The CEO of Valeo, who has just been appointed head of France’s second largest car supplier, faces two challenges: to avoid the pitfalls of an international situation shaken by the war in Ukraine, deficits and inflation, but also to build confidence of the financial markets. , chilled by his initial announcements. Between now and 2025, however, Christophe Périllat’s projects to install more technology in the car of tomorrow are not lacking.
How does the war in Ukraine affect the activities of the Valeo group?
Christopher Perillat: We employ many people of Ukrainian nationality in our Polish, Hungarian and Czech factories. Let me think of them first, of their family. The situation is really terrible. You ask me what the direct consequences of this war are: they are minimal, because we have no factory or supplier in the country.
We have one production site in Togliatti, Russia, serving Avtovaz and Renault. It is a small establishment – it employs about 500 people – representing only 0.5 to 1% of our total turnover. The production is intended for the local market, so in case of problems to continue production, it will not affect our customers outside of Russia.
What will be the impact of the conflict on the global auto market?
The industry is emerging from two years of underproduction. Between 75 and 76 million cars were produced worldwide in 2020, the year of Covid, and 77 million in 2021 as the semiconductor crisis raged. These figures should be compared with the production of previous years, about 90 million cars. So we have a production deficit of 30 million vehicles, which has thrown the market out of balance: many customers are waiting for their cars, deadlines have become longer.
So even if the war had an impact on the global economy, I remain confident as the auto industry has very full order books and strong demand to meet. So the demand is not that of the market. On the other hand, as in 2021, the question will be whether manufacturers can produce in Europe, as many suppliers in Ukraine will be severely disrupted. There are also many unknowns about inflation, the price of energy and raw materials…
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You have just taken over from Jacques Aschenbroich, who has been head of Valeo since 2009. What are your priorities?
The group is very well positioned in the mobility market of tomorrow. I plan to accelerate even further in two areas: electrification and vehicle driver aids. As for the first part, we have decided to acquire Siemens’ shares in the joint venture established in 2016 to produce high-voltage electrification systems for cars.
Integrating this activity into our Propulsion division will make it more innovative, competitive and profitable. On the second part, I announced an acceleration of our development on an essential driver assistance product: the Lidar (for “light detection and range”, a system that makes it possible to measure distances and detect obstacles with a laser beam, Ed). It is a sensor with extraordinary performance that allows a very advanced degree of vehicle autonomy.
After the presentation of your roadmap last February, Valeo’s share price fell. Why ?
Because I wanted to be careful about our goals in 2022 and our ambitions for 2025. There are many uncertainties about the car market: Ukraine, the components crisis, inflation… In the context, this caution was necessary.
What are your ambitions for the self-driving car?
Speed up again. Today we are already the world number 1 in these technologies. We make ultrasonic sensors (that “beep-beep” in your car!), cameras, and then this newcomer, Lidar. We also design “controllers”, which are used to process the data captured by the sensors in order to synthesize them and reconstruct a 360-degree view of the vehicle’s environment to avoid obstacles (pedestrians, cyclists, trucks, etc.) to avoid. We also develop a lot of software to let the car make decisions: accelerating, braking, dodging.
How quickly will these technologies become widespread?
30% of the premium models will have a level 3 autonomy function within five to ten years, a little later for the “mass market”. The driver can delegate driving to the vehicle, stop looking at the road and do something else: read, text, watch a movie… Two models in the world have received approval from the supervisory authorities for greater autonomy: the Honda Legend in Japan and the Mercedes-Benz S-Class in Germany. Their common point? Both are equipped with Valeo Lidar. For the other cars that offer driver assistance these days, you still need to show that you’re paying attention by touching the steering wheel regularly.
You also announce innovations in the field of lighting…
In the passenger compartment of tomorrow, you can adjust the lighting according to the driving situation, the weather or your mood, to promote well-being. Outdoors, the lamps will increasingly be used by designers to emphasize the brand’s signature. Cars will also communicate with their surroundings through lighting: when you turn, signs are projected onto the road to inform pedestrians or cyclists about the car’s behaviour…
Manufacturers invest heavily in software, is this competition for you?
There is more and more software in cars and there is room for everyone. Valeo is a major player in electronics. Nearly one in two engineers works on software, system architectures, cybersecurity and artificial intelligence. The developments of our customers will be fully complementary. They take the higher layers, the management of the car, and we take the lower layers: software to operate the sensors, the 360 degree map around the vehicle, etc.
The Gafa are also ambushed…
More than the Gafa, we mainly see the rise in power of the manufacturers of large chips, such as Nvidia or Qualcomm, who are thinking about both the electrical architecture and the electronics of the car, designing computers to manage all the data and the instructions. Everyone has their share of this value chain in complete realignment. The one we occupy and will continue to occupy is very important, so on that side we don’t have to worry.
What is the purpose of the recent cooperation agreement with Renault?
We are developing and co-producing a new electric motor that will not contain rare earth metals (mineral materials with exceptional properties used in advanced technology, editor’s note). These metals come largely from China, so a matter of dependency, as their extraction has an impact on the environment and their prices are very volatile.
Therefore, by setting ourselves the goal of eliminating rare earths, we can evacuate a whole host of problems. Renault will assemble the engines for its own needs at the Cléon plant (Seine-Maritime). We will offer this engine to other manufacturers.
Does the growth of the electric car market offer you other opportunities?
Yes, for example in our “thermal systems” activity. An electric vehicle contains almost three times more of our thermal products than a combustion engine vehicle. They are used to keep a battery in good condition, in particular by cooling it during rapid charging phases, which is essential for cell life.
They also make it possible to maintain autonomy. In cold weather, you lose a lot of it because some of the electrons that are in the battery that keep you moving forward are also used to heat the passenger compartment. We therefore need highly efficient heating systems. We develop heat pumps such as those used in homes, which are very economical in terms of electricity consumption.
What is the future of your combustion engine business?
In the end, they are doomed to disappear, except in after-sales. Products specifically related to combustion engines represent a very small percentage of our turnover: 11% today and it will be less than 4% in 2030. Fifteen years ago we had already decided to no longer have activities in diesel, nor are we in engine control, an activity we sold, nor in injection…
Will you continue to work on the hybrid engine?
For the car it is a transition technology. In many parts of the world, the market will eventually focus on high voltage, i.e. the 100% electric motor. But the transition phase will be a long one, and we are confident that the 48-volt light hybridization market will continue to grow well beyond 2030.
The new Euro 7 standard sets standards that make this technology almost necessary for all combustion engines. When it falls in favor of high voltage, adjacent low voltage markets will take over.
What are they ?
These are the mobility markets in a broad sense, in which we strongly believe. The technologies we master today, such as electrification or driver assistance, allow us to approach them with good prospects. This includes the electrification of two-wheelers – bicycles, motorcycles and mopeds – but also tricycles such as the rickshaws we see in Asia.
There are also small city cars like in France the Ami de Citroën, or this new object, the “droid”, a kind of cooler or Caddy on tires that will be used for last mile deliveries. You order a pizza or groceries and it’s an autonomous electric trolley that comes to the base of your building to drop them off after you text.
How did you deal with the semiconductor crisis?
Last year we were one of the only ones to serve all our customers successfully. In early 2021, we significantly increased our inventories and gave our suppliers greater visibility to anticipate and estimate their investments. In the group, all factories use the same material requirements planning system and management system.
This made it easier to communicate and share deficient products between sites. But we supply more than 20,000 different references and we buy more than 250 million components per day for Valeo’s needs. It is not an easy task to identify in this crowd who will be a problem!
Will the shortage persist?
Even if the overall situation improves, it remains complicated. There are still problems with certain technologies, but in order to be produced, a car needs 100% of its components. Every month that goes by shows the best.
The car weighs heavily in the French trade deficit. What is France’s share of Valeo’s business?
France is a very important country for Valeo. We have our headquarters there and the headquarters of our four companies. The country represents 15% of our turnover, employs 14,000 people, 23 factories. We are committed to maintaining our French industrial footprint and ensuring that much of the group’s innovation comes from our French labs.
We’ve also done a lot of reindustrialization. Factories have been converted to make more technological products aimed at the electric car. Now we have to keep working on costs. Production taxes are a subject of the presidential campaign. I hope the candidates will use it to lighten the weight that is weighing on France-based companies.
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