By T Murrali:
It was rather an unusual day at the headquarters of Bosch Group in Gerlingen, near Stuttgart, in Germany; the annual press briefing began not with the traditional presentation of its financials but with the research priorities that form the bedrock of its present and future business.
The main theme of the media briefing was on how Bosch could tangibly and decisively improve air quality with both state-of-the-art combustion engines, and electrical powertrains. “For us, clean air in our cities, protecting the environment, and combating climate change are not distant, abstract goals, but something our engineers work hard on every day. A company like Bosch, with its exceptional technological prowess, must do everything in its power to ensure the world and our cities remain good places to live,” Dr Volkmar Denner, Chairman of the Board of Management of the Bosch Group, said. Issues involved in urban air pollution and climate change are highly complex. Technology alone cannot solve them. They need strong political will and decisions. But industry should not wait, say, for implementation of such deals as the long-drawn-out Paris climate agreement, it should anticipate and act. “That is precisely what I consider to be the deepest core of Bosch’s strategic imperative, ‘Invented for life’ – applying the best technology possible to protect our natural environment, even above and beyond political directives,” he said. Bosch wants commuting on roads to be accident-free, stress-free and emissions-free, regardless of the power source of the vehicle: fossil fuel or electricity. Denner said, for this the company has been investing billions of euros both on internal combustion engines and electromobility. There is no car on the planet without something of Bosch and he wants to say that “there is no electric car without a bit of Bosch in it.” Despite the pointed focus on electromobility, Bosch is working on the future of diesel to make it a smarter and cleaner fuel.
Yes, Diesel Can!
Denner, who was in India recently, said, “We want to help keep the people mobile and improve air quality around the world. We are making heavy investments to achieve this, and it is paying off. Just a few weeks ago, we announced our breakthrough in diesel technology.”
Bosch engineers have succeeded in bringing NOx emissions down to just 13 mg of nitrogen oxide per km in road tests according to the new European RDE (real driving emission) standard. “Even in particularly challenging conditions like, stop-and-go traffic, cold weather, and steep gradients, our technology can keep NOx emissions well below future limits. This will not make diesel engines more expensive as no hardware components are added. We are pushing the boundaries of what is technically feasible by refining existing technology. For customers diesel will become an affordable low-emission fuel,” he said.
This breakthrough may end the debate over the fate of diesel. It can also make the blanket driving ban in the world’s major cities irrelevant.
According to Denner, who is also a scientist, “it is necessary to regain the lost credibility of diesel.” It was the diesel baiters that spurred the Bosch engineers and they have succeeded. Bosch technology can bring down diesel emissions far below the legal limits set for 2020. “This is the technology that Bosch stands for: ‘Invented for life,’ not for the lab alone,” he said.
But this technological breakthrough is only one part of the story; Bosch wants to go further.
“What we want is more transparency and realism in measurements relating to road traffic emissions. In other words, we are not just aiming to measure and reduce real driving emissions (RDE), as that would leave out consumption and CO2. Instead, we have to take real driving consumption (RDC) into account. From RDE to RDC – this summarises our objective. Creating more clarity for climate action calls for consumption and CO2 to be measured under realistic conditions. Low fuel consumption in a test bay does little to help the climate – we must make room for reality here too,” Denner said.
Transparency about CO2 also means including all CO2 emissions attributable to road traffic: from fuel production and electricity generation to actual consumption on the road. Taking such a comprehensive view may result in the realisation that it is better to drive the right diesel vehicle than the wrong electric car. “The point here is not an either-or proposition between combustion engines and electromobility. Instead, our aim is transparent eco- and climate-friendliness in all drive systems,” he said.
Of course, this is also an important commercial issue for Bosch. Automotive drive systems, whether conventional or alternative, are the core business of Bosch. “We are talking about tens of thousands of jobs. There is no other domain in which our company’s environmental, commercial, and social responsibilities intersect to the same extent. That is why we have chosen it as the focus of this annual press conference,” he said.
Taking a more strategic view, the question that Denner poses to himself is: how will we drive tomorrow? He observes that the change is coming particularly quickly in its largest business sector, the Mobility Solutions, which currently accounts for about 60 percent of the total revenue. According to him the transformation is happening in many areas: the public debate on environmental protection on the road, and the everyday experience of stop-and-go traffic are examples. Both change car’s importance and people are ready to switch to other modes of transport.
So, how will we drive tomorrow as emissions-free, accident-free, and stress-free as possible? “This is the vision we are pursuing with our three development paths, which we have staked out earlier than others: vehicle electrification, automation, and connectivity. And we especially consider connected mobility to be flexible mobility, allowing users to switch between car, bike, and rail,” he said.
“Our strategy is to pursue a variety of technologies. This variety can be seen especially in our new Powertrain Solutions division. We established this division to develop the best drive systems of the future. This means, for one thing, that we are committed to electromobility – fully and in all its facets: hybrids, battery-driven powertrains, and fuel cells. Our electrical powertrain components already feature in more than 800,000 vehicles around the world. No other company is working as broadly on electromobility as Bosch – from bicycles to trucks. And of course, we offer connected recharging services to make electric driving suitable for everyday use. At the same time, we are continuing to refine combustion-engine technology. Until electromobility is ready for the mass market, we need a highly efficient combustion engine that produces the lowest emissions possible. We are currently partnering with automotive manufacturers on some 1,000 RDE projects, with an eye to ensure that the new vehicles comply with the Euro 6 emissions standard on the road also. But we and our customers want more: not only to fall well within the limits, but to push the boundaries of what is technically feasible. It is exactly here that our engineers have made an innovative leap,” he said.
For the Bosch Group 2017 was successful, partly due to the robust economic fundamentals, including the global GDP growth by 3.2 percent against 2.7 percent in 2016. Automobile production worldwide witnessed 2.4 percent rise. Recovery of the mechanical engineering sector from all regions, especially China, supported its growth. The group’s sales revenue grew by 6.8 percent to Euro 78.1 billion, with all business sectors, especially mobility solutions, growing significantly in 2017.
Sales in Asia Pacific region increased by 13.5 percent and Europe by 5.6 percent. In South America, recovering from the past years of economic downturn, the group grew by 16.4 percent. Challenges in the automotive sector shrank the North American sales by two percent.
The Bosch Group wants to increase its sales revenue for 2018. In the first three months of the current year, the sales revenue has matched the high level of the same quarter of the previous year. Adjusted for exchange-rate effects, it is roughly five percent higher. “It is especially important for us to ratchet up our profitability further. This is a tall order, also considering the still very heavy upfront investments to be made in areas of future importance and of the major transformation efforts ahead. Nonetheless, we are aiming for a further year-on-year improvement in our operating margin again in 2018,” Denner said.
The research and development cost of Bosch in 2017 was about Euro 7.3 billion against Euro 6.9 billion in the previous year. Owing to the significant rise in sales revenue, R & D cost as a percentage of sales fell marginally to 9.3 percent from 9.5 percent in the previous year. The company continues to invest in driver assistance systems, mainly in autonomous driving functionalities, display and infotainment systems, and sensor technology. It is also developing state-of-the-art powertrain technology, both for combustion engines and e-mobility.
Challenges And Chances
Bosch, despite its strong economic base and technological prowess and preparedness, has to face strategic risks which relate mainly to the way markets, competitors, and suppliers develop, to innovations in technologies and business models, to changes in the political, social, and economic environment, to acquisitions, and to the Bosch brand.
Denner said, “I see the current transformation that is going on in many of our industries, not only automotive, is a challenge for every company. For an innovation company like Bosch, there are much more chances than challenges. For a technology company, it is necessary to put one’s stakes in all the technologies that may come up; that’s what we are doing. There may be lots of surprising blind spots. I believe the strong strategic move into Internet of Things (IoT) is a very good preparation for our company for the future. This refers also to customers. Today Bosch has a huge customer base that we didn’t have five years ago; we have customers from fleet operators, insurance companies, and shared mobility service. A few years ago, we had only traditional OEMs. Competition is good for a technology company.”
Denner said, “One important trend we see, both worldwide and here in India, is the coexistence of powertrain technologies. India is leap-frogging from BS-IV to BS-VI; Bosch India, in collaboration with OEMs, is ready for its implementation from April 2020. The internal combustion engine will continue to be the mainstream solution for freight and passenger vehicles. At the same time, hybrid technology will be a vital stepping stone towards electrification in India, particularly for its stop-start driving. We believe the combustion engines can be made eco-friendlier with synthetic, or carbon-neutral fuels, whose manufacturing process captures CO2. In this way, this greenhouse gas becomes a raw material from which gasoline, diesel, and substitute natural gas can be produced with the help of electricity from renewable sources.”
Denner believes that the co-existence of combustion engines and electrification with hybridisation is an interim solution on the road to an electric future. For this very reason, Bosch has been investing Euro 400 million every year since the beginning of this decade in electromobility.
Electrification in India is expected to gain momentum through fleet operators. The prerequisite for this is shared and connected mobility. Hence electrification is expected to take-off faster in small vehicle segments.
Investments In India
Bosch will be investing Euro 220 million (Rs 1,700 crore) in India in the next three years to make tailored solutions to the automotive industry, Denner said during his recent visit to the India headquarters in Bengaluru. The company plans to expand India’s role in the Bosch Group’s global network with renewed focus on Connectivity, IoT and Artificial Intelligence. The new investments will be to modernise its manufacturing plants in India, and to revamp the new Adugodi smart campus in Bengaluru. It is being converted into a high-tech engineering centre. More than 3,600 engineers are employed there.
In the past year, the company invested about Euro 300 million in the Bosch Centre for Artificial Intelligence (BCAI), in India, USA and Germany. Altogether, 18,000 of the 31,000 Bosch associates in India work in research and development in Bengaluru and Coimbatore. This makes India the most significant location for Bosch engineering activities outside Germany.
The Connected Mobility Solutions division established by Bosch in the beginning of the year will be using such solutions to take the connected mobility business forward in India as well. In the past five years, the company invested Euro 670 million in the country.
Another major trend for the future of mobility is connectivity. Denner said, “India plays a very special role for Bosch: our Indian engineers are currently developing a global telematics platform enabled by our local engineering and manufacturing facility. This platform offers end-to-end solutions, including our connectivity control unit, the integration of mobile network operators, the development and operation of cloud-based services, as well as smartphone app development and support for back-end solutions. Bosch India serves a global customer base through the telematics platform. It is a good example of how we are harnessing local expertise to offer cutting-edge innovations for the global market – an approach we call ‘local for global.’ Our newly established Connected Mobility Solutions division will also help us serve the growing demand for mobility services in India.”
Internet of Things
Bosch is transforming India through the IoT. Denner said, “We have added new teams in India to drive forward the development of solutions for IoT which are tailored to local needs. With solutions for the factories and cities of future, Bosch is supporting the government of India’s ‘Make in India’ and ‘Smart Cities’ initiatives. Smart manufacturing, or what we call Industry 4.0, is also a key element of the ‘Make in India’ initiative.”
Bosch industrial technology is making factories increasingly automated, connected, and agile, and thus better able to meet customer demands and expectations. It has all the relevant areas of expertise and offers a wide range of products and solutions for Industry 4.0. Bosch has also partnered with the Confederation of Indian Industry’s Industry 4.0 Council, to create the ‘Smart Advanced Manufacturing and Rapid Transformation Hub’ national action plan. This involves government support for small and medium enterprises as well as industrial bodies with smart manufacturing policies.
“For our part, we will be demonstrating working Industry 4.0 solutions at our own plants. Bosch’s Industry 4.0 Academy also offers top-down training to senior executives. So far it has trained more than 250 people. Now open to external participants as well, the Industry 4.0 Academy forms an integral part of the Bosch Production System philosophy which is based on the concept of lean manufacturing,” Denner said.
Another technology, according to Denner, that will play a crucial role in all areas of connectivity – from connected mobility to buildings, factories, and cities — is Artificial Intelligence (AI). AI will be a key component of the company’s products. “All our products will either possess that intelligence themselves, or AI will have played a key role in their development or manufacture. Last year we established the Bosch Centre for Artificial Intelligence (BCAI) in India, Bengaluru, Sunnyvale in the US and Renningen in Germany. A fourth location is currently planned for China,” he said.
In India, Bosch has also recently set up the Robert Bosch Centre for Data Science and AI at IIT Madras with annual funding of Euro 500,000 for the next five years. This centre will set a precedent in the way big data is used to improve problem-solving capabilities in the industrial domain. At the same time, the results of the collaboration will also deliver benefits for society at large,” he said.
The company applies AI to optimise processes in manufacturing, engineering, and supply chain management, and to enable intelligent services. From customer experience in retail environments to predictive maintenance for vehicles and machinery, intelligent parking management, automated driving, air pollution monitoring, and disease risk prediction for crops, it has been supplying the foundation for new value-added services and solutions in many different areas of application. The company is well positioned in the IoT ecosystem with sensors, software, and services. By combining these with AI, Bosch is creating unique value propositions in this domain.
Outlook For India
“India’s economy is on the rise again and showing great potential,” he said adding that the country’s GDP is forecast to grow 7.7 percent this year, with a similar outlook for the years ahead. Even now, India is Asia’s third largest economy. The Bosch Group sees a wealth of possibilities there – for example with solutions for electromobility, connected mobility services, and through government initiatives for smart cities and Industry 4.0.
Beginning in April 2020, India is planning to switch from the BS-IV to the BS-VI emissions standard (which corresponds to Euro 6). At the same time, the government is pressing ahead with the development of electromobility solutions adapted to the Indian market. The Bosch Group offers technology to support both. In the past year, Bosch had sales of Euro 2.2 billion in India, registering a growth of more than 15 percent. The global company expects business to continue to develop positively. The transformation of India’s automotive market creates big opportunities.
“India continues to offer promising opportunities for our business and our broad product range. According to the latest global data, India has overtaken Germany to become the fourth largest automotive market in the world. Automobile sales, including passenger and commercial vehicles, grew by 9.5 percent last year. With such a promising future for the automotive market in India, we are confident of our continued growth here,” Denner said.