“We can do a lot in our supply chain.”

What impact did the chip crisis have on Audi, what priority does data security have, and how does Audi ensure high standards for the environment and society? Dirk Grosse-Loheide, Member of the Board of Management of AUDI AG, Procurement and IT.

03/17/2022 Reading Time: 3 min

Dirk Große-Loheide, Member of the Board of Management of AUDI AG, Procurement and IT (2022)
Dirk Große-Loheide, Member of the Board of Management of AUDI AG, Procurement and IT

The major topic that has had the entire automotive industry holding its breath in recent months is the chip crisis. How many sleepless nights has the issue given you? 

 

I have to admit that the semiconductor shortage has kept me really busy in the last few months, though it didn’t stop me getting a good night’s sleep. What we are dealing with here is a structural issue, and that makes the situation even more challenging. The automotive industry is currently feeling the effects of a significant undersupply of semiconductors, which is caused, among other things, by the allocation of chips in the direction of telecommunications and entertainment electronics during the course of the coronavirus pandemic. Moreover, the situation has also been exacerbated by factory closures among key manufacturers due to the pandemic. Together with the other brands in the Group, we are doing all in our power to mitigate the effects of this supply shortage as best we can.

The supply chain for present-day vehicles is very long and globally spread. How does Audi ensure high standards for environment and society?

 

We work with over 14,000 suppliers from more than 60 countries. We influence all of these players – and they us in turn. This therefore presents a huge opportunity. We can do a lot in our supply chain. Our requirements for our business partners are laid down in the Code of Conduct, in which aspects such as environmental protection, human and labor rights, transparency and fairness are firmly defined.

 

We set high standards for ourselves and work on ensuring compliance with these values along the entire value creation chain. We can use the Sustainability Rating as a tool in this regard, for example, to assess adherence to social, environmental and compliance standards. A positive outcome here is a prerequisite for awarding a contract. In addition, we continually optimize our management systems and use artificial intelligence that analyzes freely accessible online media and social media for specific keywords and informs us of hits on topics such as environmental protection, human rights violations and corruption in the supply chain.

Whether in the company or on the road, digitalization is the order of the day. How is Audi ensuring secure IT structures in vehicles and services?

 

Data security is a top priority. That applies to all IT solutions. We treat any potential data breaches seriously and work intensively on precautionary measures. Whether customer, vehicle or production data: It’s very important to us that the highest security standards are met. We therefore continually enhance our security systems to prevent attacks on our IT as far as possible, to identify such attacks in good time and to limit their consequences to the greatest possible extent.

Audi is planning to increase its vehicle sales in the next few years. In other words, you will need considerably more parts and raw materials from markets that are already strained today. How will you overcome this challenge?

 

As we undergo the transformation to electric mobility, battery resources and renewable energies are obviously an important priority for us. We need to recognize that the commodity markets have become more volatile. Our attention is therefore focused on long-term strategic partnerships so that we can ensure price stability and certainty of supply. We are positioning ourselves on a broad basis in terms of technology and focusing on Group platforms. By bundling our needs across multiple brands, we are strengthening our purchasing position. The conditions for purchasing raw materials are a very important aspect in this regard. The Code of Conduct defines the framework in this context as well. On top of that, the Volkswagen Group is represented in a number of initiatives, such as the Global Battery Alliance, in order to advocate for uniform standards in the supply chain, for example in the area of human rights.

In times of resource shortages, can the circular economy also provide a solution?

 

Our goal is to manage as many materials in a circular system as can be achieved in an ecologically and economically meaningful way. The priority here is to restore all parts and materials that we recycle to original quality again. This is the only way that we will be able to create resilient supply chains and achieve significant savings in our primary material requirements. We have been operating an Aluminum Closed Loop, for example, at various sites since 2017. In this respect, we were the first car manufacturer to be awarded the “Chain of Custody” certificate of the Aluminium Stewardship Initiative in 2021.

 

It is probably not surprising that we are looking in particular at battery raw materials in the circular economy. We are entering into strategic partnerships in the Volkswagen Group in order to cover the entire value creation chain for batteries. This extends from raw material sourcing and processing to development of our own battery cells, such as the Volkswagen unit cell, through to management of future European gigafactories. New business models in the area of reusing end-of-life vehicle batteries through to recycling of valuable raw materials will also be included in the scope of action. We want to offer our customers high-performance, affordable and sustainable vehicle batteries.

The new corporate strategy views intelligent hardware as a future business model of Audi. What is behind this and what impacts does it have on your area of responsibility?

 

In simple terms, it is a service that allows us to include more functions in our cars by using connected parts. With the aid of this intelligent hardware, we will be able to inform our customers in plenty of time if a part has to be replaced, for example. In the medium term, personalized offers for upgrades of specific parts are also conceivable. We are collaborating with our business partners and suppliers in developing and expanding this intelligent hardware. Procurement can therefore make an important difference. This aspect of the strategy will also contribute to the sustainability of our products. For example, we are developing an extensive portfolio of sustainable parts, such as through the reconditioning of used replacement parts.

Strategy "Vorsprung 2030" – How Audi is shaping the future

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Strategy "Vorsprung 2030" – How Audi is shaping the future

“Vorsprung durch Technik” for the electric era

 

The electric mobility offensive of the Four Rings comes at just the right time. Climate-friendly mobility is becoming increasingly important. As of 2027, the company will offer electric models in all core segments. This range of electric cars will stand out from the competition thanks to its distinctive Audi DNA and “Vorsprung durch Technik” in certain areas. Design, sportiness, driving comfort and quality will all make a difference. In addition, Audi will demonstrate its strengths in workmanship, color & trim and acoustics.

 

A clear plan for the last and, at the same time, best combustion-engine vehicle from Audi

 

Audi is accelerating its changeover to electric mobility: As early as 2026, all new models from the Four Rings on the global market will be fully electric. And in 2033, the Four Rings will shut down the production of vehicles with internal combustion engines. One exception could be China, where the company is investigating the possibility of longer production depending on local demand. The last combustion-engine generation comes with a promise: It will be the best that Audi has ever put on the market. This drive strategy was set out clearly at an early stage, thus providing planning certainty and helping to guide future investments in a targeted and efficient manner. For Audi, this technological change goes hand in hand with the biggest transformation process in the company’s history. A particular focus will be on ensuring that the employees affected are able to train and develop successfully.

 

ESG performance as the basis for a better future

 

Audi already has net carbon-neutral1 operations for the production of its vehicles at several sites. Now the company is focusing even more strongly on sustainability throughout the entire product life cycle – from resource extraction and vehicle operation to recycling of the materials used. In the future, ESG (Environmental – Social – Governance) aspects are to play an important role in all the decisions made by Audi, as well as in its products and services. The main ESG criteria are climate protection, the use of finite resources, employee health and safety and the perception of social responsibility. Another consideration is the robustness of Audi’s corporate governance, for example in terms of compliance and risk management. Audi also submits to external evaluation in all these areas and will be given an internationally recognized ESG rating.

 

Holistic ecosystem puts users first and creates meaningful and fascinating experiences

 

Audi wants to make the progressive premium mobility of tomorrow even more attractive. Alongside the vehicle itself, its focus in the future will be on a holistic customer experience and on ways of integrating that experience into the lives of users. With this in mind, Audi is taking a close look at the users’ needs. They expect fascinating and meaningful experiences from Audi, as well as holistic solutions that seamlessly span all areas of their everyday lives. The ecosystem for electric cars – and in the future also for cars that drive automated – plays a central role in the transformation and will be key to customer satisfaction and thus to long-term, personal customer relationships. An elementary component of the ecosystem is charging, which has already been implemented successfully with charging options at home wall boxes, a comprehensive charging infrastructure with charging points throughout Europe and intelligent route planning. When it comes to further expanding the ecosystem, automated driving in particular will be a game changer. It will give rise to a large number of additional use cases that will fundamentally change the way people use their vehicles. The car will become a personal experience device and can be used as an office, a movie theater, a place to relax or as a space for shopping and gaming. The Audi ecosystem consistently focuses on the user and connects the vehicle with a wide range of services that cover all areas of life – both online and offline. This creates a holistic experience that spans all points of contact with the Audi brand and fits seamlessly into users’ lives.

 

Intelligent hardware: In the future, vehicle part will be fully connected and increasingly made of sustainable materials

 

Thanks to intelligent hardware, customers will be able to continually upgrade their cars going forward. This will ensure that Audi models remain attractive throughout their life cycle. To this end, Audi wants to offer its customers parts with an intelligent information system that proactively sends a request for replacement if it detects wear or a defect. The technical basis for this is provided by the vehicles’ connectivity with a sophisticated interplay of algorithms and sensors. In addition, Audi will recycle components to premium standards to strengthen a circular economy. Sustainable materials and resource-conserving production are key elements here. All these measures are also aimed at positively impacting the residual values of the models in the future. At the same time, Audi is thus expanding its range of services in the after-sales sector and aims to generate additional revenue in this profitable business area.

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