Corporate Strategy

Our strategy comprises seven dimensions that complement one another and are geared toward sustainably creating value and thereby ensuring the future viability of the company.

The requirements for mobility are constantly changing, due in no small part to the increase in digitalization. This gives rise to opportunities when it comes to new mobility-related services. For Continental, this means the possibility of enhancing the current business model and existing products with software-based services (known as servitization) as well as mobility services in the form of softwareonly products for the end-user market.

Seven strategic dimensions for enhancing the value of the corporation on a sustainable basis
Our seven strategic dimensions complement one another and are geared toward sustainably creating value for all stakeholders and ensuring the future viability of the company.

1. Value creation – enhancing the value of the corporation on a long-term basis
For us, enhancing the value of the corporation on a long-term basis means sustainable success while taking into consideration the cost of capital. Our target is at least 20% ROCE. We achieved this target once again in 2016. However, the return decreased year-on-year due to a number of unrelated events that occurred in the year under review, particularly in the third quarter, resulting in a negative impact of approximately €480 million.

Continental Value Contribution (CVC)

Continental Value Contribution (CVC)

2. Regional sales balance – globally balanced distribution of sales
We want to achieve a globally balanced distribution of regional sales, which will allow us to become less dependent on individual regional sales markets and on market and economic fluctuations. To accomplish this, we are taking advantage of the opportunities available to us on the growing markets in Asia and North America, while bolstering our strong market position in Europe. We aim to gradually increase the share of our consolidated sales in the Asian markets to 30%. In China we want to grow at an above-average rate in the next few years. The total share of our sales in the North and South American markets should be maintained at 25% or more.

In the year under review, we achieved 21% of our sales in Asia. The share of our sales in the North and South American markets was 28% in total.

3. Top market position – among the three leading suppliers in all relevant markets
We want to be among the world’s three leading suppliers in terms of customer focus, quality, and market share in the long term. This will enable us to plan our future based on a leading position and thereby play a major role in advancing technological development in individual sectors.

A key success factor and driver for future development is our strong presence in the innovative and promising technology sectors of the automotive industry.

Corporate strategy at a glance

Corporate strategy at a glance

4. In the market for the market – high degree of localization
The aim is for at least eight out of ten application developments to be carried out locally, and for the percentage of local production to be just as high. This is how we will meet the needs and requirements of our customers most effectively. Our development and production teams worldwide enable us to offer solutions and products for high-quality cars and affordable vehicles, as well as customized industrial applications.

We currently have production locations in 34 of 56 countries in which we are represented. At the same time, we are purchasing locally – insofar as this is possible and cost-effective – as well as marketing locally. In the years to come, we will continue to work hard to include one of the Asian manufacturers to our five largest automotive customers as well. We aim to achieve this with a high degree of localization.

5. Balanced customer portfolio – balance between automotive and other industries
We want to reduce our dependency on the automotive economy by having a balanced customer portfolio. This is why we are striving to increase business in industries outside of the automotive original equipment sector while at the same time achieving further growth with carmakers. In the medium to long term, we want to increase the share of sales with end users and industrial customers outside of the automotive original equipment sector toward a figure of 40%.

In the year under review, we further expanded our service business in fleet management through the acquisition of Zonar Systems. By doing so, we have broadened our portfolio and our expertise in mobility services and strengthened our regional balance by investing in a provider of fleet management solutions in the U.S.A.

Our acquisition of the Bandvulc Group, a U.K. fleet-management service provider, will bolster our position in the U.K. and Irish market. In addition, the acquisition of the racing tire specialist Hoosier Racing Tire enhances the balance of our customer portfolio.

Despite these acquisitions and other activities, the share of sales with end users and industrial customers fell slightly to 27%. This was due, in the year under review, to modest demand in industrial business in general and to end markets dependent on oil and mining in particular.

Our industrial business in the ContiTech division will be expanded by purchasing the Hornschuch Group, a leading manufacturer of design, functional, foam, and compact foils as well as artificial leather. The acquisition will strengthen our global business outside the automotive industry in the long term.

6. Technological balance – combination of established and pioneering technologies
Our product portfolio should consist of a mix of profitable as well as viable established and pioneering technologies. We set and follow new trends and standards in high-growth markets and market segments. On our established core markets, we ensure that our position as one of the leading automotive suppliers and industrial partners keeps on developing. This allows us to be represented and competitive in all phases of the respective product life cycles.

We are expanding our portfolio with software-based services and mobility services. This enables us to offer a competitive mix of our proven, established products and pioneering technologies such as eHorizon (electronic Horizon), a solution for sharing important route information.

7. Great people culture – a culture of inspiration
We aim to foster an inspiring management culture, in which our employees can enjoy demonstrating their full commitment and achieving top performance. A culture of trust and personal responsibility is being promoted in all divisions and departments, one in which we openly deal with and tolerate our mistakes – and learn from them. Our working conditions are intended to make it easy for our employees to focus on what is important and to strike the right work-life balance.

In the year under review, we established globally binding regulations for flexible working conditions for the first time. The package features options for working from home or elsewhere, for part-time and flextime, and for taking extended periods of leave (sabbaticals). We offer these flexibility programs at all levels and for all employees in 21 countries. They are thus available to around 200,000 employees, or about 90% of the global workforce.

Five overarching areas for pooling our business activities
Overarching business areas relate to our systems and products that are worked on by more than one division. In the year under review, we defined five overarching business areas, each of which is headed by a member of the Executive Board:

  • Electrification
  • Automated driving
  • Mobility services
  • Software-based services (servitization)
  • Holistic connectivity

1. Electrification
Alongside technologies for optimizing the combustion engine, we are developing technologies that allow all-electric driving for limited periods or continuously. Our portfolio thus includes electronics solutions such as 48-volt drive systems, hybrid and plug-in variants, as well as all-electric motor solutions. Beyond brake-energy recuperation, our expertise also lies in power electronics, which is the intelligent management of energy that is provided while driving – by the combustion engine, the electric motor, the all-electric drive system and the battery. Continental firmly believes that the electric motor will become a viable alternative drive system in the long term.

We anticipate that 10% of vehicles produced globally in 2025 will run on electric power alone. In addition, nearly one in three will be fitted with a 48-volt or high-voltage hybrid drive system. This means that we are continuing to plan significant investments in these technologies.

2. Automated driving
Based on the advanced driver assistance systems that are already being developed today, it will be possible in the future to free up some of the time the driver spends in the vehicle – time in which the car monitors and controls the driving process. This subject has raised many justified questions and doubts that have not yet been answered definitively, such as who is liable in the event of an accident. But one thing is for sure. Vehicles will make far fewer mistakes when driving than humans do. With our sensor solutions based on camera, radar and laser technology, as well as our expertise in electronic control units and vehicle connectivity, we are starting out in a strong position. With regard to advanced driver assistance systems, we expect to break past the €2 billion mark for sensor technology sales in 2020 – doubling our sales in just five years. If we include vehicle-connectivity technologies, our sales of automated driving systems will then be over €3 billion.

3. Mobility services
As a result of increasing connectivity between vehicles as well as with traffic infrastructure, demand for mobility services is constantly growing – and digitalization is opening up a new market for software-only products for automobile manufacturers and end users. Examples include advanced traffic management, intelligent payment systems, maintenance management, and driving safety, as well as new technologies that go beyond the vehicle. Our growth plan includes key elements, such as, to pave the way for mobility services and our eHorizon. Recently launched software-based services include solutions such as vAnalytics (a service platform for auto repair shops, dealers, and drivers), remote vehicle diagnostics (RVD) and over-the-air (OTA) keys.

4. Software-based services (servitization)
The servitization business area complements the current business model and existing products and systems with software services as an additional service that offers added benefits for our customer. One such example is ContiConnect, a new tire information and management system for truck and bus fleets, that we announced in the year under review. ContiConnect monitors, analyzes, and reports the tire pressure and temperature of the entire fleet based on data from the proven ContiPressureCheck sensors. If necessary, the system notifies the fleet manager and offers corrective action, for example by a Conti360° service partner. The associated online portal produces reports on the tire performance and overall efficiency of the fleet. Following its launch in the second quarter of 2017, ContiConnect will be available in key markets in the Asia-Pacific region, Europe, and North and South America. For our customers, this means a change from manual, routine tire care to automatically monitored tires and targeted care.

5. Holistic connectivity
Digitalization and interconnection of the physical world (the Internet of Things) is a significant driver of economic growth. It is extensive and comprises all manner of objects, products, and processes. Aided by digitalization, the Internet of Things could potentially connect 1.6 trillion objects. Today, 14 billion objects (about 1% of this potential) are already interconnected, which means there are still tremendous opportunities for connectivity that have yet to be seized. The positive effect of this development on the global economy is estimated at approximately U.S. $6 trillion in 2020. By 2020 alone, 50 billion devices and machines in addition to over 250 million vehicles will be interconnected, resulting in considerable potential sales for the automotive industry. The estimated market volume for 2020 is €57 billion.

Vehicles are thus also becoming part of the Internet – they are changing from a closed system to an open one. This trend is influencing a wide range of different systems and technologies, from vehicle electronics to interconnected services and big data analysis. Using our holistic connectivity vehicle, we have presented an intelligent future for mobility. Featuring context-based services, an intuitive human-machine interface, and IP-based network architecture, this demonstration vehicle gives insights into technologies and services for fully connected vehicles.

Based on our strategy and our five overarching business areas, we are striving to achieve sales of over €50 billion and ROCE of at least 20% by 2020.