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5. Hella GmbH & Co. KGaA Business Report FY ended May 2018

Hella GmbH & Co. KGaA Business Report FY ended May 2018

Recent Developments

<Autonomous driving>
The Company will accelerate its development of autonomous driving technologies. To continue to evolve and develop, the Company believes it must continue to take advantage of growth opportunities in automotive industry, so the Company is focusing on new technologies related to autonomous driving. Its core competencies of lighting and electronics will play a central role in developing autonomous driving technologies. For example, camera software and sensor solutions will contribute to assisting automated vehicles navigate safely through road traffic conditions. In addition, the Company will provide innovative lighting concepts to enhance the design of the vehicle interior, which increasingly is becoming a space to live or to work. There are more applications, and the company continues to focus on developing new technologies and products for this market.

-In February, 2018, The Company announced that it had introduced a new business model to market as a leader in this area. The Company launched its fourth generation 24 GHz radar technology with advanced safety and assistance functions and is currently preparing to launch radar sensors using 77 GHz technology. Also, more specifically, the Company will cultivate its technological expertise in automated parking and strengthen its position as a systems provider in this area.

-In December, 2017, the Company announced over the next three years it plans to research how communications between automated and non-automated road users might look like. The focus throughout will be on technologies for the core market trends in the automotive industry, such as autonomous driving, connectivity & digitization, efficiency & electrification as well as individualization. The Company sees that the development of high-resolution lighting systems is gradually gaining in importance. Lighting will also take on other and additional functions in the future.

-In the beginning of last fiscal year, the Company and ZF began collaborating in the area of developing and marketing state-of-the-art driver-assistance systems and autonomous driving systems. The Company will continue to develop and expand their network of partnerships.

-Below are some activities on alliances and collaborations related to autonomous driving:

• Renesas Electronics and HELLA Aglaia announced that their open and scalable front camera solution for advanced driver-assistance systems (ADAS) and autonomous driving.
• NXP informed that HELLA Aglaia and NXP are expanding their current ADAS car vision platform with artificial intelligence (AI) capability in 2018. The next step in the cooperation is to add artificial intelligence for autonomous driving to this innovative modular setup.
• NVIDIA Corporation (NVIDIA) announced that it has formed a strategic partnership with ZF Friedrichshafen AG (ZF) and HELLA KGaA Hueck & Co. (HELLA) to cooperate in the development of artificial intelligence (AI) for use in production self-driving vehicles.

<Automated parking>

As a leading supplier of radar sensors and front software, the Company handles sensor and data processing solutions systematically to also map complex sub-functions of autonomous driving, such as “automated parking”.

-Radar sensor development is controlled centrally by the company's headquarters in Lippstadt. The systems register moving and stationary objects in the vehicle environment; for example, measuring the size of a parking space, the height of the sidewalk and the speed, distance and direction in which an approaching car or bicyclist is moving.

-The Company developed the fourth generation of 24GHz sensor, and is preparing to launch a 77 GHz radar. The new sensor enables 360-degree detection of the vehicle exterior surroundings. This seamless detection of the vehicle surroundings is a central element for autonomous driving functions such as automated parking. Plans are underway to install the first generation of the 24GHz sensor in a production model by 2021.

Joint Venture

-In Nov. 2017, the Company and BHAP, which is part of the BAIC Group, opened a new joint venture plant for lighting systems near the Chinese metropolitan area of Tianjin. In addition, the two partners found a joint venture that is expected to start series production in 2020.

-In Nov. 2017, the Company and Israel-based start-up BreezoMeter also started to collaborate to create a cloud-based air quality management system.

-In Jan. 2018, the Company implemented a comprehensive lighting concept for the new A8 in collaboration with Audi. The HD Matrix LED headlamp with optional laser high beam ensures the best visibility on the road. In the interior, the Company has developed customizable, dynamic lighting functions and produced a rear combination lamp with OLED technology in large-scale series production for the first time.

-The Company’s capital expenditures for the fiscal year ended May 31, 2018 was primarily dedicated towards the maintenance and expansion of buildings, plants, machinery, and other equipment.

Investment outside Germany

<Mexico>
-The Company opened a new electronics plant in Mexico. Other plants are currently being constructed in India and Lithuania. Also, the Company is continuing to expand capacity at its electronics plant in Shanghai and working towards setting up a new joint venture plant in the electronics area.

-The Company has also significantly expanded its production capacity at two of its lighting plants in Mexico.