For Robert Bosch GmbH, diesels continue to be the powertrain of choice.

Like other global suppliers, Bosch is developing systems for gas- and diesel-electric hybrids, plug-in hybrids and electric vehicles.

But unlike most others, it is making a major financial commitment to the world’s two fastest-growing markets, China and India. There, the supplier believes diesel is the most cost-effective powertrain alternative for reducing carbon-dioxide emissions.

By 2035, Bosch predicts the world’s passenger-car fleet will double, with the majority of new demand in India and China.

“To secure its future success, the global automotive industry must balance its focus between mature markets and future growth regions,” Bosch Automotive Chairman Bernd Bohr said in January at India’s Auto Expo 2010.

“Auto makers and suppliers will need to address several structural changes, including rethinking their strategies in light of growing demand for smaller, more affordable cars (and) coming up with technological solutions to meet increasingly strict CO2 legislation.”

In India, Bosch has invested €356 million ($471 million) over the past five years and is committing another €339 million ($449 million) by 2012. Included in the earlier investment are common-rail production facilities in Nashik and Bangalore. By 2013, Bosch expects to sell some 2 million common-rail systems to Indian auto makers.

Meanwhile in China, where Bosch employs 20,800 workers, the largest number outside of Germany, the supplier reported sales of ($3.3 billion) in 2008. In fiscal 2009, it projected 15% sales growth.

Group-wide, Bosch registered sales of some €38 billion ($51.6 billion) last year, down 18% from fiscal-2007 peak levels. And resulting from the shortfall, the supplier reported record losses of between €1.1 billion-€1.5 billion ($1.6 billion-$2.1 billion) – the final total yet to be announced.

In fiscal 2010, the supplier is projecting global sales growth of 10% and breakeven on earnings.

Despite its preference for diesel technology, Bosch is working on hybrids, EVs and advanced storage batteries.

The supplier also has entered into a strategic partnership with PSA Peugeot Citroen to develop, manufacture and supply electric motors and power electronics for the auto maker's diesel hybrid system.

Elsewhere, Bosch is collaborating with Samsung SDI Co. Ltd. to develop lithium-ion battery technology for automotive use. Li-ion battery cells produced by SB LiMotive Co. Ltd., Samsung and Bosch’s joint venture, will be adopted by BMW AG in 2011 for the auto maker’s Megacity Vehicle EV.

By the end of 2012, the supplier expects to produce Li-ion cells capable of a capacity of more than 600,000 kW/h for hybrids and EVs.

Following is an edited transcript of a Ward’s interview with the 53-year-old Bohr, who took the helm as chairman of Bosch Automotive in 2003:

Ward’s: In fiscal 2007, Bosch’s automotive group reported record sales of E46.3 billion ($62.3 billion). Then sales fell slightly to E45.1 billion ($61.3 billion) in fiscal 2008. So you’re basically moving from record levels…

Bohr: To minus-record levels. The downturn came simultaneously in all major markets. In past recessions, when one economy went down another stayed up. So they more or less averaged. This time the downturn was synchronous in three or four economies.

Ward’s: When do you expect full recovery?

Bohr: It could take us until 2012 to reach pre-recession levels.

Ward’s: Switching to EVs, is Nissan (Motor Co. Ltd.’s) 2020 target of 10% penetration of the global auto market realistic?

Bohr: Bosch is working on both hybrids and EVs. Our guess would be low, single digits for EVs in 2020, thus around 3 million units, plus or minus, for both EVs and plug-in hybrids.

Standard hybrids would be in the 6 million-7 million range. But conventional hybrids are not electric vehicles for us. They are just a different means of reducing CO2 emissions like clean diesels. For Bosch it’s the same. We always recommend diesels, because of their better cost-benefit ratio.

Ward’s: But isn’t it a problem for diesel technology that two major markets, North America and Japan, tend to be diesel-averse?

Bohr: Penetration in the U.S. has not developed in the way we had hoped. We had a period of very high diesel-fuel prices in the U.S., which hurt the image of diesel powerplants. That was followed by the financial crisis, which resulted in quite a few OEMs reducing their development budgets and taking money out of their diesel projects.

We still see significant diesel growth in what’s going to be a major market, India, where more than 30% of passenger cars today are diesel. And the share is going up further.

We are also targeting China, because China is looking for a low-cost CO2-reduction method and (we don’t feel that) hybrids are a low-cost CO2-reduction method.

Ward’s: Regarding common-rail technology, what is your strategy for emerging markets such as India and China?

Bohr: For high-end-emission countries such as Europe and the U.S., we expect a further rise in injection pressure, higher-precision metering of valves, and increased aftertreatment and ‘de-noxation.ʼ For emerging markets, we are working on low-cost systems. For instance, a common-rail system for 2-cyl. engines will be on the Tata Nano when the diesel comes onto the market.

(The Nano diesel reportedly will be launched by the middle of this year).

Whether diesel or gasoline, the internal-combustion engine will continue to command a high share of global markets for the next 20 years. With improved direct-injection systems, downsizing, turbochargers, start/stop systems, and ultra-efficient alternators, we believe we can reduce fuel consumption by another 30%.

Ward’s: Related to powertrain improvements, what is Bosch’s forecast for petroleum prices in 2015 and 2020?

Bohr: Clearly, they are going to increase. And the reason is that emerging markets pulled so much petroleum even before the financial crisis that production numbers and actual use were substantially imbalanced, driving up prices.

Since the financial crisis, the petroleum companies have not invested heavily in new production capacity, so the situation before the crisis will likely be the situation after the crisis. We will see average prices going up. It’s volatile.

Ward’s: How high? To $200 per barrel or even $300?

Bohr: I’d rather not say.

Ward’s: Is there a threshold where it makes all of these advanced powertrain technologies, including hybrids and EVs, affordable?

Bohr: Don’t forget downsized gasoline engines and turbocharged gasoline engines, start/stop systems, improved thermal management and highly efficient alternators. What you are saying is absolutely the point.

We always look at the cost-benefit relationship of CO2 reduction technologies, whether they are the big-ticket items like hybrid or the many small things where we can get a 2% improvement here or 4% there. These all become more viable as fuel prices go up.