Q: Why do you think growth in e-mobility [electrification of vehicles and infrastructure] has slowed somewhat, and what are the opportunities in this area for Bosch?
First of all our prognosis, our forecast, has not got down. But our forecasts were never in the range of some of the other market players and also some of the media. We always said that this decade is the decade of learning, of preparing for electrification. We are going to see electrification by the end of the decade, but it is going to be in single digits in percentage terms, in terms of the vehicles – some 2.5 million electric vehicles [globally]. Plug-in hybrids have increased in our forecast because we are seeing, especially in some of the premium car brands, that they want to electrify their cars in a certain way to allow electric driving in the cities, for commuting, to give the customer this premium feeling, high-power feeling – and have the combustion engine on board. Hybrids could thus account for six million vehicles. So our investments [in electrification] are quite significant – around about €400 million a year, because we think it's going to pay off after 2020. And there we could see the reduction in cost. That's going to be the big driver, getting the cost for the battery down and power electronics and so on, with a reduction in cost and maybe with somewhat more openness on the side of the consumer – to accept a little bit less range than he or she would have in today's cars. This would lead to a pretty strong electrification of cars used for commuting etc. In Germany one third of the cars are second vehicles to ferry kids to school and so on.
Q: Do you think if the oil price continues to go up that that might spur more investment in electrification?
In the end for the consumer electrification has something to do with the feeling of an electric car, but it's also cost and cost benefits. If the consumer says, 'I like this driving feeling and at the same time I'm going to save money', it's going drive the market forward. At the moment we tell them: 'by the way, the car costs about three times as much, but you have one third of the range'. And then we are surprised it's not a mass market!
Q: The German government had some quite ambitious targets for the number of electric cars on the road. Do these now need to be revised?
We always said they were pretty optimistic and we're not quite sure really whether it's right to say that Germany should be one of the key user markets of electric cars, but it could be one of the key countries offering electric cars. That's why we say that the technology developed needs to be present and well-established in the German automotive industry. What was it, one million by 2020? Let's see. As an international supplier like Bosch, the German market as a car market is important, but not everything.
Q: We've heard a lot about Bosch's strategy in terms of photovoltaics, which are important to the company and in which a lot of money has been invested. How difficult is it to balance the needs of the current market with what might happen in the future? It must be difficult to have a strategy that takes into account every possible development.
Typically you can't forecast the future. So what we work with are scenarios. We have different sets of future possibilities and what you do is ask what the indicators are that this scenario will become more probable than another scenario. What would the subsidies be: are they going up, are they going down, are prices going up? These kind of indicators make one scenario more likely than another, and you try and build a strategy which is robust against most scenarios: that's the only possibility. Sometimes that works, and sometimes it doesn't. If it always worked, everyone would run in the same direction. It's part of the game, right?
Q: In the UK we've seen the automotive market recover since the recession – it's obviously still a key part of Bosch's business. Are you anticipating the upward trend will continue? I know you forecast that 2012 will be quite a difficult year.
If we look at it long term we always see on average, even including the downturns, around about 3% [automotive] growth a year, or 2-3%. And for 2012 we're seeing 3-5%. That's fuelled mainly by the US, which is growing nicely, then Asia where we have China and India strong. And working on creating growth for Bosch means putting more Bosch on each vehicle. The content per vehicle. So instead of having port fuel injection, putting in gasoline direct injection. We have a higher market share of gasoline direct injection then of port fuel, and gasoline direct injection is a much more valuable system so it costs more. Simply speaking, sales per vehicle go up: instead of ABS, putting in ESP; and in cars which have no ABS, putting in ABS. So this is basically the strategy we are always working on. More Bosch on each car.
Q: Is it straightforward to grow those kinds of technologies in terms of their presence on vehicles? ESP would be a well-proven technology by now.
The difficult part is not now, where there is a well-established market, and a well-established market position. The difficult part was developing ESP between 1989 and 1995, which is when we went into the market – three years ahead of our next competitor, which launched the technology in 1998. This is always a strategy of Bosch, we invest heavily in R&D. So in automotive last year we invested €3.2 billion, more than 10% of sales. Within R&D you try and be first to market and you gain market share. You're already on the learning curve in terms of production costs coming down each year, so you are early on the learning curve, and with that advantage we try to keep the competition at bay.
Q: As a member of the Bosch board, you have responsibility for the Indian market. How is that working out?
India for us has been a great market. We started very early, in 1954 – when English and British suppliers became less popular in India [laughs]. And it was a low-key business until about 2000, so in 2000, we had sales of €300 million, this year it will be €1.4 billion. So we have very solid growth, maybe not quite as steep as China, but we have very good market shares. Being entwined with the Indian OEMs over so many decades, especially in India, gives a very important customer relationship advantage which we have. We are fully localised with almost everything we sell there. So, for instance we're the first supplier to have local ABS production, we put that in in 2009, in the middle of the crisis, but still we did it. It's one of the aspects of Bosch to have this continuity in the market. We promised we were going to put ABS there and we put it there. It's very well received, localisation and having local R&D. We are also using India as an offshoring base for software development so we have an engineering company in India which last month crossed the 10,000 employee threshold, so it's big.
Q: If you had to imagine a point in the future when an equal amount of Bosch components would be going into electric and ICE cars, how far away might that be?
That's a very interesting question because the sales potential per vehicle on an electric vehicle is much higher than a combustion engine vehicle. If you look at, say, a four-cylinder diesel engine, maybe that might involve €800 of Bosch components. That's the potential there. For an electric vehicle that could be multiplied by X, because we can produce, and are producing, electric motors, the power electronics and the battery. And if you add all that together you're talking about way over €5,000. So the sales per car is highly interesting. It depends of course on our market share, which we have to fight for because of new and established competitors and competitors in the EV arena. If we are really successful in getting market share in the EV arena then somewhere between 2020 and 2030, which is not so far away in our industry, I can see us achieving a balance in terms of the value of sales. Numbers of components would be much further away of course!
Q: What are you hoping to achieve with your lithium ion battery venture?
We are in talks to restructure the current partnership [with Samsung]. And obviously as Bosch we want to play a part in the battery business, so even perhaps restarting with a new partner or doing it on our own. But we see the battery as being key in the future EV arena, and all of the strength that Bosch has in systems knowledge, in manufacturing, and high-volume manufacturing, that's well suited to batteries. We can also see a strong market pull by the European OEMs to say, 'long-term we don't want to depend on Korean or Japanese suppliers for this key component'. They want this in Europe, and there Bosch is seen as an interesting partner.