Last summer saw the official launch of Yanfeng Automotive Interiors (YFAI), a joint venture between Yanfeng Automotive Trim Systems Co Ltd and Johnson Controls. YFAI has sales revenues of some $8.5 billion, an order backlog of $10 billion and expectations to gain further market share in China and other Asian markets. Its product portfolio includes instrument panels and cockpit systems, door panels, floor consoles and overhead consoles. Matthew Beecham caught up with Han Hendriks, Vice President Advanced Product Development & Sales at YFAI to learn more about the company’s growth prospects.
What is your vision of YFAI by 2020, its revenues, market position globally, and in particular China?
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First of all, as mobility is moving towards autonomous driving, our vision is a “Better life on board through superior automotive interior solutions.” We also presented this approach with our Innovation Demonstrator 2016 (ID16) at the motor show in Frankfurt last year.
Currently our revenue is $8.5 billion, with a backlog to get to $10 billion in the next few years. By 2020, YFAI is expecting to gain further market share in China and other Asian markets, as vehicle sales in the region are continuing to grow.
Looking at our current segmented market shares by volume, we also see opportunities for growth in basically each of these individual product segments. We expect to see some quick wins in commercialising our recent door panels and floor console innovations.
Our view on the Chinese market potential in summary:
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By GlobalDataIn terms of the China market potential, considering the population and the depth of the market there, we believe that the China market will continue stable growth in coming years with a lower growth rate after experiencing a period of fluctuation.
As a global company with a presence in all regions, Yanfeng Automotive Interiors is well positioned and benefits from the growth of markets worldwide. Our global presence is our strength.
We often hear about the differences in consumer taste and preference for car interiors in, say, Europe versus China. Could you give us your vision of the Chinese premium car segment by 2020 and how it will differ from elsewhere?
A predominant trend we’ve identified is what we call “Chinese Luxury”. China is the world’s largest market of luxury goods since 2012. And, China is the world’s second largest market of luxury cars. According to industry estimates, it is expected that the luxury car market in China will grow at an annual compounded rate of 12 percent in 2014-2020 while the overall passenger car market will grow at 6 percent only.
In the past, there was a trend toward convenience and luxury particularly in the rear of the vehicle, as wealthy car owners had a private chauffeur. Today, we also see an orientation of younger drivers preferring Western European fashion and styles. The SUV is becoming the new indulgence in China within 5 years. Some years back, the Chinese end-customer preferred sedan models and then moved to the hatchback. But over the past three years, the SUV (including MPVs) has been the most increasing segment. There is a clear up-sizing trend in China’s passenger car market, where consumers are addicted to large passenger space. Increasing SUV sales go in parallel with ongoing luxury vehicle sales growth in China. Driving an SUV for young people is a sign of affluence, especially in China.
We also find electronic gadgets catching up. In particular the younger Chinese car owner is looking for what we call “Relevant Functionality.” This is functionality that is recognisable by end-consumers as clever, purposeful, fun and smart. But it needs to offer benefit rather than function.
However, the dynamics in urbanisation are also impacting a change in vehicle needs. Air pollution, urban space and population density are driving the needs in the cities. The combination of spacious, smart, luxurious and fuel-efficient/electric is a crucial driver of vehicle development these days.
There is an increasing demand for new cars for these new citizens moving from rural into urban areas with the progress of urbanisation and MPVs are considered a good choice within this target group.
The Chinese market is obviously key to YFAI’s long-term growth prospects, despite the recent stock market turbulence. What is your sourcing strategy there?
Strategic local sourcing in China is a key element of our regional sourcing strategy in China. While our operations processes and manufacturing technologies are very standardised at a global level, we look for local suppliers near our manufacturing sites. However, it’s not the regional proximity of a supplier, but the quality and consistency of delivery that qualify a local supplier. Those suppliers often are acting in a global context, means are able to produce globally. We try to localise as much as possible. However, if the quality or the cost is not right, we need to go for alternatives which could imply broadening our own vertical integration scope.
YFAI excels by its deep expertise through our vertical integration. We combine a comprehensive range of manufacturing processes with in-house capability or most sets of equipment required for the chosen technologies and processes; and we excel with our development capability for all major tools for both prototype and production globally.
In terms of further consolidation in the automotive interiors industry, what are your expecting?
We are still seeing movement in the automotive industry, including first tier and second tier suppliers alike. Generally speaking, a lot of automotive suppliers look for opportunities that match their business case. At the same time, new markets arise constantly – especially in China. One example: China is on its way to pass the U.S. and become the world’s largest market for new energy vehicles.
As for Yanfeng Automotive Interiors, we see our new company well positioned for growth, fuelled by our unique innovation operating model.
There is a lot of talk these days about the autonomous car and the future of driving. How will that impact the cockpit?
Our innovation approach draws on the assumption that in 10 to 15 years from today, 80 to 90 percent of driving will be automated, but a licensed driver still required. While only 20 percent of the time spent in the car will have a cognitive focus on driving, we prepare for 80 percent “new found time”. Therefore, we see it as our role to develop the interior around these new consumer needs and opportunities. Actions like working, eating, playing in the car and communicating or relaxing will take more time than just driving.
Storage will be increasingly important as when people do not have to drive, they will bring more items in the vehicle that they will use during the drive. We are working on new and larger solutions for safe and easy access storage. Therefore, we integrated the new StowSmart floor console featuring customisable storage compartments including flexible tambour doors in our ID16 concept car. The benefits to passengers are better organisation, increased storage, and ergonomic usability. The ID16 concept combines various coordinated floor console modules, which can be configured individually or together. A two-way coolbox, removable cupholder and sliding compartment for large bags, and an integrated catch bin around the floor console prevent even the smallest objects, such as coins, from slipping underneath the seats.
In the future, the classic compartments in the cockpit will become obsolete. At some point, we may not need a steering wheel any longer but will use a joystick instead. Also, new electric features and advanced display technologies or alternative approaches to HVAC systems more and more show that the role of the instrument panel is changing. We need to stay flexible and see the vehicle interior as a flexible room apt for change.
But not only is autonomous driving influencing our approach to innovation. We also tailor our new product strategies around the trends of the future including China Luxury and urban SUV. Our ID16 Innovation Demonstrator is a luxury urban SUV interior for the first generation of automated cars with over 30 new solutions to create a better life on board. These are solutions to enhance the ambiance, solution to increase practical functionality, and solutions that let the driver engage in other activities enabled by automated driving.
Being interior designers, we see ourselves in the role of innovators and facilitators of bringing autonomous driving inside the car. The vehicle interior as a whole is the largest human machine interface we have in the car. We have a big responsibility in integrating this large space with the requirements of autonomous driving. We cannot just draw the attention to any single innovation we’ve integrated in the ID16. It’s the overall concept and the combination of all interior assets we’ve combined in the Innovation Demonstrator.
The importance is to think ahead and challenge each interior part we put through our development processes. All new features and products need to be able to support the autonomous driving mode and to provide a value add to future mobility scenarios.
Reducing the weight of every car component is a necessity. Yet is there not then a danger of making interior parts look inferior?
“Value up and Cost down” is a key element of our innovation strategy.
Lightweight design is not inferior at all. This is exactly where we see our strengths. We develop advanced technologies and products that combine premium appearance with robust performance, safety and quality.
Our global Engineering network is committed to ensure technical robustness and manufacturing feasibility at best cost through our deep understanding of OEM customer requirements and development processes.
Innovation is essential to win in Interiors. This includes innovation in the field of lightweight design. Our mission is to be our customers’ preferred partner for automotive interior solutions. We will do this through our global capabilities and partnerships, imaginative and cost-effective innovations, and execution excellence.
What premium will OEMs pay for weight reduction?
We can read it in the papers every day, how much OEMs struggle on their road to reduce CO2 emissions. It is a joint challenge between OEMs and their tier-1 suppliers to reduce the weight of each single component to the maximum. However, we still don’t see a willingness to pay for lighter materials. Lightweight is no longer a differentiator. It has become a basic requirement – a must – in the development specifications. Lightweight specifications need to be as competitive as overall pricing, otherwise your competition will get the business and win the race.
We achieve best cost through a focus on materials, manufacturing processes and relevant product features.
A recent example where we combine the principle of value up and cost down is our lightweight CHyM Eco-Lite door panel solution. It allows for up to 40 percent mass savings compared to conventional plastic substrates.
Could you draw on an example on the way in which YFAI has pushed back the technical boundaries of vehicle acoustics and soft trim, in particular for lightweight solutions?
Our door panels help significantly boost fuel economy, a major factor in car-purchasing decisions today. Our Compression Hybrid Eco-Lite Glass Fiber for instance provides weight reduction of up to 40 percent with all the structural strength our customers require. It is extraordinarily efficient and cost-effective because it combines compression and injection molding into one streamlined, single-step process. It uses economical, high-performance materials such as glass and polypropylene resin. CHyM Eco-Lite is just one of the many innovations with which we are driving lightweight construction and sustainability forward. When CHyM is used in all four doors, it can provide a weight savings of at least 3 kg.
Another example is our new StowSmart floor console that we integrated in our ID16 concept car. It offers reduced component complexity and a weight savings of approximately 30 percent. The StowSmart floor console features customisable storage compartments and flexible tambour doors. This provides enhanced organisation and additional storage.
Considering the area of instrument panels we use IMG Thin TPO Foil – Foam-In-Place. This innovative process and materials make it possible to produce a TPO skin that can be as thin as 0.5mm for Foam-In-Place. That represents a significant mass reduction of 50 to 70 percent compared to the traditional 1.1 to 1.3mm industry standard. Yet, this remarkably thin TPO skin provides a durable, blemish-free surface. As an added benefit, no scoring is needed, which guarantees a quality appearance in the instrument panel above the passenger airbag.
