German group Rheinmetall is rebranding itself as a technology group, with a focus on mobility and security.
Automotive Industries (AI) asked Horst Binnig, Rheinmetall Group's Executive Board member in charge of Automotive, what the objective of the change is.
Binnig: Perception of the Group is important because, while we have a large range of technologies, the big concern for the future is how to attract the right people to our company to meet the future requirements of all sides of the business. Rheinmetall's civilian operations, especially as a supplier of components for the automotive industry, have frequently been overshadowed by the high profile of the military equipment sector of Rheinmetall Defense. This is despite the fact that the automotive division generated around one-half of the Group's total annual sales of about €5.2 billion in 2015.
Within the Rheinmetall Group sales of around €2.6 billion excluding our 50:50 joint ventures is pure automotive business, €2.6 billion is defense-related and around 10% of this is already generated by the civil engineering division. We are emphasizing the fact that we are a Technology Group to make us more attractive for young engineers offering a wide range of technologies.
AI: How does the ONE Rheinmetall strategy integrate the automotive and defense sectors?
Binnig: The Group management set out to identify what technological intelligence elements from our defense portfolio can be used to create new business. We identified a number of areas where the technology is applicable, particularly in the automotive sector. Of particular relevance and interest is the highly professional expertise of our defense colleagues in the domain of data control and the security of data-controlled components. It may take some time to find matching business opportunities, but we are confident this expertise will serve to transport the Group into a new era.
AI: How does your automotive sector meet the challenges of the new forms of mobility?
Binnig: We have a three-lane strategy. The industry will make roughly 80 million cars this year. In 2025 it is expected to build around 100 million cars, and we expect 20% of these to be fitted with alternate powertrain systems. That will leave us with a remaining market of 80 million cars with combustion engines. The right lane approach is, therefore, to continue with what we are doing. This is a huge market, and we are one of the top players.
The central lane is where more and more elements in the car are electrified. An example is how mechanical pumps have been replaced by electrical pumps, with maybe two or three of these pumps in a standard car. In a hybrid car we have four or five or even more, because you still need to transport fluid when the combustion engine is turned off. To stay on course in this lane we will strengthen our mechatronics business.
The left-hand lane is the new one. We have to focus on completely new business. Among other components our range extender drive will become part of the portfolio of the new business section. Our challenge now is to attract the right people on board, to make new products in order to provide people with new forms of mobility.
AI: How would the new brand architecture reflect the Rheinmetall Group brand?
Binnig: Our Automotive sector KSPG is from now on operating under the name Rheinmetall Automotive, thus reflecting membership of the Group. The premium global brands, Kolbenschmidt (Hardparts), Pierburg (Mechatronics) and Motorservice (Aftermarket) will, however, continue as before, but with restyled branding which links them directly to Rheinmetall Automotive.
AI: How closely will the two divisions cooperate in the future?
Binnig: The prime reason for changing the name is to bring the Group together. We will have cooperation at top management, HR and a common initiative to attract talent from the colleges and universities. This strategic process will also improve the efficiency of our R&D work and our purchasing. We’ve got to learn to manage our purchasing in the same way as the OEMs.
AI: Would that result in a mobility supplier with an understanding of security?
Binnig: We can talk about the issue of cybersecurity. This might be an opportunity to take knowhow from defense to apply to the automotive business by, for example, protecting vehicles from hackers.
AI: Would that help you to achieve continuing growth and success in the global markets?
Binnig: I think we are very well established globally. We have more than 40 automotive plants worldwide. We are highly profitable, with more than 8% return on sales. This puts us in the upper third of world’s 100 leading automotive suppliers in terms of earnings, despite the fact that we are in the bottom third in terms of sales. We have a double-digit growth in China, and we are strong in Europe.
AI: Which of the current megatrends will have the biggest effect on the automotive sector?
Binnig: The big drivers for us are legislative. Look at what Norway is doing by subsidizing the business and making legislative regulations banning combustion engine cars from 2025 onwards. In France, they are already planning on banning diesel cars from Paris. Whereas over 60% of cars in France were diesel, that number is now below 50%. Regulations will play a big role because all the end customer wants is a car with an attractive cost of ownership, one that you can drive in town. The range of mobility will change. Today you can already see Volkswagen and Mercedes E Truck delivering goods in town. We are talking about small trucks and small cars.
In addition to our vast expertise in conventional drives, we will strengthen our competence in relation to the upcoming changes in the automotive market. In principle, our goal is the same as it has been for more than 100 years. Then as now, we want to help advance the revolution in mobility over the long term through novel solutions and innovative products.