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Chairman’s Letter

 

Dear Shareholders,

Mobility and our industries are currently changing faster than ever before, which means there has rarely been a more exciting and promising time for Continental to shape the future of these areas. By investing in us, you are investing in our pioneering technologies. I would like to thank you for doing so on behalf of our global team, as well as on behalf of millions of people.

After all, with your investment, you are fostering our solutions and helping to protect millions of road users around the world from accidents and their consequences. Moreover, you are also contributing to cleaner air, while paving the way for intelligent, convenient, and connected driving. Backed by your support, we are designing mobility to be sustainable, thus creating immense value.

In 2016, our pioneering technologies enabled us to continue our streak of successful business years. Our net income was just above the previous year’s level, even though several isolated events impacted our earnings. We are working hard to ensure that this does not happen again. We will be continuing our profitable growth in 2017.

Today, you can find our technologies in three out of four vehicles, where they play a crucial role. Take, for example, advanced driver assistance systems with their sensory technology and software. These systems are our fastest-growing product area. In just a few years, we have increased their sales from zero to approximately €1.2 billion, and we expect that figure to exceed €2 billion in 2020. And that’s not all.

In addition, we provide solutions for connected mobility. In the future, vehicles will communicate not only more directly with their drivers, but also more intensively with each other and with the infrastructure. They will warn one another of dangers and tell each other about alternative routes. We are providing hardware and software for this digital exchange of data and information. In doing so, your Continental is becoming one of the leading technology and service companies.

Think about it. All in all, drivers spend as much as an entire year of their life in traffic jams, which is an unbelievable waste of time, not to mention a needless waste of fuel. Traffic jams harm the environment and are quite simply an annoyance for everyone. Our goal is therefore to keep traffic flowing. To this end, we are making vehicles intelligent and capable of learning.

We currently generate a total of nearly €15 billion with digital technologies. This equates to 60 percent of the sales in our three Automotive divisions.

Another example is zero-emission mobility. The future lies in electric drive systems, and we are very well-prepared for this. We are working on orders from all of the world’s major markets. At present, demand for hybrid drive systems in particular is on the rise. Such systems consist of a diesel or gasoline engine, as well as a small electric motor with a battery. This technology serves as a transitional bridge until all-electric vehicles have caught on in the medium term. Our 48-volt “people’s hybrid” offers the best value for the money, while cutting carbon-dioxide emissions by as much as 20 percent.

Your Continental is right at the forefront when it comes to electric mobility. In past years, we invested more than a billion euros in this future-oriented field, and the trend is rising. We are currently working on customer orders worth more than €2 billion. The transition from the combustion engine to electric mobility will not gather momentum significantly until between 2025 and 2030. At some point during this phase, the number of combustion engines will reach its highest level and then decline moderately. Our strategy and planning are therefore paying off, because if you invest too early, you end up throwing away billions. But if you invest too late, you will lose out on the market.

We expect that some 110 million cars and light commercial vehicles will be produced in 2025. One out of ten of those vehicles will feature all-electric drive systems, and nearly one in three will be equipped with a 48-volt or high-voltage hybrid drive system.

Profitable growth outside of the automotive industry is another important part of our strategy. The share of sales to industrial customers and end users is to be increased gradually toward a figure of 40 percent, with most of the increase coming from our tire replacement business and from the ContiTech division. In 2016, the Tire division had its most successful fiscal year to date. At the same time, it kicked off the third phase of its long-term growth strategy, making investments in the billions. Our ContiTech division has continued to pursue its growth strategy with acquisitions. In this way, we will strengthen our activities in the growth market of air springs and air spring systems for railway engineering, while also boosting our surface-materials business.

Our company is well on track for continued success in the future. In our business fields, we are growing quickly and profitably and are striving to achieve sales of over €50 billion in 2020.

Your trust is what drives us! We are looking forward to the next stage of our shared success.

 

Signature Dr. Elmar Degenhart

Dr. Elmar Degenhart
Chairman of the Executive Board

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v, Chairman of the Executive Board

Dr. Elmar Degenhart
Chairman of the Executive Board