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Automotive World Must Prepare for Unprecedented Challenges

Developments in digitalization, connectivity, electric transmissions, energy storage and artificial intelligence are to transform both auto production and automotive service industries in the next decade, with far-reaching consequences.

The self-driving car of the very near future will be able to “see” around corners 200 meters ahead and begin decelerating if approaching congestion, both for reasons of safety and to save fuel. Simultaneously, it will be transmitting information on traffic conditions to vehicles behind it (so they can also begin to decelerate) and, should it hit a pothole, it will automatically inform the highway maintenance authorities of the fault.

This example, cited by Jens Brüning, an expert on advanced driving assistance systems with the German automotive services company Continental, is an indication of the impact modern technology – most particularly advanced computers and artificial intelligence – will have on not only the automotive industry, but on broad swathes of society in general.

“With autonomous, self-driving cars, our vision is that in the future we will have zero accidents. [But] we can only reach that if we have a whole bunch of assistance systems for drivers in complicated traffic conditions, [including] ice and snow,” Brüning said, addressing a conference entitled “Automotive in Transition” in Budapest on January 24. Change, disruption and ultimately perplexing legal and ethical issues related to the automotive world in general, and Hungary in particular, were the common themes of the conference, organized by law firm CMS and the German-language Andrássy University Budapest.

Gigantic Role

Pointing to data showing vehicles made up 20% of Hungary’s exports in 2017, Ágnes Halász, head of economics and strategic analysis at UniCredit Bank, said: “The car industry plays a gigantic role in the Hungarian economy. Therefore, it is crucial for us to be a winner in this transition.”

Indeed, the automotive sector is even more important than the basic statistics imply at first sight, Halász stressed, as it is a major driver of higher added value throughout any economy.

“[Globally], empirical studies show that 1% growth in automotive production eventually results in 1.5% GDP growth in the economy [….] and [in Hungary] its share in GDP is higher than its share within employment, and this means the per capita added value of the Hungarian car industry is higher than the national average.”

The high productivity of the domestic automotive sector is largely down to the presence of leading international companies such as Audi, Mercedes and now BMW establishing modern production plants in Hungary, along with an increasing role played by automotive research and development centers, László Palkovics, Minister for Innovation and Technology, noted.

Yet, despite significant recent developments, Hungary still lags behind Czech Republic and Poland in global competitiveness rankings. The government intends to change this through more “dual education” courses involving integrated college and practical training in industry, along with special facility developments, such as the state-of-the-art auto test track in Zala county, southwest Hungary, built to attract research and development work within the auto industry, Palkovics said.

Boosting Productivity

Speaking from the side of industry, Taira-Julia Lammi, managing director of the Swiss-Swedish engineering company ABB in Hungary (and winner of the 2019 BBJ Expat CEO of the Year title, see Special Report in this issue), pointed to the statistics on robot density as an indication of one means to boost productivity.

According to data from the International Federation of Robots, Hungary has 57 robots per 10,000 manufacturing workers, compared to 309 in Germany, which leads the robotic rankings in Europe.

“So, here in Hungary we still have more room for automatization in factories, at least when it comes to robots,” she said.

(For a regional comparison, robot density in 2016 was highest in Slovakia, at 135 per 10,000 workers, followed by Czech Republic on 101. Poland, on 32, lagged Hungary.)

Summing up the conference, Martin Wodraschke, a partner with the CMS AutoTech group, argued that Hungary “is on the right way” with a solid education system and economic basis supporting efforts to meet the challenges.

However, he expressed concerns over the ability of domestic small- and medium-sized enterprises to cope with the myriad of tasks ahead.

“How can the SMEs, out in the countryside, do the same changes? This is not a [subject] only for the international elites, this is a thing which is going through the whole Hungarian automotive industry. I think this will be the most difficult thing in the future.”

The Connected Car: a Cyber-security Risk

The connected car, fitted with sensors and computers to control every function from steering and fuel consumption to humidity and tire pressures, holds out the promise of many astonishing advantages. But the very systems that provide these enormous benefits also offer a challenge to a more nefarious type of “entrepreneur”: the hacker.

“Autonomous cars, vehicle-to-vehicle connectivity, [both are] coming in the next few years. The amount of computers in every car is exploding,” Tamás Kerecsen, chief technical officer with NNG, a Budapest-based software provider for the automotive industry, told the CMS conference.

“[But], thanks to all these different trends coming together, cars are becoming a huge risk, because a car which is a computer upon wheels, when it’s hacked, it’s not only that it can become disabled, or you can lose some data, you [put at] risk other people on the roads, the passengers in the cars, the infrastructure of a city,” he said.

NNG, which began life as a navigation software provider [originally called Nav N Go] has, perhaps unsurprisingly, since moved into the cyber-security arena. The task, however, is immense, not least because of the vast number of different component makers in the industry.

Even cars are built with limited connectivity, owners are likely to plug in their own systems, “opening this door ever wider” to potential cyber intruders, Kerecsen said.

“There are many issues: who is going to be liable if, for example, the owner of a car fails to take his car in for a software update? Solutions are out there, and we are working with a lot of partners. […] There is a huge need for solutions to this problem [… but] this is not something that a single company can solve,” Kerecsen noted. “Industry and governments need to come together [on this].”