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5. Continental AG Business Report FY ended Dec. 2017

Continental AG Business Report FY ended Dec. 2017

Factors
1) Net Sales
-The Company’s net sales for the fiscal year ended December 31, 2017 increased by 8.5% over the previous year to EUR 44,009.5 million. Excluding changes in the Company’s scope of consolidation or currency exchange effects, sales increased 8.1% over the previous year. The increase in sales was primarily due to improved business performance in the Automotive Group, particularly in China. Changes in the consolidation scope contributed to the increase in sales, though the effects were partially offset by negative currency exchange effects.

2) Chassis & Safety sales
-The Chassis & Safety division had sales of EUR 9,767.8 million in the fiscal year ended December 31, 2017, an increase of 8.8% from the previous year. Increased sales of electronic brake systems and brake boosters, which increased by 9% and 6%, respectively, contributed to the division’s growth. Sales for brake calipers integrated in electric parking brakes increased by 33% over the previous year, while sales of advanced drive assistance systems increased by 41%. In addition, sales volumes of airbag control units increased by 21% year-to-year.

3) Powertrain sales
-Sales for the Company’s Powertrain division increased by 4.7% to EUR 7,660.9 million during the fiscal year ended December 31, 2017. Product lines in the Powertrain division with increased sales include engine control units, injectors, pumps and turbochargers. Stricter emission regulations have also boosted the sales of exhaust gas sensors. In the Hybrid Electric Vehicle business, sales of power electronics, on-board power supply systems and battery systems all increased. Sales volumes in the Fuel & Exhaust Management business unit also increased over the previous year.

4) Interior sales
-In the fiscal year ended December 31, 2017, the Interior division had sales of EUR 9,305.2 million, an increase of 11.8% over the previous year. The Body & Security business unit had significantly higher sales during the year due to increased demand in Asia and Europe. Sales in the Infotainment & Connectivity business unit increased due to higher demand and new products. Volumes in the Commercial Vehicles & Aftermarket business unit increased due to stronger demand in Western Europe and North America. In the Instrumentation & Driver HMI business unit, sales increased based on development in the European market combined with increased demand for displays and HUDs.

5) Tires sales
-The Company’s Tire division’s sales in the fiscal year ended December 31, 2017 were EUR 11,325.8 million, an increase of 5.7% from the previous year. While sales for OE passenger and light truck tires remained level compared to the previous year, sales of replacement passenger and light truck tires increased by 4%. Sales in the commercial vehicle tire business unit increased by 5% over the previous year.

6) ContiTech sales
-Sales for the ContiTech division increased by 14.4% over the previous year to total EUR 6,246.4 million in the fiscal year ended December 31, 2017. Increases in sales in both the industrial and automotive businesses contributed to the division’s growth.

Acquisitions

-In order to further strengthen and enhance its capabilities in automotive cyber security, the Company acquired Argus Cyber Security (Argus), one of the global leaders in this domain. Founded in 2013 by Israeli cyber security experts, Argus is headquartered in Tel Aviv, Israel, has a team of more than 70 people and the most comprehensive, market-ready solution suites in the industry, based on 38 granted and pending patents. In order to help vehicle manufacturers rapidly respond to the growing need for cyber security solutions, Argus has forged significant collaborations with key industry players and is successfully delivering projects to vehicle manufacturers and suppliers worldwide. Argus will become a part of EB, Continental’s stand-alone software company and will continue to engage in commercial relations with all automotive suppliers globally. (From a press release on November 3, 2017)

-The Company announced that it has acquired Singapore-based mobility intelligence provider Quantum Inventions. Quantum Inventions has three business lines: Automotive, Telematics and Intelligent Mobility. Quantum Inventions has 120 employees working across three offices in Singapore, Malaysia and Indonesia, and a development center in India. Quantum Inventions will add to the Company’s growing intelligent transportation systems portfolio with its city data including next-generation navigation systems that are responsive to real-time information such as traffic data, road incident information and dynamic road pricing. (From a press release on July 7, 2017)

-The Company has agreed to acquire a minority share participation in the company EasyMile SAS, a French autonomous driving company, which is focused on developing driverless electric shuttles. The objective is to develop cutting-edge technologies for driverless vehicles and to open up new fields of competence. The Company and EasyMile will test the Company’s current technologies with EasyMile’s autonomous navigation software and systems. In addition to the Company’s equity investment in EasyMile, the companies plan to cooperate closely in the fields of environmental sensors, braking systems and driving safety technologies. (From a press release on July 4, 2017)

Restructuring

-The Company announced that it is restructuring itself for the development and marketing of digital solutions in the Commercial Vehicle Tire business unit. The Company is consolidating all relevant functions for digital solutions for tires for trucks, buses and special vehicles in this new organizational unit, including business development, research and development and human resources. The new department will support the creation and further development of digital solutions for commercial vehicle tires worldwide. (From a press release on September 13, 2017)

Joint Ventures

-The Company and Osram announced the establishment of a joint venture called Osram Continental. The 50:50 joint venture will have its registered office in the Munich region. The purpose of the joint venture is to combine innovative lighting technology with electronics and software to develop, manufacture and market intelligent lighting solutions for the automotive industry. Its goal is to generate annual sales in the mid-triple-digit-million-euro range with a workforce of approximately 1,500 employees and 17 locations worldwide. The joint venture is scheduled to begin operations in 2018 subject to final agreement on the binding contracts and antitrust approvals. (From a press release on November 6, 2017)

-The company established a new joint venture, Unicom Continental Intelligent Transportation Technology (Shanghai) Co., Ltd., with China Unicom Network Technology Co., Ltd., a subsidiary of China Unicom. The 50:50 joint venture has a registered capital of CNY 40 million. It plans to develop a new world-leading intelligent transportation system (ITS) platform and provide mobility services in China. The Company and China Unicom reached a partnership agreement in 2011 and signed a strategic alliance contract in April 2017 to establish the joint venture. (From some releases on October 20, 2017)

-Huayu Continental Brake Systems (Chongqing) Co., Ltd., a joint venture established by the Company and Huayu Automotive Systems Company Limited on an equal basis, officially began operations on May 18, 2017. The joint venture 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 CNY 600 million. The facility 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)

-The Company announced that it has signed a strategic joint venture contract with China Unicom Smart Connection (CUSC), a fully owned subsidiary of China Unicom. Both companies will have a 50% share in the new joint venture, which will be headquartered in Shanghai, China. The new joint venture, Unicom Continental Intelligent Transportation Technology (Shanghai) Co., Ltd., will establish and operate a world-class Intelligent Transportation Systems solution provider to satisfy increasing market demands in China. The company will focus on vehicle data services, intelligent vehicle applications, connected vehicle software, and hardware integration solutions. The first products offered in the Chinese market will be services from the vAnalytics product family, including the Fleet+ mobility service product which provides an on-demand car sharing platform for OEMs, and the TSP2.0 telematics service platform which provides vehicle data driven services for OEMs and their partners. (From a press release on April 19, 2017)

-Nexteer Automotive and the Company announced that it has reached an agreement to form a joint venture focused on the advancement of motion control systems and actuator components for automated driving. Both companies will own 50% in the joint venture. The joint venture will focus on research and development activities including rapid evaluation, design and prototyping. This joint venture will combine Nexteer’s advanced steering and driver assistance technologies with the Company’s portfolio of Automated Driving and advanced braking technologies to accelerate advancements in vehicle motion control systems. It is expected that this project will begin operations in the first quarter of 2017. (From a press release on January 11, 2017)

Recent Developments

-The Company has prepared a framework to market technology packages needed for implementing Level 3 autonomous driving. Continental has already started looking into projects with several automakers. The Company comprehensively handles autonomous technologies in both hardware and software. Thus, it can supply autonomous technologies as a total system. In doing so, the Company can support customers that have been slow to develop autonomous driving technology. (From an article in the Nikkan Jidosha Shimbun on November 9, 2017)

-The Company announced that applications which used to be integrated directly in the head unit have now moved over to the cloud, where they are processed before being displayed on a powerful browser in the head unit. This ensures that the system is always up-to-date and that new functions can be added at any time. The terminal also uses HTML5 technology, which enables platform-independent application development and allows data to be presented on different displays with different resolutions. This means that new functions and micro-services can be added to the system even after the start of production, keeping it constantly updated. This is possible through common Internet of Things solutions, as well as open protocols and standard interfaces such as MQTT or the REST interface. (From a press release on July 27, 2017)

-The Company announced that the trend toward autonomous or driverless vehicles will have significant impacts on vehicle interiors. Interior focus will shift towards privacy, relaxation, communication and work. Thus, the purpose of the interior will therefore be different in the future. The Company will be demonstrating the major opportunities that interior materials offer as a result of their options for personalization, design freedom, variety of designs and ability to integrate functions. Significant weight savings can also be achieved thanks to modern passenger compartment materials. The Company’s “Light”-labeled products cut fuel consumption and CO2 emissions. (From a press release on July 10, 2017)

-The Company began producing 12-volt dual battery management solutions (DBM) for micro hybrid A-, B- and C-segment vehicles in March 2017 in Tianjin, China. Micro hybrid cars with DBM solutions and lithium batteries have a 4% better fuel efficiency than conventional micro-hybrid vehicles, in WLTC mode and with start-stop function. (From some releases on May 26, 2017)

-The Company’s subsidiary, Continental Tires (China) Co., Ltd., announced that General Tire, operating under the Company, will enter the Chinese market. General Tire will release six products from its Grabber and the Altimax series for SUVs and sedans. (From news releases issued by multiple sources on May 9, 2017)

-The Company announced that it will invest an additional EUR 300 million in its electric drive business by 2021 as part of its new “Powertrain Strategy 2020+”. In the last five years, the Company has invested EUR 1 billion in powertrain electrification. Its Hybrid Electric Vehicle business expects turnover to increase from EUR 130 million currently to EUR 1 billion by 2020-2021, and EUR 2 billion by 2025. To support this growth, the Company intends to spend EUR 300 million more than previously planned by 2021, focusing on research and development. In 2025, the Company expects a 10% market share for pure electric drive systems and a 30% market share for hybrid drive systems. The Company does not expect a decline in combustion engines until after 2025. The Company expects Powertrain division sales of approximately EUR 8 billion for the current fiscal year and EUR 10 billion in 2019. The Powertrain division’s adjusted EBIT margin in fiscal 2017 is expected to reach 9% followed by a margin of approximately 10% in following years. (From a press release on April 25, 2017)

-HUD production has started in the Company plant in Guadalajara, Mexico. “This is a one-of-a-kind, novel device, and the first in the world to use the Micro-mirror Device technology, which contributes to driver's safety,” said Paulo Santos Rebelo, Plant Manager. Using the Micro-mirror Device technology, the HUD shows pertinent information, including vehicle speed, on the windshield to keep the driver’s eyes focused on the road. (From a Mexico-Now article on March 24, 2017)

-The Company is expanding its product and service portfolio to offer OTA updates of electronic control units across the entire vehicle. from powertrain to infotainment systems. The Company is demonstrating its capabilities at CES 2017 together with Inmarsat, the industry leader in global, mobile satellite communications. Immarsat’s global communication network connects vehicles everywhere combining highly efficient and cost effective satellite broadcast with a two-way data service. (From a press release on January 3, 2017)

Business Partnership

-The Company’s Commercial Specialty Tires (CST) unit and the Belgian specialist for port tow tractors and trailer solutions, MOL, have announced their cooperation at the TOC fair in Amsterdam. MOL terminal and RoRo tractors can be equipped with the Company’s TractorMaster as an iTire. The tire already comes with a pre-installed sensor ex-factory which constantly monitors inflation pressure as well as tire temperature and transmits the information in real time via the ContiPressureCheck system to the driver’s dashboard of the MOL tractors. (From a press release on June 27, 2017)

-The Company announced that it is teaming up with Carnegie Technologies, a wireless connectivity solutions provider, to ensure that vehicle manufacturers and drivers can always make use of the fastest, most reliable network connection available to the automobile. Under the agreement, the Company is reselling Carnegie Technologies’ Network Convergence Platform and integrating it into its Smart Telematics solution for vehicle manufacturers. The solution runs on the Company’s next generation telematics control unit (TCU) with a cloud-based supporting component for analytics and diagnostics. (From a press release on June 13, 2017)

Contracts

-The Company announced that the Lincoln Motor Company, a division of Ford, is for the first time, putting the Company’s head-up display with digital micromirror device (DMD) technology into production to improve communication between drivers and their vehicles. The solution was first integrated into the 2017 Lincoln Continental, followed by the 2018 Lincoln Navigator. Head-up displays show all relevant information in the driver’s field of vision, reducing driver distraction and thus improving comfort and safety. The DMD generates graphical elements in the same way as digital cinema projectors, based on mirror optics and a picture generating unit. With an intermediate screen, sequential color management and a lens-based optical path, the image is brighter and sharper than with conventional head-up displays. (From a press release on November 14, 2017)

-The Company announced that the ContiEcoContact 5, the ContiSportContact 5 and the ContiCrossContact LX Sport tires have been selected as original equipment for the new Volvo XC60. The tire sizes are 235/60 R 18, 235/55 R 19 and 255/45 R 20. (From a press release on August 30, 2017)

-The Company and its partner Transcomfort supplies Polish vehicle manufacturers with suspension systems and rubber-metal parts and is represented in almost all important public transport projects in Poland’s large cities. In its ContiTech division, the Company is currently developing products for public transport that are robust, durable and enable a high level of safety. In terms of fire protection, the Company offers products that fulfill the requirements of European standard EN 45545. (From a press release on August 1, 2017)

-Honda will adopt parts made by the Company for its highway autonomous driving technology that will go into practical use in 2020. Honda is aiming to accelerate development speed by using Company parts, including the sensors used in cameras, lidars and ECUs. As autonomous driving technology advances, improvement in development efficiency is an issue to be addressed. (From an article in the Nikkan Jidosha Shimbun on July 26, 2017)

-The Company 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 by Great Wall Motor. Currently, the DCT is mounted on models sold under the WEY brand, the luxury brand of Great Wall Motors. (From a press release on May 23, 2017)

-The Company announced that its combiner HUD has been adopted for Mazda Motor Corporation's compact cars. Combiner HUDs, which are half the size of normal HUDs, are suitable for use in compact cars and sporty models. The Company has started mass production of combiner HUDs as optional equipment for the Demio, CX-3, and CX-5. Combiner HUDs display information on a small, transparent plastic disc called the "combiner." By utilizing applications, combiner HUDs exhibit the same functions as conventional HUDs. Combiner HUDs can project a full-color display over the end of the bonnet, and giving drivers important information without changing the direction their eyes are looking in. (From an article in the Nikkan Jidosha Shimbun on May 16, 2017)

-The Company announced that it is supplying central powertrain controllers for all versions (gasoline vehicle, diesel vehicle, or a plug-in hybrid) of the new Mercedes-Benz E-Class. This newly developed control unit features a powerful multicore processor and an open variable interconnection architecture based on the Company’s new engine control unit platform, Engine Management System 3 (EMS3). (From a press release on March 28, 2017)

-The Company 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 800x600 resolution level and high contrast ratios. The cluster is well connected to the infotainment displays and realizes interactions between the 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 smoothly united by the virtual gauge concept. (From a press release on January 11, 2017)

Awards

-The Company has succeeded in winning honoree awards at CES Asia 2017 in two different categories. The Company will receive the Honoree Award for its Intelligent Glass Control in the Vehicle Technology category, while its 3D Display surfaces will receive the Honoree Award in the Mobile category. The Company’s Intelligent Glass Control enables the selective and incremental shading of nearly all car windows at the touch of a button. Additionally, it reduces CO2, enhances driver comfort and makes driving safer since it minimizes the time the driver takes his eyes off the road in order to regulate shading of the windows. The Company’s 3D display surfaces offer an advanced level of personalization and customization for the brand and driver. (From a press release on May 23, 2017)

-The Company announced that it has won a 2017 Automotive News PACE Award for its integrated brake system MK C1. The vacuumless braking system was among the 2017 PACE Award finalists, marking the ninth consecutive year that the Company has had an award finalist. (From a press release on April 4, 2017)

Outlook

-Due to the Company’s original equipment business performing under expectations and weaker demand in the tire markets in Europe and China, the Company revised its guidance for the fiscal year ending December 31, 2018 in August. The Company expects that its consolidated sales will total approximately EUR 46 billion in the fiscal year ending December 31, 2018, a decrease of EUR 1 billion from its previous guidance. Of the EUR 46 billion in expected sales, the Company’s Automotive Group will have approximately EUR 28 billion in sales, while the Rubber Group will have sales of approximately EUR 18 billion. These new estimates represent a decrease of EUR 500 million in each group. (From a press release on August 22, 2018)

-In recent years, the Company has invested approximately 7% of its sales in research and development each year.

-The Company has increased the percentage of its total sales invested into research and development due to its increased focus on business areas such as electric mobility, automated driving, connectivity, digitalization and urbanization.

R&D Facilities

-As of December 31, 2017, the Company has 78 locations in which research and development take place.

-Continental Reifen Deutschland GmbH, a Company subsidiary, marked the start of construction of its Taraxagum Lab Anklam research and test laboratory in Mecklenburg-Western Pomerania with a traditional groundbreaking ceremony. The Company invested EUR 35 million in the facility, while The Ministry of Economics provided a state subsidy of EUR 11.6 million. The laboratory will provide work for approximately 20 employees. Taraxagum Lab Anklam is scheduled to begin operations in the fall of 2018. Research at the laboratory will focus on the cultivation and processing of the Russian dandelion as an alternative source of raw material to traditional rubber tree plantations. (From a press release on November 13, 2017)

-On June 8, 2017, the Company held a groundbreaking 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. The lab will also have the capacity to design electronics and machinery, develop system requirements and software, and test and measure systems and products. The total investment into the center is CNY 280 million. The first phase of construction will take place on a site of 15,000 square meters. The lab will begin operations at the end of 2018. It will hire 400 engineers by 2020 and employ up to 1,000 engineers by 2025. (From a press release on June 9, 2017)

-The Company announced that it is expanding its worldwide network of its research and development centers. The Company opened a new location in San Jose in Silicon Valley, California, U.S., where up to 300 experts across the Company will work on pioneering solutions for future sustainable mobility. Their projects are concerned with automated driving, electromobility, connectivity and mobility services. The Company is investing millions of dollars in the new research and development center. The state-of-the-art laboratories, workshops and offices are housed in a complex of approximately 6,000 square meters. Besides the new location, the Company’s Intelligent Transportation Systems business unit has been based in Silicon Valley since 2014. (From a press release on April 12, 2017)

-The Company announced that its Taraxagum Lab Anklam project has been presented to the Anklam town council. The next steps are for the Company to acquire the approximately 30,000-square-meter plot of land located in the Lilienthalring business park, obtain a building permit from the town of Anklam and erect the first building. Taraxagum Lab Anklam is the research project for the industrialization of dandelion rubber in tire production. As announced in August 2016, the Company intends to invest EUR 35 million to the project over the next five years. It is planning to gradually increase the number of employees at the Taraxagum Lab site in Anklam to more than 20 and enlarge the acreage in the region from 15 hectares at present to 800 hectares by 2021. (From a press release on March 28, 2017)

-The Company is planning to hire 500 additional engineers for its Bengaluru research and development center in 2017. The total research and development headcount on this center will be 2,500. At the center, the Company is focusing on research for HMI, connectivity and system integration. (From various reports in February 2017)

R&D Activities

-The Company and Huawei have conducted field trials to test the efficiency of the Cellular Vehicle to Everything (C-V2X) communication standard in Shanghai with positive results. In their field tests, the companies judged the performance of C-V2X direct communication on a set of parameters including reliability and latency. To test in realistic conditions, The Company conducted its driving tests in China’s National Intelligent Connected Vehicle Pilot Zone in Shanghai. The joint tests leveraged Huawei's prototype C-V2X module and infrastructure for use cases such as Emergency Brake Light and Stationary Vehicle Warning. While the average latency was 11 ms, single event message latencies as low as 8 ms were achieved, and throughout the tests the packet reception rate was nearly 100%. The Company will demonstrate the results of the C-V2X field trials during CES 2018 to its customers. (From a press release on December 18, 2017)

-Engineers from the Company and Magna International traveled between the U.S. and Canada in a self-driving Cadillac ATS and Chrysler 300. The vehicles featured Level 3 autonomous technology and drove themselves on the highways, but the engineers were in control across the borders and through customs as they studied what sort of signals, sensors, systems and other infrastructure might be needed at the border for an autonomous vehicle to cooperate with border patrol officers. The vehicles continued to Traverse City, Michigan for a conference at the Center for Automotive Research Management Briefing Seminars. At the conference, Michigan Department of Transportation and Ontario Ministry of Transportation officials signed a memorandum of understanding to “promote and foster growth of connected and autonomous technology testing and deployment”. (From Detroit News article on July 31, 2017)

-The Company has built a demonstration vehicle to enable driverless mobility, especially in cities. The vehicle, named CUbE (Continental Urban Mobility Experience) will start its trials at the Company’s Frankfurt location. The technology used in the CUbE is based on the driver assistance systems and sensors that are already installed in today’s serial production vehicles, but also includes new technologies, such as a laser sensor. Based on this expertise, these systems will be further developed to enable completely autonomous operation. Contributing to modern mobility, robo-taxis provide a solution for congestion, accidents, contaminated air and parking problems in cities. The Company will demonstrate the CUbE during IAA 2017. (From a press release on July 20, 2017)

-The Company is cooperating with the Urban Software Institute to contribute to the development of a smart city and intelligent transportation systems. By taking over the advisory board for car applications at the Urban Software Institute, the Company will utilize its extensive expertise in car electronics and interconnectivity to streamline the requirements between automotive technology and urban applications and services. The Urban Software Institute was founded in 2012 with the aim of assisting cities around the world with digitalization. (From a press release on January 10, 2017)

Technological Alliance

-The Company and EasyMile SAS, a French autonomous driving company focused on developing electric shuttles, will cooperate closely in developing environmental sensors, braking systems and driving safety technologies.(From a press release on July 4, 2017)

-The Company has announced that it has become a development partner and system integrator of the collaboration between BMW Group, Intel and Mobileye for automated driving. The BMW Group, Intel and Mobileye began their partnership in July 2016 to ensure series production of highly and fully automated BMW vehicles by 2021. The Company expertise in advanced driver assistance systems includes multi-function cameras, fish-eye cameras with surround view, as well as short range and long range radar sensors. Furthermore, its expertise includes high-resolution 3D LiDAR technologies and central control units for assisted and automated driving. In 2016, the sales of advanced driver assistance systems amounted to over EUR 1.2 billion. By 2020, the Company expects sales of more than EUR 2 billion. (From a press release on June 20, 2017)

-The Company 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, the Company 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)

-The Company 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, to build a stable partnership on a long-term basis. Under the agreement, the Company and NIO will further collaborate on NIO new car platforms. As a first step, the Company 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)

-The Company’s subsidiary, Continental Automotive Japan K.K., announced that it will collaborate with NTT Docomo, Inc. in research and verification of the 5th generation mobile communication system (5G) and Cellular V2X technologies to realize connected cars. Continental Automotive Japan is aiming to create safe and comfortable connected cars by integrating its connected car control software with NTT Docomo’s 5G, and Cellular V2X. The two companies will perform joint demonstrations at the Wireless Technology Park 2017 at Tokyo Big Sight, and the Automotive Engineering Exposition 2017 Yokohama at Pacifico Yokohama, both of which will open on May 24. (From an article in the Nikkan Jidosha Shimbun on May 18, 2017)

Product Development

Battery charging systems at CES 2018
-The Company will present two new battery charging systems at CES 2018. The Company will showcase an inductive charging system which will permit fully automated battery charging without cables. Another revolutionary system is AllCharge, which enables electric vehicles to use any charging station, recharge with enough power for 300 kilometers in ten minutes, and deliver AC power for tailgate parties or power tools without accessories. (From a press release on December 13, 2017)

Holistic Connectivity Experience
-The Company will demonstrate its Holistic Connectivity Experience demonstration car during CES 2018. In this demo car, the Company showcases a digital travel guide that provides the driver with contextual, dynamic and interactive information on navigation, infotainment, travel services and vehicle assistance. The user can interact with a range of services presented in a timeline on the center console, including weather updates, traffic information and points of interest. A backend hub aggregates and prioritizes the data based on user profile, context and destination to display the most relevant information. (From a press release on December 7, 2017)

ProViu digital side-view mirror
-The Company has developed the next generation of its ProViu Mirror digital side-view mirror. Various images from the cameras mounted on the side of the driver’s cabin are displayed as a single merged image by ProViu Mirror. This increases the visible area and reduces blind spots. The camera monitor system can reduce fuel consumption by up to two percent due to reduced air resistance, helping to optimize fleet cost efficiency and reduce environmental impact. (From a press release on December 6, 2017)

Fifth-generation of radar sensors
-The Company has incorporated its expertise in vehicle surroundings sensors into the fifth generation of its short- and long-range radar sensors, which will enter series production in 2019. The new generation of sensors have greater capacity and are based on a scalable modular principle, which flexibly supports vehicle manufacturers' different requirements and electrical-electronic architectures. In order to meet the rising demand worldwide, the Company is constantly expanding its production capacities. Production of long-range radar sensors was launched in Shanghai, China, in October 2017 with the aim is to produce several million units a year to meet local demand. The sensors are also produced in Germany, the U.S. and the Philippines. (From a press release on November 28, 2017)

Tire technology concepts
-The Company developed two new tire technology concepts for use in future vehicles. ContiAdapt optimally adjusts the contact area in response to road surface conditions. ContiSense measures and transmits data on tread depth and temperature with built-in tire sensors. A combination of the two technologies will enable proper adjustment of tire pressure and rim width based on roadway conditions. (From an article in the Nikkan Jidosha Shimbun on October 17, 2017)

Smart Control central input device
-The Company developed a central input device called the Smart Control input device which transparently and intuitively configures the change of role from driver to user of automated driving functions. In order to ensure the safe division of tasks between driver and vehicle in the conditional and highly autonomous driving levels, the new input device performs several key tasks. As an element in the center console of the vehicle, it continuously informs vehicle occupants of the current driving mode using a kinematics function. During manual driving phases, it disappears into the center console so the driver can only use the touchpad on top, to control the infotainment. The central input element for automated driving is currently being tested in both physical vehicles and the driving simulator. (From a press release on October 11, 2017)

Electric vehicle charging systems
-At the 30th International Electric Vehicle Symposium & Exhibition, the Company will present innovative systems for both cable-based and wireless charging, and for all types of current and voltage levels. For cable-based charging, the Company’s systems comprise both the established on-board charger for AC charging and the all-new AllCharge system, which also supports DC charging at fast-charging stations. The Company also offers a further solution in the form of automatic inductive charging. In the future, it will be possible to use electric vehicles as grid-integrated mobile energy stores, giving them a role to play in the transition to renewable energy. (From a press release on October 8, 2017)

Synchroforce Carbon rubber timing belt
-The Company’s ContiTech division has launched one of the strongest rubber timing belts in the market, Synchroforce Carbon. The new heavy-duty timing belt features a hybrid tension member made of a glass carbon compound. The belt offers high tear strength and dynamic load capacity, with a similar performance to polyurethane belts. The Synchroforce Carbon transmits rotary motion with great angular precision. Due to its material properties, the timing belt is also maintenance-free. (From a press release on October 02, 2017)

Smart access technologies
-The Company showcased its full range of smart access technologies at IAA 2017, including Continental Smart Access (CoSmA) and Remote Cloud Key. Both solutions support on-demand access to vehicles using a smart device to lock, unlock and authorize the vehicle for start. In addition, the Company has acquired full ownership of OTA keys, a former joint venture with D'Ieteren, underlining its interest in developing the Key as a Service as an important component of its mobility services portfolio. (From a press release on September 20, 2017)

Translucent surface material
-The Company announced that it will develop a translucent surface material for vehicle interior lighting. The highly light-permeable material facilitates application of light to both the material and its surroundings to create new interior lighting designs. Variable colors and intensities can enable effects that can be adapted to suit particular moods. The Company anticipates that translucent surface materials will play an important role in electrified and autonomous mobility concepts in the future. The Company revealed the concept at IAA 2017. (From an article in the Nikkan Jidosha Shimbun on September 19, 2017)

Balanced Economy and Ecology mobility concept vehicle
-The Company showcased its Balanced Economy and Ecology (BEE) visionary mobility concept at the IAA 2017. The BEE is one of the Company’s comprehensive visionary solutions for individual mobility in the urban environment. The BEE is designed as a vehicle for one or two people. It is electrically powered, can reach speeds of up to 60 km/h, and has a range of more than 350 kilometers. The BEE can be summoned to your location through a smartphone. It is designed to ensure tailored, stress-free and comfortable travel in the smart city of the future. (From a press release on September 15, 2017)

Technologies at IAA 2017
-The Company announced that it will showcase examples of its new production applications at IAA 2017. The portfolio ranges from 48-V mild hybrid applications to high-voltage drives in electric and hybrid vehicles. It will present innovative solutions for all-electric driving includes the highly integrated electrical powertrain module. Its 48-V technology enables intelligent hybrid operating strategies that can be implemented in vehicles with gasoline or diesel engines. This technology achieves proven fuel savings of around 21% in real-life urban traffic. The Company will also present global innovations for charging technology and a new, weight-reduced wheel and brake design called the New Wheel Concept. (From a press release on September 5, 2017)

Smart Access smartphone solution
The Company announced that it has expanded its Smart Access solution for convenient vehicle access via smartphone to offer drivers a complete package of services. Wi-th the new emergency unlocking solution, users can gain access to their vehicle even if the car battery is dead without having to resort to the mechanical emergency key. In combination with the Continental Smart Access system, the entire door is intelligent, which means that it opens and closes independently. In order to ensure that the emergency lock and entire door handle is independent, the Company integrated an assistant function into the intelligent door. The Company will present the intelligent door at IAA 2017. (From a press release on August 29, 2017)

MFC 500 camera platform
-The Company has developed a modular, scalable, and interlinked MFC 500 camera platform, which performs all camera tasks and caters to all vehicle architectures. The modular kit consists of the intelligent MFC 500 camera, various satellite cameras, and a central computer for assisted or automated driving. Its hardware and software enables capabilities from simple object detection to the instant analysis of complex scenarios with neural networks for automated driving. This latest camera generation opens up a wide range of application possibilities, with up to eight megapixels of resolution and an aperture angle of up to 125 degrees. The environment recognition and driving functions are optionally integrated in the camera. By connecting the platform to the electronic horizon and Road Database, road information and landmarks can be transmitted to and received from the cloud to locate the vehicle and enable proactive driving. (From a press release on July 25, 2017)

Cruising Chauffeur function
-The Company announced the development of a Cruising Chauffeur function. This function is designed to give vehicles the ability to assume driving responsibilities on highways in accordance with traffic laws. As soon as the vehicle needs to exit the highway, the system transfers control back to the driver via a human-machine interface that is currently being tested. If the driver fails to respond when prompted to take over, the vehicle identifies a safe and secure area and removes itself from the flow of traffic by initiating a minimum-risk maneuver. The Company expects the Cruising Chauffeur function to be ready for production in 2020. (From a press release on July 13, 2017)

Electronically switchable engine mount
-The Company announced that it has developed a brand-new electronically switchable engine mount for the latest generation of a premium-segment sports sedan. Engine mounts link the powertrain to the body, reduce road-induced engine vibrations, and insulate against engine-induced vibrations to prevent them from being transmitted to the body and car interior. (From a press release on July 5, 2017)

Trained Parking function
-The Company has announced that it has developed a solution which can relieve drivers from recurring parking routines. Upon request, the new Trained Parking function records and stores the sequence of a parking procedure. When the procedure is to be repeated, the driver first drives the vehicle near where the recording began. At the touch of a button, the vehicle independently performs the previously learned parking procedure. For the Trained Parking function, the Company uses sensors already available in the vehicle, such as cameras and radars, to detect surroundings. The first time the route is driven manually, the system generates and stores a precise map of the surroundings. When the vehicle is in the area covered by this map, it can determine its precise position and automatically drive the learned route. (From a press release on June 29, 2017)

Speakerless audio system
-The Company has announced that it is replacing conventional loudspeakers with actuators that create sound by vibrating certain surfaces in the vehicle. The speakerless audio system delivers a new sound experience while being smaller and weighing less than traditional systems. Compared to a conventional high-end vehicle audio system, the speakerless system can reduce the system volume by a factor of ten or higher, while bringing down the system weight to a fraction of a traditional audio system. In addition, speakerless technology can be integrated into any car model, from high end sedans to small electric vehicles. Speakerless technology can also provide a sound source for human-machine interaction concepts, such as navigation instructions or indicator warnings. (From a press release on June 28, 2017)

2025AD.cn Chinese internet platform
-The Company launched the 2025AD.cn Internet platform for China. 2025AD.cn is an independent online platform designed to encourage people to share information related to automated driving in China. The content for China is closely linked with the global 2025AD.com platform, which was launched in January 2016. 2025AD.com offers the opportunity for people to share their opinions, concerns and expectations with regard to any issues surrounding automated driving. The 2025AD.com platform currently reaches more than 10,000 consumers, experts and industry and government representatives every month. China, as the world’s largest automotive market, is playing an increasingly important role in the development of autonomous driving. The platform can be accessed through WeChat, Weibo, QQ Zone and other major social media platforms in China. (From a press release on June 9, 2017)

Electric powertrain that offers compatibility with non-standardized charging infrastructure
-The Company announced that it will present an answer to the problems posed by non-standardized charging infrastructure for electric vehicles at IAA 2017 in September and at the Continental Tech Show in June 2017. Rather than filling the car with extra technology to match all the different types of charging stations, the Company turns the electric powertrain itself into a ‘charger’. Dubbed the ‘AllCharge’ system, this technology is based on the components of a conventional electric powertrain. The Company is able to provide interoperability with different charging technologies using an onboard, vehicle-based solution. (From a press release on May 29, 2017)

Touch gesture systems
-The Company has devised a range of user-friendly touch gestures for the cockpit to improve non-verbal communication between drivers and their vehicles. Thanks to a combination of gesture interaction and touchscreens, drivers can draw specific, defined symbols on the input display to instantly trigger a diverse array of functions and features for rapid access. Drivers can enable touch gesture interactions simply by touching the display with two fingers. When touch gesture interaction is enabled, the driver can use two fingers to draw a heart symbol to access a favorite contact or a house roof symbol telling the navigation system to drive home. (From a press release on April 7, 2017)

TrailerLinc fleet management service
-The Company presented a new trailer service TrailerLinc by VDO, one of its product brands. TrailerLinc is part of VDO FleetVisor, a premium solution for efficient fleet management by the Company. Qualified personnel first install the hardware on the trailer, after which TrailerLinc regularly transmits the trailer’s GPS data to FleetVisor. VDO TrailerLinc unit is always active, providing dispatchers with continuous information about the location of their trailers. This enables fleet managers to check the locations of a trailer and the vehicle to which the trailer is attached. The TrailerLinc hardware design is rugged and waterproof. The battery automatically recharges when the trailer is in motion. TrailerLinc is equipped to provide even more information via CAN in the future. Software updates can also be easily installed on the device wirelessly. (From a press release on March 14, 2017)

Urban bus tire
-The Company developed the new Conti Urban HA3 245/70 R 19.5 tire for use on medium-sized urban buses, expanding its range of 19.5-inch tires. The reinforced side walls of the Conti Urban HA3 provide a specially stiffened tire contour, which can also withstand frequent curbstone contacts at bus stops. The rubber compound used for the tread and the tread design increase the mileage of the bus tire by up to 20% compared with a standard regional tire. The deep sipes also ensure optimum lane holding even in extremely wet conditions throughout the entire life of the tire. The Conti Urban HA3 245/70 R 19.5 combines superb handling and excellent grip, ensuring the comfort and safety of passengers and is suitable for year-round use in many European regions. (From a press release on February 24, 2017)

Ultra-thin augmented realty HUD
-The Company has developed an ultra-thin augmented reality head-up display (HUD) in partnership with U.S.-based DigiLens Inc. The newly-developed HUD is a holographic HUD and is smaller than conventional HUDs by a factor of three. The augmented reality technology will be utilized to develop safer and more intuitive human-machine interfaces required for autonomous driving. (From an article in the Nikkan Jidosha Shimbun on January 27, 2017)

High-resolution 3D Flash Lidar
-The Company is working on the next generation of an environmental model that will deliver a seamless, true-to-life, 360-degree view of the entire vehicle's surroundings. The High Resolution 3D Flash LIDAR is a core component for generating a comprehensive 3D environment model. The 3D Flash LIDAR expands the Company’s portfolio of surroundings sensors for advanced driver assistance systems to support highly and fully automated driving in combination with other sensors. The High Resolution 3D Flash LIDAR comprises two key components: A laser as a transmission source, and a highly integrated receptor chip. Series production is scheduled to start in 2020. The Assisted & Automated Driving Control Unit (ADCU) is used for evaluating and interpreting the acquired data and ultimately constructing a comprehensive surroundings model. It is a central control unit comprising of a network of multiple heterogeneous processing units. The goal is to offer a scalable product family for assisted and automated driving that meets the most stringent of safety requirements (ASIL D) by 2019. The control unit will be equipped with various connections for Ethernet and Low Voltage Differential Signaling to manage the required flow of data. (From a press release on January 4, 2017)

-The Company expects to invest approximately 7% of its sales, or EUR 3.2 billion, in capital expenditures for the fiscal year ending December 31, 2018.

Investments outside Germany

-The Company celebrated the foundation stone laying ceremony, marking the start of construction of its new tire plant in Rayong, Thailand. The Company committed to a long-term investment totaling approximately EUR 250 million in the first phase of development with a planned production of about 4.0 million passenger and light truck tires per year by 2022. Plant operations are scheduled to begin in 2019. The Company will create around 900 new jobs at the plant. The size of the site is about 750,000 square meters which potentially allows a capacity expansion of up to 25 million tires per year. (From a press release on November 21, 2017)

-The Company’s subsidiary, Continental Tires Thailand, has set a new goal to become one of the top three international tire brands in the Thai market by 2025, boosted by a new plant in Rayong where operations is set to begin in early 2019. Currently, the Company has only a 3% market share. It announced earlier this year that it had chosen Rayong to build a greenfield tire plant for passenger cars, pledging a EUR 250 million (THB 9.46 billion) initial investment and 900 new jobs. The plant will make tires for passenger cars and light trucks in the Asia-Pacific region. Upon completion of the first phase of construction, the facility is expected to have an annual production capacity of 4 million tires for passenger and light trucks. (From an article of Bangkok Post on June 12, 2017)

-The Company celebrated the first piling ceremony at its greenfield tire plant site at Rayong, Thailand. The Company invested EUR 250 million in the new greenfield plant site. It will produce approximately four million passenger and light truck tires per year for the whole APAC region. The new plant is located close to the targeted markets and customers, offers access to infrastructure as it is located 140 kilometers from Bangkok and 60 kilometers from a deep-sea port in Laem Chabang, and has technologically inclined universities located nearby. The size of the site is about 750,000 square meters which potentially allows a production capacity expansion to up to 25 million tires per year. Construction on the new plant is scheduled to be complete by the middle of 2018. The plant will begin production in 2019 and create 900 new jobs. (From a press release on March 22, 2017)

-The Company finalized the site selection process for its new passenger and light truck tires production facility in the Asia Pacific region. The Company selected a site in Rayong, Thailand and will begin operations in 2019. In the first phase of construction, the Company will invest approximately EUR 250 million in the plant, resulting in a planned production of about 4.0 million passenger and light truck tires per year by 2022. This investment is an essential part of the long-term growth strategy from the Company’s Tires Division called “Vision 2025” aiming to expand and balance its global manufacturing footprint to best serve its customers in all regions. (From a press release on January 25, 2017)


-The Company announced that its cutting-edge RAAX turbocharger will be built in Shanghai. The Company will enter this segment with the opening of its first non-European turbocharger plant at its site in Jiading, Shanghai, China. In November, the facility will start production of the RAAX turbocharger, developed for the Volkswagen Group’s EA888 Gen.3B engine platform and in production in Europe since 2016 in the Audi A3. In the Chinese market, this 2.0-liter turbocharged gasoline engine will debut in the VW Teramont SUV, followed by the VW Tiguan and other high-volume models. Preparations are already under way for the next round of capacity expansion. Production of the RAAX turbocharger for the same Volkswagen Group engine will launch at the Company’s plant in San Luis Potosi, Mexico in 2018. (From a press release on November 20, 2017)

-The Company’s Tires division 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 approximately EUR 250 million, the expansion will boost the plant’s annual production capacity to 14 million units by 2019 from its current capacity of 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)


-The Company’s ContiTech division opened a new production facility in San Luis Potosi, Mexico to produce air induction systems for turbochargers. The opening comes seven months after the Company opened another plant in San Luis Potosi to manufacture hydraulic brake systems and turbochargers. (From a Mexico-Now article on November 3, 2017)

-The Company announced plans to expand its ContiTech Tlalnepantla plant in Mexico, due to expectations of tripling its sales to more than USD 114 million by 2018. ContiTech manufactures high pressure hoses for air conditioning and hydraulic steering systems at the Tlalnepantla site. During a 20-year anniversary ceremony, plant director Felipe Gonzalez said that the company expects to increase its production from two million pieces to six million pieces in 2018 due to increasing demand. “By 2017 we will be close to nearly USD 40 million sales, but we will exceed USD 114 million by 2018,” Gonzalez said. The plant’s footprint will increase from 12,000 to 17,000 square meters to reach its target. By 2019, the manufacturer expects to have another significant increase in sales due to the opening of the Infiniti plant in Aguascalientes and the possible expansion of Volkswagen in Puebla. Founded in 1997 to serve Volkswagen Beetle production in Mexico, the Tlalnepantla plant now supplies BMW, Mercedes-Benz, Nissan, Ford, Daimler Trucks, and Packard. (From a Mexico-Now article on July 11, 2017)

-The Company recently started operations at a new brake components plant located in San Luis Potosi after a year of construction work and a USD 167 million investment. The new plant will manufacture hydraulic brake systems with integrated solutions for actuation, modulation and brake pressure, and can provide information to the vehicle’s electronic systems. Turbochargers will also be assembled at the plant. The initial workforce of 97 workers will increase to 250 workers by 2018, 518 workers by 2019, and 990 employees upon reaching full capacity. With the new plant, the Company has sixteen plants and two R&D centers in Mexico. (From a Mexico-Now article on March 29, 2017)

-The Company has invested approximately USD 8 million to expand one of its two facilities in Ciudad Juarez, Mexico. The Juarez Plant 1, one of the Company’s global competence centers within the Powertrain Division for the production of sensors and actuators, will be expanded by 10,000 square meters, to a total of 26,000 square meters, to allow the production of 40 million products annually. Over the next two years, the location will begin production of brushless DC motors and mass air flow measurement sensors. Continental will add 300 more workers with the plant expansion. (From Mexico-Now and other sources on February 9, 2017)


-The Company announced the construction of a new manufacturing plant in Kaunas, Lithuania, to expand its automotive electronics production footprint. The groundbreaking ceremony is scheduled for the middle of 2018. The Company plans to invest EUR 95 million over the next five years and create approximately 1,000 new jobs. Production in this plant will begin in mid-2019. The 16,000-square-meter plant will manufacture products from the Company’s Body & Security and Advanced Driver Assistance Systems business units, including door and seat control units, gateways and intelligent glass control units, and radar sensors for applications such as Adaptive Cruise Control. (From a press release on October 30, 2017)


-The Ohio Economic Development Association announced that ContiTech USA, Inc., a Company subsidiary, would expand its facilities in Fairlawn. The Company expects to create 50 full-time positions, generate USD 4 million in new annual payroll and retain USD 17.3 million in existing payroll. ContiTech USA provides rubber products and technology for the automotive and industrial markets. (From Ohio Economic Development Association release on August 15, 2017)

Future Investments

-The following is a planned list of projects that the Company expects to invest in during the fiscal year ending December 31, 2018:

• Global expansion of production capacity for MK 100 and MK C1 brake generations in the Vehicle Dynamics business unit.
• Global expansion of production capacity for long-range and short-range radar sensors, 360-degree and multi-function cameras in the Advanced Driver Assistance Systems business unit.
• Expansion of production capacity for high-resolution 3D lidar sensors in the Advanced Driver Assistance Systems business unit.
• Development of a new plant in China for the Powertrain division.
• Expansion of production capacity for electric motors and 48V belt-driven starter generators in the Hybrid Electric Vehicle business unit.
• Construction of new plants in Eastern Europe and North America in the Interior division.
• Expansion of passenger tire production capacity in Southern Europe, Eastern Europe, Asia and North America in the Tire division.
• Expansion of commercial vehicle tire production capacity in Eastern Europe and North America in the Tire division.
• Relocation of a plant in the Mobile Fluid Systems business unit.
• Expansion of production in the Benecke-Hornschuch Surface Group business unit in China.