Magna’s new CEO Swamy Kotagiri on what’s next for him and the auto industry.
Video Transcript
ADAM SHAPIRO: Swamy Kotagiri is joining us right now. And there’s a lot going on in the US automotive industry. But your company, it’s more than just parts. It’s the technological expertise, and the software, and the different kinds of components necessary to help GM get back to a healthy sales. So tell us more about what’s going on at your end of this supply chain.
SWAMY KOTAGIRI: You sounded really good. But before I start, good afternoon and happy new year, Adam. Magna is a 60-year-old startup, as I would like to say. It’s $40 billion, largest in North America, third in globe. But more importantly, we are in a transforming industry with electrification, autonomy, and different business models. So it’s a $3 trillion industry, and lots of room to grow.
We have a product portfolio and deep systems thinking, whether it’s body and chassis, or mirrors, or seeds, powertrain, ADAS, and to top it all off, our ability to engineer and manufacture full vehicles. That’s what makes it special and unique in the supply industry. And that’s what lets us do what we do really well, which is the go-to supply for all automakers.
SEANA SMITH: Swamy, you mentioned transformation there– the way we design cars, the way that vehicles are being built these days. How do you see that continuing to evolve over the next several years?
SWAMY KOTAGIRI: I think overall, the industry is changing. I think the transformation is something so significant that this is a milestone that we’ll remember in the history of automotive. There are so many secular trends– one in terms of electrification fundamentally driven by the desire to make sustainability an important topic– keep the planet sustainable for the next generation– better, cleaner air, less emissions, and so on.
We are also looking at making them safer, which is really the driver assist functions. And as all of these systems come together, the architecture of the car is changing. And since it’s a changing roadmap as we look to the next 5, 10, 15 years, we have to keep in mind how do you architect or design these platforms, because what you have now, in two years might change.
You cannot do all the time a re-melt and re-pour. So we’ve always looked at it as a platform strategy, which is scalable and modular– really means you develop and engineer a platform with enough flexibility. So you can deploy it many times. So that’s the most efficient way to deploy capital or R&D dollars going forward.
ADAM SHAPIRO: One of your accomplishments before you became CEO recently was the billion dollar joint venture with LG Electronics. And you’re manufacturing e-motors, inverters, and on-board chargers. How does this position Magna going forward? Because there is the issue if you got the different kinds of charges for the different kinds of EVs, but I would imagine the mechanics on the inside, the engineering is standard across the industry.
SWAMY KOTAGIRI: So, Adam, that’s a great question. From a Magna powertrain perspective, which is one of the product lines, we have the capability and the expertise to design the entire system, integrate, put the software on. But one of the thoughts for us, as discussed before, we looked at scalability and modularity.
As we are changing from ice, to different types of hybrids, to full electric vehicles, you’ve got to be able to address the spectrum. So we looked at it as different building blocks– call it pieces of a jigsaw puzzle. And there are some that are really important, which is the inverter and the e-machine. We had the mechanical gearbox, the integration, and the system knowledge– we felt we needed to have that.
And we are really excited to have LG as partners. So with this, we can not only put the entire system together– and we have a couple of awarded programs today. We make the e-drive for MEV platform for VW in China. We have another North American OEM that has awarded us another e-drive that we’re going to be launching soon. But we went deep into the value chain and said, we need to have this.
But if there are some OEMs that are looking at just the subsystems– whether it be the inverter or the e-machine, we are able to even address that part of the market right now. So it gives us a chance to put our foot in the door, meet the needs of their customers as they want it, but hopefully we are able to address both sides of it– whether it’s a system or a component.
SEANA SMITH: Swamy, you’re also working with Fisker on its SUV. How big of an opportunity is this for the company? And then also when you’re entering into these types of partnerships, what are you looking for when you’re identifying some attractive opportunities for the company?
SWAMY KOTAGIRI: This is a great example of bringing the overall knowledge and value that Magna brings to the table. We talked about full vehicle manufacturing and engineering. With Fisker, it’s an early involvement, so we were looking at how do we effectively bring this to the market. How can we help them to bring their vision to reality?
It started off with contact vehicle engineering and manufacturing, but later now we are talking about getting the entire ADAS system, the e-drive, and other systems from Magna. So the efficiency and the interface of everything coming together, and the program management, the engineering, the value chain management, all of that is something we have done for 60 years. Just the group that we are talking about in Magna has built 3.7 million vehicles in the facility there.
So there is a little bit of experience there. With that brought in, we are hoping we de-risk significantly for the OEM– in this case, Fisker. So that’s the value that we bring.
ADAM SHAPIRO: Swamy, I want to ask you– you know, it’s an out of the ballpark kind of question, but here goes. Because you’re in discussions with the OEM, with the original equipment manufacturers worldwide. Put a prediction on it– within how many years are we going to have 50% EV saturation in the major markets– whether it be China, the United States, or Europe?
SWAMY KOTAGIRI: You’re asking me to look into a crystal ball, and I’ll try. We’ve always typically said, the more important thing is how do you make it agnostic to take rates and volumes. But I would say by 2030, 50% of the global vehicle are going to have some form of electrification, right– different levels of hybrids or full batts.
Today, I know it’s a difficult thing to say, but to say 15% to 20% of the vehicles to be fully electric, absolutely don’t see a problem there. But there is an inflection point, right? Today, it’s driven by emissions and regulations. But if there is a change in the infrastructure, if there is a significant drop in the batteries that we are all talking about, and the solid-state batteries, I think that point could shift, you know, earlier.
SEANA SMITH: And tell me real quick, because we’re almost out of time here– but I’m curious just how big of a difference you potentially see the Biden administration making when we talk about this acceleration here and the shift to electric cars in the US.
SWAMY KOTAGIRI: Look, as an automotive industry in general, and Magna is part of it, we are dealing– we are a global company with 28 different countries where our manufacturing locations are. So we always deal with changes in administration changes in policy. Not only that, even if you look at the regulations that are different in different regions, honestly, all of these policies and something that we take as a normal course of business to strategy as we go through them, it’s going to be a change. But it’s not something new that we have not dealt before.
ADAM SHAPIRO: All right, Swamy Kotagiri is the CEO of Magna. We wish you the best. And thank you for joining us here on Yahoo Finance Live.