Automotive industry: Sustainability as a USP

The transformation of the automotive industry is progressing. Transportation prices are at record highs, supply chains are struggling. And digitization is bringing new, powerful players to the table. Should the European automotive industry be afraid? On the contrary, says Manuel Kallweit of the VDA: the industry will emerge stronger from the transformation.

ALUMINIUM: Mr. Kallweit, has the German automotive industry ever experienced such upheavals as it is currently experiencing?

Manuel Kallweit: We are indeed experiencing a transformation process which we have never seen before. Right now, the course is being set for where the journey will take the European and German automotive industry over the next ten to 15 years. And this involves far more than the current problems resulting from the pandemic.

But they are not without their own problems.

Kallweit: Of course, the passenger car market in particular has suffered a unique slump. We are currently in the process of recovery, but the global supply chain disruptions are far from being over - with the familiar consequences for transport prices. Now, extremely strong demand is meeting weakened supply chains. This makes it extremely difficult for all parties involved.

Is it a deceptive impression, or did some people underestimate what the consequences of the pandemic would be?

Kallweit: During the first lockdown almost a year and a half ago, there were economic forecasts that everything would be back to normal after a few weeks. To seriously believe that you could just pull the plug without massive consequences was, of course, absurd. And some of these effects could be permanent. For example, permanently increased logistics costs.

But for a variety of reasons.

Kallweit: For many reasons, in fact, probably not least because of the increasing importance of the concept of sustainability.

What do you mean by that?

Kallweit: Commercial vehicles have been becoming increasingly efficient and environmentally friendly for many years. But the pressure to reduce emissions will of course continue to increase. The solution can only lie in new technology, new powertrain types, new vehicles. And this will inevitably have an impact on logistics costs. Added to this, among other things,  will be the costs for the charging infrastructure which needs to be built and the further increase in the CO2 price.

Let's stay on the subject of sustainability. How do you assess the efforts of your industry?

Kallweit: The major German OEMs and suppliers alone are investing around 150 billion euros in electro mobility, in digitization and in new types of powertrains by 2025. And these amounts are coming from the companies' profits, which is not the case in all countries. Just look at the model ranges: Manufacturers have flipped the switch a long time ago. If Saxony were a state, it would be the third-largest producer of electric vehicles in Europe and the seventh-largest in the world.

Won't the transformation also inevitably change the self-image of the automotive industry?

Kallweit: I actually believe that a future USP will develop here: "Vehicles from German manufacturers are sustainable." Also in terms of supply chain, production and power generation. Think of the customers of premium vehicle manufacturers: it is precisely with this clientele that the concept of sustainability is playing an increasingly important role. And this is true throughout the entire life cycle, right through to disposal.

How do you assess the framework conditions for this transformation?

Kallweit: The automotive industry is making its contribution, and doing so with conviction. Setting up charging stations for the whole of Europe and making green electricity available – it can't do that.

What does that mean?

Kallweit: People are quite happy to tell the European automotive industry what it must or must not do, and they also back this up with threats of punishment. When it comes to the question of charging infrastructure, I see somewhat less ambition. Currently, 75 percent of all charging options in Europe are concentrated in three or four countries. But the fleet limits apply to the entire EU. And consumers will only buy vehicles that also offer an applicable mobility solution. So in terms of charging infrastructure, grid infrastructure and renewable energy generation, I think the European Commission should be more ambitious.

What does this development mean for the value chains?

Kallweit: They will change. Having the battery for a car manufactured in China and then importing it is not a business model. Neither, of course, is the other way around. Electro mobility will strengthen the principle of "local production for the respective location. The question of diversification will be exciting. On the one hand, it is disadvantageous for both sides if OEMs place orders for mass-produced parts with many suppliers. On the other hand, the pandemic has shown how advantageous this can be. How this will develop remains to be seen.

What impact do you actually see on the aluminum industry?

Kallweit: Certainly not a negative one. In electro mobility, as you know, the mass of the vehicle is a decisive factor. Lightweight construction will therefore play an increasing role - also and especially in commercial vehicles. Added to this is the increasing importance of recycling, and here again aluminum is superior to composites. So both of these factors play into the hands of aluminum as a material.

I assume digitization is changing the face of the automotive industry on a similarly massive scale?

Kallweit: Definitely, and on several levels: In production as well as in the networking and use of vehicles. The fact that production facilities are being adapted or newly built in the course of the switch to electro mobility naturally gives digitization and automation of production a further boost. And the visions regarding the networking of vehicles with each other and with the infrastructure are well known and will also be implemented.

Digitization also brings new players with new business models into your industry.

Kallweit: Yes, it's an important topic. Think, for example, of the operating system that modern cars need today. Do I build it myself? Do I take one from a major IT player? These are key strategic decisions. Or think about the change in user behavior: People expect, for example, to be able to connect their cell phones to their vehicles with complete ease. For that, you need interfaces, and these players are now also sitting at the same table.

And the German automakers, with their engineering self-image, can handle this?

Kallweit: I think that new companies have certainly provided a breath of fresh air. That's competition, and it's also good. But German carmakers are unbeatable in two main areas. On the one hand, in scaling up and producing huge quantities in top quality. And on the other hand, in offering the ability to configure the vehicle individually down to the smallest detail. Others are leaders in the field of consumer electronics, but German engineers are world champions when it comes to Industry 4.0. Our carmakers are therefore taking this competition sportingly: "You've shown us what you can do. But now we'll show you what we can do."

The interview was conducted by Bernhard Fragner.

Experience Manuel Kallweit at the

ALUMINIUM Business Summit 2021
September 28th­–29th, 2021
Altes Stahlwerk Düsseldorf

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