By Bruce Meyer, Crain News Service
HANOVER, Germany (July 23, 2013) — Continental A.G. has appointed one of its executive board members to oversee its efforts in China as the conglomerate looks to continue the strong growth it has shown in that country.
Ralf Cramer, head of the Chassis & Safety Division since December 2007 and a Conti board member the last three years, will become president of the firm's organization in China, effective Aug. 1. Based in Shanghai, he will oversee an operation in China that posted sales of nearly $3.5 billion in 2012, has recorded growth rates for several years twice that of the market as a whole, operates 19 production sites and nine research and development centers, and employs about 17,000.
"It is our strategic goal to increase the share of corporate sales on the Asian market from 18 percent at present to more than 30 percent over time," said Conti CEO Elmar Degenhart. "Here, our growth engine is China, which today is already the largest manufacturer and market for automobiles."
He said that by 2020, China also will be the world's top market for premium cars, and "nowhere in the world will the demand for individual mobility and industrial goods be growing stronger than there." The number of automobile plants in China will grow from 120 today to 142 by 2014, Conti said, with Chinese auto makers operating half of the plants.
Strong presence
While Mr. Cramer will oversee Conti's entire Chinese business, he said it is not his marching orders to unify everything because various parts of the company are at different stages of its ventures in China.
For example, the ContiTech A.G. automotive and industrial rubber goods division has done business in China for more than 30 years, with a physical presence there since 1996. It now operates 10 plants in China, employs 2,350, and in March it opened an R&D center in Changshu to develop products for suspension and vibration control technology.
Contrast that with the firm's tire group, which just opened its first tire plant in Hefei about two years ago, with annual capacity to produce 4 million tires for cars and light commercial vehicles.
"It is not our intention to make everything the same," Mr. Cramer said in a recent interview during a Conti media event in Hanover. "Where we can find synergies through the same processes…or we can use our engineering resources in a common sense manner—that we will work out. We will analyze it, and then we will definitely use all of the opportunities we have in China. There is not just one general way to go."
He said he was chosen for the assignment because he does have some experience in China, with the Chassis & Safety unit deriving 28 percent of its revenues from Asia, most of that from China.
Mr. Cramer said Conti will boost its R&D efforts in China extensively. Over time, he said that more than 80 percent of new applications will be developed locally as the Chinese warm up to new technology.
He did acknowledge, though, that China is at a much different level of usage of advanced automotive technologies than regions such as Europe, North America and Japan.
"It will take some time until a country like China will be on the same or similar level like the other countries," he said.
But China also is a country that has a high interest in top-level technology and will accept it faster than such nations as Brazil, Russia and India, Mr. Cramer said. It's likely, he added, that China will develop into a two-level market, with a premium to mid-compact tier with cars that cost more but have more options, along with a lower tier with vehicles that are more basic but have fewer features.
Conti will strive to deal with both the foreign-owned car makers doing business in China along with the domestically owned vehicle manufacturers.
"That will be one of the major goals, to increase that business share (with domestic OEMs) because around 40 percent of cars sold in China are Chinese," he said. "Still 60 percent is international, but we definitely cannot ignore the 40-percent Chinese."
With the amount of safety items in Conti's portfolio—from braking to future automatic driving know-how—Mr. Cramer said there definitely is room for growth with Chinese car makers.
Government initiatives
Conti and other automotive suppliers must monitor and observe what the Chinese government is doing, he said, more so than in other major markets. For example, nations in Europe and North America may want to push electric or hybrid-drive vehicles, but they don't have the kind of government-backed programs like China will have in the future.
Other countries believe in self-driven market behavior, but China works from a different angle. For instance, the country has to make environmental improvements, so discussions are ongoing regarding such issues as reducing the carbon dioxide levels from cars.
"They have a real pollution issue in their big cities," Mr. Cramer said. "So a government approach to reduce pollution through other car concepts makes a lot of sense."
Conti said some of its main sales drivers in China, in fact, are systems for active and passive safety features, energy-efficient drives and information technology. That includes technologies for hybrid drives, e-mobility and connectivity, along with sensors, brake systems, transmission electronics, diesel-injection systems, safety telematics and instrument clusters.
Besides the tire plant in Hefei and the new ContiTech R&D center, Conti also said it has made substantial investments in all of its business units in China over the past two years.
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This report appeared in Rubber & Plastics News, an Akron-based sister publication of Tire Business.