just-auto.com

Q&A with Gentex

By Matthew Beecham | 4 January 2006

In an exclusive interview with just-auto.com, Matthew Beecham talked with Garth Deur, CEO, Gentex Corporation about the company’s auto-dimming rearview mirrors and other promising technologies.

Gentex Corporation is the largest supplier of electrochromic auto-dimming rearview mirrors to the automotive industry, selling to most major carmakers worldwide. The company’s auto-dimming mirrors are based on the science of electrochromics, which is the process of reversibly darkening materials by applying electricity.  During night time driving, the mirrors use a combination clever sensors and electronic circuitry to detect glare from rearward approaching vehicles and darken accordingly to eliminate the glare and protect driver vision.  Last year, Gentex began shipping auto-dimming mirrors with its so-called SmartBeam, a high-beam headlamp control feature, on the Cadillac STS and Jeep Grand Cherokee as optional equipment.  Option (take-up) rates were in the 25 – 30% range on the 2005 models.  In Europe, Gentex will supply its SmartBeam for the BMW 5-, 6- and 7-Series models, marking the technology’s first appearance in the region.  BMW will market the system as ‘high beam assistant.’  Option rates are expected to be 40 – 45% on those models.

just-auto.com: Gentex has managed to buck the trend in the automotive rearview business, posting an 11% increase in net income in the third quarter of 2005.  How have you managed it?

Garth Deur:  “The primary force at work is demand for our auto-dimming technology.  Although auto-dimming has been available for the past 15 years, its penetration is still relatively small in the global vehicle industry.  Last year, approximately 18% of vehicles built globally used an auto-dimming interior mirror.  That means 82% of the market is left for us to go after.  In the current environment when vehicle production is flat or in some cases down, we still have the opportunity of higher penetration.”

just-auto.com: As you say, there is a massive potential.  But surely the interior auto-dimming rearview mirror will plateau at some point and you won’t get anything like market saturation? 

Garth Deur:  “As we are able to improve our product technology and cost position, we are not going to accept that there is a plateau.  We liken it to the penetration of air conditioning in vehicles. That said, we believe that there is an opportunity, over the next two vehicle cycles [6 – 12 years], to increase the penetration of auto-dimming mirrors to 50%.  But then again, 50% still means we have 50% to go after. Although the technology started in the luxury segment, we have already penetrated some mid-size segment vehicles.”

just-auto.com: How do things stand with exterior auto dimming mirrors? 

Garth Deur:  “Far behind the adoption of inside mirrors, outside mirror penetration last year was about 5% of the vehicles built globally.  Historically, exterior auto dimming mirrors have been used on luxury cars.  Although we have had some success with exterior, it has lagged the adoption in interior auto dimming mirrors.  In our third quarter this year, however, the rate of increase on exterior auto dimming mirrors was actually higher than the acceleration of interior auto dimming mirrors.  We had a 12% growth of inside mirrors against 27% growth rate of our outside mirror business.”

just-auto.com: Why has your exterior mirror business lagged your interior?

Garth Deur:  “It took us several years longer to develop outside mirrors with auto-dimming technology.  The reason for that is two-fold.  First, outside mirrors have to function in a far more difficult environment, in all temperatures and weather conditions.  The other issue is that in North America, a flat driver side mirror and convex passenger side mirror is standard across all vehicles.  But in Europe, for example, they use a combination of convex and aspheric mirrors.  Yet to execute our technology, we need two perfectly matched pieces of glass which sandwich the chemistry to enable auto-dimming.  So there has been a manufacturing process challenge which has created a cost issue. Consequently, outside mirrors tend to be more expensive than inside mirrors.  We have, however, made great progress over the past few years.  We are now able to offer the outside auto dimming mirrors -- particularly the curved type -- at more competitive pricing than just a few years ago.  I think that is one of the reasons we will see more vehicles in the mid and lower segments fitted with auto-dimming outside mirrors.”

just-auto.com: Assuming your prospects for a 10-15% year-over-year rate of growth continues, when do you see your manufacturing capacity being reached?

Garth Deur:  “We are currently building a new facility in Zeeland, Michigan. It is scheduled to open next summer and should take our manufacturing capacity into the 20 – 25 million mirror units annually range. That is up from about 15 million units this year.  So that should hold us for a few more years. We can put up a new building in 18 months.”

just-auto.com:  What else can we expect to see packaged into the rearview mirror? 

Garth Deur:  “The interesting thing for Gentex is that not only is there the opportunity to grow our business by increasing the penetration of auto-dimming mirrors to global vehicle build, all of the features we supply – such as compass, telematics, microphones, lighting, and the HomeLink transceiver -- has the same opportunity.  So we can grow the business significantly by just doing more of the things we already do today.”

just-auto.com: What are your ambitions for your Smart Beam headlight technology? In particular, what are its prospects in Europe? 

Garth Deur:  “We are only at the very beginning of the SmartBeam product story.  It was introduced a year ago on two vehicles for General Motors and Chrysler [on the Cadillac STS and Jeep Grand Cherokee as optional equipment].  The feedback we have received from our customers has been very positive.  From an OE customer perspective it has been almost problem-free.  Those customers have already committed that there would be many more SmartBeam programmes in the future.  Last summer, BMW announced its intention to use SmartBeam on the 5-, 6- and 7-Series.  What is interesting is that the Chrysler and General Motors applications were for the North American market only.  We wanted to launch SmartBeam with customers whom we are very familiar with.  We have been doing business with Chrysler and General Motors for more than 15 years.  Their engineering groups are just a two-and-a-half hour drive from our engineering groups.  So it is very easy for us to be with them every day.  Our thought was that if we launched SmartBeam with a customer on another continent, there would be so many unique things that it would be very challenging for us to do it with the 6 or 12 hour time difference, language differences, and it would have been more difficult for us to be with them every day.    So we very intentionally launched it in North America first.  Now, BMW’s use of the SmartBeam will initially be for the European specification vehicles for those three platforms.  They are also choosing to launch SmartBeam in their home market.”

just-auto.com: I guess SmartBeam is a perfect match given that German motorists like to drive fast and have both hands on the wheel …

Garth Deur:  “Yes.  BMW say they want to offer it in their home market where it is close to the marketing and engineering groups so that they can get a good feel for their customers’ reaction to this new technology.  But we also believe there will be demand in all parts of the world for the technology because it makes so much common sense.  People understand it intuitively.”

just-auto.com: It sounds like an obvious innovation.  I just wonder why it took you so long?

Garth Deur:  “It took us so long because it was so hard to perfect the technology.  An automatic high beam system was actually developed way back in the 1950s by General Motors.  It was called Autronic Eye.  But as it performed so poorly, it was soon dropped. So the issue isn’t that it is a remarkably new idea but about developing the technology that gives the driver confidence to leave it switched-on.”

just-auto.com:  What other products show potential for long term revenue and profit growth? 

Garth Deur:  “I think our mirror-embedded microphone technology is another great opportunity.  Although the EU has introduced laws for hands-free cell phone use while driving, it is only just catching-on in the US with some States introducing legislation.  Also, navigation and entertainment systems use voice commands which need a microphone to control them.  Our proprietary microphone technology has been developed specifically for use in the automotive environment.  By installing it in the rearview mirror gives OEMs a consistent, simple location rather than trying to design a new location in different vehicles.  So we think the microphone is another feature that shall see a far higher adoption rate.”

Expert Analysis

Global market review of automotive rearview mirrors – forecasts to 2011-3rd edition

Today's exterior rearview mirrors offer a number of features such as auto-dimming, electric in-car mirror adjustment with memory function, electric power-fold, heated glass, integrated turn signals and approach lights. As with other 'value-added' automotive technology, innovations are typically introduced in the premium segment and subsequently appear in the high-volume segment as awareness of these products and their usage increases. For example, Schefenacker's exterior rearview mirror with integrated turn signal designed initially for Mercedes-Benz in 1998, has since been adopted by Volkswagen in the Golf V. 

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