Despite growing competition and lower profit margins, Robert Bosch says it won’t back off on its commitment to research and development spending.
In 2003, investment in R&D at Bosch’s automotive division grew 8% to €2.2 billion – or more than 9% of sales.
Bosch increased the number of employees working in automotive R&D by 500 to 16,000 in 2003. Altogether, the automotive division has 144,000 employees.
The German group registered 2,748 new patents in 2003 – most of them in the auto sector.
Bosch claims to be the leading registrant of automotive patents in the US as well as in Europe. It has 1,600 employees in R&D in North America.
The emphasis on technology will continue, says Wolfgang Chur, a director in Bosch’s automotive business.
In 2004, Bosch will open its new technical development centre in Abstatt in Germany. Bosch is also growing its automotive R&D operations in Asia.
Bosch has 1,800 development staff in Asia and plans to add another development centre in China to broaden its range of products there.
Currently, Bosch has a centre with less than 100 employees working on petrol direct injection in China. The new centre will employ several hundred technicians working on electronic systems, navigation, brakes and diesel systems.
Not all investments give a rapid or attractive payback. Bosch has to make the right bets.
Waiting for pay-offs
Some areas that Bosch has invested in have not taken off.
The market for navigation systems is growing in Europe. Bosch has won OEM contracts with Ford and at least one other carmaker for its “people navigation” system, its Travelpilot E1.
But retail prices need to drop from nearly €900 to nearer EUR 500 before volume increases much, say Bosch executives.
Bosch has invested heavily in “sensitive car” components – radar and other sensor systems that predict an impact. But adaptive cruise control, the key to the sensitive car, has not grown as quickly as expected.
Bosch has refocused its research in recent years toward investments in projects that directly benefit the consumer, says Chur. It has new technologies on the way – such as its first production contract for a night vision system. But the medium term outlook will be determined by the growth of a few key technologies.
“We have learned from all the earlier success stories that the only innovations that achieve big volumes are those that appeal to the car driver,” he says.
ESP and diesel have significant market potential. To increase consumer demand, Bosch is helping to market them.
The supplier is teaching dealers and consumers about the benefits of ESP. For example, in 2003 it used test drives to train 650 Peugeot dealers.
Bosch expects to produce 4 million ESP units in 2003 – half a million more than in 2003. Bosch expects ESP installations in Europe to grow from its current 40% to 50% in 2006.
Diesels are also set to grow. The sheer size of Bosch’s €7 billion diesel business underlines the rewards a company can achieve through leadership in innovation.
Bosch produced almost 6 million common rail and unit injector systems in 2003, and expects to produce 7 million in 2004.
Diesel penetration is growing in Asian markets outside Japan and Bosch executives say it is well suited to US driving conditions and preferences. But US consumers mostly believe diesels are dirty, noisy and unreliable.
Bosch expects to reach US EPA norms for emissions starting in 2007 with developments over the next 12 months. But in the end consumer perceptions will decide what technologies win out.