Once a year for 22 years the electronic divisions of the European automotive industry converge on the small town of Ludwigsburg just outside Stuttgart. Stuttgart is a big enough city, you've probably heard of it. In the automotive world, it is home to both Mercedes-Benz and Porsche. I am sure that it was a fairly sleepy conference 22 years ago, since automotive electronics was sleepy too. But with ADAS and autonomous vehicles, it is one of the best places to put a finger on the pulse of what is really going on. Since it is held in a small conference center in a small town, it always sells out. Germany is really the heart of European automotive, home to not just Mercedes and Porsche, but BMW, Audi, Volkswagen, Opel (which used to be GM, but they sold it to Peugeot), Bosch and even Renasas (which is obviously not German but bases its automotive activities there). Like most conferences these days, there is an App. Among other things the App shows all the attendees. There are about 600 of them. They include lots of very senior people. For example, Bosch has 15 people attending including senior vice presidents and the CEO—the sort of people who meet with Lip-Bu Tan when he is in Germany. To give you an idea of how importantly the suppliers take this conference, despite only having 600 attendees (versus 150,000 for CES), Intel presented on the first day. But they didn't send the European marketing guy, or even the head of automotive. Brian Krzanich, Intel's CEO, made the presentation himself. At CES, Brian gave one of the keynotes, but at Ludwigsburg, he's just one of the non-keynote presenters. Last year, Jensen Huang, the CEO of NVIDIA attended and presented. Overall Impression When I came last year, the mood was very much that the automobile industry needs to get its act together, and cannot go on with business as usual. One of the core competences of the big automotive companies is mechanical design, especially engines. I hadn't really thought about it too much until Tesla has been struggling, but clearly another core competence is knowing how to do high volume vehicle manufacturing. What is, for sure, not a historical core competence is developing software. Historically, the automobile industry has been divided into layers. At the top are the car manufacturers (BMW, Audi, Ford etc). They are known as OEMs, and they seem to use the same term to refer to people on the top of the pile in other industries such as medical. They generally don't design any of the electronics in the car, they buy that from the next level down, known as Tier-1. These are companies like Bosch, Delphi, and Desnso. They never designed their own chips, they would buy those from the semiconductor companies, such as NXP and Infineon, which are known as Tier-2s. That structure is all changing. Indeed, during the two days of the conference, there were several companies that presented very similar slides, except for the logos of the companies involved. The slides that were common were two-fold. The first slide would show how cars used to be designed, with electronic control units (ECUs) spread all over the car and without any central coordinating processor. The ECUs were all purchased from the Tier-1s, and the chips (mostly analog or microcontrollers) purchased from semiconductor companies. The new architecture is to have a big central ECU that controls all the advanced driving and communicates with other ECUs over networks, typically automotive Ethernet if forward-looking, or CAN-bus for older ECUs that don't need much performance (adjusting your seat or mirrors, for example). The above image comes from Audi, but is almost identical to several others. The other slide was showing how the OEM, Tier-1, TIer-2 system is breaking down. All the big German manufacturers seem to be developing the software for these central ECUs themselves. Some seem to be doing chip design, or at least coordinating with semiconductor manufacturers directly. The Tier-1s are also designing similar central ECUs and doing their own chip design. There is a realization that advanced driving and the in-cabin user-interface (often called the HMI, for human-machine interface) need to be differentiating. The above slide is Audi again, but it could have been any of the presentations by the main German manufacturers (OEMs). Two things clearly worry the car companies. One is that they need to make sure that they continue to own the customer, even though "there will be less interaction since electric cars don't need oil changes." The other is a longer-term worry that young people don't want to own cars and just want the advantages of a car anyway, meaning ride-sharing. This can, in time, lead to a shrinkage of the car market as has already happened in the bicycle market in China due to bike sharing. However, there is a worse fate, which is nobody cares about brand in a ride-share or a taxi. If Uber eventually uses self-driving cars, then you will think of it as using an Uber (and maybe the car will even have Uber logos on the back) rather than a Toyota or a BMW. It's not a lot of good delivering the ultimate driving machine to people who don't want to drive the vehicle themselves. My daughter works in the whisk(e)y business and is effectively not allowed to drive by her company. She is perhaps a harbinger of the future since she takes Uber everywhere (she has a four-figure Uber bill each month). Her company picks that up, but even if it did not, it is probably cheaper than owning, insuring, maintaining, and gassing a car. A challenge everyone talked about was hiring. One of the presenters said that in round numbers, it is 1000 engineers for infotainment, 1000 for chassis, 1000 for connectivity, 1000 for security, and 1000 for driver assistance. Different companies broke it down differently. But there aren't that many engineers in Germany. As Daimler said: We can’t just be here. We need to be in Seattle, Sunnyvale, Berlin, Bangalore, Tel Aviv, Beijing. We need the talent to do it. China Last year, the conference organizers had been asked to make it more international, since the changes are too big to stay only focused on Europe. There were several presentations about the Chinese market, which seems to be very different from the rest of the world. Due to pollution, and due to many companies being new, they are going strongly for electric vehicles, BEVs in the jargon (battery-electric-vehicles). I will write a separate post about China, but here are a couple of facts to whet your appetite: In 2017 In US, Japan, and Germany (together) 25.9 million vehicles were sold. In China it was 25.8 million vehicles, the same number In 2017, Uber gave 4 billion rides in 78 countries. In China, Didi gave 7.4 billion, almost twice as many The push for electric vehicles is not really driven by consumers. It is next to impossible to get a license plate for a non-electric vehicle (and it is expensive if you do) whereas electric vehicles are free to license (and not taxed to buy, they are subsidized). Plus, internal combustion engine (ICE) cars in Beijing (and maybe other cities) are all banned from driving one day each week. Sign up for Sunday Brunch, the weekly Breakfast Bytes email.![]()
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