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
3. Questions on disruptive technologies
Chris: What are from your perspective the most disruptive technologies the automotive industry faces?
Mr. Xu: There are technologies in following areas that will have large impact: electrification, automated driving, and connectivity. Electric vehicles (EVs) will change the industry by replacing internal combustion engines. Connectivity will enable car to be connected to the internet, and then create different service and business models. Automated driving will release drivers from driving and make car safer, and traffic more efficient, although I personally think that fully automated driving will still take more time to be fully deployed, say 10-15 years. Automated driving plus connectivity will increase the utilization of cars which will eventually decrease the total number of car sales. Thus there’s a mixed impact of these new technologies
From Bosch’s perspective, our core competency has traditionally been in engine control, powertrain systems. So, the impact of EVs to us is actually pretty big. We need to transform the company to focus more on EV components. We must quickly adapt to adjust to a new reality where EVs outsell gasoline cars. On the connectivity front, we are facing threats from IT companies who believe that they can work more efficiently than our traditional suppliers. For automated driving requires technology of HD MAP, AI, big data, etc., which introduce many tech companies and startup companies into the game.
Our core competency is coming under threat, so we need to make large investments into new technologies to make sure that we can stay competitive. We have been continuously investing large sums of money into these new technologies so that we can continue to introduce new products and maintain our edge. Besides, we have to corporate with tech companies or startups in many new areas.
Chris: What is your investment strategy for EVs?
Chris: I read a report recently that said Bosch Global is no longer actively developing battery technology. Can you elaborate more?
Mr. Xu: We made this decision because we don’t think that we can become the best. We need to make smart decisions about where our competitive advantages are, where we can make a profit and become one of the industry leaders. If we realistically evaluate our competitiveness and don’t think that we can succeed, we must be responsible and exit.
From our conversation with David Xu, we learned that auto executives are facing questions about how trends in the automotive industry will affect sales and market competitiveness. Bosch will have to make large changes in order to shift from a strategy focusing on powertrain components for gasoline/diesel cars to electric vehicles. The organization will have to face the advent of disruptive technologies including automated driving and connectivity, and the era of new mobility. All of these changes must also be made amid the backdrop of a slowing global economy and auto sales that may not recover for 2-3 years.
It is a challenging time for the global automotive industry, and the Chinese market is particularly difficult to be in. However, Mr. Xu and others believe that there will still be robust growth in the Chinese market over the long-term. The automakers and suppliers that are nimble enough to change their strategies to adapt to the environment will thrive, while those who are not able to change quickly enough will have a difficult time.