Alumni Story | China holds the future of automotive innovation
For the Chinese automotive industry, the past 20 years have been a period of unprecedented development not only in terms of growing market size but also sophistication, innovation and adaptability.
The same timeframe has been transformative for Stefan Dattenberger too. Having built his consulting career in China, he is now General Manager and an Associate Partner at Ingenics Consulting a global consultancy firm with strong connections to the automotive industry. He's seen the China Subsidiary of the company grow from 15 full-time consultants to 55, alongside the development of ever-strengthening client relationships spanning multiple regions and sectors.
We sat down with Stefan to ask him about his time in China, his personal and professional growth journey, and his take on the future trajectory of Chinese auto innovation.
Stefan Dattenberger
General Manager & Associate Partner
Ingenics Consulting
中国一级片 Global EMBA (GEMBA) 2021
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Why China? Where else is there?
"I first came to China 20 years ago as part of a university exchange programme," Stefan recollects fondly. "It was my first time in Asia, but I instantly knew that this was the place to be. I'm a firm believer that Asia will become the world's leading economic powerhouse, because I've seen firsthand the dynamism in China and other Asian countries. I knew that I wanted to be part of what was happening here; to learn, to build a network and to test my business understanding and ideas. I don't think there's a better testing ground in the world. I also love the lifestyle and culture too; that's why I've stayed for the best part of two decades."
Throwing himself headfirst into everything China has to offer, Stefan quickly came to appreciate an almost globally unique aspect of its business culture – the ability to rapidly experiment with new concepts and approaches, leading to lightning-fast product development cycles and market entry, followed by equally rapid periods of scaling up production.
The automotive industry is a prime example of this culture in practice. It's not just the technologies and production methods that are changing with increasing rapidity, so are the Chinese consumer's expectations and purchasing habits. This has given Stefan plenty of opportunities to test his ability to keep pace with unrelenting cycles of change at both the production and consumption ends. It's a highly competitive space in which to consult, but it's one that plugs him into many of the most exciting industrial and technological developmental trends in the world.
From optimisation to innovation – China's automotive evolution
Consulting for Ingenics' auto clients – in China and around the world – has changed markedly during Stefan's career, particularly in the past 6 years since he assumed the GM position in China.
"At the beginning of my time in China, the focus was heavily on capacity expansion," Stefan shares. "Clients wanted efficient processes to ensure that production kept pace with rising sales orders, while increasing the output as much as possible. Efficiency increases are still important, but now the scope of our consultation is much broader, with multiple areas of focus including digitalisation, automation, sustainable supply chains, green factories and reducing emissions."
Stefan outlines how the Chinese auto market is experiencing significant consolidation. The advent of electric vehicles (EVs) spawned dozens, and then hundreds, of small Chinese EV brands, which are now beginning to coalesce as both the Chinese and global EV markets mature. ?
"10-15 years ago, you could sell literally every car in China. The explosion of the middle class and their easy disposable wealth meant everyone was hungry for imported auto brands, not just EVs. Now, Chinese consumers are much more discerning. They want a mobility solution that fits with their lifestyle aspirations. A lot of global brands made the mistake of thinking that their standard approach is just as suitable for Chinese customers as Western ones, and that's not necessarily the case. So Chinese brands are generally showing greater agility and awareness of what the market really wants."
Essentially, this means the relative youth of Chinese auto brands is now a major asset. Conventional wisdom dictates that shoppers looking for a new car will look at an established brand and view their long history as an indication of reliability. While this may be true, it also overlooks the crucial factor of flexibility. For older, well established European, American and Japanese car brands, working in steel for decades has not prepared them for a software-first approach – i.e., finding the right software and then building the car around it, rather than trying to plug the right software into the car design.
Stefan feels that Chinese brands hold several crucial advantages here. Their youth means that they have fewer legacy issues to deal with. They also operate in a business environment where it's comparatively easy to raise capital for R&D, undertake rapid tech integrations and carry out testing of advanced products such as automated/driverless vehicle solutions.
Together, these advantages translate into an increasingly agile and innovative auto industry. This is fortunate, because that's exactly what everyday Chinese car buyers now expect.
Hungry for novelty – Chinese consumers spur innovation
Even as the technological sophistication of new auto products in China goes up, the length of their production cycle is quickly going down. You might think that consumers would be willing to wait longer for the right car that complements their lifestyle, their personal tech setup, their mobility needs, but in fact the opposite is true.
"In Europe and the US, the norm among previous generations of drivers was to choose a brand and stick to it. Chinese consumers are very comfortable switching things up. If they see a different brand that better suits their tastes and needs, they'll happily switch. Similarly, they won't wait 10+ years to run the car into the ground; they'll have no qualms about trading in after a couple of years if there's something new they have their eye on."
Stefan explains that, from a production perspective, this adds a lot more pressure. 10-15 years ago, it was the industry norm for new auto models to take several years to develop. Now, new Chinese OEMs are pushing the timeline from initial design to Start of Production (SOP) down to less than 2 years. At the same time, the average market shelf life of a given product has dropped from 7 years to just 2-3 on modern EV cars until the customer expects something new. This lightning-fast production and selling cycle comes with a lot of challenges – how best to calculate R&D budgets and ROI, how to configure supply chains for speed as well as reliability how to accommodate an expanding range of electronic components, powertrain setups, batteries and interface systems, all of which are vying to become market leaders.
Even though the complexity of the challenges facing the Chinese auto industry has rocketed upwards, it has forced Chinese brands (and their global partners) to innovate and adapt.
"China still holds the future of auto innovation. Geopolitics aside, traditional OEMs in the West still want partnerships with Chinese solutions providers because they understand what is happening here. We're on the cusp of big changes in automotive products and infrastructure setups across the world, and eyes are drawn here because China is where big changes happen fast. Look at the cooperation on EVs – Volkswagen are teaming up with Xpeng, Stellantis with Leapmotor – there is lots of interest to engage with and learn from Chinese brands despite recent uncertainties around the world."
Learn by doing – Going Global again with GEMBA
While China holds no end of fascinating changes to explore, Stefan has been stretching his legs further in pursuit of new knowledge, ideas and points of comparison. After the long pause in global travel during the Covid years, he has been eagerly enjoying the resumption of his international learning journey, travelling to Africa and India alongside his GEMBA peers in their global modules.
"If you want to understand a market, you have to go there. You can't get it purely from classes and case studies. You get access to real business leaders, see real companies operating in situ. You see conditions on the ground and even with all our technological progress, there's no substitute for this. That's why I'm so pleased to get back to learning internationally with my GEMBA friends and classmates."
The Africa module was Stefan's first visit to the Western part of the continent. Here, he saw the promise the region holds in its budding entrepreneurialism, as businesspeople find innovative ways to create and scale up new business models that cut to the heart of current consumer needs, while using emerging technologies to leapfrog infrastructural hurdles as well as the many trade barriers in place across the continent.
In India, Stefan felt almost nostalgic, seeing parallels to China's position almost a decade prior:
"Economists love to compare China and India, since they're both large, dynamic markets. But there are indeed similarities; the big cities feel in many ways like China was 10 years ago; there are masses of ambitious infrastructure projects, roads and metro networks in Mumbai and Bangalore, and some very impressive new airports. It feels like India is poised to do even bigger things domestically and on the world stage. It's such fertile ground for rapid technological change, and that makes it an exciting prospect that plenty of industries, from healthcare to AI are interested in. I was particularly impressed by their startup communities and culture; I love to see innovators and engineers coming together."
Reading the crowd, feeling the flow
As 2024 gets underway, Ingenics is preparing for a new round of global expansion and choosing the right markets for entry will be key. With this in mind, Stefan has eagerly set his sights on more of the upcoming global modules that can help him unlock new insights and region-specific knowledge.
Despite his increasingly busy schedule, Stefan tries to find time for a personal passion of his – techno music. A veteran live musician, he can be seen playing in clubs across China as well as music festivals. If electronic music is to your taste, look out for him under the artists' projects KlangausStrom and RustyChuan.
Stefan says that it's a fun, creative outlet, but it also has some bearing on his work mentality:
"With consulting or music, you have to know your clients' respective audiences. You must understand and feel what they desire. You read the crowd, you consider the conditions, then you adapt and sometimes need to improvise– you have to be able to flow. That's how you deliver the right result to the right audience."
It may be a very changeable time for China's economy and global business in general, but having the tools and overall mentality to assess and adapt to changing circumstances means that any outcome can lead an organisation to new opportunities. For Stefan, China continues to provide all manner of exciting challenges, ideas and openings for personal and professional growth.
