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Continental aims for the top in parts

Future vision: Continental chairman of the executive board Elmar Degenhart (left) says the parts-making company will acquire more businesses in the future to expand its operations.

Continental's tyre division pushing for innovation as company seeks growth in parts

17 Jul 2017


THE push by German parts giant Continental into automotive products other than tyres could shortly see it become the largest parts supplier in the world, with big operations in powertrain, electrification and autonomy backing up its growth in rubber.

Meanwhile, the big Hanover-based group is planning to revolutionise tyre manufacturing by ditching natural rubber as its main raw material and turning to dandelion gum as the principle ingredient in its tyres.

Continental recently passed Denso to take second place on the global components supplier ladder with annual turnover exceeding €40 billion ($A58.68 billion) in 2016 and is closing in on current parts industry leader Bosch, which earns about €43 billion ($A63.08 billion) from its automotive operations.

Continental’s rapid growth in the last decade was powered partly by takeovers, particularly the 2007 acquisition of Siemens-VDO, and executive chairman Elmar Degenhart believes there will be more takeovers in coming years.

“One thing is for sure,” he said at the company’s recent TechShow in Hanover.

“We will see further consolidation in the industry because size matters, sales volume matters.”

In 2016 Continental bought control of Hoosier Racing Tire Corporation in the US, after several years of co-operation. Overnight, the acquisition made Continental the biggest producer of racing tyres in the world, having previously not made any.

“In terms of mergers and acquisitions, it always makes sense to acquire IP (intellectual property) and competence or market volume, or both together,” Mr Degenhart said.

Partnering with other suppliers or even car-makers was also a way forward he said, although he indicated that directors had to be realistic about working closely with manufacturers.

“Partnerships with OEMs (original equipment manufacturers) make sense as long as they don’t touch commercial interests because, for sure, the commercial interests of our customers are different from the commercial interests of suppliers,” Mr Degenhart said.

“Partnerships make sense if you can accelerate processes, if you can join forces (and) by doing so arrive at solutions at an earlier time.

“We have to be selective because not every party fits to the other, so competencies have to be added in a complementary way, very important."Dr Degenhart said that, while Continental was focusing a lot of effort on the electrification of vehicles and systems on vehicles, hybrid systems would be as far as mass markets are willing to go for the foreseeable future. He said a switch to pure electric vehicles was not about to happen soon.

“Why not jump directly on pure electric driving? Because it is still too expensive,” he said. “The affordability is suffering at the moment with today’s technologies.

“And incentives doesn’t really help because they may boost demand for a certain period of time, but if you take the incentives away then the volumes are plummeting again.

“So we need better results in the future which allows for a range of about 500km, fast charging, inductive charging and batteries which have a high energy density.

“The volume and the weight of today’s lithium-ion cells have to be cut in half and the costs have to come down from around €250 per kW/hr to significantly below €100 per kW/hr.”

However, Mr Degenhart said the technology still needs to progress to that point first, which he expects to take about six years.

“We don’t have this technology today,” he said, adding that he believed it would require new storage technology.

“We don’t have the cells today and we believe that it needs a technological change. We are talking about solid state technology which is most promising (and) which most probably, from talking to the experts, will not be available before 2023 timeframe.

“Therefore, we need from today to 2023-24 timeframe the hybrid technology to enhance combustion type of engines.”

That was the thinking behind Continental’s new 48-volt mild hybrid system developed in conjunction with Renault. Fitted to the Renault Scenic, the new system cuts fuel consumption by at least 13 per cent and reduces CO2 emissions to a class-leading 92g/km.

The expansion over the last decade into powertrain, electrification and interiors has not distracted the brand from its tyres operations, which are expanding rapidly, said Continental head of process development and tyre assembly Gerrit Bolz.

The big push in tyres is to reduce rolling resistance and the key to that is lighter tyres, achieved by reducing the volume of rubber in the tyre.

Mr Bolz said 50,000 people – about a quarter of Continental’s total workforce of 227,000 – were engaged in making tyres in 11 countries, with another plant currently being built in China.

“There is a wealth of possibilities to reduce the tyre’s rolling resistance and the effort to do so is getting higher and higher,” he said.

“The direction we are going is we are making the tyre thinner and thinner because it’s a physical principle: rubber causes damping and damping is a waste of energy. I would expect in 10 years tyres are much lighter than they are today.”

Dr Bolz said part of the quest to reduce weight will involve new materials, including an alternative to natural rubber called taraxa gum.

“It is coming from a little flower called a dandelion,” he said. “This story has been going three or four years. We know we can take the rubber from these flowers and build tyres.

“We did it for passenger car tyres, we did it for truck tyres, and we know that these tyres work. They are superior performance-wise so we can use this material today already. Unfortunately it is too expensive to produce it.”

He said a key factor in the program was to become independent of rubber trees, which only grow in limited areas. The dandelion grows “everywhere”, Mr Bolz said.

The company is aiming ultimately to become a dandelion grower on a mass scale.

It has already started a breeding program to develop dandelions with greater taraxa gum content.

“We are breeding bigger dandelion roots which, over time, have then such rubber content that we can plant them close to our facilities,” he said. “We don’t send ships around the world to transfer them, and we can fine tune this rubber to how we need it in out tyres.

“Rubber trees only grow in a certain area of the world and we don’t own production facilities. This could be a nice opportunity for Continental.”

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