National Post (National Edition)
HIGH-TECH CARS COULD DRIVE REVENUE HIGHER: MAGNA.
More complex cars means more parts value
LAS VEGAS • Cars have never been more complex, and with that complexity comes an opportunity for parts suppliers to significantly increase their content per vehicle, according to the chief technology officer of Magna International Inc.
As one simple example, Swamy Kotagiri cites the humble door latch. Magna, Canada's biggest auto supplier, has gone from making simple mechanical latches to more complex electronic ones, adding to the amount of content it is producing and, therefore, the amount of revenue it is generating from each vehicle.
“We are seeing that uptick in the value of the products that we have and the content per vehicle,” Kotagiri said in an interview at the CES tech show in Las Vegas this week.
But it's not just door latches — the same is true of advanced driver assistance systems (ADAS) like adaptive cruise control, blind-spot detection and lane departure warning systems.
“We take what we have in the ADAS systems now and the more we can integrate, the more we have in terms of value that we can bring,” Kotagiri said. “You have some huge numbers that people are taking about: billions of dollars in the ADAS market and radar is supposed to be $3 billion to $5 billion in the next number of years, so if you're able to integrate all of this and provide features, we can be taking a reasonable piece of the pie.”
A 2015 report from Goldman Sachs estimated that the major suppliers' content per vehicle will grow from as little as US$300 for current vehicles with drive-assist technologies to US$2,800 for fully autonomous vehicles. This would mean a 42 per cent compound annual growth rate in global revenue from automated features over the next decade.
For Magna, Goldman Sachs predicted 140 basis points of incremental revenue growth from automated features between 2015 and 2020.
Luckily for consumers, Kotagiri predicted that vehicle costs won’t move in tandem with complexity.
“Everybody wants all these features but I don’t think a customer is willing to pay $3,000 or $4,000 more per car to get them,” he said. “I think that will drive a lot of technologies in manufacturing, like advanced robotics, flexible manufacturing, new materials, to be able to offset this addition of content and features and comfort and convenience without adding too much cost.”
Although Kotagiri believes fully autonomous vehicles are still a long way off, Magna is positioning itself to be a major player in the autonomous space. In areas where it hasn’t developed the technology itself, it is partnering with startups that have. For example, last month Magna announced that it is partnering with Innoviz Technologies Ltd., an Israeli startup, to develop lidar sensors for autonomous driving.
“Our goal is not to be called a camera or a radar or a lidar supplier; we are providing the features that enable the car to become autonomous,” Kotagiri said.
Kotagiri also sees significant opportunity in hybrid powertrains, but cautions that U.S. president-elect Donald Trump could throw a wrench in their proliferation if he decides to halt the implementation of more stringent fuel-economy standards.
“I don’t think it’s a switch that’s going to be flipped on and off, but if you see some easing of regulations, I believe that the consumer is not willing to pay thousands of dollars to get an electric car,” he said. “The (automakers) are planning their product portfolio with hybridization or other things so they can meet their fleet requirements. If that goes away, then that mix will change.”