Opel CEO Lohscheller on the Transition to Electric Vehicles

in the transition to electric vehicles. Michael has experienced working for numerous companies in the automotive industry, including Volkswagen, Daimler, and Mitsubishi Motors. During our summit, he was interviewed by Nicolas Solopolos, advanced transport analyst. Here at B and e F. For more information about our summits, also taking place in London, New Delhi, New York, San Francisco, and Shanghai, go to

about dot bien ef dot com forward Slash Summit. As a quick reminder, bien ef does not provide investment or strategy advice and are more complete disclaimer is at the end of the show. But now let's hear the interview with Michael Lohler, CEO of Local Automotive, about the future of electric vehicles. So hello, Michael, thank you very much for being here with us to day. It's it's great,

great pleasure to have you on the summit. So it's also a very interesting time for the automotive industry, particularly in Europe. Among many other things, we have the next zero targets that are in place now for a course, the European Union, the UK as well has some of those. And one of the questions that are gaining more momentum now the industry is that of legislating and end to the sale of vehicles that are using in telecombustion engines.

What is your view and that I mean, first of all, we try to be very customer focused because at the end of the day, we offer mobility to our customers. We want to give them excitement with with our cars and offer clean and safe mobility and I think we shouldn't forget this. This is really the key of our business. At the same time, the political framework is changing. Yeah, so what we from the open side try to do

is we want to be open for various technologies. Yeah, what's very obvious now is that electrification is gaining momentum. It's gaining momentum. We saw that last year. Our sales of electric fire cars is increasing. We see that also this year. And basically we prepare now the future for this growing demand of electrification. But basically we also want to be open for other technologies. Yeah, because CEO two

reduction is not only with electric cars. Are like last year on the open side, we reduced our CEO two emissions by twenty three Graham, which is quite significant, and of course also gas and diesel engine contributed to this great performance. But long story short, we want to be open for all technologies. But we see clearly electrification is

picking up now. So you have a portfolio at the moment that we talked about that has I see is it has plug and fire bridges, has body electrics, and soon enough you'll have even fuel cell cars, fuel self vance vance in fact, and you just described that you want to be ready for all the market eventualities. There is that a longer term option as well. So looking five or even ten years ahead, do you think that

you'll maintain this broad technology portfolio. So at the moment, we have two architectures and we call them multi energy and they are basically for one car. Let's take an open coursa you can produce on one assembly line, I guess diesel and electric car, and this works very well. We are very flexible, we are very edgile, and whatever happens in the market, we feel we are very well prepared for this. So I think this is a very

good approach for the next couple of years. But then more outwards, we think that electrification will gain momentum and also as part of goopstell lunches, we will then transition to pure electric platforms, and I think this is a way to think about this. And on top of this, we look also at things as you mentioned Nico Future, so we think this also is a very attractive technology, many advantages in terms of charging time also see you two balance. But we transition from a let's say, multi

energy approach to then pure electric going forward. And what is the platform strategy was something that I want to come back to later on. But since you brought it up, for you for doing it, of course, I guess the answer is yes. But is that the given the fact that as you say, electrification games momentum and in a few years time, you will perhaps need two separate platforms, one for electric and one for the non electric part

as electric sales gain momentum. Is that a multi energy platform approach the something that you think will will stay with you for for a few more years. Well, at the end of the day, obviously the customer will decide, and then we will decide how long we run the multi energy platforms. As I said earlier, at the moment, we feel very comfortable with this because it gives us flexibility.

But then we expect that electrification will gain more momentum, so at one stage we will switch to electrified platforms, but of course we have flexibility for how long we run the multi energy platforms. Yeah, so I think it's always good to be open for for many scenarios and

not just focus on one. I feel this is very very important because it's hard to predict exactly what the customer will require, and let's say five, six, seven years, one thing is for sure, the political framework is very clear, so we have to improve on CuO two and therefore obsolutely electrification and Field said, will pay will play a

major role. Yeah, you talk about the customer and what what they want, and earlier on about this very large increase in the electric vehicle sales in Europe last year. Do you feel that we're at the moment where you're seeing organic demand for primarily electric cars or it's still a regular or driven the market pushed by the automakers in order to reach some of the very tough emissions limits here in Europe. Well, from from the opposite, we

very clearly see there is customer demand. Yeah, it started last year, Um, it's increasing now. Of course, the question will it continue like this? Yeah, because to give you a data point, like last year, or sold thirty five thousand electrified casts. This is around five six of our total volume, and of course we see this growing also in twenty one. Yeah, so we think customer demand is increasing, but the key question is will it come to levels

of thirty very very shortly? And it also obviously depends on support from the government, charging infrastructure, many factors, but we do think customer demand is significantly increasing, significantly increasing going forward. As you have this certain multi platform strategy, multi elements platform and you're going to shoot soon enough to the to the all electric platforms, how does the

strategy and which platform we use affect your profitability? In electric cars center, how do you even define the profitability of electric cars? So there is a lot of discussion in the industry now that will be in the twenty five for different segments, will be earlier for other segments. It would perhaps all the way up maybe from a from from some people what they're saying, So, how do

you see the profitability of electric cars? Primarily buttery electric cars developing in the next in the next several years. So when we from the oppen side look at the requirements of profitability of electrified cars, we don't differentiate between electrified cars and I cast because at the end of the day, we have to come to similar levels, right, I mean, obviously the volume is reduced at the moment, many things were changed. Obviously we get also support from

governments in various countries. But long story short, we have the same requirements in terms of profitability, and I think it would be very let's say difficult to differentiate for a long period of time and say, look, profitability of electrified cars is much lower than for I see, so we have to come to similar levels. That's in a very important requirement. And when do you see that in terms of the time frame is that something you can share. Do you see this profitability at the same level in

the next five years, for longer, for your for your business. Well, we steer this obviously already today because the question is today and I don't want that electrified cars have lower profitability than I see cars. And we tried everything to do so that this is going in in the right direction. Now for a very short break, stay with us, So shifting a little bit. Are related to the platform strategies and the profitability of cars up until now and still

that now. Of course, scale when factoring production, primarily on the in term combustion engine side of things, is a key factor that affects both profitability but also for an extent completive advantage in the in the auto industry along many others. Do you see that changing scale becoming less relevant in a in a more electrified era. Well, although I would say scale is always helpful, Yeah, it's it's

always helpful. It's a factor. But what for us is it is probably even more important, is that we have a good control of the entire value chain. So what what do I mean in terms of electrified cars? So we for example investor also in the production and the R and D of battery cells, which is a very important strategic decision to say, look, we want to do this ourselves um and not purchase it from from suppliers.

We invest, for example in Germany and France a few billion of euros to do the battery sales ourselves, also with the electric motor, so it feels like for us this is co competent um and we want to manage the entire value chain. This is very important. And then of course we benefit from the fact that we are part of good Sell. Launch is a very large automotive company. So I think scale is always a factor, but also strategic thinking what do we do ourselves and what do

we do with external papness. Is there something beyond scale that may become a source of competitive advantage in the next few year? You said strategic thinking of course, and I guess product placement. Does the electrified era offer different opportunities or additional opportunities to differentiate yourself and get some some advantage over your competitors. Absolutely, and there are there are many many ways to do that. And again it comes back to Okay, what is our customer demanding from us?

What is the customer really requesting in terms of electrified casts. So we try to differentiate this in various aspects, and yeah,

of course gain our competitive advantage in this. Okay, I guess earlier when you talk about sells, you primarily refer to this UH venture that you have, the automotive cell company that you have with p s A, Total and Soft, and the scale of that ambition I think has received less attention than at least in Europe compared to other forays of automakers in the In that in that business you explained a little bit about the russianale behind it.

Could you expand a little bit on that? I mean, for example, what is the role of the different partners in this business? Again? Why does a lotomaker want to become a sell manufacturer? Isn't that becoming a commodity business relicly food? Well, a couple of things. I mean, first of all, it's important that we control the entire value chain. And we teamed up with Total and Stuft and created a joint venture and we'll build now in the first

step two factories, one in Germany, one in France. Quite significant investments or just here in Germany when when invest two billion euros in a I would say a real giga factory and we will produce and better resells for five hundred thousands like ctrified cars per years, so it's

significant volume. And of course we first of all think that together with our partners, we have the know how for this, but then also the competitive advantage, and I think it's it's very important to have in this case here in Germany and test us lout on the factory close to other factories where we manufacture our cars, so we feel this is a competitive advantage instead of shipping bettery sales around the world. It's obviously also good from us.

You too footprint similar things we do with the electric motor, so we are of the opinion this is core competence. We can also differentiate in terms of cost, but also customer requirements and it's better in our hands and it makes total sense in terms of the overall electrification strategy

going forward. We talked earlier on so I didn't just take the final a few minutes to ask you something broader beyond the technology striate or manufacturing decisions also has gone through a lot in the last few years, and that's probably an understatement. So can you describe from your own point of view what happens since and when are you coming out of that cycle? Does that cycle end, and what's the next few years will look like? Yeah,

so a bit of background. So two thousand seventeen was a very important year for Open because we became part of Group p s A. R p s A took over Open and Open had I think twenty years of permanent losses. So it was very obvious that we had to change something fundamentally, and we did so. We put in house a plan together which we called the Pace Plan and gave it very clear but also straightforward, simple targets and said, look, we have to become sustainably profitable,

go electric and become a global brand. And then with internal people and I think that's important, we really unleashed the power of Open inside and said, look, we have to improve our brand perception, the pricing, reduced complexity, reduced costs and very simple things, and then worked very hard on the implementation and this worked very well, I have to say. So in the first year after the implementation we came to profit level two thousand nineteen we had

one point one billion profits, so significant profit improvement. And now we invest into the electrification is as you and I discussed during this interview, and we also go more into markets outside of Europe. So we feel this was a very important transformation of the company. To your question, will it ever end, No, it will always continue out because first of all, we want to get better every day, but the industry isn't such a transformation. So I feel

this was an important turnaround. But in a way, the basis for what we are doing now in terms of investing into electrification fuel sure we talked about. So it will continue and I guess that makes the industry so exciting. So what I heard here is a lot of you know, like a large number of improvements, perhaps small steps in

some cases, bigger steps in other cases. Is that the a learning a lesson for other companies or for investors when they're looking at this transition that other companies will will have to go through in the next few years. So is it a continuation of a large number of small steps Rundan something big that can change things very quickly? Well, I would say it is a combination of big things

and small steps. Yeah, you have to do both. Um. For example, in our case, our diversity complexity was huge, and we significantly reduced it, like down by fifty sixty percent, So heart decisions. Also, we transitioned very quickly to the group architectures, the mighty energy platforms we discussed early on. So I think it requires, especially in these days, very big changes. At the same time, you always need to have like small steps on top, because just rely on

a few things is not sufficient. Yeah. Um, so that was our experience. And then of course it's always helpful when you are in an environment where everybody in the company knows, like, look, we cannot continue as in the past. Yeah, and maybe that is also a good lesson out of the COVID pandemic in many many examples, we know we cannot continue as in the past, so we have to change,

and maybe that is accelerating the whole transformation. Yeah. So we had very good experience with it and we we we we feel we did the right things, but it will continue. Like one last question I have free Michael, is beyond technloud power train technologists and where you place your manufacturing plants and everything, what are the other big trends or mega trends that you're monitoring on a recurrent basis and have the potential to affect the other industry

in the next two years. Well, I would say that the key point from my perspective is um all around digitalization, so connectivity within the car, but also digitalization in terms of how people buy cars. So I think UM selling online is a big, big topic. We learned about this much more now in the pandemic, So the whole topic of digitalization is probably changing the automotive industry very very strongly,

maybe even more than the power train one. And I mean we are in good company with all the other industries. But I think the whole topic of digitalization from a customer point of view but also from a product point of view, I think is very very big change, and of course we have to do a lot of things to get ready for this. So digitalization is from my perspective, that the next big, big topic for us. Michael, thank you very much for being here today and all the

best for the next few years. Thank you, Nicole, thanks for having me. This week's show was produced by Eva gonzalezi Isla and edited by Rex Corner of Grace Took Media. Bloomberginni app is a service provided by Bloomberg Finance LP. And its affiliates. This recording does not constitute, nor it should it be construed as investment advice, investment recommendations, or

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