On the 3rd of January 2019 we had the chance to interview David Xu, Executive Vice President and Head of Mobility Solutions at Bosch China. Bosch China is part of the engineering and electronics company Robert Bosch GmbH, which generated revenues of €78bn in 2017 and is the largest automotive supplier globally with global automotive revenues of over €47bn in 2017. Bosch China has around 60,000 employees across all business units, including R&D, sales, operations, and manufacturing. We talked with Mr. Xu about the major trends affecting the automotive industry and how Bosch plans to adapt to these changes. The interview is split in two articles. The first article deals with general questions about the structure of Bosch China and the strategy of Bosch China. The second article includes a discussion about emerging technologies.
Major challenges in the automotive industry
For the last twenty-five years, China’s automotive market has seen unprecedented growth. Today, it is the largest auto market in the world, with around 28 million cars sold in 2018. To put this number in perspective, the United States (the second largest auto market) had 2018 sales of only 17 million cars.
However, Chinese automakers are now facing significant challenges. Some of these challenges reflect global trends. For example, the fight against climate change is driving a fast transition, away from gasoline and diesel cars towards electric vehicles and fuel-cell technology. Additionally, new technologies including connected vehicles and automated driving vehicles may accelerate the adoption of car-sharing and other disruptive business models. Other challenges such as the trade dispute between US and China and the global economic slowdown, are specifically impacting the Chinese automotive industry. The slowdown was reflected in 2018, when China experienced the first year-over-year decline in car sales since 1990.
Biography of David Xu
David Xu has had a long career in the automotive industry. He completed his undergraduate studies in China before going to Japan for a Ph.D. program in fluid dynamics. After graduation, Mr. Xu started working for General Motors in Japan in the Powertrain division. After five years at GM Japan, Mr. Xu transferred to General Motors in the United States. He spent around eight years working in the USA for GM and later for Delphi a GM spinoff. In 2005, Mr.Xu was assigned to a management role in Delphi China to develop the business in the fast-growing Chinese market.
To Mr. Xu, this transfer was a life-altering experience. While working in the United States, Mr. Xu had been observing the rapid growth happening in the Chinese market. In his words, “I was always looking for opportunities to come back to China, because I knew that being a native Chinese with long time oversea experience, I could take on more responsibility and contribute more back in my homeland. Besides, the economy in China was growing fast and automotive would be a fast-growing industry”. When he moved to Delphi China, Mr. Xu also transferred from engineering to plant operation, which focused more on business development. He realized quickly that management of business “was what I was really passionate about. You need to manage and keep a good team. I love helping the people on my team thrive, grow professionally and create the best products, which meet customer expectations. I get a lot of enjoyment from meeting targets, having my teams be successful and for my team members to find success in their own work. So, it takes experimentation and a bit of luck to discover what really drives you. The success and camaraderie of my team is my true motivation.” In 2010, Mr. Xu moved to his current job in Bosch China.
Interview with David Xu
1. General questions on the structure of Bosch China
Chris: Can you explain the organizational structure of Bosch China in more detail? What kind of work does the China organization do?
Mr. Xu: Bosch China is a subsidiary of the global Bosch organization, but it is relatively self-contained. Each business unit has developed its own team with manufacturing capability in China. Furthermore, each business unit in China has established its own R&D.
Local for local has always been our strategy. While vertically linked to Bosch global organization and aligned in overall strategy, the key success factor is to develop local team and define local strategies. Localization does not only mean manufacture localization, but also include finding local talents, setting up local management team, and local R&D.
Chris: Local R&D implies that Bosch China is developing products unique for the Chinese market. Can you describe how the Chinese products differ from those made for the US and European markets?
Mr. Xu: In the early days, we were doing mostly application work. Today, we’ve expanded our mandate to include platform development. Platform development includes lots of innovation originating from our local R&D offices. We’re developing platforms that satisfy Chinese market requirements. If we find out that these products also satisfy the needs of other regions, (Brazil, Russia, Middle East, etc.), then the Chinese group will also be responsible for pushing this platform out of the country. The China team would have major responsibility for the development of this products.
Chris: Can you give an example of a product that was developed in China and then exported?
Mr. Xu: There are lots. Take for example ABS (Anti-lock braking system). Originally, we used the global ABS module in China. However, we soon realized there are many smaller cars in China for which the global ABS module didn’t meet requirements, including package size, performance, and cost. So we redeveloped the product in China to reduce the costs and better meet the requirements of smaller cars. Now we have this new platform for which we see need in other markets, and we export it out of China.
Chris: How does the China organization work with the global organization?
Mr. Xu: China operates under the Global organization. Local R&D centers think primarily about local customers and their requirements. We work with global to develop China’s core competency in R&D. We modify many global products to meet local requirements. At the same time, we develop our own products as well. It’s more of an aligned approach.
2. Questions on the strategy of Bosch China
Chris: In the last few months, the Ministry of Industry and Information Technology (MIIT) has constantly reported a reduction in auto sales in China. This year might be the first year since 1990 where the number of auto sales has shrunk. How do you see this trend going into 2019, and how will Bosch respond to this?
Chris: I’d like to return to the metric of cars per 1000 people. Off the top of my head, this metric may not be directly comparable between countries. China has a higher amount of urbanization than the US for example, and people may not need as many cars. How do you factor this in? Does it matter?
Mr. Xu: Not really. The degree of urbanization in China is actually lower than in the US. China is also continuing to urbanize. The urbanization increases the demand for mobility solutions. When you think about cities you may be thinking about first tier cities, Beijing, Shanghai, Shenzhen. In these cities the car level is already at 250-300. However, Tier 3 or Tier 4 cities will continue to have an increase in the demand for car ownership.
The only thing that could have a big impact on what I’ve just said is car sharing. This is a trend that we’re looking at closely because it could have a huge impact on the number of cars that people buy. If young people change their concept of car ownership, it might change the picture of future mobility.
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