Bosch is betting on vehicle electrification. The German automotive supplier (with 32,500 U.S. employees) hopes that a decline in profits in the short term, as it shifts from traditional components and invests in developing electric drivetrains that are cheaper yet more compact and powerful, will pay off in the long run.
The company sees an audience, that’s for sure: A recent back-of-the-envelope survey of 1,000 U.S. car buyers found that 62% expect to own at least one fully electric vehicle within the next 10 years. Still, even the best-laid electric plans are unpredictable: President Trump promises to ease fuel-economy regulations in the U.S., while the auto industry must grapple with outsized expectations for the electric car. The Bosch survey also found that the average new car buyer thinks that a full-electric vehicle has a 300-mile range—100 miles more than in real life.
Michael Budde, a mechanical engineer by training who started out with Bosch in the late 1990s in technical sales, then moved over to electrified components, talked with IndustryWeek about the company’s electrification strategy. He’s based at Bosch headquarters in Germany, but was in Detroit for the North American International Auto Show.
Do you think that 62% ownership of electric vehicles in 10 years is realistic?
If you ask people on a hypothetical basis, they often say “Yes I would [buy an electric vehicle],” but when it comes to actually doing the purchase, I think that’s a different story. My assumption is that it’s a little lower than what we have there.
We see a clear trend that electrified vehicles in 2020 will be roughly 10% of the global market, and that equals roughly 10 million vehicles. That includes hybrid, plug-in hybrid and fully electric vehicles. That is already a big business, on batteries, motors, inverters. And 2025 we roughly see 20%. So that’s roughly 20 million vehicles electrified.
That shows that electrification is a growing business that we want to have a strong position in, like we have in the conventional powertrain.
And you’re figuring acceptance in the U.S. will be slower than in Europe and Asia?
I think the U.S. figures could be a little lower, and the Asia figures a little higher.
We also see here in the U.S .market, a lot of our [OEM] customers were focusing very much on hybrid electric vehicles in the first wave. And now we see a lot of pickup on plug-in hybrids and also fully electric projects from our conventional customers and also the startup automakers in California that go right to electrification. They don’t even go to the combustion engine.
Do you see the electric market mostly in luxury vehicles, or in lower-priced models too?
I think there’s a good potential also for the midsize and compact vehicles. If you can build them at the price point Michigan automakers are targeting [in the $35,000 range], that’s a very interesting concept.
In these vehicles, right now you typically have a four-cylinder engine with 120, 130, 150 horsepower. If you put in a 150 kilowatt electric drive, you get the feeling of a 200 horsepower or more gas engine. So you basically have a very nice driving experience—especially in that vehicle class, where it really makes a difference.
The big question is how much can you bring down the cost of the battery? The cost of the battery is dominating the cost of these kind of vehicles and the power train.
So do consumers’ perceptions on battery range need to be lowered, or does the technology need to rise to the occasion?
Most importantly, the industry has to get the capabilities higher. If you have 200 miles, 250 miles, in every condition—with heater, with windshield wipers—then I think you’re at a range that is decent. But under all conditions—not if you can only do it in nice weather without air conditioning.
That we think is a sweet spot where we can reach most people. I think something like that is possible in 2020.
Do you see most of your market for EVs in major metropolitan areas?
On a global basis, the first big population you will have in urban areas because of the infrastructure. Electrification goes with infrastructure. And then for the other products, for example, plug-in hybrid is a possible solution for bigger [light] trucks. Also, I think there will be a significant amount of HEVs. And also diesel on a big truck is still a good engine, if you go hundreds of miles.
In the U.S., if I go to California and I go to Michigan, the markets are completely different. In California, every motel has three, five, seven charging stations in front. There, it’s getting more common to have an electric vehicle as a first vehicle. In a place like Michigan, it might be a second vehicle.
In general, there are several different markets for electric cars. Electric goes very nicely in car sharing, which is popular in Europe right now, and also with self-driving vehicles. It’s easier to steer an electric motor than a conventional power autonomously.
There is a large population for commercial use, in fleets and car-sharing. There is a population for electric as a second vehicle, and also some people will have it as their only vehicle.
I don’t think it’s black and white. For the next 10 years, we will see a mix.