Continental Eyes Safety-Technology Growth in China

FRANKFURT – Continental sees opportunity for growth in China with its line of safety technology, particularly antilock-braking systems.

“(The Chinese) want to be on the same level as the U.S. and Europe,” Ralf Cramer, head of Continental’s Chassis and Safety division, tells WardsAuto here. “They don’t want to wait 10-20 years for new technology.”

Over the next five years, his group expects one-third of sales to come from Asia, with China accounting for 20%. ABS will be the bigger driver of growth, followed by airbags and electronic stability control.

Continental has been expanding its presence in China to keep pace with demand. It now has four manufacturing facilities and 15,000 employees, some 10% of its global workforce, in the country.

Cramer says 25% of the supplier’s sales now come from Asia, meaning only 5% growth is needed to meet corporate objectives. He does not expect much demand in Japan and Korea, which are mature markets.

However, there will be a “little growth in Japan due to the recovery” following the March 11 earthquake and tsunami, he says.

While long-term growth in China is expected, it may come in fits and starts as the market begins to slow from its blistering pace. But that doesn’t faze Cramer. “Even if it’s not double-digit growth, it’s still growth. You don’t have that in Japan or Korea.”

Continental’s expansion won’t come without challenges. Cramer says Chinese auto makers expect product programs to be complete in just 12-18 months. In most other parts of the world, the industry finds a 30-month turnaround acceptable.

“They want it tomorrow,” he says. “They’re really fast.”

For example, ABS penetration is near 60%. ESC is only 15%, but Cramer says that number should double in the next couple years.

Even with low-cost cars, priced $5,000-$10,000, the supplier takes safety seriously, he says, citing systems for emerging markets that are affordable but don’t sacrifice performance.

Continental’s engineers have learned the key to lower-cost designs is integrating electronic functions and using fewer components. For instance, the motherboard on its ABS controller is considerably smaller due to this approach.

Additionally, the company draws from the local low-wage workforce, including engineers and specialists, Cramer says. It also purchases from local suppliers to avoid exorbitant transportation costs.

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