Consumer Discretionary

<p style="text-align: justify;">It is a no brainer that the major challenge for the Auto industry is the transition to the electrification of the drive train whilst at the same time complying to the requirements of the regulators.It is clear that there are more major trends in the industry such as autonomous driving and digitization, however pressure is on electrification due to legal requirements.</p><p style="text-align: justify;">What is the industry doing at present?</p><p style="text-align: justify;">There are essentially two major activities for both the established and the new players in the industry.</p><ol style="text-align: justify;"><li>Preparing the capacities for electrical vehicles (EV&rsquo;s)</li></ol><p style="text-align: justify;">The main markets for EV&rsquo;s are the US, China and Europe, and due to regulations, it is not surprising that most of the capacities are set up in these global regions.</p><p style="text-align: justify;">The established players such as VW or Ford are transforming their current factories for ICE-vehicles into new factories for electrical cars (VW already finished its plant in Zwickau, Germany; Ford just announced transforming its plant in Cologne, Germany (investing 1 billion &euro;).</p><p style="text-align: justify;">The new players, such as Tesla, will increase their capacity by extending their footprint. Besides their first plant in Freemont, California, they did setup a new plant in Shanghai, China (start of production January 2020) and they are busy setting up a new factory close to Berlin, Germany. There also rumors that the next American E- OEM is looking to expand in Europe.</p><ol style="text-align: justify;" start="\&quot;2\&quot;"><li>Searching for alliances</li></ol><p style="text-align: justify;">Here the obvious question is: Who will finally be at the top of the pyramid in the future. Will it be the new players like Apple, Google etc. or will the established players be able to survive?</p><p style="text-align: justify;">Tech companies such as Apple or Google are obviously looking for OEM&rsquo;s with regards to manufacturing competencies and capacities. Apple has been mentioned in connection with Nissan and Hyundai over the past few weeks. This would obviously be more than electrification only, but also include autonomous driving and digitization. So here we are looking at something between &ldquo;contract manufacturing&rdquo; up to collaboration with sharing of know-ow.</p><p style="text-align: justify;">It looks like none of the established players will be as keen to transfer into a Tech Company (and by that be able to survive) than Volkswagen. At least none of the established players are communicating their plans as consequently and as detailed as Volkswagen.</p><p style="text-align: justify;">They have developed an MEB matrix, which is already active, and they have even communicated a delivery contract with Ford to share MEB platforms. On the other hand, they also set up a separate company, the car.software.org, to develop their own automotive operating system. This company was carved out of the current organization, and currently includes around 4000 people, with the intention to grow it to around 10.000 people.</p><p style="text-align: justify;">So, the race will continue between the established and the new players, and it will be interesting, who will have the best options and most courage to be successful in the end.&nbsp;</p>