Christophe Périllat, Valeo: “we want to be the world number 1 in sensors for autonomous cars”

Having just been appointed head of France’s second-largest automotive supplier, the CEO of Valeo must face two challenges: avoiding the pitfalls of an international situation shaken up by the war in Ukraine, shortages and inflation, but also install the confidence of the financial markets, cooled by its first announcements. Between now and 2025, Christophe Périllat’s projects to install more technology in the car of tomorrow are not lacking, however.

How does the war in Ukraine affect the activities of the Valeo group?

Christophe Perillat: We employ many people of Ukrainian nationality in our Polish, Hungarian and Czech factories. Let me think first of them, of their family. The situation is really terrible. You ask me what the direct consequences of this war are: they are minimal, because we have no factory or supplier in the country.

We operate a single production site in Togliatti, Russia, which serves Avtovaz and Renault. It’s a small site – around 500 people work there – which represents only 0.5 to 1% of our overall turnover. Its production is intended for the local market, so in case of problems to continue production there will be no consequences for our customers outside Russia.

What will be the impact of the conflict on the global automobile market?

The industry is emerging from two years of underproduction. Between 75 and 76 million cars were manufactured worldwide in 2020, the year of Covid, and 77 million in 2021 when the semiconductor crisis raged. These figures should be compared with the production of previous years, around 90 million cars. We therefore have a production deficit of 30 million vehicles which has unbalanced the market: many customers are waiting for their car, the deadlines have lengthened.

Even if the war had an impact on the global economy, I therefore remain confident, because the automotive industry has very full order books and strong demand to satisfy. The question is therefore not that of the market. On the other hand, as in 2021, the question will be that of the ability of manufacturers to produce in Europe, since many suppliers in Ukraine will be seriously disrupted. There are also many unknowns concerning inflation, the price of energy and raw materials…

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You have just taken over from Jacques Aschenbroich, who has headed Valeo since 2009, what are your priorities?

The group is very well positioned in the mobility market of tomorrow. I intend to accelerate even further in two areas: electrification and vehicle driving aids. On the first part, we decided to acquire Siemens’ shares in the joint venture created in 2016 to produce high-voltage electrification systems for cars.

The integration of this activity within our Propulsion division will make it more innovative, competitive and profitable. On the second part, I announced an acceleration of our developments on an essential product for driving assistance: the Lidar (for “light detection and ranging”, a system which makes it possible to measure distances and detect obstacles by laser beam, Ed). It is a sensor with extraordinary performance that makes possible a very advanced degree of vehicle autonomy.

After the presentation of your roadmap last February, Valeo’s share price fell. Why ?

Because I wanted to be careful about our objectives in 2022 and our ambitions for 2025. There are a lot of uncertainties regarding the automotive market: Ukraine, the component crisis, inflation… In the context, this caution was necessary.

What are your ambitions for the autonomous car?

Accelerate again. Today, we are already the world number 1 in these technologies. We make ultrasonic sensors (those that “beep-beep” in your car!), cameras, and then this newcomer, Lidar. We also design “controllers”, which are used to process the data captured by the sensors to merge them and reconstruct a 360-degree image of the vehicle’s environment to avoid obstacles (pedestrians, cyclists, trucks, etc.). We also develop a lot of software to allow the car to make decisions: accelerate, brake, avoid.

How quickly will these technologies become widespread?

30% of premium models will have a level 3 autonomy function within five to ten years, a little later for the “mass market”. The driver will be able to delegate driving to the vehicle, no longer look at the road and do something else: read, send SMS, watch a film… Two models in the world have received approval from the supervisory authorities for extended autonomy: the Honda Legend in Japan and the Mercedes-Benz S-Class in Germany. Their common point? Both are equipped with Valeo Lidar. For the other cars that offer driving assistance today, you still have to show that you are attentive by touching the steering wheel at regular intervals.

You are also announcing innovations in lighting…

In the passenger compartment of tomorrow, you will be able to change the lighting depending on the driving situation, the weather or your mood, to promote well-being. Outside, the lights will be increasingly used by designers to highlight the brand’s signature. Cars will also communicate with their environment via lighting: when you turn, signs will be projected on the road to inform pedestrians or cyclists of the behavior of the car…

Manufacturers invest a lot in the field of software, is this competition for you?

There are more and more software in cars and there is room for everyone. Valeo is a big player in electronics. For us, nearly one in two engineers works on software, system architectures, cybersecurity and artificial intelligence. The developments of our customers will be completely complementary. They will take the higher layers, the management of the car, and we will take the lower layers: software to operate the sensors, the 360 ​​degree map around the vehicle, etc.

The Gafa are also in ambush…

More than the Gafa, we see above all the rise in power of the manufacturers of large chips, such as Nvidia or Qualcomm, who think about the electrical architecture as well as the electronics of the car, design computers to manage all the data and execute the instructions. Everyone has their part in this value chain in full recomposition. The one we occupy and will continue to occupy is very important, so we have no worries on that side.

What is the objective of the recent partnership agreement signed with Renault?

We are co-developing and co-producing a new electric motor that will not contain rare earths (mineral materials with exceptional properties used in high technology, editor’s note). These metals come mostly from China, hence a question of dependence, because their extraction has an impact on the environment and their prices are very volatile.

Giving ourselves the objective of eliminating rare earths therefore allows us to evacuate a whole series of problems. Renault will assemble the engines at the Cléon plant (Seine-Maritime) for its own needs. We will offer this engine to other manufacturers.

Does the growth of the electric car market offer you other opportunities?

Yes, for example in our “thermal systems” activity. In an electric vehicle, there are almost three times more of our thermal products than in a combustion vehicle. They are used to keep a battery in good condition, in particular by cooling it during rapid charging phases, which is essential for cell longevity.

They also make it possible to preserve autonomy. In cold weather, you lose a lot of it, because some of the electrons that are in the battery and allow you to move forward are also used to heat the passenger compartment. We therefore need very efficient heating systems. We are developing heat pumps like those used in homes, which are very economical in terms of electricity consumption.

What is the future of your combustion engine business?

Eventually, they are doomed to disappear, except in after-sales. Products specifically related to combustion engines represent a very small percentage of our turnover: 11% today and it will be less than 4% by 2030. Fifteen years ago, we had already decided to we no longer have activities in diesel, nor are we in engine control, an activity that we sold, nor in injection…

Will you continue to work on the hybrid engine?

For the automobile, it is a transitional technology. In many parts of the world, the market will eventually focus on high voltage, that is to say the 100% electric motor. But the transition phase will be long and we are convinced that the light hybridization market, 48 volts, will continue to grow well beyond 2030.

The new Euro 7 standard establishes standards that will make this technology almost necessary on all combustion engines. When it decreases in favor of high voltage, adjacent low voltage markets will take over.

What are they ?

These are the mobility markets in the broad sense, in which we strongly believe. The technologies that we master today, such as electrification or driving assistance, allow us to approach them with good prospects. These include, for example, the electrification of two-wheelers – bicycles, motorcycles and mopeds –, but also three-wheelers such as the rickshaws that we see in Asia.

There are also small urban cars like in France the Ami de Citroën, or this new object, the “droid”, a kind of cooler or Caddy on tires which will be used for last mile deliveries. You will order a pizza or groceries and it is an autonomous electric trolley that will come to the foot of your building to drop them off after sending you an SMS.

How did you handle the semiconductor crisis?

We were among the only ones to successfully serve all of our customers last year. At the beginning of 2021, we increased our stocks significantly and gave more visibility to our suppliers so that they can anticipate and size their investments. In the group, all factories use the same material requirements planning system and the same management system.

This made it easier to communicate and share shortage products between sites. But we supply more than 20,000 different references and we buy for Valeo’s needs more than 250 million components per day. Identifying in this mass the one who will pose a problem is not an easy task!

Will the shortage continue?

Even if the overall situation is improving, it remains complicated. There are still pockets of difficulty with particular technologies, but to be produced, a car needs 100% of its components. Each month that passes shows the best.

The automobile weighs heavily in France’s trade deficit. What is the share of France in Valeo’s activities?

France is a very important country for Valeo. We have our head office and the headquarters of our four businesses there. The country represents 15% of our turnover, 14,000 people employed, 23 factories. We are making efforts to preserve our French industrial footprint and ensure that a large part of the group’s innovation comes from our French labs.

We have also done a lot of reindustrialisation. Factories have been converted to manufacture more technological products geared towards the electric vehicle. Now we have to continue to work on the costs. Production taxes are a topic of the presidential campaign. I hope that the candidates will seize it to lighten the weight which weighs on the companies established in France.

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Christophe Périllat, Valeo: “we want to be the world number 1 in sensors for autonomous cars”

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