DirleaAmericas
Dr. Wulf Stolle EMEA
Ram KidambiAsia
Andreas FormEMEA
Rick KozoleAmericas
Thomas Luk EMEA / China
Masahiro KishidaAsia
Frederic Ramioulle Americas
Marcus Weber EMEA
Manish MathurAsia
Jian XuAsia
Doug MehlAmericas
Dr. Christian Malorny Global
Nils Kuhlwein von Rathenow
EMEA
Vinod KumarAsia
Automotive Vol. 9
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Content
Noblesse obligeGoodwood—where petticoats
and historic race cars mix
18
Automotive Vol. 9
3
A.T. Kearney
Content
ContentNew kids on the blockChina’s e-car start-ups hit the gas20
China: New rules Action plan for long-term success in China’s auto market
6
TA L K I N G W I T H …
4 “New is always exciting” Dr. Christian Malorny, Head Global Automotive, A.T. Kearney
C OV E R STO RY
6 China: New rules Action plan for long-term success
in China’s auto market
FACTS & O P I N I O N
12 A.T. Kearney global
ST R AT EGY
14 No distractions, please! Smart cars can be overwhelming
S I D E M I R RO R
18 Noblesse oblige Goodwood—where petticoats and historic race cars mix
M A R K E T
20 New kids on the block China’s e-car start-ups hit the gas
F I N A L P O I N T
24 Running on water Around the world—on water and wind
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“New is always exciting”
“New is always exciting”Ever since his schooldays, Christian Malorny has had a fascination for sports and baby cars from the Fifties and Sixties, which he collects and lovingly maintains. For fun, he drives an XL1—the one-liter model built by VW from 2014 to 2016. His love of cars shines through whenever he talks about the big picture for the global automotive industry, because “a fascination for the product is everything.” Malorny took over A.T. Kearney’s global automotive business on April 1 this year. He sees turmoil as an opportunity for change, upheaval as a new beginning, and “new is always exciting.”
TALKING WITH …
I like that the industry encompasses countless different disciplines with a high level of innovation. And that it involves people from very different backgrounds: mechanics, engineers, managers, scientists—everyone working together on the same product. Being German, it is exciting for me to see how our car industry has maintained its outstanding reputation worldwide. This is an industry that can genuinely lead the world. Everyone looks to us when it comes to cars.
A third of the added value in the German automotive industry—around $150 bil-lion in 2017—comes from the premium segment. Our analyses show that the premium share of the market could more than triple by 2035, primarily driven by digital services. When it comes to digital offerings—many of which extend throughout a vehicle’s lifetime—we expect to see strong customer demand, with margins of up to 30 percent.
Today, premium is defined as 30 percent brand and design, 25 percent driving dynamics such as acceleration and handling, and 15 percent perceived quality. The dynamics aspect will go down, and range and charging time will define pre-mium in the future.
What makes the automotive industry so exciting for you?
A number of big automotive companies are doing very nicely from their premium positioning, and they are happy to charge us dearly for it. Is premium likely to remain a safe bank in the future?
What will premium mean in the future?
Some people say that OEMs who fail at “new premium” will end up hiring themselves out as contract manufacturers. Isn’t that overly pessimistic?To deal with the challenges ahead, companies will need clever partnering, where they can ally themselves with other strong brands without losing their own brand identity or watering down their brand values. OEMs that are unable to do so are in danger of their brand losing ground and their products becoming less attractive.
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“New is always exciting”
Is external production a business mode traditional automakers need to keep an eye on?
How successful have carmakers been so far in partnering with the tech industry?
What are the potential hurdles for partnerships like this?
What can the auto industry learn from the tech world?
Where do you see the strengths of the traditional auto industry in this scenario?
We expect to see a shift away from the B2C business we still see widely today to more and more B2B activities. For example, new mobility providers will want to stock their fleets with cars they have developed and designed themselves, with-out actually producing the cars. Why not consider that as a lucrative new business model?
The automotive industry and the tech world are still getting to know each other. They are figuring out how they can combine capabilities in their first joint projects. Different forms of partnership will emerge, depending on the brand, the product, and the digital services involved. Lead times will vary just as much as the content. The auto industry will have to learn to live in ecosystems like this and accept changing leadership roles. For the tech industry, that is not a problem: ecosys-tems are their bread and butter.
When one of the partners realizes that the other has better access to the end customer and is therefore able to generate bigger profits. The tricky part is then: who earns what from the retail business? OEMs will have to work out how to price access to digital services to drivers. Just like Apple does with apps: a share of the profit always goes to Apple, regardless of who offers the app or digital service.
How to handle technology platforms, algorithms, and big data; how to obtain information from data and turn that information into knowledge they can use to create digital experiences. They can also learn from the tremendous agility of these organizations and their processes. By comparison, automotive OEMs are monoliths that will not be able to survive if they hold on to their conventional structures.
The strength of the traditional automobile industry lies in the outstanding product quality it provides and its products’ high dependability over a very long lifecycle. Translating this reliability to new digital areas is a huge and crucially important task. Also, by continuing to innovate, the automotive industry has managed to keep cars desirable for more than 100 years. People still want to buy and drive cars—that is an immense asset anywhere in the world.
Dr. Christian Malorny, head of Global Automotive at A.T. Kearney:
“The auto industry will have to learn to live in ecosystems and accept
changing leadership roles.”
Interview: Tina Rumpelt
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China: New rules
COVER STORY
Ch na:Newrules
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China: New rules
The CEOs of the world’s biggest automotive companies are proud of their successes in China so far. This vast market, with just 79 vehicles per 1,000 inhabitants
(2017), has filled carmakers’ coffers for years, consistently delivering increased sales and revenue. The prospects for continued growth are excellent.
Thanks to China, global demand for new passenger vehicles climbed from 50 million cars in 2000 to 85 million in 2017. Last year, every third passenger car, SUV, minivan, and MPV was sold in China—a total of 24.8 million vehicles. In their best-case scenario, A.T. Kearney experts believe car sales could increase by 7.7 percent annually to around 35 million by 2022. “We base our optimistic forecast on the A.T. Kearney China Auto Monitor and analysis tools, including the latest machine-learning algorithms,” says A.T. Kearney partner Thomas Luk. (See p. 12, A.T. Kearney China Auto Monitor: Always in touch with the mobility market of the future.)
China’s auto industry is becoming more self-assuredThese days, China is no longer content to stand by and watch as foreign automobile manufacturers pursue ambitious growth plans in the country. The government is challenging the domestic auto industry to compete on an international level, with an eye to exporting in the future. Progress is evi-dent in the local market: Chinese manufacturers now make 96 percent of alternative-fuel vehicles. According to the China Association of Automobile Manufacturers (CAAM), Chinese brands achieved a 44 percent share of all vehicle segments in 2017, with a 60 percent share of the SUV seg-ment and an 83 percent share of the van and MPV segments.
It is widely known that the rules that apply to China are different than Europe and the US. But many of those rules no longer serve any useful purpose; some never did. As new challenges and risks threaten not only success in the marketplace but possibly even the companies themselves, car-makers need to understand the changing environment and to act fast. It’s time to throw out the old rule book and to reposition for long-term success.
Ch na:
taken from the Agenda for the Car of the Future published by the National Development and Reform Commission, Beijing, 2018
» By 2035, the Chinese standard for intelligent vehicles will be world- famous. «
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China: New rules
The used-car market shifts gear While the market for new cars in China continues to bubble, the heat is lower as the first signs of saturation emerge. The megacities are restricting new vehicle registrations and purchasing power is low outside cities. At the same time, the used car market is gaining momentum. US news agency Bloomberg reported that the Chinese used-car market could reach 20 million vehicles by 2020. Twelve million used cars changed hands last year in China, and consumers bought 29 million new vehicles. By comparison, 39 million used cars were sold in the US in 2017—and just 17 million new vehicles.
Growing dependency on China “China is steering into calmer waters,” says Luk. Still, the Chinese economy will continue to grow—and the car market with it. “Sustained growth will magnify the economic impor-tance of China’s automotive industry, making foreign OEMs and their suppliers increasingly dependent on China as other markets, including those in Europe and the US, slow down,” Luk says. “What’s more, we see China gaining a leading edge worldwide in electromobility, autonomous driving and, especially, connectivity.
“The ability to equip vehicles with seamlessly integrated services will be essential in the future,” explains Luk. He elab-orates: “Anyone who gives up technological know-how and experience, or is incapable of creating systems and solutions tried and tested by customers, is ceding this profitable field to China.”
How to refresh strategy and avoid the trapsWith business-as-usual in China no longer a viable option, Luk urges auto manufacturers to review their current China
strategies and objectives. “For many, it will take major cor-rections to ensure long-term success in this market,” he says. “Western industry competes not only with individual Chinese companies, but with and within the entire Chinese system.” Luk recommends eight actions companies can take to update or overhaul their China business:
1. Stop seeing China as a “special situation.”Very rarely is the “special situation” label used in a positive sense (for example, where a high level of local independence is combined with fast decision-making for superior results).
Instead, people at headquarters and locally will point to China’s unique situation to justify lengthy and difficult pro-cesses. This is a handy excuse for avoiding ambitious per-formance targets found in other markets. As long as profits kept pouring in, people asked few questions. A company’s China operations can no longer afford this special treatment; seeing China as an investment case is misguided, too.
2. Negotiate tough.Patience is certainly an asset when negotiating with potential Chinese business partners. It is advisable to adopt a long-term strategy and not settle for short-term compromises—rush into what appears to be a profitable short-term arrange-ment and you could end up compromising your future. However, the argument “We have to do this to participate in the market at all” admits you are in a weaker position. The Chinese view this as a gift. Make clear both your priorities and the fact that you do not have anything to give away.
Chinese business partners will often walk away from the table quite demonstratively to force their Western counter-
» China has achieved a great deal, but still has big plans. We can help them achieve those goals. «Herbert Diess, CEO Volkswagen
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China: New rules
parts to make a move. You should stand up, too, and end the talks if an agree-ment to your taste appears unlikely. Resume negotiations on your terms. Do not act hastily or emotionally just be-cause you feel the pressure to report progress back to headquarters. Other-wise, you risk “death from a thousand cuts,” as the Chinese like to say.
3. Insist on performance management.In the West, companies know the main elements of performance management systems and apply them more or less across the board: systematic KPIs; transparent, concrete target definition and tracking; regular performance meetings and target discussions. These elements are absent in China, or exist in rudimentary form. Yet there is no reason not to apply these successful concepts just as systematical-ly there. A performance management system in China should meet the same global standards and be tracked as rigorously as in the rest of the world. While it may be possible
to compensate for performance gaps from one area to anoth-er, should you find such gaps, avoid attributing them to the ‘China effect.’ Label them as ‘underperformance’ instead. Now you could argue that this leads to loss of face of the responsible staff, which is to be avoided at all cost according to every guide to doing business in China. Our experience clearly demonstrates that openness and transparency can be practiced even in Chinese companies and produce better results.
4. Avoid shadow organizations.Local partners often create shadow positions to balance power. In reality, this practice duplicates functions and often creates an independent, parallel shadow organization with processes that remain in the dark. Avoid this by establishing a joint global team in the beginning whose members under-
stand and are committed to a clearly defined mission and responsibility for the China business.
5. Help shape regulations. The formal process for creating new regulations in China has stayed much the same for decades. Yet there is no reason
Passenger car sales 2013 – 2017: NAFTA and the US slowing down
Region Average annual growth
China + 10.4 %
EU + 6.2 %
Germany + 3.9 %
Japan – 0.8 %
NAFTA – 3.8 %
USA – 5.1 %
With weaker sales in the US and a number of European countries, the Chinese market is increasingly important to the international automotive industry.
Sources: A.T. Kearney, IHS Markit
Growth at a slower rate: For 2018, the China Association of Automobile
Manufacturers forecasts an increase in car sales of not more than 3 percent.
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China: New rules
to be a passive recipient of current law, as there are plenty of examples of foreign companies that have successfully changed the status quo. Active involvement with industry and local interest groups to help reform guidelines and laws is not only accepted but welcomed in China these days. The country relies on foreign support and experience to achieve its ambitious goals, especially in the key automotive industry.
6. Use China as a global launchpad.Anyone who sees China simply as a production location for the domestic auto market is not thinking big enough. This immense country offers much bigger and more diverse pros-pects. Take advantage of opportunities to discover and drive innovations in China, where testing and validating products and services is faster. Invest heavily in digitization. Use China as the starting point for expanding to other markets.
7. Don’t become Chinese.A lot has been written about understanding Chinese culture and customs. Respect these insights but know that no one expects you to behave like a Chinese person while you are in China. What guidebooks deem as absolutely necessary often turns out to be a disadvantage. If you no longer operate based on personal experience in negotiations and meetings, you could emerge with poorer results.
8. See China as part of a bigger picture. China is currently the world’s largest car market and will continue to grow in global economic importance. Still, do
not not stake everthing on this card. Opportunities will arise beyond China in fields relating to electromobility, auto-nomous driving and, above all, digital services. The ability to integrate seamlessly these services in vehicles will generate future profits and determine the competitiveness of many automotive companies going forward.
A word of caution, however: It is never a good idea to give up one’s own technological edge and core expertise just to be able to do business in a market (e.g. as observed with partnerships for autonomous driving). As in the past, those who use their own strengths to identify new oppor-tunities early and develop marketable products with customer input quickly will lay a foundation for lasting success in the auto business—in China and worldwide.
Text: Thomas Luk / Tina Rumpelt
» Western industry competes not only with individual Chinese companies, but with and within the entire Chinese system. «Thomas Luk, partner, A.T. Kearney
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China: New rules
» Profitability lies in ecosystems «A.T. Kearney partner Thomas Luk talks about the West’s growing dependence on the Chinese auto market and the risk of losing its techno-logical edge.
What do you think about the Chinese government’s ambitious goals for the automotive industry and their impact on Western car companies?The Chinese government identified the auto motive industry as one of paramount importance and has created conditions and initiatives for closing the gap between China and the world’s leading car nations. The impact of these efforts is now visible and growing. China’s successful model is being expanded and current technological and sociological disruptions will amplify the changes under way. Leading auto manufacturers not only respect this but recognize they will gain the most by contributing.
What are the dangers?Until now, the Chinese auto market has prac-tically guaranteed stable growth and profit-ability. In traditional automotive areas, the European premium manufacturers in particular have relied on their technological edge. But that advantage has disappeared. China’s Internet companies are already way ahead of the West in the digital arena, especially user experience. We see this in related tech-nologies, including cashless payment trans-actions, communications platforms, and e-commerce. So far, only by finding a Chinese partner did non-Chinese OEMs have a chance of obtaining a production license or autho-
rization to test automated cars on the roads. This could be a decisive factor in the market-place.
What might solutions look like?OEMs need to reposition themselves to maintain their independence. This is the case not only in China and future business regions such as India, and perhaps Africa, but in technologies and innovations, to achieve a more stable economic balance. Companies would do well to assess existing and new cooperation models to make sure they are not losing their innovative edge. Policymakers can help, too. For instance, what environment and conditions would help a successful national industry such as car-building remain innovative?
How can Western OEMs partner better with Chinese companies?Most are already working with China’s big tech companies to build platform interfaces for their cars. While customers demand this kind of access, OEMs aren’t always part of ecosystems built by Alibaba, Baidu, Tencent, and even Didi. The promise of future business models lies above all else in these ecosystems.
What would you say are Western car-makers’ biggest strengths in competing with China?Outstanding design, superb quality, excellent driving dynamics, and product durability are just a few of their many strengths. Most Chinese manufacturers have a long way to go in these areas. But they will count for less as mobility becomes a commodity with totally different requirements. At that point, direct access to customers will be the decisive factor—and it’s for that reason that it has to be a focal point today and in the future.
What would further support innovation in China?Chinese companies are already strong inno-vators and should be encouraged to seek international competition to become truly global. I firmly believe they can make a major contribution to overall progress in our global economy. They’ll have to expand their focus beyond the local market and develop global strategies, of course. They’ll also have to create global management teams, develop a new corporate culture, and recruit and successfully integrate international talent. I think these efforts will be well worth it.
Interview: Tina Rumpelt
Thomas Luk, partner and China
expert in the A.T. Kearney
Automotive Team.
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A.T. Kearney global
A.T. Kearney globalFACTS & OPINION
News
Detailed view on the Chinese car market, for example, volume and price development passenger cars June 2018 (YTD). A.T. Kearney experts Ruben Tessmann, Qiannan Gao, Florian Schirk, Astrid Peine and Jun Ge are co-working in the China Auto Monitor team.
and scenarios for this purpose. As well as utilizing proprietary analysis methods
and data bases, A.T. Kearney experts conduct detailed analyses and expert
interviews on the ground in China to identify the latest innovations and assess their implications. The China Auto Monitor is avail-able to all A.T. Kearney clients and selected prospects as the basis for making major strategic
and tactical decisions in the world’s largest automobile market. For more
on the China Auto Monitor, please contact [email protected].
“China is the world’s most important car market and its most innovative market for future mobility. Monitoring and understanding development as it happens is crucial to the success of every company that does business in China and wants to continue participat-ing in the market in the future,” accord-ing to Thomas Luk, A.T. Kearney partner and China expert. With the China Auto Monitor, A.T. Kearney has created a tool that not only analyzes market changes in different vehicle segments in detail, but also explores implications and future trends. Modern machine-learning algo-rithms are also used to develop sales forecasts
China Auto Monitor: always in touch with the mobility market of the future
Volume development (k units)
Mini
Sub-Compact
Compact
Midsize
Fullsize
Fullsize Plus
Total
Price development (index)
Sub- Compact Compact Midsize Fullsize
Fullsize Plus Total
Premium
Basic
Economy
12,06711,494
69
740630
1,863
7,225
1,596
111115
1,718
7,437
1,992
64
2017 June (YTD)
2017 June (YTD)
2018 June (YTD)
2018 June (YTD)
Sources: A.T. Kearney, EMIS, LMCA, various sources
+3 %
+ 8%
+ 3%
+ 7%
+ 17%
– 7%
+ 5%
4.034.023.36
3.13
2.50
2.63 2.64
2.432.35
2.53
3.12
3.40
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A.T. Kearney global
kilometers or 75,000 times around the world: that is the distance autonomous test vehicles would need to drive to provide artificial intelligence with sufficient empirical data to eliminate virtually all accidents. This figure was quoted by Amnon Shashua, Senior Vice President at Intel, and
co-founder, CEO, and CTO of the Intel subsidiary Mobileye. The mathematics professor analyzed six million real-life accidents: “Of those, 99.4 percent fall into one of 37 typical scenarios.” The remaining 0.6 percent will no doubt lead to a whole lot of discussion—and thousands of test miles.
3,000,000,000 Number
Recently heard …
» The auto industry faces a whole universe of possibilities. To take advantage of this, we have to constantly question our existing business model and draw the right conclusion—before somebody else does. «
… we think
“The automotive sector, with business models more than 100 years old, is a very mature industry. But now the time has come for it to reinvent itself. The develop-ment from car to platform opens up countless possibilities for new business models in the area of mobility and beyond. In the quest for the right ideas, neighboring industries with shorter innovation cycles provide exciting analogies for likely customer needs. However, the biggest challenge will not be generating ideas, but implementing them. It is therefore important to use control points intelligently, think in ecosystems, and find the right form of organization.”Andreas Form, partner, A.T. Kearney
Dr. Dieter Zetsche, CEO, Daimler AG
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No distractions, please!
No distractions,
please!As the cars we drive get smarter and more sophisticated, so the user interface expands and becomes increasingly complex. Drivers inevitably spend more time operating these functions instead of paying attention to the road. Austria recently introduced a standardized test procedure to limit visual driver distraction, which is likely to become law. Other countries may well follow suit.
STRATEGY
Your typical car driver uses about 10 percent of their cognitive abilities just to steer and drive a vehicle. A high-end model such as the new Mercedes-Benz S
Class or the Audi A8 takes up even more brainpower. Why? Because the driver is also the operator of up to 120 cockpit functions and services: flicking the indicator, activating a wide range of infotainment and assistance systems, or scroll-ing through the HMI submenu to adjust seat ventilation or find the real-time weather app. During all of this, the driver retains visual control over the vehicle—in the new Audi A8, for example, thanks to 134 green, yellow, red, and blue infor-mation and warning lights in the cockpit.
Drivers have their hands fullThe driver operates paddles and levers, presses buttons, turns and pushes dials, swipes the touch display, and issues voice commands to tell the cockpit what to do. An interesting note about voice control: figures released by the AAA Foun-dation for Traffic Safety in Washington (see graphic) indicate that holding a conversation with a passenger already doubles the cognitive load on the driver, while operating a menu during driving triples it. Enabling gesture recognition is therefore a priority: BMW and VW are among those who already offer this as standard, although the driver still has to check on the display that their gesture has actually effected the desired outcome.
As in-car infotainment options expand and, in many cases, become trickier to use, the driver spends more time occupied with them; the level of distraction increases and the more dangerous the situation becomes. Making a call from the car ceased to be the biggest distraction for drivers long ago. Bring “Siri” or “Alexa” into the mix and the driver’s brain is occupied to such an extent that the actual task of driving becomes dangerously secondary.
“The human capacity for handling complexity is limited. If this capability is exceeded, the time it takes to complete a task rapidly increases—which, in a difficult driving situation, can be a fatal combination,” according to Canadian computer scientist William (Bill) Buxton. His findings on the complexity of user interfaces, human capability, and time are known in the science world as Buxton’s Law.
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No distractions, please!
Operating safety put to the testMost crashes are caused by distraction and lack of attention. Four out of 10 incidents occur because the driver is preoc-cupied with something else, instead of paying attention to the road—sometimes with fatal consequences. At 75 miles an hour, if you take your eyes off the road for just a second, that means you are driving blind for 36 yards. Even at a com-fortable inner-city speed of 25 miles an hour, you will still travel 12 yards.
The National Highway Traffic Safety Administration (NHTSA) is researching how much car drivers are distracted by various additional tasks. In a simulator, testers are asked to perform certain tasks while driving: for example, making a call from the car’s phonebook or entering an address in the navigation system. They are supposed not to take their eyes off the road for more than 12 seconds for the required tasks. The US gov-ernment agency deems a system “road safe” if at least 22 of 24 test drivers are able to complete the virtual driving tasks
ME
NT
AL
WO
RK
LO
AD
1.0driving
5.0total cognitive distraction
3.8operating the menu (average)
3.1speech-to-text
2.8operating the menu (benchmark)
2.4talking on the mobile phone
2.3talking to co-driver
2.2telephoning using hands-free devices
2.1radio listening
4.2Siri: listening, texting, Twitter
1.0 represents simple baseline driving; 5.0 is total cognitive distraction (simulated by
the OSPAN test), which does not leave any mental capacity free for driving.
Source: AAA Foundation for Traffic Safety /
Audio Mobil Elektronik
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No distractions, please!
satisfactorily. The NHTSA recommendation is very important to automobile manufacturers as well as customers. Auto-motive engineers work to NHTSA specifications and even US insurance companies refer to their findings. If an onboard system fails to pass the test, it may be rated as “not road safe” and the car may be denied coverage.
Driving studies provide food for thought Driving studies in Austria, which require the NHTSA’s sample tasks to be performed during actual driving on an on-road loop, certainly provided food for thought. Test subjects spent between 46 and 78 seconds looking at the display to enter a destination in the onboard navigation system (as a reminder, 12 seconds is recommended by the NHTSA). The cars used in the study came from Audi, BMW, Ford, Mer-cedes-Benz, Opel, and VW. Scientific support was provided by the Christian Doppler Laboratory for Contextual Interfac-es at the University of Salzburg. Manfred Tscheligi, head of the Center for Human-Computer Interaction at the universi-ty, certified that, in terms of ergonomics, the operating sys-tems showed “significant upside potential”—and that was putting it kindly. The man who initiated the driving study and conducted it in cooperation with the scientists from the University of Salz-burg is Thomas Stottan, managing director of Audio Mobil Elektronik GmbH, based in Braunau, Austria. His company specializes in in-car information and communications tech-nologies: from design, development, and testing, all the way to prototyping and small-scale production. Stottan, a strong
believer in ease of operation, has taken an interest in dis-tracted driving for many years—ever since two of his children’s schoolmates died in a road accident. He has devoted himself to this cause and is now a member of numerous organiza-tions and working groups on safe and simple car operating concepts. He works with scientific institutes, transport as-sociations, and the Federal Ministry of Transport, Innovation, and Technology in Vienna. The Austrian also works for the German Ministry of Transport in the Specialist Group on the Use of Digital Testing for Autonomous and Connected Driving.
Things can be done differently Stottan firmly believes that overengineering contributes to excessive complexity in the vehicle and therefore to more driver distraction. Operating a car with well over 100 functions occupies nearly all the senses: looking, listening, speaking, doing. According to a study by IT service provider CSC, 61 percent of Germans feel overwhelmed by in-car infotainment options and wish they were simpler and safer to use.
Stottan argues that less is more and demonstrates this with his company’s interactive communication steering wheel. A compact control unit with a small display is integrated into the steering wheel so that all vehicle functions can be oper-ated by just two paddles, two dials, and no more than a dozen buttons—all at the driver’s eye level. Things can be done differently.
“We have to make the best possible use of human capabilities in the car,” asserts Stottan, and backs up his words with
0 Seconds 12 Seconds 25 Seconds 50 Seconds 75 Seconds ➝
Blind flight In a test drive, drivers took their eyes off the test track for up to 78 seconds to enter an address in the onboard navigation system. A new Austrian testing standard considers up to 20 seconds as “road-safe.”
Source: Christian-Doppler-Labor Contextual Interfaces, University of Salzburg / Audio Mobil Elektronik
NHTSA recommendation
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No distractions, please!
actions. A working group representing the automotive in-dustry, universities, various Austrian ministries, the public sector, and motor clubs set the standard “ÖNorm V 5090” in motion, with Stottan heading the working group. The new standardized testing procedure measures visual distraction of the driver through interaction with driver information and assistance systems in the car. “We are using the process to determine reasonable limits for the amount of time a driver’s eyes can be off the road,” explains Stottan. The working group’s guidelines and test design are geared towards the NHTSA test methods, although Stottan is at pains to stress the differences: “In our tests, people don’t sit in a simulator, like they do in the United States. We have them driving 20 kilometers an hour on an on-road loop, which requires con-stant steering and concentration on the road.”
Austrian standard set to become lawStottan is backed by various automobile manufacturers who want to see the testing standard become a legislative pro-posal as soon as possible: He says: “We are already in discus-sions—also with German authorities,” but he’s not currently prepared to reveal more details. “The auto industry also wants a legal basis with standardized guidelines for testing and comparing results,” explains Stottan. And, just like in the States, European insurance companies are also interested in the legal implications.
Stottan has been working closely for many years with assis-tant professor Dr. Alexander Meschtscherjakov. The computer scientist heads the Car Lab at the University of Salzburg and provided support for Stottan’s test series. Together they compiled an almost 170-page compendium entitled “Car User Experience Pattern.” Its 50 design recommendations
for safe and ergonomic operating concepts are continually updated and improved.
Will people still even be allowed to drive in 20, 30 years’ time?Meschtscherjakov airs a controversial idea: “In 20, 30 years, people might not even be allowed to drive cars anymore”—because the human factor is simply too great a risk to safety. He claims people’s emotional connection to cars is already waning. “For the young smartphone generation, the main thing is that a car provides a power outlet and Wi-Fi,” he says. Going forward, the ever-present smartphone could take over many functions in the car that auto engineers are so proud to have integrated into vehicles, such as telephone and messenger services, information, and entertainment op-tions. Google already provides real-time navigation, but few cars can offer the same degree of accuracy.
Apple and Google are betterThe latest tests conducted by the American Automobile Association, AAA, have now confirmed Apple and Google’s advantage: as trade magazine Automobil Industrie reported, Apple Carplay and Android Auto distract the driver from the road for a much shorter time than the cars’ own built-in systems.
Text: Tina Rumpelt
Thomas Stottan, managing director of Audio Mobil Elektronik: “Our primary
objective must be to adapt technology to humans, not humans to technology.“
Assistant professor Dr. Alexander Meschtscherjakov, Car Lab, University of Salzburg: “We have to understand people and their needs to develop interactive systems that make the entire user experi-ence more positive.”
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Noblesse oblige
Seamed stockings and petticoats, gentlemen in knickerbockers polishing chrome parts. The roar of engines resounding through the hills of Sussex in the south of England. Time for Charles Gordon-Lennox, 11th Duke of Richmond, to shift things up a gear—as creator, host, and manager of the annual Goodwood Revival Festival.
On the weekend of 7 – 9 September, traffic around the Goodwood Estate just outside the small town of Chichester will inevitably grinded to a halt. Every
year in early September the Goodwood Revival Festival creates what is arguably the most elegant traffic jam in the world. Older models, classic, and vintage cars polished to perfection appear wherever you look—joined, at every corner, every roundabout, by new auto motive jewels. The result is a beautiful cacophony: some engines whirring, some screeching, and others rattling and sputtering.
Good taste dictates that period clothing be worn to the Goodwood Revival, and the majority of the 150,000-plus visitors who attend these days comply. It is not unusual to see ladies dressed in Fifties fashions serving coffee on the running board of a pre-war Landaulet on the visitors’ parking lot. In a neighboring spot, the champagne is chilling, ready for five o’clock tea on a camp table decked with a full-sized sterling-silver candelabra. This is Goodwood live.
Where once pilots raced for the betIt all dates back to World War II, when Royal Air Force pilots liked to hold private races on and around the military airfield in the grounds of the Goodwood Estate. In 1948, the perimeter track around the airfield was converted into an official race-track that went on to host Formula One races. In 1966, after more than 20 years, the Goodwood Race Circuit no longer met the required safety standards and racing was shut down.
But it was to return, in 1998, in a style reminiscent of its heyday. Today the Goodwood Revival is exclusively open to authentic racecars built between 1948 and 1966. Participants and spectators alike enjoy a weekend of partying, with a
Fifties and Sixties feel. In the midst of all this activity, between teacups a n d e x h a u s t fumes, sandwich-es and engine noise, is Charles Gordon-Lennox, better known to many as the Earl of March and Kinrara until his father passed away in early September l a s t ye a r a n d Charles became the 11th Duke of Richmond. It was the new duke who revived the racing spectacle, which he manages himself with an obvious passion. No doubt the blood of his grandfather runs through Charles’ veins: Frederick (Freddie) Gordon-Lennox, born in 1904, was a talented racing driver and a lifelong technology enthusiast who liked to design car bodies. After the war, he built the racetrack in his grounds.
Goodwood: a flourishing businessToday Goodwood is a diverse and flourishing business, with organic farming, a horseracing track, an aerodrome with a flying school, two golf courses, a four-star hotel, and the Goodwood Circuit—which not only hosts the Goodwood Revival, but also the annual Goodwood Festival of Speed, held every year in early July. The whitewashed grandstand,
Always happy to chat about cars: Charles Gordon-Lennox, Duke of Richmond (right).
SIDE MIRROR
Noblesse oblige
19
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Noblesse oblige
the pit lanes, the 3.8-kilometer circuit: all are original and perfectly preserved. Prestigious sponsors and wealthy race-car owners from around the world mingle with famous former racing drivers. They form a close-knit group in the paddock, where rare and exquisite beauties idle under faded but authentic tarps, as they get ready for the race.
At 12 years of age, Charles moved with his parents to Good-wood House, a place he already knew and loved from vaca-tions with his grandfather. The 9th Duke of Richmond often took his grandson to races held in his own backyard. The youngster’s fascination with cars began just a few years later when he acquired an aging Morgan three-wheeler, a roadster with two front wheels, one at the back, and a twin front engine. He persuaded his parents to let him have what he now refers to as “a horrible thing,” when they wouldn’t let him ride a motorbike. Driving a bit too fast one day, Charles lost the back wheel. His next car was a Datsun Cherry.
The young Gordon-Lennox wanted to join the movie industry and, by the age of 17 and a student at the National Film School, he worked for director Stanley Kubrick, famous for the classics 2001: A Space Odyssey and A Clockwork Orange. Shortly after turning 21, Charles married the dancer Sally Clayton and began working as an advertising designer and photographer. While working in London as a photographer, the current duke‘s passion for cars was rekindled and he bought a Porsche Carrera, which he kept for 13 years. Photo-graphy is an interest he continues to pursue. In recent years, exhibitions of his nature photography, signed simply
“Charles March,” have been staged in several cities, including London, Mos-cow, and New York. Charles remarried in 1991 and is now the father of five children.
Rolls-Royce plant is moulded into the landscape
How does the duke reconcile the love of nature he expresses through his camera with gasoline fumes and smoking tires? He just does. And the charming, enterprising Gordon-Lennox
pulled off a masterstroke by bringing Rolls-Royce onto the estate. After BMW acquired the rights to Rolls-Royce and sold the existing factory in Crewe to Volkswagen, they were on the lookout for a new location to produce the brand’s luxurious limousines. BMW and the duke reached an agree-ment for around £65 million.
BMW built a car factory and new Rolls-Royce headquarters on the duke’s land. They did so in such a way that it is hard to believe the nature-loving aristocrat didn’t draw up the plans himself. In fact, it was Sir Nicholas Grimshaw who designed the building, having already earned himself a name with the Eden Project, a futuristic botanical garden in Corn-wall. Two meters of subsoil were removed to allow the plant to be molded into the landscape. A huge living green roof of more than 30,000 square meters covers the factory, which opened in 2003. Thousands of plants and 120 different species of trees were installed to disguise the industrial architecture on the ducal country estate—which, by the way, is officially classed as an Area of Outstanding Natural Beauty—and make it as discreet as possible. Because, after all, noblesse oblige.
Text: Tina Rumpelt
Suspenders, roaring engines, legendary cars: the Goodwood Revival Festival, held every September in the south of England, attracts more than 150,000 visitors.
Automotive Vol. 9
They have no qualms about calling their cars “Welt-meister” right off the bat. Confidence is high, ambi-tion abounds, and their well- heeled investors have deep pockets. A string of Chinese start-ups are striking fear into the hearts of established OEMs. Or are they? Who are these new kids and what are their plans?
MARKET
A.T. Kearney
20New kids on the block
Automotive Vol. 9 A.T. Kearney
21New kids on the block
The newcomers, like Byton, Nio, and Xpeng, are banking on e-mobility and they are backed
by wealthy investors: Chinese self-made billionaires, but also industry giants such as Alibaba, Tencent, and Foxconn, who are playing their part in Beijing’s ambitious “Made in China 2025” initia-tive with generous investments in the domestic auto industry. For this reason alone, these new kids should not be underestimated.
Intelligence as “core selling point”The models the Chinese newcomers are currently unveiling are high-end smart e-cars: fully connected, serviced via the cloud, largely voice- and gesture- controlled, and as autonomous as pos-sible. “They use intelligence as their core selling points,” explains Jian Xu, A.T. Kearney partner in Shanghai, com-bining sharply focused customer orien-tation and streamlined administration with innovative sales and service struc-tures.
Much of what they are putting out onto the roads may appear, to traditional manufacturers at least, to be too brash, technologically not mature, driven by an excess of ambition. The “new guys” disagree. They model themselves on companies from the tech industry, such as Apple, rather than the traditional auto motive world. “Many of the new-comers decide not to go for the entire value chain. This reduces their invest-ment, of course—especially if you leave out capital-intensive in-house produc-tion,” explains Xu. Components are
bought in on a large scale. Xu continues: “In a scenario like this, it is vital to build a strong brand. That is why they are in-vesting instead in brand development and innovative products with totally new use cases. They leave production to experienced contract manufacturers or partners, at least in the early stages.”
Money no objectThis also saves time, and the new firms certainly move quickly: Xpeng, for in-stance, presented its first model, the E-SUV Xpeng G3, earlier this year at the CES. Its launch is scheduled in 2019. Those lining up behind Xpeng include Amazon’s Chinese twin, Alibaba, and iPhone producer Foxconn. The Guangzhou-based company raised $350 million with its IPO. No one is counting the pennies.
That also applies to Nio, previously NextEV, which was created in 2014 by Chinese self-made billionaire William Li, together with Lihong Qin from Roland Berger and Taiwanese native Jack Cheng of Fiat Chrysler. Li made his money from Internet platform bitauto.com. Nio started selling its electric seven-seater crossover, the ES8, in China in late 2017 and claims to employ a total of 4,000 people at 20 locations worldwide.
Fast breeder: Nio, a company founded only in 2014, plans to put a self-driving
BEV on United States roads by 2020 (photo: seven-seater crossover ES8).
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New kids on the block
The newcomers like to buy in expertise from the “old” car nation Germany. For example, former BMW manager Carsten Breitfeld, who is now in charge of the Byton brand, claims: “We see ourselves as competition for BMW, Mercedes, and Audi.” Breitfeld’s executive team boasts a number of previous BMW managers, including Daniel Kirchert, who used to be BMW’s sales boss in China before building up Nissan’s Infiniti luxury brand in Asia. They are joined by Belgian Mark Duchesne, who managed production for Toyota and Tesla.
The Byton brand, which focuses on of-fering infotainment and premium at a discount price, and whose electrical system works with Amazon’s Alexa app, while Bosch provides the power train, is owned by Future Mobility Corporation (FMC). Strong investors are part of the mix here, too, including Harmony Motor, Suning, FAW, and battery cell manufac-turer CATL.
Diversity through (supplier) platforms The Byton M-Byte SUV, which Breitfeld refers to as a “smart device on wheels,” is scheduled for initial release in China in late 2019, but will also be launched in Europe and the United States at a later date. A sedan has been announced for 2021, with speculation over an additional model. A modular platform developed with German engineering service pro-vider Edag will enable large volumes to be produced quickly, despite the model diversity: “Up to 300,000 units per year,” promises the Byton CEO, who used to be responsible for BMW’s hybrid sportscar
i8. The idea of modular platforms also appealed to BAIC, the parent company of Beijing Electric Vehicle Company (BJEV), in which Daimler acquired a nearly four percent stake in March: Magna will develop electric-car plat-forms for BJEV, which will be ready for series production in 2020.
Aspiring electric-car producer Thunder Power is also counting on European partners. The Taiwanese start-up out-sources engineering to the north Italian racecar design firm Dallara. Their head developer is the former Bugatti engineer
A flurry of camera flashes at the premiere of the Byton M-Byte at the CES 2018 in
Las Vegas. The SUV will soon be followed by further models.
Off to a flying start: Dr. Philip Koehn, who joined the Borgward Group in May 2018 as chief technology officer, also took over as CEO at the beginning of July. The 49- year-old comes from Rolls-Royce, where he was in charge of development.
Byton chief Carsten Breitfeld
» We will be to the auto market what the iPhone was to mobile phones: a gamechanger. «
23New kids on the block
Peter Tutzer, who was responsible for the Bugatti Veyron super sportscar; an-other comes from Ferrari. Capital is provided by Chinese venture capitalist and CEO Wellen Sham. For its first se-ries-production model, an electric sedan styled by Zagato, Thunder Power has filed no fewer than 390 patents. The car, which will go into production later this year, claims to offer inductive charging in record time. The pronounce-ments of WM Motor Technology Com-pany are equally bold: the electric SUV named “Weltmeister” is said to have a range of 600 kilometers. The WM boss is former Geely executive Freeman Shen, whose bid to buy small-scale German manufacturer Wiesmann when it filed for bankruptcy in 2014 was re-jected. Financial backing is provided by Taiwanese funds.
Fully loaded, no lead timesLynk & Co, on the other hand, is one of a number of start-ups created as well- calculated spin-offs by traditional auto-mobile companies not prepared to take unnecessary risks in this largely un-known territory. Nevertheless, they are being remarkably bold: Volvo subsidiary Lynk & Co sells only car subscriptions: anyone who does not currently need their car can make it available to other Lynk & Co users.
The vehicles are delivered ex works with the full range of equipment options, although there are only six colors to choose from. “This eliminates lead times,” brand director Alain Visser told the German car magazine AutoBild. It also means that everyone gets their car delivered the very next day. Instead of maintaining expensive showrooms, Lynk & Co is touring European capitals with pop-up stores. An influential Chi-nese businessman pulls the strings: Li Shufu, founder of the Geely Group, Volvo’s parent company, and a major Daimler shareholder, also has close ties to China’s political leaders.
Latecomers Qoros and Borgward But not everything has gone according to plan for the new firms: the Qoros and Borgward brands had a shaky start and almost stumbled. Qoros, founded in 2007 as a joint venture between Israel Corporation and Chery Automobile, has since been acquired by real-estate tycoon Yao Zhenhua, one of China’s wealthiest men. Borgward, former pos-terchild of the post-war German car industry, is hoping for a successful re-vival, after selling its brand rights to commercial vehicle manufacturer Foton Motor. SUV sales in China are climbing and the brand’s European comeback is already being planned. They also have
a new boss: Chief Technical Officer Dr. Philip Koehn, former Rolls-Royce head of development, who took over from Ulrich Walker as CEO on 1 July 2018. Koehn will also continue to co-manage the technology division.
Text: Matthias Pfannmüller
“ The consumer will be the ultimate winner”
Jian Xu, A.T. Kearney partner, Shanghai
BEV newcomers such as Byton, Nio, and Xpeng have made pretty big promises, but haven’t really shown us much yet. Can they deliver?Certainly not everything. But they will probably be able to fulfill a lot, if not most, of those promises. Tesla is the best example of this.
What can established auto manufac-turers do to counter the new guys? In a market where technology is rapidly evolving, and the landscape is constantly changing, all brands should redefine their value proposition from the perspec-tive of a seamless consumer experience. It is essential—not optional—to develop smart vehicles that customers can really say “know me” and “delight me.” Whether emerging manufacturers or traditional brands come out on top, the consumer will be the ultimate winner.
Will the newcomers leverage their cross-holdings with the tech industry to realize that “seamless consumer experience” faster than others?Not all the newcomers will be able to, for sure, but some of them will definitely deliver a seamless user experience faster and with more innovation than the industry’s more established companies.
A.T. Kearney
sition—a vision we plan to take all the way to the Olympic Games in Tokyo”, where the ship is scheduled to dock in 2020. The catamaran is currently sailing across the Mediterranean, stopping off in northern Europe next year. In addition to the fuel cell, Energy Observer is also fitted with two electric engines, solar panels, and two wind turbines. During sailing, both electric engines work as generators, producing electricity that is stored in rechargeable batteries.
Toyota is providing the technological expertise and hardware to support the project. The circumnavigation of the catamaran, built in Canada in 1983 as a racing boat, “once again demonstrates the many practical applications on the road to a hydrogen society,” according to Matt Harrison, VP Sales and Market-ing at Toyota Motor Europe. The com-pany is one of the pioneers in the use of fuel-cell technologies in cars: the Mirai, Toyota’s mid-sized hydrogen fuel- cell vehicle, has been on the market since late 2014; around 5,300 of them had been sold worldwide by the end of 2017. The Japanese carmaker is current-ly also testing fuel-cell trucks in the United States.
Text: Tina Rumpelt
A car fueled by water is surely every motorist’s dream. To show how water can indeed do the job, “Energy Observer”, the world’s first hydrogen-powered boat, is setting sail around the globe using fuel-cell technology from Toyota.
FINAL POINT
Runn
ing
on
The twin-hull vessel, more than 30 meters long and almost 13 meters wide, takes advantage of what is readily available on the seas: sun, wind, and seawater. The seawater is used to generate hydro-gen for the on-board fuel cell. “Energy Observer is more than just a boat: it provides inspiration and solutions for obtaining energy from nature in a sus-tainable and compatible manner,” writes Toyota in its press release.
Water fuel is converted into hydrogen through the chemical process of elec-trolysis. Salt and ions are removed from the seawater, which are then separated into hydrogen and oxygen. The resulting carbon-free hydrogen is compressed and stored in tanks. This kind of hydro-gen technology offers a considerable weight advantage over boats powered by storage batteries alone.
Victorien Erussard, creator and captain of Energy Observer, sees “hydrogen as the key to stepping up the energy tran- w
ater
24Running on water
Automotive Vol. 9A.T. Kearney
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