VDA Technical Congress 2022: Quality instead of Quantity

The capital market sees the world differently – it can invest anywhere. This was the most important statement by Tim Rokossa, Deutsche Bank Managing Director. It means: it can also invest where more returns are to be expected. And: In his opinion, the winners will increasingly differ from the losers. Which leaves us wanting to know how winners differ from losers?

Rokossa likes to question whether the strategies of companies go far enough? Or whether one needs to look further into the future – in fact, it's currently not an easy task, which also often leads to companies being split. Into a passenger car and truck division, into an electric and combustion engine world, into a hardware and software world. Rokossa finds this correct, as the new often requires different structures. Malorny's statement is also interesting, noting that we associate old thought patterns with brands like Ford, for example – even when a brand is undergoing a complete transformation.

Additionally, there is the faster and very different culture of the tech industry: it experiments a lot and can endure a tremendous amount of pain, operating faster and more complexly. However, it should be noted that "old" in this case does not mean "bad," but rather "established," and one should know precisely what they want!

Rokossa's numbers and his derivations from them are interesting: the auto industry generates around 100 billion euros in revenue worldwide, of which 40 million is made by German manufacturers because they can offer premium. People pay the premium price worldwide, and these qualities need to be defended. The car as a mechatronic product benefits in the premium segment from design, quality, and brand. Damasky's interjection that vehicle development is always extremely labor-intensive and expensive is only partially accepted by Malorny:

“Software is not that expensive. 200 good people can build the entire operating system of a car!”

Thousands of employees are not needed for that.

Rokossa sees the capital base of suppliers as challenging, especially since automakers are tending to insource again. Because: Software is considered a new core competence, so it makes sense to do it yourself. Therefore, the supplier has to prove more than ever what they can do. And according to Rokossa, they have to align themselves with the capital market. The capital market believes in electromobility, software, and digitalization. That is why splitting a company can make absolute sense, because software requires a different culture, electromobility requires a different culture - and these areas compete with new, sometimes entirely different players in the market!

Nevertheless, experts see the position of the German automotive industry as good. Apart from Lucid Motors, there are few efforts to attack Premium made in Germany. The challenge is that currently all companies want to become tech companies. A mind shift is needed here. Malorny explains:

"We like to talk ourselves down, but building a car is not that easy. Even Silicon Valley has understood that by now."

However, according to Rokossa, the German automotive industry finds it difficult to build cars costing 10,000 or even 20,000 euros, which is why withdrawing from the compact segment is the right trend. Because if the German industry tries to swim along cheaply, it could backfire, because the growth in volume is no longer there! You can grow in terms of quality and profits, but not quantitatively. And the capital market sees it that way too.

What does that mean?

Quality instead of quantity, digital and analog, but not necessarily under one roof - this is how the morning panel outlined the future of the German automotive industry - and thereby cut a few old ties radically! Exciting!