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Eyeing fast and agile adaptation

Eyeing fast and agile adaptation

Considering the current challenges in the tyre markets, Christian Kötz, recently named to lead Continental’s Tire Division, says his main task is to create the structure and mind set which allows ‘fast and agile adaptation’ to a dynamically changing environment

 

By Sharad Matade

Christian Kötz was promoted, effective April 1,2019, to lead the tyre division at global tyre major Continental. The global tyre industry is going through a tough phase. Current market dynamics in the tyre industry are bringing in new business challenges, while disruptive technology developments in the automotive industry are putting pressure on tyres companies on technology front.

“The tyre industry has experienced nearly 10 years of continuous growth which has slowed down in 2018. The current market is being affected by many current circumstances and Brexit, trade war, tariffs, CO2 vehicle emission regulations, and others are some of them. All in all, this creates uncertainty and does not support a positive market development,” says Kötz in an interview with Tyre Asia. Considering the current challenges, according to Kötz, his main task is to create the structure and mind set which allows ‘fast and agile adaptation’ to a dynamically changing environment.

Kötz, who has been with Continental over decades, has succeeded Nikolai Setzer as the head of the Tire Division and Corporate Purchasing at Continental. Prior to the new role, Kötz was heading the Commercial Vehicle Tires business unit at Continental.

Major global tyre companies have already been working on smart mobility and electrifications of vehicles. This has been forcing tyre companies to work on various technological and market driven trends concurrently. However, Kötz sees the current and future trends bring great opportunities to Continental.

“We are being able to combine tyre technology and products with a service network and automotive know-how,” says Kötz. “Also, fleets – and not only fleets like we used to know fleets – will continue to gain in terms of importance. They are and will be looking for services to optimise the total cost of ownership. Hence, this is a great opportunity for our company to offer more than just good products,” adds Kötz.

Tyres are also becoming more and more digitally integrated into the complete vehicle, measuring tyre temperature and pressure today, but, according to Kötz, in future, tyres will be expected to deliver more than what they are offering. “By doing so, we are and will be providing additional opportunities to generate value e.g. in terms of improved safety or convenience service solutions,” adds Kötz.  Continental is actively combining its tyre know-how with its service footprint as well as with its automotive competence to provide value adding solutions to its customers worldwide.

Electrification

Kötz does not see major tyre technology impacts caused by the electrification of the powertrain. According to him, performance criteria such as rolling resistance, noise and comfort will gain more important, which will trigger certain technology developments. “Still, Original Equipment Manufacturers (OEM) requirements have always driven tyre technology progress so the electrification of the powertrain will demand technology enhancements, too. And again, this is good news for premium manufacturers and technology companies alike,” says Kötz.

The global tyre market today is clearly divided into two markets, developed and developing. Continental gives an equal attention on both markets. Looking at social and demographic changes, urbanisation, legislation, and so forth, Kötz does not see further significant market growth in the mature markets in future. “The growth will increasingly depend on the maturing of the developing markets,” says Kötz.

“On the other side, in absolute terms of the volume the greater part of tyres will continue to be needed in the developed markets for the next decades – so loosing focus here is not an option either,” adds he.

Potential markets

For Continental, Asia and the Americas are major growth potential markets. The German- tyre company also believes that its customers need reliable partners to sustainably develop the business. The company continues to invest into localising its activities not only in terms of production but also in terms of local sales force, logistic infrastructure and much more.The opening of Continental’s greenfield plant in Rayong, the acquisition of a major retail network in Australia, the foundation of a joint venture company in Saudi Arabia or opening of its second greenfield in the Americas at the end of this year are few latest examples of the company’s localisation activities.

The tyre industry, particularly in Europe, is also witnessing gaining momentum in the only tyre selling segment. The industry has seen many acquisitions in the segment in recent times. According to Kötz, the online channel is visibly gaining in terms of importance not only as a pure sales channel but may be even more important as an information and end consumer interface platform. “By means of the internet the amount of information has clearly exploded. Differently from the past, end consumers can now make buying decisions based on research catering for personal needs and providing facts that matter to the individual. This is a great opportunity also for us to extend sales channels and I am sure we will continue to see this trend towards more and more online marketing,” explains Kötz.
“Ultimately, the end consumer can hardly do anything with just the tyre, but also needs a service station to actually obtain the necessary quality services for the vehicle and its tyres. Therefore, I believe we will continue to see the online-offline synchronisation with Brigs & Clicks models, with “virtual” service networks and so forth. This is making it more and more difficult or even impossible to differentiate between online and offline sales which opens the field for new business models at the same time.”
Kötz also thinks that standard tyres are becoming less important and currently OEMs demand for more and more specific or tailormade products which lead to further increasing product complexity. “A major requirement field from OEM surely is around sustainability targets. For tyre, this starts with ever increasing rolling resistance requirements to optimise the vehicle efficiency (eCars as well as cars with combustion engines) and extends to specific requirements regarding our raw material suppliers,” says Kötz.

Sustainability

The company also is known for its efforts for sustainability since many years. The environmental strategy of continental’s tyre division engages in four areas, people and organisation, process, products and customer, supplier including raw material purchasing and stakeholder including society, to ensure a sustainable development of the environmental performance. “We believe in pro-active environmental measures which are realised along our value chain, e.g. at our plants operating resource-efficiently as well as low in emissions,” says Kötz.
Few examples of Continental’s efforts for sustainability are the installation of the Cold Plasma technology in several tyres plants which helped the company to reduce odor emissions from the production by up to 80 percent. “Since 2013 the Tire Division reduced energy consumption by 2.5 percent, the water demand has been reduced by 15 percent, and the solvent demand by ca. 50 percent,” adds he.

Continental’s Rubber Group is also committed to responsible raw material sourcing which is reflected amongst others by the Business Partner Code of Conduct in the supply chain, and by application of sustainability assessments supported by its partner EcoVadis. Moreover, the company carries out on-site audits for all new raw material suppliers. In 2018, Continental has released the Sustainable Natural Rubber Sourcing Policy that details major development areas and requirements.  “We implement this policy by cooperating with relevant stakeholders as founding member of the Global Platform for Sustainable Natural Rubber (GPSNR). In this context we are also running a pilot project with the GIZ (Gesellschaft für Internationale Zusammenarbeit) in Indonesia targeting at improving livelihood and income of smallholders. Overall on an industry and on a company level we are realising different projects and initiatives, e.g. aiming at advancing traceability of natural rubber but also identifying alternative natural rubber supply sources,” tells Kötz. The company has also been implementing its sustainbility approach in procurung materials for making tyres. Over the last years Continental has invested significantly in order to industrialise dandelion rubber within a decade.

Recycling is another investment area where the company has set ambitious targets. Continental targets to use 10 percent of recycling material in tyre production in 2025. “Today we are at about 3 percent,” says Kötz.
Continental set Its vision 2025 in 2001. Being on track, Continental is successfully completing phase 2 during which the company has heavily invested into its global footprint. “This foundation has enabled us to realise growth opportunities mainly outside Europe and in the specialty tyre segment,” says Kötz
“Now we need to turn those investments into profitable growth. Unfortunately, for the time being the markets are not developing as in the past. Nevertheless, every challenge is also an opportunity, and this, definitely is how we like to see it,” adds Kötz.

 

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