Experts share their visions of what’s ahead in a changing industry

Clockwise top, left: Guillermo Malpica Soto, Sabrina Sussman, Michael Robinet, Claus Moehlenkamp, Bo Andersson, Tamara Snow, Ami Dotan and Robert Kamischke Photo credit: AUTOMOTIVE NEWS ILLUSTRATION from Greg Horvath photos

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Auto companies have a lot to worry about.

It’s not all bad — but it’s all disruptive.

At the Management Briefing Seminars last week in Traverse City, Mich., the annual high-level “big think” held by the Center for Automotive Research, executives, engineering leaders, consultants and automotive startup entrepreneurs agreed on one recurring point: The world is changing beneath their feet.

From podium microphones, expert panel exchanges and personal ruminations in conference hotel coffee shops, here is the industry’s vision of what’s coming, compiled by News Editor Lindsay Chappell:

TECHNOLOGY

Danny Shapiro, senior director of automotive at Nvidia:

Computing technology is transforming the $10 trillion transportation industry, and at the heart of that transformation is the graphics processing unit.

“We started as a video game company developing the hardware and software to enable 3D graphics,” Shapiro said of Nvidia. “The investments that we made in the GPU have enabled this amazing resurgence in artificial intelligence” and are now fueling autonomous vehicles.

AI is at the core of technology that lets vehicles interpret and respond to a multitude of driving conditions, such as a vehicle about to run a red light, that humans intuitively recognize and process.

Cary VandenAvond, president of manufacturing, distribution and logistics at JDA Software, a supply chain solutions company:

AI, advanced software platforms and the latest tools in data collection and Internet tracking are making it easier to know, more or less, where everything is in real time. And more important, logistics managers will be able to predict more precisely where everything is going to be.

“We now have the technology to digitize the entire chain, from end to end, for manufacturers to make optimal decisions,” VandenAvond said of the industry. “The more external data we can bring into our decisions, the greater our competitive advantage.”

Ami Dotan, CEO of Karamba Security, an Israeli company specializing in connected-car security:

If automakers don’t take control of vehicle software, self-driving cars could be riddled with bugs that leave them vulnerable to hackers.

“Every 1,800 lines of code have some bugs. Out of those, 80 percent have been found to be security vulnerabilities,” Dotan said. “The number of potential security vulnerabilities is 5,000 in a connected vehicle and 15,000 in an autonomous vehicle. That is mind-boggling.”

Maarten Sierhuis, director of the Nissan Research Center in Sunnyvale, Calif.:

Sierhuis: Nissan borrows from NASA’s playbook. Photo credit: GREG HORVATH

Nissan is tapping into NASA technology to develop an onboard autonomous system that uses a remote human operator sending the vehicle commands or alternate routes to deal with construction and unexpected road situations. Its inspiration: the NASA crew that drives the Mars rovers.

“Show me an autonomous system without a human in the loop and I’ll show you a useless system,” he said.

“You have to put a lot of data into a small pipe,” Sierhuis said. “NASA is good at that.”

CONSUMER SHIFTS

Pom Malhotra, director of connected vehicles and data at Audi of America:

Millennials are fueling the adoption of in-vehicle technology. “This is a group that has learned the comfort and conveniences that come with good technological solutions,” he said. “If something can be done much more easily, and much more comfortably through technology, then why not do it?

“We have to create an experience that is comfortable and convenient, a lot more mobile,” Malhotra said. “Our dealership experience needs to change in a big way, a lot more utilization of software tools.”

MANUFACTURING

Robert Kamischke, vice president of the Smart Production division at Kuka Systems:

Instead of having a traditional assembly line, plants will move parts on automated guided vehicles, autonomously driving the parts to work cells as needed. The guided vehicles also continually relay data to other such vehicles and plant engineers to ensure parts are being delivered to the proper areas. “You have not a line concept — you have cells,” Kamischke said during a presentation at the seminars. “Each cell has special capabilities.”

The matrix can automatically convert itself as products change, without wait times and without lost production time, he said. That would lower inventories and increase flexibility, according to the company.

PRODUCT DEVELOPMENT

Matthias Erb, head of holistic user experience at Volkswagen Group:

VW will rely more heavily on its sales and marketing divisions in vehicle development so it can incorporate more consumer service features.

“The development of cars will no longer only be driven by technology,” Erb said. “The user experience becomes the second most important driver for product development.

“Customers don’t want to buy a product — they want to buy an experience,” Erb said. “If you want to buy an experience, you are asking for something different. You are not asking for physical things, necessarily.

“Everything we are offering is something around the car. We are offering services such as media, security and navigation,” he said.

Tamara Snow, head of systems and technology for the interiors division at Continental North America:

Snow: Change how we innovate. Photo credit: GREG HORVATH

“New technology is coming at a faster and faster rate, and for this reason we need to be able to harness disruption and change what we innovate and how we innovate,” Snow told an audience at the seminars.

“Agile” product development is crucial to ensuring companies stay competitive as the vehicle morphs from manual to self-driving.

“There are many factors to agile development,” Snow said. “Part of those would be things like: Are our teams set up in the organization to be flexible? Are we ready for shorter release cycles? And if so, do we have shorter approval cycles to help us with those new release cycles? Are we balancing agility and risk management?”

POWERTRAINS

Craig Balis, chief technology officer at Honeywell Transportation Systems:

Balis: Turbochargers will have a big role in the electrification age. Photo credit: GREG HORVATH

Turbochargers are sitting pretty in the age of electrification.

“We still see hybridized vehicles as a great opportunity for us in our core business,” Balis said at the seminars.

Honeywell forecasts that hybrids will grow globally from 3 million units annually in 2016 to 16 million by 2021.

And at least 70 percent of mild hybrids are expected to have at least one turbocharger by 2021, a scenario that would have a higher penetration of turbos on hybrids than on regular vehicles.

Claus Moehlenkamp, CEO of Freudenberg Sealing Technologies:

The German supplier of seals and gaskets used in engines, transmissions, axles and other components stands to lose as much as 70 percent of its traditional revenue if electric vehicle sales take off.

“Any supplier who is heavily focused on the powertrain systems derived from the internal combustion engine is at risk and will be challenged in the long run,” he said.

Freudenberg is investing in businesses outside its usual sphere of expertise — in a fuel cell manufacturer and a battery company that also makes the power storage and management equipment.

PRODUCT SEGMENTS

Rebecca Lindland, executive analyst at Kelley Blue Book:

Lindland: New crossovers are under pressure from off-lease, used-car markets. Photo credit: GREG HORVATH

The star of the new-vehicle market has been crossovers. But new crossovers are now in danger of some deflation because of the rising volume of used crossovers, Lindland said. For the first time, the new-crossover segment is under pressure from the off-lease and used-car markets, she said. The prospect of tariffs also could affect sales. “The luxury buyer is actually starting to become more sensitive to affordability,” she said.

TRADE

Michael Robinet, managing director of IHS Markit:

U.S. tariffs on imported vehicles and auto parts will have a pricing impact on all vehicles, Robinet said. Sticker prices for domestically built vehicles could rise about $1,800, imported mass-market vehicle prices could jump $3,300 and imported luxury vehicle prices could surge $5,800, he said.

The Trump administration’s proposed tariffs on imported vehicles could cut light-vehicle production by 1.4 million-2 million units.

“Anybody who is making major capital decisions based on what is happening right now — that may not be smart.”

Colin Bird, Canada’s minister-counsellor of economic and trade policy:

“The steel and aluminum tariffs, allegedly to protect U.S. security, have hit a raw nerve in Canada,” Bird said. The idea that Canada could “pose a national security threat challenges our very sense of the relationship,” which has included Canadian soldiers fighting and dying alongside American troops in major U.S. conflicts, he said. “Tariffs on steel and aluminum are, simply put, attacks on the U.S. auto industry and ultimately attacks on U.S. consumers.”

Guillermo Malpica Soto, head of the Trade and NAFTA Office at Mexico’s Ministry of Economy:

“Mexican parts are key to the U.S. auto industry competitiveness,” he said. “We believe that integration has been beneficial for the three countries and NAFTA has played an important role in this integration.”

MERGERS AND ACQUISITIONS

Dietmar Ostermann, U.S. auto advisory leader at the Detroit office of PwC:

Ostermann: Numerous factors will drive merger and acquisition activity.

Mergers and acquisitions will continue at a high volume this year, even as uncertain politics and trade friction complicate strategic planning around the world, according to a report released during the Traverse City event. Factors that will drive deals include nontraditional companies’ desire to enter the auto industry, the allure of powertrain technology suppliers and a scramble to buy suppliers in Asia, particularly in China, Ostermann said.

EMERGING MARKETS

Bo Andersson, CEO of Yazaki North and Central America and president of Yazaki Europe:

Growth opportunities for the auto industry will come from nontraditional mobility sources — but also from emerging markets. Andersson believes most industry growth will come from opportunities in 11 markets, also known as the New 11.

The countries are Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, the Philippines, Turkey, South Korea and Vietnam.

“These are what the smart people today think the majority of the growth will be,” he said.

POLITICS

Steve Center, vice president of the connected and environmental business development office at American Honda Motor Co.:

American Honda will go ahead with plans for more environmentally friendly vehicles despite the Trump administration’s proposal to roll back emissions targets.

“To reduce the requirements this late in the game doesn’t change anything,” Center said. Honda plans for electrified vehicles to make up two-thirds of its global auto sales by 2030.

“The product cycles going forward — that work’s done. We view those regulations as a low bar; that’s the bar you have to hit to play.”

MOBILITY

Mark Thomas, vice president of marketing and alliances at Ridecell, a provider of software platforms for car-sharing and ride-hailing services:

Thomas: “Triple disruption” Photo credit: GREG HORVATH

The mobility service sector will have a market cap of $9 trillion by 2030, six times the estimated market cap of all automotive companies today, Thomas said.

“There’s going to be a huge amount of wealth that’s going to be created with these services,” he said. The combination of autonomous technology, on-demand services and electrified powertrains is the “triple disruption” that is going to change transportation forever, he said.

Sabrina Sussman, manager of public partnerships at Zipcar, a car-sharing service:

Two-thirds of the world’s population will live in cities by 2050, creating big implications for private vehicle ownership and driving, Sussman said. The current urban model of privately owned vehicles sitting idle up to 96 percent of the time is not sustainable as urban areas swell in size.

“We want people to feel car sharing is just as easy as owning a car,” she said. “The idea is you can go outside your house, grab a car and use it for an hour, two hours, three hours, then return it.”

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