A speech by Andreas Renschler, a member of the Executive Board of Volkswagen AG responsible for commercial vehicles and CEO of Volkswagen Truck & Bus GmbH, delivered during the International Press Workshop 2016 in advance of the 66th IAA Commercial Vehicles show in Hannover from 22 to 29 September 2016. 

“I am very pleased to be here today in my new role at Volkswagen AG.

In 2016, Volkswagen Truck & Bus will see its first IAA Commercial Vehicles trade fair. More than one year ago, we decided to realign our truck brands under this roof.
In the meantime, we have detached the truck and automobile processes and significantly intensified collaboration between our commercial vehicle brands. 2016 is the first year in which we get to jointly implement our plans.

Joachim Drees is here today representing MAN, Henrik Henriksson representing Scania, and Eckhard Scholz representing Volkswagen Commercial Vehicles.
My colleagues will tell you more about their individual businesses and their ideas later when we address the topics of the industry that keep our drive. In addition, I would also like to take a look ahead today.

We do not need a crystal ball to look further into the future. We already know very well in which direction we are headed. In the next few years, the world of transportation will undergo massive changes. Most of you know how down to earth I am – but in this context, even I would say that we can speak of radical transformation.

Today, let me, therefore, take a look far ahead, into the year 2040. Will we still be transporting goods then? Yes, but the system will have changed. Will we still have haulers and carriers? Yes, but their roles will have changed. Will we still have trucks? Yes, but trucks other than what we see on the road today.

In 2040, our transportation system will have reached a new level: fully connected; significantly more efficient and effective, above all. This will all become possible thanks to digitization. Digitization will open up the future for the transportation industry and all people involved in this ecosystem: no more inefficiencies, no more increasing obstacles of acceptance, no more negative impacts on the environment and the transportation infrastructure.

This is our vision: in 2040, all individuals involved in the ecosystem of transportation will benefit noticeably from our digital innovations. But what does that mean? It means minimizing systemic inefficiencies — such as exploiting loading capacities: with an estimated market size of an annual €300 billion in Europe, we are transporting “air” in the double-digit million range – that is expensive air, both for our customers and the environment.

It means a significantly lower impact on traffic and the environment – specifically: traffic jams, noise, particulate emissions. It means eliminating obstacles of acceptance, e.g. passage restrictions for driverless vehicles that move around in connected, intermodal transportation systems, in which the flow of traffic is optimized through artificial intelligence.

This digital future is no daydream – we already have it today in other branches of industry where it is already leading to profound changes and even better opportunities. What we are witnessing now is the dawn and the reinvention of business models with a massive increase in efficiency as a result.

Just to give you some examples: Gett, in which VW made an investment of €300 million, is operating a very successful driving service without having any vehicles of its own. Fintech companies such as TransferWise are currently turning the financial industry upside down. The company offers simple money transfer between individuals at a lower rate than banks do.

Last year, the company was rated at around $1 billion. With more than 1.5 billion users, Facebook is the largest media platform on the globe and does not create any content itself. There are plenty of other examples – and there are even more of them day by day. Some of them only have a short shelf-life, others create new benchmarks.

At the same time, technology keeps developing at a high pace: artificial intelligence developed by major IT corporations is permeating our everyday lives. And just to give you one example from a completely different branch of industry: IBM Watson is an artificial intelligence technology that learns and analyses entire subject areas on its own. It generates answers to concrete questions that Watson then renders in a natural tone of voice. Within a few weeks, Watson can analyze scientific fields of study and contribute to significant results, e.g. identifying unknown proteins to inhibit the growth of tumours. The business area of IBM Watson is planned to generate sales revenue of $10 billion until 2025.

Artificial intelligence will also be a key success factor when it comes to autonomous vehicles in normal traffic situations. At the same time, global data volumes are doubling every two years. Already in 2020, the volume will increase to 40 zettabytes – this equals fifty times the amount of all grains of sand worldwide; in 2005, there were still five times more grains of sand than bytes.

The heartbeat of this data is algorithms that will set the pace for the future. In many industries, algorithms already complete tasks today that used to be done by people beforehand: At the University of California in San Francisco, a fully automated pharmacy measured 20 million drugs without one single error – people had made mistakes around 20,000 times.

And just to give you one other example from the banking sector: the blink of a human eye takes one hundredth of a second – during this time, algorithms in high-frequency trading can carry out around 25,000 and soon around 40,000 trade orders; in Germany, high-frequency trading already represents 50% of sales revenue today. Profound innovations can also be found in the transportation industry. Last mile logistics is becoming increasingly customized and autonomous: Amazon is experimenting with “Prime Air” test centres in the U.S., the United Kingdom, Austria, and Israel; according to Amazon, they will be able to make deliveries with drones within 30 minutes as of 2019 – provided that the project is technically and legally feasible.

Less futuristic: In several states in the U.S., Amazon’s Prime Now service is already available today making deliveries possible within one hour by identifying customer needs even before customers realize it themselves.

The commercial vehicles industry, too, has undergone numerous developments with a historically strong power for innovation. In the early beginnings of commercial vehicles, technological developments were driven by the ambition to develop more and more powerful vehicles. This trend was soon replaced by the focus on optimizing total cost of ownership – and by fulfilling ever stricter environmental regulations.

As a next step, digitization will now improve efficiency along the entire value chain. As a result, we are rethinking transportation systems from scratch. Today, the commercial vehicles industry already plays a leading role in terms of digitization when it comes to creating intelligent and sustainable mobility.

As an industry, we are increasing capacity usage and optimizing single tours by connecting all parties involved in new, smart systems. That is why MAN invested in the American start-up FR8. As manufacturers, we rely on the automation of processes and special tasks, such as fully autonomous mining vehicles that independently accept and execute orders. Such vehicles will soon be delivered to customers of our Scania brand, for example. And the optimization of vehicle operation through telematics-supported driving/parking as well as through real-time data analysis of vehicle parameters will reduce downtimes by over a third.

At Volkswagen Truck & Bus, we plan to offer our customers an open platform with internal and third-party applications in the near future. This will enable us to improve operational planning of employees, drivers, and vehicles – and continue to drive forward networking within the value chain.

We anticipate that the majority of freight forwarders will use database services by 2025. All of this will be made possible first and foremost by excellent data availability and analysis – whether historical or in real time. Our trucks continually collect and send data, and exchange this via vehicle-to-vehicle and vehicle-to-infrastructure communication – a fantastic basis for the development of new technologies.

In Sweden, Scania and Eriksson are already testing 5G technology to expand the range of networked services, as well as to enable completely new applications. Our mission for the near future is clear: to make freight transport more efficient for our customers, our customers’ customers, and the entire transport ecosystem.

Ultimately, the ideal state in transport is one of continual flow. And this requires a secure and dedicated flow of data. European manufacturers will set new standards in intelligent and sustainable logistics here and will continue to play a leading role in the development of these technologies – including for other sectors. Our aim is, therefore, to continue to invest strongly in these future technologies.

What will this achieve? Improved profitability and competitiveness of freight forwarders and carriers by continuously reducing non-delivery, empty runs, waiting periods. Faster, more accurate and more tailored deliveries for customers thanks to the optimal utilization of loading areas and automation of last-mile logistics. Increased flexibility and minimal disruptions to supply chains as a result of networked software applications across vehicle manufacturers.

Improved safety and working conditions for drivers with assistance systems. In 2015, 835 truck drivers died in accidents in the U.S. alone – more than in any other occupation. We can change this. Other positive effects for infrastructure use and the environment will be gained from networked route planning, reduced consumption and the use of empty capacity on roads and highways, as well as to alternative drive concepts and new technologies.

To go back to the questions about the year 2040 I asked at the start: the technical and systemic progress in the commercial vehicles sector and beyond pave the way for a completely new era in transport. This is not about evolution. Rather, we are talking here about a revolution in an industry that is over one hundred years old that will impact everyone involved. Will there still be freight transport in the future? In the future, freight will be moved using decentralized transportation systems that operate autonomously using artificial intelligence.

We expect that this will be the case for most goods transport in the Western markets in 2040. Smart, tailored solutions for a wide range of customers will achieve considerable efficiency gains.

Will there still be freight forwarders and carriers in the future? The focus going forward will be on matching supply and demand using real-time data and fully networked vehicles and vehicle control systems. Managing and monitoring data flows will be an important part of freight forwarders’ and carriers’ work in the future.

Will we still need trucks in the future? In the long term, the classic truck will be replaced by intelligent, driverless transportation systems – and the leading manufacturers of commercial vehicles will continue to play a leading role in their development and production in the future. Europe and Germany, in particular, are at the forefront of this innovative movement and have the best chances to turn these changes into a competitive advantage.

How can I be so sure about this? In our region of the world, technology and quality go hand-in-hand. In an increasingly complex environment, some “quick fixes” simply fall dangerously short of the mark. Europe is the core market for the introduction of networked commercial vehicles.

Volkswagen Truck & Bus already has well over 200,000 networked trucks on European roads alone. Internet capability is becoming increasingly important for commercial vehicles. We anticipate that every MAN and every Scania truck delivered to customers from 2017 onwards will be online.

All manufacturers are already working on specific projects and buying into equity interests to make the technology of tomorrow accessible to customers today. Volkswagen Truck & Bus will invest an amount in the mid three-digit million range in digital technologies by the end of 2020.

In the long term, as a commercial vehicles manufacturer in Europe, we will move away from the role of an OEM with a traditional hardware focus. We will then be much more than just a “manufacturer” when we offer our customers clean and intelligent transport solutions that help all of the players in the transport ecosystem to achieve real efficiency gains.

I would like to conclude my brief look into the future with a couple of fundamental thoughts: We – the commercial vehicles industry – have a tremendous opportunity to achieve lasting change in our business – but this also brings with it the risk of falling behind out of inactivity.

25 years ago, consumers still accepted being tied to landlines, waiting days to have photos developed in store, or writing postcards. It has been a long time since we have been prepared to put up with these kinds of inefficiencies. E-mails, digital photography, smartphones – only a few examples of how more efficient and better products, as well as fundamental innovations have accelerated the downfall of global corporations who did not take key developments seriously.

It is, therefore, our responsibility as a leader in the commercial vehicles industry to anticipate our customer’s wishes – and those of our customers’ customers as well – today. Only then will we be able to continue to shape technological progress going forward, instead of being overtaken by it.

Ladies and gentlemen: I am convinced that we have the most exciting years in the history of our sector ahead of us yet. We are committed to our goal of playing a significant and meaningful role in the transformation of the transport industry. We will do this with a great openness to new partners and business models. Because we know that better logistics creates a better world.

And this is why I am looking forward to the years ahead of us.”