Continental AG, a global auto-parts supplier, will no longer invest in parts used in internal combustion engines, the latest sign that the automotive industry is being forced to respond to increasingly strict emissions laws.
Instead, the company said it will put more focus and capital on the electric powertrain, which it believes is the “future of mobility.”
“Our customers are increasingly and consistently turning to the electrification of combustion engines through hybrid drives as well as to pure battery-powered vehicles,” said Andreas Wolf, head of Continental’s Powertrain division, which in the future will operate under the name Vitesco Technologies with Wolf as CEO.
This shift toward electrification is being driven by tighter regulations around the world. Cities are clamping down on the use of diesel- and gas-powered cars, trucks and SUVs in urban centers and states like California are tightening rules to meet air quality and emissions targets to combat climate change. China has placed restrictions on gas-powered vehicles and provides incentives to electric ones. France wants to end the sale of fossil fuel-powered cars by 2040.
And automakers are following. Volvo, VW and others have announced plans over the past two years to increase sales of electric vehicles and move toward more electrification throughout their portfolios of existing vehicles. Electrification can mean hybrid, plug-in or all-electric vehicles.
There has been plenty of speculation and attempts to predict exactly when — not so much if — a tectonic shift to electric powertrains would occur. Suppliers have grappled with the “when” part. Putting too much capital too soon toward developing automotive parts can saddle a supplier with inventory and mounting costs.
What’s happening at Continental is starting to play out within the rest of the industry. If companies like Continental want to survive and keep up with the demands of automakers, they have to act. But not wildly. Development costs for powertrains are, after all, no small matter.
Continental is making specific choices on what exactly it pursues. The company, for instance, will not consider producing solid-state battery cells in the future. Apparently the company was open to making an investment in battery cell production. But now the company believes the market no longer offers any attractive economic prospects for battery cell production for Continental, Wolf said.
What Continental is going to do is reduce investment in its hydraulic components business, which includes parts like injectors and pumps for gasoline and diesel engines.
“Investments in research and development and in production capacity for innovations are becoming less profitable,” says Wolf, explaining the reasoning behind this decision.
Continental will fulfill existing orders. New orders will “play an increasingly marginal role.”
This shift within Continental will likely extend over a number of years, as combustion engines essentially serve as the basic drivers for hybrid solutions, Wolf said. The company will also review its business in components for exhaust-gas after treatment and fuel delivery.
All of this translates into big changes within the company, including the technologies it decides to invest in, jobs and even locations of some of its operations. Continental said it will also consider partnerships.
Car shoppers now have several new options to avoid long-term debt and commitments. Automakers and startups alike are increasingly offering services that give buyers new opportunities and greater flexibility around owning and using vehicles.
In the first part of this feature, we explored the different startups attempting to change car buying. But not everyone wants to buy a car. After all, a vehicle traditionally loses its value at a dramatic rate.
Some startups are attempting to reinvent car ownership rather than car buying.
My favorite car blog Jalopnik said it best: “Cars Sales Could Be Heading Straight Into the Toilet.” Citing a Bloomberg report, the site explains automakers may have had the worst first half for new-vehicle retail sales since 2013. Car sales are tanking, but people still need cars.
Companies like Fair are offering new types of leases combining a traditional auto financing option with modern conveniences. Even car makers are looking at different ways to move vehicles from dealer lots.
Fair was founded in 2016 by an all-star team made up of automotive, retail and banking executives including Scott Painter, former founder and CEO of TrueCar.
The Vera autonomous, electric truck from Volvo’s trucking subsidiary is not what you might expect in a transport truck – it looks like a road-hugging sportscar, something emphasized by its lack of a place for humans to sit. The real reason it looks like this is that it’s totally self-driving, however – and tailor-made for use in specific situations like serving the Swedish port in Gothenburg where it’ll soon begin operations.
Vera’s inaugural job will be to move goods packed in cargo trailers from a logistics center the actual port terminal, where it’ll be ready to loaded onto boats for transport. This first commercial use of the connected, electric freight moving vehicle will be done in partnership with logistics company DFDS.
Use of the Vera will make up one part of a larger connected system to move goods from the logistics center to distribution destinations around the world. They’ll operate autonomous but be monitored by a central operator working out of a control tower, and they’ll be operating at a top speed of only around 24 mph.
These are basically just heavy-duty land tugs for now, but if successful, there’s a lot of potential business to be had in providing similar services for shipping port facilities around the world.
Buying a car is painful. Dealerships are the worst, and the options are endless. The rise of the Internet produced powerful tools for shoppers, but in the end, most buyers still have to trudge down to a car lot.
For this series of articles, TechCrunch spoke with several founders and investors attempting to rethink car buying. It’s clear these startups are the underdog in this fight. Most consumers buy cars the same way as their grandparents did and for good reason. Dealerships nationwide fought for years to enact laws and regulations that protect their businesses.
Several young companies are attempting to put the dealership online. Companies like Carvana, Shift, Vroom and Joydrive are putting the entire car buying process online, allowing customers to buy, trade-in and even test drive vehicles without talking to a salesman in an oversized golf pullover.
In the next part of this series, we’ll look at companies like Fair that are moving consumers away from purchasing and into short-term leases. Even automakers are trying something new. Tesla sells directly to consumers while Volvo, BMW, Mercedes and others are launching subscription options to give owners even more flexibility.
Several companies are building online car dealerships. Shoppers find and buy a vehicle solely through these sites, and often, the cars are delivered to the buyer. These online dealerships even take trade-ins.
Three services dominate this space, and they were all founded in 2013. Carvana, Shift, and Vroom hit the market at the same time but have experienced different paths. One thing is clear though: it takes hundreds of millions of venture capital money to build an online dealership.
Emily Melton, co-founder and managing partner, Threshold Ventures (formally known as DFJ Ventures), points to consumer’s changing expectations and an optimized process across all kinds of vehicles. She invested in Shift’s recent $140m round.