2022 Outlook: Views from around the automotive industry

Swamy Kotagiri (SK):  The pandemic certainly continues to be a challenge, but I am very pleased with how we have been able to navigate it. It really shows the resiliency and can-do attitude of our employees. Keeping our employees and the communities in which, we operate safe always remains our highest priority.

As for the biggest challenge beyond the pandemic has been the supply chain and semiconductor shortages. It is difficult to plan amidst continued uncertainty – the demand and availability for products change every day. Nevertheless, our decentralized structure coupled with a culture of entrepreneurship gave us the agility and flexibility to navigate these challenges. Although we have experienced some impact, fortunately we never had to shut down a customer.

Despite the challenging business environment, we’ve accomplished a number of successes this year. Our joint venture with LG – which enables us to accelerate our position in powertrain electrification, and our collaboration with Fisker, are two key highlights.

The shift towards electrification is progressing very fast, and, Magna is embracing this challenge with its best-in-class hybrid and electric powertrain portfolio – for which we’ve been awarded some significant business in 2021. We’ve also secured a number of new business awards for in future technology areas including our digital radar, 360-degree surround-view system, our integrated front integration panel (Mezzo Panel), several awards for our patented FreeForm seating, and more.

We’ll continue to face a lot of the same challenges with the chip shortages, COVID spikes, and so on, but with the variables we are aware of today, we expect an improvement in market conditions in the Q2 / Q3 2022 timeframe. The market demand for vehicles is strong and end-consumers are buying cars which is positive for the whole industry.

With our Go-Forward strategy, the strength of our company and people, the recognition we have in the market from our customers and the high consumer demand, I’m optimistic about the coming year. There is also a lot of opportunity with the transformation of the industry – new business models, new entrants, new concepts are taking shape and Magna is already active in this space.

As mentioned, the whole industry is facing challenges with the supply chain and chip shortages. We can´t predict exactly when this will end, but we see some light at the end of the tunnel. We do see that the race for talent in certain areas like Software engineering is getting more challenging as the requirements in the industry are changing.

Our industry is not slowing down, it’s a $3 trillion industry projected to double by 2030. But the boundary conditions are changing fast and we’re at a critical turning point, or even a revolution in our industry. At Magna, we believe we are uniquely positioned for these transformative times with expertise in components, systems integration, and complete vehicle engineering and manufacturing. It gives us a unique perspective when it comes to innovation across our future portfolio, but also when it comes to working with other partners in the mobility eco-system and collaborating with new entrants. This is what sets us apart.

Johannes M. Biermann (JB):  Frankly, the year has been an inflection point for software in automotive. Everybody is on now with respect to the software-defined vehicle as the new reality. Strong push for electrification, autonomous driving, plus AI propagation and data monetization all drive the need for software life cycle management including OTA as delivery method of choice, and with that the ability to access and leverage the large amounts of device data.

So much opportunity for an embedded software company like aicas that always thought that software unification across a diverse range of HW/SW platforms is the key to managing the ever increasing software complexity. Our expertise in automation of software delivery, device connectivity (e.g., in telematics), abstracting or decoupling software from underlying device footprints is what market participants, OEMs, 1st or second tiers, all are vying for. Feels as if the past 20 years were just the beginning of a scale journey. Our biggest challenge like for so many others in the industry: get the right talent.

We made a strategic choice in 2020 at the beginning of the pandemic to not stop our investment into our embedded software DevOps product aicas EdgeSuite. It served us well and just two months ago we released the aicas EdgeSuite into a commercial offering with one of our hyper scale partners, in this case AWS. The AWS Wavelength offering is focused on providing 5G (4G works too) ultra-low latency data management which is useful in many automotive or smart city use cases, example collision prevention, where real-time data exchanges are critical. aicas EdgeSuite provides the gateway in the MCS to manage the software and data exchange at the most local level.

aicas EdgeSuite also is perfectly positioned to automate software and data management across automotive vehicle platforms. Customer interest is high.

Software, software, software. Automotive OEMs, in particular, are building their software organizations and trying to find capacity to develop their software platforms. Existing tiers are adjusting away from hardware driven engineering projects to software-centric. It is a big shift in fact, and painful. The ecosystem is changing because of software. aicas is now directly engaged with OEMs, but equally we continue to work with our existing 1st tier partners.

And then there is data in everything and the value from it. Works from edge-to-cloud and assumes of course that connectivity costs do not eat up the benefit from data gathering. That is where we come in. We feel that, all said and done, our capabilities are hitting a sweet spot in the market, and that makes me feel really good about the upcoming year.

We need to get back on track globally in running our everyday lives and with that the livelihoods of people in all places. Covid has stressed everything out, including our supply chains. In auto, the software-defined will continue to change the entire ecosystem, and least not impact those working in it as leaders or employees.

Moving from HW to SW centric is a full-scale transformation of products (software enabled), processes (agile, fast, flexible), and people (new skills, retraining). And I should add, also policy, which plays a key part in providing reliable guardrails for the large tech infrastructure investment needed or critical issues such as data privacy and cybersecurity. Big task, and it does require heavy focus, investment, and some patience to make it happen.

Software and data are at the core of the next automotive transformation. And it will be teamwork across a wide range of existing and new partners in the automotive ecosystem to get it right.

The most important thing for everyone involved in the industry – get ready and prepare now for tomorrow's developments. The automotive solutions aicas offers reduce complexity and provide unification of systems while enabling the development, implementation and management of new generations of applications for connected mobility solutions.

Jacques Aschenbroich (JA):  Valeo’s teams have done an absolutely fantastic job. We are probably the third or fourth largest buyer of automotive chips in the world and we have never stopped a customer. That is a great source of pride. Our teams have done an absolutely remarkable job, they have been very reactive, they have always found alternative solutions, they have reserved capacities, they have constantly adapted to these production "stop and go" situations which are nevertheless very complicated to manage. Clearly, in that challenging year, where nine million cars could not be produced because of the semiconductors shortage, we did the best we could and could confirm the upper end of our guidance.

Despite this difficult context, we have achieved some very good successes this year, such as the arrival on the market of the first level 3 autonomous cars, equipped with our LiDAR, and the Mercedes EQS, for which we are equipping the entire electric propulsion system. These successes highlight Valeo's unique positioning in the fast-growing driving assistance and electric vehicle markets.

They show Valeo's successful transformation. During the 13 years that I have had the privilege of leading this company, Valeo has profoundly transformed itself from a traditional automotive supplier to a tech company at the heart of the mobility revolution. We have profoundly changed our scale; we have profoundly changed our pace. We have more than doubled in size and established ourselves as a world leader in each of our major businesses. We have never stopped accelerating.

It seems today that things are getting better from the point of view of the semiconductor shortage. The peak of the shortage is probably behind us, even if it won't be back to normal any time soon.

Perhaps the biggest concern is cost inflation. Raw materials are going up, energy of course, but also copper, aluminum, plastics, freight... I am one of those who believe that we are changing world: we were in a deflationary world; now we are entering an inflationary world. I think that costs will remain high... So there is no choice: we absolutely have to pass on all these costs to our customers. There is no choice! We are doing it, and we will do it.

The good news is that our customers' order books are very full and the industry as a whole has very little inventory. So there is a point where there is going to be a rebound. It is hard to say when, but the rebound will come.

Our industry has begun the biggest transformation in its history. Cars and mobility are becoming electric, autonomous, connected and intelligent. Valeo is at the forefront of these transformations. We have been anticipating them for a long time and have developed the technologies that will enable us to respond to them, whether in the automotive or new mobility sectors. The accelerating demand for cleaner, safer and more intelligent mobility is a boon for Valeo. We are a key player in this transformation and will support our customers to make it possible.

Hui Zhang (HZ):  Obviously, recent events have had significant impact across the industry. NIO has been able to weather the storm and recover well. Our online-to-offline (O2O) retail strategy during the early stages of the COVID-19 pandemic stemmed falling car sales that hit other brands hard – NIO car orders dropped by just 12 per cent compared to the market falling by 70 per cent. The semiconductor shortage meant a temporary halt to production in one of our factories early this year, but this was short term.

For NIO, the biggest challenge of 2021 has been pushing on with our sales strategy and launching our brand in Europe despite the issues affecting companies worldwide. China has been a great market for a brand such as NIO to grow, but our ambition is to be a truly global company. After announcing our intention to enter the Norwegian market in May 2021, we opened the doors to NIO House Oslo in September and began selling the NIO ES8. Norway is our first market entry outside of China.

While NIO has become renowned in China, as we enter new territories we face the challenge of establishing the brand and attracting the best talent to continue building the business. NIO was founded as a global start-up with global values, so we are well prepared to support our rapidly-expanding teams in new markets. We now have a very international feel to the company with more than 14,000 employees from around 50 different countries. We have built a small but diverse European team, with many attracted by NIO’s user-centric philosophy and technology concepts. Our most recent additions include studio directors Joaquin Garcia and Alister Whelan: Joaquin joins us from SEAT and CUPRA, while Alister has over two decades of experience from Jaguar Land Rover.

Delivering NIO models to our first customers in Norway has been the highlight of 2021 for the brand in Europe. The first batch of NIO cars left the Shanghai Waigaoqiao Port this summer and arrived with customers in September. As a company that has celebrated great achievements in China, we feel very proud to expand overseas and enter Europe.

Furthermore, we are excited to see the great reception NIO has received so far. A real sense of community has already started to build with NIO’s early adopters in Norway. Playing a key role in this is the NIO User Advisory Board. More than 650 Norwegians applied to become members, with 200 selected to support NIO’s integration into the market. They were the first to experience the NIO ES8 and offered advice and suggestions that helped shape our service, offering and operations within the market.

 As we near the end of 2021, we are feeling very positive about 2022: we have lots in the planning. We are excited to grow our presence in Europe; to introduce our brand to new customers in new markets and empower a community of users to share joy and grow together. Germany is a key territory for NIO, and we are excited to share more news on our European strategy in the coming months.

Critical to our brand expansion is our product and technology offering, and we are confident in both. In 2022 we expect to deliver the NIO ET7 to customers – our first autonomous driving model and smart electric flagship sedan. It is a product we aim to bring to Europe in the near future, too, starting with Germany.

An important part of the owner experience for NIO is the holistic charging and battery swapping solutions. We have received approval from authorities in Norway to have our first Power Swap station in Lier, which is about 30 kilometres south of Oslo and is set to open imminently. We plan to have another 20 in Norway by the end of 2022, located in major cities and along busy transport routes.

Additionally, in November we announced a new partnership with Shell that will lead to further improvements to battery charging and swapping facilities for NIO users, both in China and Europe. As part of the plans, pilot stations will be constructed and operated in Europe from 2022, with 100 battery swapping stations to be installed in China by 2025. We want to ensure that it is as easy as possible to drive NIO cars and improving the infrastructure is a major part of this.

Managing NIO’s rapid growth will be a significant challenge that we need to handle carefully, ensuring we establish a good and strong foothold and deliver to our new NIO adopters in these markets.

We thank all those that have supported and welcomed NIO to Europe. Taking a brand into new markets on new continents is a significant challenge and one we didn’t underestimate. To deliver our first European customer orders and see NIO models driving on European roads has been a monumental milestone in NIO’s short but incredibly fast-moving history.

Thomas Stierle (TS):  Yes, first Corona Pandemic and then its aftermath with supply disruptions.

The spin-off from Continental on September 16, with the advantages of being able to react more flexibly and quickly to market changes. Preparing the company for this important step, setting it up as a stand-alone stock corporation, convince analysts and investors and at the same time driving forward the transformation from the combustion engine to electromobility and all this in the Corona aftermath was the biggest challenge. I strongly believe, Vitesco Technologies and its 40000 employees have done this very very well.

In the end, we made it and Vitesco Technologies (VT) is a major player in the field of electrified drivetrain technologies. Today, VT supplies key technologies in the field of electromobility efficiently in large-scale production and our electrification share is already significant and growing in all areas. I am really proud to be part of this company, having the opportunity to drive things forward and leading the transformation to success.

For me the highlight is clearly our order intake in the electrification area in this year. To mention some examples: VT is going to supply its first 800-volt inverter with silicon carbide technology in significant quantities for the new electric vehicle platform of the Hyundai Motor Group, or our great achievements with our integrated axle drive – requested from customers worldwide, e.g. Dongfeng, Hyundai, PSA.

Despite all the global market challenges, 2021 was a successful year for VT. It gives us the tailwind for the execution of our future strategy, means electromobility will remain a long-term trend despite all the short-term market challenges. VT is well positioned, and is continuing unwaveringly on this course, which is also confirmed by the end user behavior and legislation aspects. 2022 will be an important year for us, we must continue to drive forward our customer projects, and also new milestones await us as a stock company, such as our annual Capital Market Days, press conferences and annual shareholder meetings. I am very optimistic about 2022 and looking forward to see it coming.

I can imagine the Covid pandemic and semiconductor shortage are issues, which will continue to keep us busy.

What I have learned: it is important to be open to changes and to actively go along with it - with a strong focus on sustainability with whatever we do. Therefore, the Future is Electric and it has already started! Finally, everyone stay healthy!

Amanda Roble (AR):  One of the biggest challenges was demand variability throughout the year with multiple OEM production slowdowns and ramp ups. We worked closely with our customers and exercised the flexibility we could to ensure we were in a position to meet their needs. Raw material availability issues and logistical constraints, with an unprecedented number of force majeure announcements from suppliers, exacerbated the situation. We are very grateful to the many people from across the value chain who did their part to help the industry navigate through these disruptions.

In a time of uncertainty with the challenges already mentioned, it is important that the industry be able to work together. We largely did that, thanks mostly to clear and transparent communication with our customers and suppliers. We appreciate everyone’s professionalism, resilience and commitment.

A second high spot is the momentum we have built in some new areas of opportunity for us and our customers. As one example, our team has made big inroads with our customers and their suppliers on advancing plastic solutions for EV battery packs. We are very excited about the value that we can deliver to the industry in this important area. Materials from our portfolio, including flame retardant plastics such as STAMAX long glass fiber polypropylene resin and SABIC PPcompound, can potentially be game changers and enablers in the development of next generation EV battery packs, supporting extended range and improved overall performance.

We are optimistically inclined, so we certainly look forward to greater stability and yet another full year of opportunities to support our customers. With that said, and based on the outlook at this moment, the industry can expect to experience further variability in OEM production, and this will impact the entire value chain. We also need to continue adapting in how we come together, virtually and physically, until we can return more closely to how we operated before the pandemic. Our teams are committed to work closely with the industry to overcome these challenges.

Looking ahead, consumer demand appears strong. This can bode well for future production. However, as noted, we can likely expect to see continued variability in manufacturing because of the ongoing chip shortage and supply issues. This can have a detrimental impact on the supply base. We can all agree that we need a supply chain healthy enough to continue providing all the content found in a car. To do that, we would benefit from further proactive collaboration between OEMs and suppliers to better manage and address some of these challenges.

We can be sure that 2022 will bring more challenges and change. With that said, we as an industry have proven how resilient, adaptable and creative we can be. Those qualities will see us through, and I know our automotive team at SABIC is determined to do our part. We certainly have reasons to be optimistic. Innovation in our industry is healthy and ongoing. The shift to electrification is accelerating and opening up new opportunities for many. Producing vehicles that have less impact on the planet is a mission increasingly embraced by all actors across the value chain. We are excited to be part of this seismic transformation with everyone in the coming years, knowing that the work we are doing together is truly fulfilling a higher purpose for the world.