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5. Continental Group (China) Business Report FY ended Dec. 2017

Continental Group (China) Business Report FY ended Dec. 2017

Near-term Trend

-On May 8, 2017, Continental Tires (China) Co., Ltd. announced that General Tire, which operates under the Continental Group, will enter the Chinese market. General Tire will release six products from its Grabber and the Altimax series that are suitable for SUVs and sedans. (From news releases issued by multiple sources on May 9, 2017)

New Plant

-In December 2017, Continental AG announced that the Phase III Expansion Project of Tianjin Plant had been completed and would put into use. This Expansion Project covers a construction area of approximately 25,000 square meters, including a workshop of 5,400 square meters, an office of 1,300 square meters and a warehouse of 9,000 square meters. The production line in the new plant will be used to manufacture the decorative and functional plastic products and injection products that support the gearbox, car body and security products, so that it will contribute to increase the productivity of TCU（Tape Control Unit）, TPMS（Tire Pressure Monitor System）, BCM(Body Control Module), SCM(Skylight Control Module) and so on. In particular, the highly integrated High Voltage Shaft Drive Armature System (EMR3) will also be produced in the new plant so as to meet the requirements of the Chinese electric vehicle market. (From a press release on December 6, 2017)

-On November 20, 2017, Continental Automotive said that the company had completed the construction of its first RAAX turbocharger production lines outside Europe in Jiading District, Shanghai. The RAAX turbocharger is developed by Continental. Its production began in Europe in 2016 and is now adopted by Volkswagen AG for the EA888 Gen 3B engine platform of the Audi A3. The VW Teramont with a 2.0-liter turbo gasoline engine is going to be the first model to have this turbocharger in China. Then it will be followed by other models with engines with greater displacement such as the VW Tiguan. The new Continental plant in Jiading District, Shanghai, has a workforce of 1,600 employees and many production lines including those for anti-lock braking system (ABS) systems. The turbocharger production facility is built currently on a site of 2,000 square meters, but the company intends to expand the site next year. The investment in the new facility has already reached several tens of millions of Euros. The company is also planning to complete the construction of a new plant in Mexico next year. Therefore in next year, the company is going to have a capacity to cover three major automotive markets, namely Europe, China and North America. (From some releases on November 23, 2017)

-Continental Group said on October 26, 2017, that Continental Automotive Body Electronics System (Wuhu) Co., Ltd. completed its plant expansion work in Wuhu and launched its operation. The company spent Chinese yuan (CNY) 60 million in total to enlarge the plant by 4,500 square meters and the office by 700 square meters for example, or 7,200 square meters in total. By 2019, the company intends to add 13 production lines for attaching surface materials to instrumental panels and man-machine interface units to support the production of instrumental clusters, head-up displays, display solutions, control panels and full-size liquid crystal display meters. The plant in Longshan, Wuhu, launched its operation in 2014. It's built on a site of 120,000 square meters located in the Economic and Technical Development Zone in Wuhu. It currently has 72 customers in 20 regions in China and 9 overseas customers in 8 countries. It has a workforce of 1,650. (From a press release on October 27, 2017)

-Huayu Continental Brake Systems (Chongqing) Co., Ltd., a joint venture established by Continental Automotive and Huayu Automotive Systems Company Limited on an equal basis, officially began its operation on May 18, 2017. The joint company was built on a site of more than 80,000 square meters in the Chongqing Liang Jiang New Area Yufu Industrial Zone with a capital investment exceeding Chinese yuan (CNY) 6 million. It produces parts and components for automotive brakes, such as brake calipers, vacuum boosters, and electrically-powered parking brakes. (From some releases on May 18, 2017)

-Continental Tires completed the third phase of its plant expansion project in Hefei, China and began new operations on March 28, 2017. With a total investment of around EUR 250 million, the expansion will boost the plant’s annual production capacity to 14 million units by 2019 from the current 8 million units. Continental Tires Hefei Plant officially opened in 2011 with a total land area of 340,000 square meters. The plant mainly produces replacement and original equipment passenger car tires for the mid- to high-end Chinese market. (From a press release on March 28, 2017)

Contracts

-Continental has signed a strategic cooperation framework agreement with NIO, a global electric vehicle startup. The two companies will collaborate closely in the field of fully electric vehicles and other relevant fields, including intelligent transportation systems and automated driving, striving to build a stable partnership on a long-term basis. Under the agreement, Continental and NIO will further collaborate on NIO new car platforms. In a first step, Continental will supply vehicle technology such as air suspension systems and tires to NIO’s ES8 electric SUV. (From a press release on May 31, 2017)

-Continental will start supplying Great Wall Motor with sensor control units, transmission control units, applied software and advanced system solutions for Great Wall Motor’s 7-speed double clutch transmissions (DCT). This transmission is the first 7-speed DCT developed in China for the first time, by Great Wall Motor. Currently, it’s mounted on models sold under the WEY brand, which is the luxury brand of Great Wall Motors. (From a press release on May 23, 2017)

-Continental has developed a 7-inch color TFT cluster for the SAIC Roewe RX5. The cluster has been used on the new model since September 2016. Developed locally by Continental Automotive Body Electronics System (Wuhu) Co., Ltd., the cluster is the first large instrument panel developed locally by Continental. It is equipped with a full-color LCD with a high resolution (800x480) level and high contrast ratios. The cluster is well connected to the infotainment displays and realizes interactions between three displays (smartphone, infotainment system and cluster) through the intelligent connected system developed by the SAIC Group and Alibaba. In addition, the cluster employs holistic Human Machine Interface design in which the physical gauges and the LCD are united smoothly by the virtual gauge concept, providing the driver with brand new technology experiences. (From a press release on January 11, 2017)

Strategic Cooperation in the Field of Intelligent Vehicle

-In December 2017, Continental AG and Huawei carried out in-field test on the efficiency of the Cellular Telematics (C-V2X) Communication Standard in Shanghai. The test result shows that the average delay of direct communication among vehicles is only 11 milliseconds. Through C-V2X communication, vehicles, infrastructure and other road users will achieve the interconnection. The Continental AG said it will continue to deepen its research and development of this technology for the early use on the connected car. (From a press release on December 20, 2017)

-Continental Group said on October 19, 2017, that the company established a new joint company, Unicom Continental Intelligent Transportation Technology (Shanghai) Co., Ltd., with China Unicom Network Technology Co., Ltd., a subsidiary of China Unicom. The new company has a registered capital of Chinese yuan (CNY) 40 million and is owned 50% by Continental and 50% by China Unicom Network Technology. It plans to develop a new world-leading intelligent transportation system (ITS) platform and provide mobility services in China. Continental and China Unicom have reached a partnership agreement in as early as 2011. The two companies signed a strategic alliance contract in April 2017 to support the joint establishment of the mobility service company. (From some releases on October 20, 2017)

-Continental has signed a strategic cooperation agreement with Baidu, one of the biggest Internet companies in China, with the goal of establishing a comprehensive strategic cooperation in the areas of automated driving, connected vehicles and intelligent mobility services. Under the agreement, Continental and Baidu will explore collaboration fields such as sensor systems and software for advanced driver assistance systems and automated driving, applications for Baidu’s Apollo platform including artificial intelligence, cyber security and connected cars, as well as road test, data collection and analysis for automated driving. (From a press release on May 31, 2017)

R&D Center

-As of December 2017, the Group has 17 R&D centers and more than 2,400 engineers in China. From 2010 to 2017, the Group has filed 3,602 patent applications in China, among which 2,269 were granted.

-On June 8, 2017, Continental Automotive held a ground-breaking ceremony for a new research and development center in Chongqing, China. The lab will focus on the application of automotive electronics products and development of products and solutions for new energy vehicles and in the industrial fields. It will also have the capacity to design electronics and machinery, develop system requirements and software, and test or measure those systems and products. The total investment is Chinese yuan (CNY) 280 million. The first phase construction will take place on a site of 15,000 square meters. The lab will start operating at the end of 2018. It will hire 400 engineers by 2020 and has a plan to increase this number to 1,000 by 2025. (From a press release on June 9, 2017)

Major R&D Centers

New Product

-Continental Group began producing 12-volt dual battery management solution (DBM) for micro hybrid vehicles of A, B and C segments in March 2017 in Tianjin. Micro hybrid cars with DBM solutions and lithium batteries have a fuel efficiency of 4% better than conventional micro hybrid vehicles, in WLTC (Worldwide Harmonized Light Duty Driving Test Cycle) mode and with start-stop function. (From some releases on May 26, 2017)