Is it worth it to be an Ola driver

Driver change

As the current head of development at Mercedes-Benz, Ola Källenius worries about what the car of the future might look like. In 2019 he will succeed Dieter Zetsche as CEO of the Mercedes parent company Daimler.

"You have come to the right place here," exclaims Ola Källenius. Shortly before, he had asked why we wanted to do an interview with him - and seemed almost astonished that someone might be interested in what he said. Played or real: the modesty works.
We told the tall Swede, who welcomes us in a light blue shirt - without a jacket and tie - that we wanted to talk to him about the car of the future. And Källenius' office in Sindelfingen, Germany is probably a very good place to start. The local Mercedes
Werk is a veritable mini-city in which 25,000 employees work, research, and tinker with the same cars of the future day in and day out. Not only do the Mercedes E and S classes come off the production line here, the location is also home to the development and design of the parent company Daimler. Mercedes vehicles have been produced here, around 40 minutes southwest of Stuttgart, for 100 years - Sindelfingen is probably the most traditional of the Daimler locations. Right in the middle: Ola Källenius. In a corner office with a view of production and development. A model of Formula 1 is in a showcase
World championship cars by Lewis Hamilton from 2008.

Ola Källenius
Born in Sweden in 1969, Ola Källenius studied International Management in Stockholm and Finance and Accounting at the University of St. Gallen. In 1993, at the age of 24, he joined the international junior research group at what was then Daimler-Benz AG. Källenius has been Head of Development at Mercedes since January 1, 2017, and in 2019 he is to succeed Dieter Zetsche as Chairman of the Board of Management of Daimler. The Swede is married and has three sons.

Since the beginning of the year (the article is from the summer of 2017, so all other times also refer to it, note) Källenius is head of development at Mercedes. This post is preceded by more than 20 years in the Daimler Group, which began in 1993. Källenius joined the group at the age of 23 (in the international junior group of what was then Daimler-Benz AG, note) and worked through engine and exhaust management and material purchasing as well as the McLaren brand to manage Mercedes' high-performance brand AMG up. The next step was to switch to the brand's sales department, from 2015 the manager was Mercedes-
Head of Sales and Member of the Daimler Board of Management. And now head of development. The first non-engineer in the company's history is he to hold this post. Because Källenius is a trained business economist, completed his studies in Stockholm and at the University of St. Gallen. That alone is a strong signal for the proud and traditional German automotive industry. But Källenius is traded as one of the hottest personalities in the industry for a different reason. Because it is an open secret that Källenius will replace 47-year-old Dieter Zetsche as CEO of the Daimler Group in 2019.

Originally acting as his successor, Wolfgang Bernhard left the group at the beginning of the year; he had previously headed the Trucks & Buses division. The two are seen as opposing poles: Bernhard was tough and direct, offended - among other things at the works council. Källenius is considered diplomatic, polite, calm. So while Bernhard left (or: had to go), Källenius' contract was extended for another five years. The years will be interesting and challenging. As head of development, the manager is currently responsible for no less than the future of Daimler's best-known brand - and soon even more than that.
At the moment, Källenius is in a good position: Mercedes has been going brilliantly for some time. The recently old-fashioned, almost dusty-looking brand has undergone a makeover.

We want to make the route from A to B as convenient and time-optimized as possible for the customer. There's a lot in there.

“We want all customers, regardless of whether they are young or 'young at heart'. We have seen a big change here in the last five years, ”says Källenius. 2016 was a record year for Daimler in general and Mercedes-Benz in particular. While the group increased its sales by around three percent to € 153.3 billion and posted a profit of € 8.8 billion, sales at Mercedes rose even more strongly. Sales of the brand with the star grew a full 11.3 percent; in the 2016 calendar year, 2.1 million vehicles were delivered. In Europe they grew by 12.4 percent, in China even by 26.6 percent. Only in the US was it down 0.8 percent. The rejuvenation of customers - and the brand - was primarily driven by the new compact car family from Mercedes. In 2012 the new A-Class was launched, the vehicles of which were more like a VW Golf than classic Mercedes models. Traditional fans were skeptical about the dimensions, but the step paid off: women and, above all, younger drivers suddenly became Mercedes customers, and the family sold over 600,000 units in 2017 alone. But despite good numbers and new customers, a battle awaits Källenius and Mercedes on numerous fronts. There are four major fields for which strategies are needed. They are abbreviated with the acronym "CASE". Because it is nothing new that the automotive industry is in a state of upheaval, which is taking place in the areas of Connected, Autonomous, Shared & Services and Electrification. Enough to talk about if you are interested in the car of the future - or the future of the car. So Källenius is sitting across from us - and immediately begins to ask: Whether the German-language edition of Forbes is subordinate to the US magazine (yes, partially); whether we also take over content from the international editions for our edition (yes, partly) and what we want to talk to him about - whereby we are back at the beginning. Then he leans back, looks at us through his rimless glasses - and waits.

The mere fact that a non-engineer is becoming head of development is a signal for the German automotive industry.

You keep hearing that people are moving faster and faster. However, physical mobility is not really increasing - we are still flying and driving at about the same speed as we were 70 years ago. So are we going faster?
The number of movements increases. With the invention of the automobile, we expanded this individual freedom when it comes to moving from A to B. We see this need for mobility, both for people and goods, as an increasing trend. The speed at which you move is determined by the StVO (road traffic regulations, note). The number of movements is a growing business worldwide.

Isn't it primarily the perceived mobility that is accelerating?
The intelligent networking of cars will mean that traffic systems can be further optimized. That was always an issue. When it comes to networking “Car-to-Cloud” and “Cloud-to-Car” - which we introduced last year with the E-Class and the associated “Car-to-X” communication - we primarily have security in mind. If an E-Class is on the road and ESP intervenes because the surface is slippery, this information can be sent to the cloud and sent to subsequent cars as a warning. This networking is increasing. Even with our new partner, we have made an investment in the map service provider Here, the aim is to intelligently network traffic, maps and routes. We want to make the route from A to B as convenient and time-optimized as possible for the customer.

Note: Originally developed by Nokia for its own smartphones, Here, as a geodata service, is now taking care of the map of the future for the car of the future. At the end of 2015, Audi, BMW and Daimler jointly took over the company for around € 2.6 billion. The three German carmakers seem to understand that their competitors are no longer just Toyota, General Motors and Hyundai, but also Google and Amazon. And intelligent cards are a key to the functioning of self-driving cars. In addition, the German companies apparently use Here as a platform to bring more allies on board: At the beginning of the year, 15 percent of the shares went to the US chip manufacturer Intel. In addition, a total of ten percent went to the Chinese Internet company Tencent, the map service provider NavInfo and Singapore's sovereign wealth fund GIC. More share sales? Not expressly excluded, as it is officially called. While Google takes the photos completely independently, companies like Here or the Swedish start-up Mapillary (see p. 142) work with the community.

At Here, the community can improve maps by contributing images. Are you not putting the security of mobility in the hands of amateurs?
No, I don't see it that way. Here is the leading card manufacturer in the automotive sector - with by far the largest market share in this business. A “standard definition map” that covers the world has been developed there over decades. Now we are moving on a new level in the direction of “high definition map”. This map has to record more precisely where you are and which reference points the environment offers. This is recorded professionally, you know these vehicles, which are equipped with all kinds of cameras. Here does that, other card manufacturers do that - there is no fundamental difference. What is also added is a kind of “learning layer” where vehicles collect data in parallel in traffic. This is a kind of “self-learning map” that provides this very robust base map with even more up-to-date information. This is not about amateurs, but about high-tech, where the sensors in the cars capture information that is filtered. The relevant information is used to keep the HD map even more up-to-date.

Which competencies do you want to keep in-house in the future - and where does Mercedes have to work with partners?
The components that we need for autonomous driving Level 4 (almost autonomous, the driver can give up control of the car, can - and must, in certain situations - still drive himself, note) or Level 5 (completely autonomous, the car does not have to You need a steering wheel or pedals, note), that starts with the sensors, we work together with partners. We have a strategic partnership to pool resources and jointly develop a very secure system.

In the second point, we need extremely high computing power, which we can also accommodate spatially in the vehicle. The next generation of chips increases the computing power per package volume considerably. We are on the road with the most competent manufacturers. Then there is the challenge of developing the software that is needed for image recognition and driver decisions. We program this software partly ourselves - and partly with our partners. When it comes to how the vehicle behaves - we want to be able to do that. And the last part is the HD card.

The upcoming changes can be summarized with the acronym CASE (Connected, Autonomous, Shared & Services, Electrification, note). That includes a large area - which company do you see as a competitor?
We have some good competitors in the automotive industry that we take very seriously. And it may be that other companies, which may not have been in the automotive industry before, now dare to take the step - you have to see that. But we have our own strategy. At the same time, we look to the future with optimism that the transformation we are in is an opportunity for us. We have always been an innovation and technology company. The spirit of founding, our DNA, is disruption. Gottlieb Daimler and Carl Benz were the "Original Disruptors". They removed the horse as a means of transport for people and goods. We still have this entrepreneurial mentality. Now we are reinventing the car and individual mobility as part of CASE, and we want to be at the forefront.

We are still people who are moved in a physical vehicle.

Nowadays, when you hear the term “original disruptors”, you probably no longer think of traditional automobile manufacturers. To be more specific: Who from the group Google, Tesla and Amazon do you take more seriously - even if you take them all seriously?
Please understand that I am not commenting on individual competitors. Of course we watch what they do. At the same time, however, it is important to have your own strategy, your own DNA, your own brand promise. On the way to autonomous, emission-free driving and also to more mobility services in the shared area or connected cars: Traditional strengths are what you need. We are still people who are moved in a physical vehicle. That means: aesthetics, design, chassis, seats, noise level, these are all small pieces of the mosaic. So we have to combine traditional strengths with new technologies. If you do it really well, you win this game. And we think we have a good chance.

Note: The abbreviation CASE already shows that the challenges are manifold. Google and Amazon are working on self-driving cars - and have the advantage over classic car manufacturers such as Mercedes or Daimler that they have been researching cloud solutions for a long time. In the electric car space, Tesla is the hottest topic of conversation right now. But even Mercedes no longer only wants to rely on the combustion engine - even if, according to Källenius, this will not become extinct. In 2019, Daimler's first e-car, the Mercedes-Benz EQC, will go on sale. By 2025, the Stuttgart-based company reckons that 15 to 25 percent of all cars that Mercedes-Benz sells will have a purely electric drive. And there is still largely a question mark behind sharing. Daimler started early with its own Car2Go offer, which is the market leader in fully flexible car sharing with 2.6 million users worldwide. Almost ten percent of the total of 14,000 vehicles are electrically powered. But whether the classic Mercedes driver can really be deprived of his property just because it is more efficient or more environmentally friendly (although both remain controversial)?

From today's perspective, it is an open question whether sharing will prevail and whether people want to do without the basic principle of owning a car. Do you think that the sharing concept will prevail in the long term? And if so: Are you tinkering with new business models for it?
For most customers, it's about convenience. The mobility services bring additional convenience and we are helping to shape this world. We are successfully active on the market with the first examples such as Car2Go and MyTaxi / Hailo. We are also currently doing a pilot project with peer-to-peer sharing in Munich and Berlin (private car rental company named Croove, note). Mobility services are therefore a growth area in which we are investing. However, we do not believe that ownership is disappearing. As part of the CASE strategy, we prepare all of our vehicles so that they can be used seamlessly in mobility services. That is a clear part of our future strategy.

You are expanding the plant in Kamenz, where batteries are produced. Is the idea of ​​making batteries entirely in-house? Or will these continue to be bought in in the future?
Our main strategy for battery systems and modules is "make", ie build it yourself. But I do not rule out that we will continue to work with competent system suppliers in the future. Just as we now do some shell structures ourselves - and in some cases have them produced by suppliers. For battery cells, we have again decided to work with partners. There is a lot of technological movement in there and you need enormous economies of scale here to make it economically viable. From our point of view, we must continue to be deeply involved in development, down to the research, i.e. the chemical level, so that we can talk to the cell suppliers on an equal footing. But we buy in the cells themselves.

From a regional perspective, China is doing well ...
Very good.

... but there is a question mark behind the future growth rates of the Chinese economy. The automotive industry is also feeling this. Are you afraid of it?
We have seen extremely dynamic growth in China in recent years. The first five months of 2017 were also fantastic for us. In the previous year, the total Chinese market was over 22 million vehicles. This makes the country by far the largest car market in the world - and also the largest market for Mercedes for two years. In the long term, we still see China as our greatest growth opportunity over the next five to seven years. Of course there can be up and down movements in the market. But the long-term trend is up.The vehicle density per thousand people in China is still at a very low level compared to Germany or the USA.

Note: In China, Mercedes grew by 26.6 percent - in China alone, over 472,000 units were sold to customers. This means that Mercedes-Benz is still in third place among the German premium manufacturers behind Audi and BMW, but is now within reach of the competition. And when it comes to growth, Mercedes is doing significantly better than the others: Audi sold 516,335 vehicles in China in 2016 - a growth of 11.3 percent. The Volkswagen subsidiary Audi (still) remains at the top: 591,554 units sold, but only 3.6 percent growth.

In other markets such as India, too, you are more successful again after a dry spell. One of the reasons was that the customer structure was getting younger. Are you already addressing the customer groups that you want to have?
We want to address all customers, whether young or "young at heart". We have seen a big change in the past five years. This new strategy - and also addressing customer groups that we did not yet have in our portfolio - started on a large scale with the new compact car family. When we introduced the new A-Class in 2012, it was a revolution that surprised many. The average conquest rate of our compact cars is over 50 percent, we got to know a lot of people who we had not yet had in the Mercedes family. In Europe, for example, the average age of A-Class customers has decreased by 13 years. We have changed a lot here and more models are being added. Let yourself be surprised.

Note: The seller in Ola Källenius shows up again and again. Not the classic salesman, not a frequent speaker who kills his audience with information. The Swede is much more likely to let the facts speak for themselves in order to get his message across to the conversation partner. That makes it all the more difficult to contradict him, to pin him down on falsehoods, because the man seems to know what he is talking about. And formulates it in a sufficiently interesting way that you want to listen to him - but at the same time diplomatic enough not to give yourself up to be shot down. That is also evident in the very last question we ask him. Because on the way to the Mercedes plant we asked our taxi driver what he would ask the Mercedes head of development if he could. His question: Why aren't cars being built like they were 20 or 30 years ago, when they lasted for decades and you almost never had to go to the workshop? Källenius smiles and answers in his own way: facts - then sales. “I would say: That's not true. We have the best quality values ​​since we started taking measurements. He can buy an E- or C-Class with a clear conscience - and the taxi will bring him money. "

Will the winning demeanor, the diplomatic manner and two decades of experience in the group really be enough for the chair at the top as Dieter Zetsche's successor? From today's perspective, it seems almost certain. Will Källenius then lead the company with its almost 300,000 employees successfully into the future? A little less certain, but not unlikely - but above all difficult to assess. So it is probably best to follow the advice of Mercedes’s head of development: "Let yourself be surprised."

This article appeared in our 2017 summer edition “Keep it movin '!”.

Klaus Fiala,
Editor-in-chief