Speaker 1: I'm Dana Perkins and you're listening to Switch It on
Speaker 1: the B E F podcast. On the seventeenth of May,
Speaker 1: BENF hosted our Munich Summit, one of six summits taking
Speaker 1: place around the world each year, each with a different theme.
Speaker 1: This summit focuses on where automotive manufacturing and energy converge.
Speaker 1: So naturally, we were delighted when Michael Loscheler, CEO of
Speaker 1: Opal Automotive, agreed to join us to discuss automotive strategy
Speaker 1: in the transition to electric vehicles. Michael has experienced working
Speaker 1: for numerous companies in the automotive industry, including Volkswagen, Daimler,
Speaker 1: and Mitsubishi Motors. During our summit, he was interviewed by
Speaker 1: Nicolas Solopolos, advanced transport analyst. Here at B and e F.
Speaker 1: For more information about our summits, also taking place in London,
Speaker 1: New Delhi, New York, San Francisco, and Shanghai, go to
Speaker 1: about dot bien ef dot com forward Slash Summit. As
Speaker 1: a quick reminder, bien ef does not provide investment or
Speaker 1: strategy advice and are more complete disclaimer is at the
Speaker 1: end of the show. But now let's hear the interview
Speaker 1: with Michael Lohler, CEO of Local Automotive, about the future
Speaker 1: of electric vehicles. So hello, Michael, thank you very much
Speaker 1: for being here with us to day. It's it's great,
Speaker 1: great pleasure to have you on the summit. So it's
Speaker 1: also a very interesting time for the automotive industry, particularly
Speaker 1: in Europe. Among many other things, we have the next
Speaker 1: zero targets that are in place now for a course,
Speaker 1: the European Union, the UK as well has some of those.
Speaker 1: And one of the questions that are gaining more momentum
Speaker 1: now the industry is that of legislating and end to
Speaker 1: the sale of vehicles that are using in telecombustion engines.
Speaker 1: What is your view and that I mean, first of all,
Speaker 1: we try to be very customer focused because at the
Speaker 1: end of the day, we offer mobility to our customers.
Speaker 1: We want to give them excitement with with our cars
Speaker 1: and offer clean and safe mobility and I think we
Speaker 1: shouldn't forget this. This is really the key of our business.
Speaker 1: At the same time, the political framework is changing. Yeah,
Speaker 1: so what we from the open side try to do
Speaker 1: is we want to be open for various technologies. Yeah,
Speaker 1: what's very obvious now is that electrification is gaining momentum.
Speaker 1: It's gaining momentum. We saw that last year. Our sales
Speaker 1: of electric fire cars is increasing. We see that also
Speaker 1: this year. And basically we prepare now the future for
Speaker 1: this growing demand of electrification. But basically we also want
Speaker 1: to be open for other technologies. Yeah, because CEO two
Speaker 1: reduction is not only with electric cars. Are like last
Speaker 1: year on the open side, we reduced our CEO two
Speaker 1: emissions by twenty three Graham, which is quite significant, and
Speaker 1: of course also gas and diesel engine contributed to this
Speaker 1: great performance. But long story short, we want to be
Speaker 1: open for all technologies. But we see clearly electrification is
Speaker 1: picking up now. So you have a portfolio at the
Speaker 1: moment that we talked about that has I see is
Speaker 1: it has plug and fire bridges, has body electrics, and
Speaker 1: soon enough you'll have even fuel cell cars, fuel self
Speaker 1: vance vance in fact, and you just described that you
Speaker 1: want to be ready for all the market eventualities. There
Speaker 1: is that a longer term option as well. So looking
Speaker 1: five or even ten years ahead, do you think that
Speaker 1: you'll maintain this broad technology portfolio. So at the moment,
Speaker 1: we have two architectures and we call them multi energy
Speaker 1: and they are basically for one car. Let's take an
Speaker 1: open coursa you can produce on one assembly line, I
Speaker 1: guess diesel and electric car, and this works very well.
Speaker 1: We are very flexible, we are very edgile, and whatever
Speaker 1: happens in the market, we feel we are very well
Speaker 1: prepared for this. So I think this is a very
Speaker 1: good approach for the next couple of years. But then
Speaker 1: more outwards, we think that electrification will gain momentum and
Speaker 1: also as part of goopstell lunches, we will then transition
Speaker 1: to pure electric platforms, and I think this is a
Speaker 1: way to think about this. And on top of this,
Speaker 1: we look also at things as you mentioned Nico Future,
Speaker 1: so we think this also is a very attractive technology,
Speaker 1: many advantages in terms of charging time also see you
Speaker 1: two balance. But we transition from a let's say, multi
Speaker 1: energy approach to then pure electric going forward. And what
Speaker 1: is the platform strategy was something that I want to
Speaker 1: come back to later on. But since you brought it up,
Speaker 1: for you for doing it, of course, I guess the
Speaker 1: answer is yes. But is that the given the fact
Speaker 1: that as you say, electrification games momentum and in a
Speaker 1: few years time, you will perhaps need two separate platforms,
Speaker 1: one for electric and one for the non electric part
Speaker 1: as electric sales gain momentum. Is that a multi energy
Speaker 1: platform approach the something that you think will will stay
Speaker 1: with you for for a few more years. Well, at
Speaker 1: the end of the day, obviously the customer will decide,
Speaker 1: and then we will decide how long we run the
Speaker 1: multi energy platforms. As I said earlier, at the moment,
Speaker 1: we feel very comfortable with this because it gives us flexibility.
Speaker 1: But then we expect that electrification will gain more momentum,
Speaker 1: so at one stage we will switch to electrified platforms,
Speaker 1: but of course we have flexibility for how long we
Speaker 1: run the multi energy platforms. Yeah, so I think it's
Speaker 1: always good to be open for for many scenarios and
Speaker 1: not just focus on one. I feel this is very
Speaker 1: very important because it's hard to predict exactly what the
Speaker 1: customer will require, and let's say five, six, seven years,
Speaker 1: one thing is for sure, the political framework is very clear,
Speaker 1: so we have to improve on CuO two and therefore
Speaker 1: obsolutely electrification and Field said, will pay will play a
Speaker 1: major role. Yeah, you talk about the customer and what
Speaker 1: what they want, and earlier on about this very large
Speaker 1: increase in the electric vehicle sales in Europe last year.
Speaker 1: Do you feel that we're at the moment where you're
Speaker 1: seeing organic demand for primarily electric cars or it's still
Speaker 1: a regular or driven the market pushed by the automakers
Speaker 1: in order to reach some of the very tough emissions
Speaker 1: limits here in Europe. Well, from from the opposite, we
Speaker 1: very clearly see there is customer demand. Yeah, it started
Speaker 1: last year, Um, it's increasing now. Of course, the question
Speaker 1: will it continue like this? Yeah, because to give you
Speaker 1: a data point, like last year, or sold thirty five
Speaker 1: thousand electrified casts. This is around five six of our
Speaker 1: total volume, and of course we see this growing also
Speaker 1: in twenty one. Yeah, so we think customer demand is increasing,
Speaker 1: but the key question is will it come to levels
Speaker 1: of thirty very very shortly? And it also obviously depends
Speaker 1: on support from the government, charging infrastructure, many factors, but
Speaker 1: we do think customer demand is significantly increasing, significantly increasing
Speaker 1: going forward. As you have this certain multi platform strategy,
Speaker 1: multi elements platform and you're going to shoot soon enough
Speaker 1: to the to the all electric platforms, how does the
Speaker 1: strategy and which platform we use affect your profitability? In
Speaker 1: electric cars center, how do you even define the profitability
Speaker 1: of electric cars? So there is a lot of discussion
Speaker 1: in the industry now that will be in the twenty
Speaker 1: five for different segments, will be earlier for other segments.
Speaker 1: It would perhaps all the way up maybe from a
Speaker 1: from from some people what they're saying, So, how do
Speaker 1: you see the profitability of electric cars? Primarily buttery electric
Speaker 1: cars developing in the next in the next several years.
Speaker 1: So when we from the oppen side look at the
Speaker 1: requirements of profitability of electrified cars, we don't differentiate between
Speaker 1: electrified cars and I cast because at the end of
Speaker 1: the day, we have to come to similar levels, right,
Speaker 1: I mean, obviously the volume is reduced at the moment,
Speaker 1: many things were changed. Obviously we get also support from
Speaker 1: governments in various countries. But long story short, we have
Speaker 1: the same requirements in terms of profitability, and I think
Speaker 1: it would be very let's say difficult to differentiate for
Speaker 1: a long period of time and say, look, profitability of
Speaker 1: electrified cars is much lower than for I see, so
Speaker 1: we have to come to similar levels. That's in a
Speaker 1: very important requirement. And when do you see that in
Speaker 1: terms of the time frame is that something you can share.
Speaker 1: Do you see this profitability at the same level in
Speaker 1: the next five years, for longer, for your for your business. Well,
Speaker 1: we steer this obviously already today because the question is
Speaker 1: today and I don't want that electrified cars have lower
Speaker 1: profitability than I see cars. And we tried everything to
Speaker 1: do so that this is going in in the right direction.
Speaker 1: Now for a very short break, stay with us, So
Speaker 1: shifting a little bit. Are related to the platform strategies
Speaker 1: and the profitability of cars up until now and still
Speaker 1: that now. Of course, scale when factoring production, primarily on
Speaker 1: the in term combustion engine side of things, is a
Speaker 1: key factor that affects both profitability but also for an
Speaker 1: extent completive advantage in the in the auto industry along
Speaker 1: many others. Do you see that changing scale becoming less
Speaker 1: relevant in a in a more electrified era. Well, although
Speaker 1: I would say scale is always helpful, Yeah, it's it's
Speaker 1: always helpful. It's a factor. But what for us is
Speaker 1: it is probably even more important, is that we have
Speaker 1: a good control of the entire value chain. So what
Speaker 1: what do I mean in terms of electrified cars? So
Speaker 1: we for example investor also in the production and the
Speaker 1: R and D of battery cells, which is a very
Speaker 1: important strategic decision to say, look, we want to do
Speaker 1: this ourselves um and not purchase it from from suppliers.
Speaker 1: We invest, for example in Germany and France a few
Speaker 1: billion of euros to do the battery sales ourselves, also
Speaker 1: with the electric motor, so it feels like for us
Speaker 1: this is co competent um and we want to manage
Speaker 1: the entire value chain. This is very important. And then
Speaker 1: of course we benefit from the fact that we are
Speaker 1: part of good Sell. Launch is a very large automotive company.
Speaker 1: So I think scale is always a factor, but also
Speaker 1: strategic thinking what do we do ourselves and what do
Speaker 1: we do with external papness. Is there something beyond scale
Speaker 1: that may become a source of competitive advantage in the
Speaker 1: next few year? You said strategic thinking of course, and
Speaker 1: I guess product placement. Does the electrified era offer different
Speaker 1: opportunities or additional opportunities to differentiate yourself and get some
Speaker 1: some advantage over your competitors. Absolutely, and there are there
Speaker 1: are many many ways to do that. And again it
Speaker 1: comes back to Okay, what is our customer demanding from us?
Speaker 1: What is the customer really requesting in terms of electrified casts.
Speaker 1: So we try to differentiate this in various aspects, and yeah,
Speaker 1: of course gain our competitive advantage in this. Okay, I
Speaker 1: guess earlier when you talk about sells, you primarily refer
Speaker 1: to this UH venture that you have, the automotive cell
Speaker 1: company that you have with p s A, Total and Soft,
Speaker 1: and the scale of that ambition I think has received
Speaker 1: less attention than at least in Europe compared to other
Speaker 1: forays of automakers in the In that in that business
Speaker 1: you explained a little bit about the russianale behind it.
Speaker 1: Could you expand a little bit on that? I mean,
Speaker 1: for example, what is the role of the different partners
Speaker 1: in this business? Again? Why does a lotomaker want to
Speaker 1: become a sell manufacturer? Isn't that becoming a commodity business
Speaker 1: relicly food? Well, a couple of things. I mean, first
Speaker 1: of all, it's important that we control the entire value chain.
Speaker 1: And we teamed up with Total and Stuft and created
Speaker 1: a joint venture and we'll build now in the first
Speaker 1: step two factories, one in Germany, one in France. Quite
Speaker 1: significant investments or just here in Germany when when invest
Speaker 1: two billion euros in a I would say a real
Speaker 1: giga factory and we will produce and better resells for
Speaker 1: five hundred thousands like ctrified cars per years, so it's
Speaker 1: significant volume. And of course we first of all think
Speaker 1: that together with our partners, we have the know how
Speaker 1: for this, but then also the competitive advantage, and I
Speaker 1: think it's it's very important to have in this case
Speaker 1: here in Germany and test us lout on the factory
Speaker 1: close to other factories where we manufacture our cars, so
Speaker 1: we feel this is a competitive advantage instead of shipping
Speaker 1: bettery sales around the world. It's obviously also good from us.
Speaker 1: You too footprint similar things we do with the electric motor,
Speaker 1: so we are of the opinion this is core competence.
Speaker 1: We can also differentiate in terms of cost, but also
Speaker 1: customer requirements and it's better in our hands and it
Speaker 1: makes total sense in terms of the overall electrification strategy
Speaker 1: going forward. We talked earlier on so I didn't just
Speaker 1: take the final a few minutes to ask you something
Speaker 1: broader beyond the technology striate or manufacturing decisions also has
Speaker 1: gone through a lot in the last few years, and
Speaker 1: that's probably an understatement. So can you describe from your
Speaker 1: own point of view what happens since and when are
Speaker 1: you coming out of that cycle? Does that cycle end,
Speaker 1: and what's the next few years will look like? Yeah,
Speaker 1: so a bit of background. So two thousand seventeen was
Speaker 1: a very important year for Open because we became part
Speaker 1: of Group p s A. R p s A took
Speaker 1: over Open and Open had I think twenty years of
Speaker 1: permanent losses. So it was very obvious that we had
Speaker 1: to change something fundamentally, and we did so. We put
Speaker 1: in house a plan together which we called the Pace
Speaker 1: Plan and gave it very clear but also straightforward, simple
Speaker 1: targets and said, look, we have to become sustainably profitable,
Speaker 1: go electric and become a global brand. And then with
Speaker 1: internal people and I think that's important, we really unleashed
Speaker 1: the power of Open inside and said, look, we have
Speaker 1: to improve our brand perception, the pricing, reduced complexity, reduced
Speaker 1: costs and very simple things, and then worked very hard
Speaker 1: on the implementation and this worked very well, I have
Speaker 1: to say. So in the first year after the implementation
Speaker 1: we came to profit level two thousand nineteen we had
Speaker 1: one point one billion profits, so significant profit improvement. And
Speaker 1: now we invest into the electrification is as you and
Speaker 1: I discussed during this interview, and we also go more
Speaker 1: into markets outside of Europe. So we feel this was
Speaker 1: a very important transformation of the company. To your question,
Speaker 1: will it ever end, No, it will always continue out
Speaker 1: because first of all, we want to get better every day,
Speaker 1: but the industry isn't such a transformation. So I feel
Speaker 1: this was an important turnaround. But in a way, the
Speaker 1: basis for what we are doing now in terms of
Speaker 1: investing into electrification fuel sure we talked about. So it
Speaker 1: will continue and I guess that makes the industry so exciting.
Speaker 1: So what I heard here is a lot of you know,
Speaker 1: like a large number of improvements, perhaps small steps in
Speaker 1: some cases, bigger steps in other cases. Is that the
Speaker 1: a learning a lesson for other companies or for investors
Speaker 1: when they're looking at this transition that other companies will
Speaker 1: will have to go through in the next few years.
Speaker 1: So is it a continuation of a large number of
Speaker 1: small steps Rundan something big that can change things very quickly? Well,
Speaker 1: I would say it is a combination of big things
Speaker 1: and small steps. Yeah, you have to do both. Um.
Speaker 1: For example, in our case, our diversity complexity was huge,
Speaker 1: and we significantly reduced it, like down by fifty sixty percent,
Speaker 1: So heart decisions. Also, we transitioned very quickly to the
Speaker 1: group architectures, the mighty energy platforms we discussed early on.
Speaker 1: So I think it requires, especially in these days, very
Speaker 1: big changes. At the same time, you always need to
Speaker 1: have like small steps on top, because just rely on
Speaker 1: a few things is not sufficient. Yeah. Um, so that
Speaker 1: was our experience. And then of course it's always helpful
Speaker 1: when you are in an environment where everybody in the
Speaker 1: company knows, like, look, we cannot continue as in the past. Yeah,
Speaker 1: and maybe that is also a good lesson out of
Speaker 1: the COVID pandemic in many many examples, we know we
Speaker 1: cannot continue as in the past, so we have to change,
Speaker 1: and maybe that is accelerating the whole transformation. Yeah. So
Speaker 1: we had very good experience with it and we we
Speaker 1: we we feel we did the right things, but it
Speaker 1: will continue. Like one last question I have free Michael,
Speaker 1: is beyond technloud power train technologists and where you place
Speaker 1: your manufacturing plants and everything, what are the other big
Speaker 1: trends or mega trends that you're monitoring on a recurrent
Speaker 1: basis and have the potential to affect the other industry
Speaker 1: in the next two years. Well, I would say that
Speaker 1: the key point from my perspective is um all around digitalization,
Speaker 1: so connectivity within the car, but also digitalization in terms
Speaker 1: of how people buy cars. So I think UM selling
Speaker 1: online is a big, big topic. We learned about this
Speaker 1: much more now in the pandemic, So the whole topic
Speaker 1: of digitalization is probably changing the automotive industry very very strongly,
Speaker 1: maybe even more than the power train one. And I
Speaker 1: mean we are in good company with all the other industries.
Speaker 1: But I think the whole topic of digitalization from a
Speaker 1: customer point of view but also from a product point
Speaker 1: of view, I think is very very big change, and
Speaker 1: of course we have to do a lot of things
Speaker 1: to get ready for this. So digitalization is from my perspective,
Speaker 1: that the next big, big topic for us. Michael, thank
Speaker 1: you very much for being here today and all the
Speaker 1: best for the next few years. Thank you, Nicole, thanks
Speaker 1: for having me. This week's show was produced by Eva
Speaker 1: gonzalezi Isla and edited by Rex Corner of Grace Took Media.
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