Podcast transcript – The Future Car transportation revolution episode 1

In this series of the Future Car podcast, I speak with Nand Kochhar about the trends and overriding forces in the automotive industry today. In the first episode, we talk about the state of the industry and introduce the idea of the ‘transportation revolution’ that has taken hold in the automotive industry. You can view the transcript from this episode below.

Nand Kochhar: Thank you, Conor! My name is Nand Kochhar. I joined Siemens in the early part of 2020 as Vice President of the Automotive and Transportation Industry. The majority of my career has been working in the automotive industry for nearly 30 years at Ford Motor Company. I’ve had the opportunity to work in the US in the Dearborn area, in Metro Detroit. I also had the opportunity to work as an ex-pat in Germany.

Our design centers both in the Cologne area as well as in other parts of Europe. At that point, some of our facilities in the UK, and the product we launched was in Belgium, so I had the opportunity to work across various countries.

Conor Peick: So then, over this long and diverse career that you’ve had the pleasure of experiencing, I’m just curious what are the most significant changes you’ve seen so far.

Nand Kochhar: Obviously, 30 years is a long time. Several changes. I would say the most important one in the early days of globalization – automotive industry is global but we saw a significant change come in through a lot of the emerging markets at that time popping up. So, the countries like China, India, becoming significant players in the automotive industry. Throughout my career, I’ve seen changes going from making our traditional power trains and the gasoline and the Diesel power trains – how do we make all our products more efficient, continuous pressure of delivering cost and innovations. But lately, the biggest changes I’ve seen coming through the technology trends, as well as the trends in the automotive industry, which are going towards the autonomous vehicle, and the consumer demands coming in for electrification, and things of that nature. Those are some of the significant changes I’ve seen in my career.

Conor Peick: And then, could you compare and contrast those long-term changes with what we’ve been experiencing the last few months?

Nand Kochhar: Yeah, the last few months, I think you’re referring to the disruptions caused by COVID. One of the changes I didn’t touch on before was also going on about the digital transformation. That’s been a journey companies have started and the disruption which we recently experienced in the industry, really highlighted the importance of that digital transformation. The companies which were on a path of that transformation were able to handle those disruptions a lot better than the companies who were not on the path or had just recently started on that journey had to struggle quite a bit handling those disruptions.

Conor Peick: So that’s interesting. I’m wondering if we could dive into that a little bit, related to how traditional automotive companies are remaining competitive in this changing landscape and specifics on why digital transformation has helped certain companies thrive, where others have struggled?

Nand Kochhar: Yeah. So, the fundamental thing in digital transformation is what’s called Digital Thread. That is the information thread all the way from concept into product development, getting into manufacturing, and into the service lifecycle management. Once you have that, obviously, you’re giving access to that information and you combine that with all the other technologies from the telecommunication standpoint and the connectivity standpoint, then you have a workforce, which is able to work and influence the continuation of the product development in a manner that these disruptions caused and the safety issues caused by COVID were able to address from remote locations. Of course, there’s a whole manufacturing aspect of it. You still need people in your plants, but if you have a digital transformation journey as a foundation, then you’re able to switch things and play all those scenarios, how to make things safe. As an example, in a factory, when the workflow is happening, now you have to redo some of those from keeping the social distancing at a certain distance apart. So, that means you have to reconfigure the factory setup. And if you were a digital platform already it allowed companies to adapt to that very quickly versus not having that setup as a foundation.

Conor Peick: I’m curious, do you think smaller or startup companies have some sort of an advantage in this case where it might be easier for them to adapt to those changes quickly versus a larger OEM?

Nand Kochhar: Yes, to some extent, you could say it’s not necessarily just the size, of course. If it’s a smaller organization, it’s also how their footprint is – global versus local – and in today’s environment, hardly there’s anything which is that locally contained that you don’t have to interact with the world. I think, when it comes to globalization, then the challenge is the same whether it’s a small business or a medium-sized business or a large business. The whole automotive space is very well-connected from a business standpoint and it is global in nature, the way things are today.

Conor Peick: So even small companies are operating on a global scale, nowadays?

Nand Kochhar: Most of them. A lot of them I would say is, if you’re looking from raw material supply to all the way to the finished product and selling that product, there’s a lot of details which go behind, even for smaller businesses.

Conor Peick: Very interesting! it brings us on to another trend we’ve been seeing, which is companies, in a bid to sort of accelerate their transformation or accelerate their adoption of new technologies, they’re starting to partner together, even between major manufacturers, such as Volkswagen and Ford, we know announced a partnership around electric vehicles not too long ago. So, I’m curious what you see as the benefits to this approach, or if there are other good examples that you can share of these partnerships?

Nand Kochhar: Sure. Some of these changes which are going on – or the trends – they’re so huge, they’re so complex. That is the number one thing I want to communicate. That’s what causes people to think that if they need to be successful, they can’t do everything on their own. No one can do all aspects of product development, delivery, and service. And technology is changing so fast as well. And those are the kind of things which lead to a partnership. And there’s all kinds of partnerships, as you mentioned, a couple of examples, but these are popping up; almost every day, every month you’ll see a new one. So, the latest one, let’s say, Hyundai partnering with Aptiv. So, there’s a technology company, which is going to provide for autonomous vehicle and Hyundai being a traditional automotive company partnering that they can address the challenges of let’s say, creating an autonomous vehicle. So, the partnerships are happening. A large existing OEM, another OEM, plus the technology company. Others are happening just between two partners – a software technology company working with an OEM. And the third level, you could say is tier one/tier two partnering with an OEM. So, you see that a lot of consolidation partnerships and all those kinds of things happening. And that’s all in the spirit of how can we deliver the most innovative product for our customers, which they care for and which they’re willing to pay for.

Conor Peick: I wonder if you could comment on the kind of emergence of even non-traditional automotive companies in becoming a role in these partnerships. So, for example, Amazon, I believe, invested in Rivian – the electric truck startup.

Nand Kochhar: Yes. So, one thing is very clear: the automotive industry is a good place to be in and it is a very important business from a consumer standpoint. In different shapes and forms, it’s changing but at the end of the day, every country is, at a country level, making sure that they have a very successful and flourishing automotive industry. So, with that kind of thing in mind, when software companies are looking at, once they have generated enough revenue, enough capital from their software business, how do they diversify? Where do they need to go for the next level of business growth? And they’ve been coming towards the automotive business. The example you used, Amazon has got its own business and, of course, they’ve got a vested interest, their partnerships in the spirit one from a technology perspective, they could work with the automotive industry and, let’s say, bring in their technologies into the businesses. For example, their AWS, which is the cloud solutions coming from Amazon – it’s good to have a partner from that perspective. On the other hand, they’ve also given in that partnership in order for generating electric vehicles specifically for Amazon delivery. So, now it’s one of those things that you’re creating your own vertical channel of being an automotive company and using that product. So, it all makes sense from a business perspective. And there’s several examples. You brought up a good one where there’s several scenarios of these types of partnerships.

Conor Peick: So, do you think it will accelerate our development of autonomous vehicles, electric vehicles, and such? Or are the challenges still pretty significant?

Nand Kochhar: Of course, yeah. On the acceleration front, I started to look at, electrification is already at full speed. Obviously, everyone is familiar with companies which are just focused on electrified products only. You mentioned Rivian, the new one, but Tesla is the example used by almost everyone in several cases. So the electrification trend is on the go, on the move, and is continuing to grow and, of course, just like any other technology, when it comes, it comes with its own challenges. And those challenges are the ones that need to be addressed, which are being addressed. And, as you move forward, there’ll be new challenges which you and I have not even thought about when you switch into those new modes of transportation. The same thing is going on in the autonomous front. Autonomous gets even more interesting because you have part of autonomous which is the ADAS – that is the level one and two of autonomy. And that is already happening today. Over the last several years, there’s been significant progress in that. If you look at any major OEMs they will be offering features related to those Advanced Driver-Assistance Systems, whether they could be in autonomous emergency braking, or it could be adaptive cruise control. All those functions are happening today.

Conor Peick:  I’m curious about electrification in particular since that is, as you said, it’s really at full speed now. And I think even, at least for the public, five years ago, it didn’t seem like something that was likely to happen. So I’m curious what you see has changed for electric vehicle development, maybe how the development push has changed over time. And then, something if there’s anything that’s new right now in electric vehicles.

Nand Kochhar: So, the electrification has been maturing. One of the big things in electrification has always been and was, which is getting addressed, was the range anxiety. So, when you tell someone you’re switching from gasoline-based vehicles, those power trains into electric, the first thing that comes to mind is I drive 400 miles or 500 miles to make a trip, to go out of town, what am I going to do? So, range anxiety is being addressed through several different things. Number one, it comes as an example the infrastructure setup will have the ability to charge. What if I’m traveling longer distances? The second thing is how long does it take to charge? So, those are two high-level examples, which are being addressed which have progressed over the last few years and that’s why now you see more and more popularity – the consumer is feeling comfortable.

Nand Kochhar: Alongside, whenever a new technology comes, initially it’s always very expensive. When you start building volumes, the cost part of the equation starts to get addressed, so the cost of some of these things has been coming down as well – for example, the power pack or the battery costs – and those are some of the things which caused these trends to become more real, or have had great progress from last five years to today.

Conor Peick: And infrastructure also plays a role, doesn’t it? Are the charging points available?

Nand Kochhar: Yes! Infrastructure plays a big role. Especially, both infrastructure at home for charging overnight and quickly infrastructure to the office and local malls where you might drive your vehicles, having the ability to charge at any of those locations during a time when the charging times were long. And then, the infrastructure especially on a longer drive. Today, instead of a gas station every few miles or on every corner in a city environment, we will need the infrastructure for charging, which is the new fuel replacing the gasoline, as an example.

Conor Peick: It adds a new dynamic to planning a western United States road trip, when you think about, is there going to be a charging point available in the middle of Wyoming or Colorado, for example?

Nand Kochhar: That’s right! So, today you can see in the West Coast there’s a little bit of the infrastructure was built and you see the growth of the electric vehicle usage more and more in that part of the United States, and slowly it’s growing. We’re all here in Detroit, making trips from Detroit to Chicago, which is a good weekend-trip for a lot of people. Having the infrastructure in between, as we grow that, that just increases the comfort level of people driving from one city to the other.

Conor Peick: I know I’ve seen advertised here in Oregon, where I live, they have electric byways, which are specific routes that they have kind of determined that there are enough charging points around. So, you can take a road trip with your electric vehicle and be confident that there are charging stations available for you. So, it’s an interesting way to kind of get consumers comfortable with the idea of taking a long trip in an EV.

Nand Kochhar: That’s right! I think that goes back to the comment I made about range anxiety. It’s getting that anxiety out of the users. Customers will feel more comfortable and it doesn’t happen overnight. So, it’s a combination of city governments, industry, policymakers – all coming together and setting up this infrastructure. And obviously, the private companies both on the automotive side, and it could be the new companies getting into those businesses. The point is making customers more comfortable with it so that the industry can grow more and more.

Nand Kochhar: So that is making good progress. As an engineer, we always know there’s the next opportunity because you’re never satisfied with the level of performance you have. So, one of the aspects in there is the total user experience of an electric vehicle. And that will continue to mature with more and more technologies coming into that. And the other thing I touched on in the opening is the cost aspect of it, right? So it’s both the initial cost of the product – as the volumes grow, that will continue to grow. The usage of the battery packs in the vehicles, that’s a challenge on an ongoing basis. Cost is a big challenge in the industry today. We’ve been working for the last hundred plus years. Cost is always a big challenge. And then, I think the electrification journey, the unique parts in that – whether it’s electric motors, batteries, packs, etc., and the manufacturing operations around those – they will start their journey on how to be more efficient from a cost perspective as well as getting more mileage out of the given setup, which is the range part of it. So that’s a big challenge. Another big challenge, which will continue to come is how do we go after end of life and the recycling of the unique things which are coming in the electric vehicles, that still will lead to a lot of advances will need to happen. That’s a challenge which is going to stay in front of the industry. And then, obviously, the raw materials coming into making these electrifications; that always needs to be as well – how is that maturing? In what countries? What specific things are needed for that. So, it’s the entire supply chain. I think there’s plenty of challenges for the next few decades for us to continue to evolve and make things more efficient.

Conor Peick: Yes, efficiency seems like a common theme in some of those challenges between the production, the raw material development, and then of course, the vehicles themselves.

Nand Kochhar: That’s right! I mean, I always look at it – we’ve been, as I said, designing, manufacturing, building, selling vehicles for 100 plus years and there’s not a single auto company I’m aware of who could say, “Yeah, I’m all set. We are efficient.” We are constantly looking for opportunities on how do we continue to make our current businesses which have been there for so long, more efficient, better, and so on. So, I think the electrification or autonomous, they’re just getting on that journey as well, and that challenge will always be there.

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This article first appeared on the Siemens Digital Industries Software blog at https://blogs.sw.siemens.com/thought-leadership/2021/04/23/podcast-transcript-the-future-car-transportation-revolution-episode-1/