DETROIT -- It may be years before ordinary motorists enjoy door-to-door trips in autonomous cars, but Delphi Automotive is enjoying a financial payoff now.
Of the company's projected global sales of $16.2 billion to $16.5 billion this year, sales of active-safety equipment -- mostly radar and cameras for collision avoidance -- are expected to generate $350 million. Those revenues are rising 50 percent a year, said Delphi CEO Kevin Clark. In two or three years, Delphi and partner Quanergy Systems Inc. expect to introduce a lidar unit, which sends out pulses of light to determine an object's distance, for automakers that want a fail-safe array of sensors for their autonomous vehicles.
"It's real money," Clark said. "It's something that consumers want, and it's something they're willing to pay for."
Clark, 54, spoke of his plans for emerging technologies such as lidar and 48-volt electrical systems during an interview with Staff Correspondent David Sedgwick at Delphi's headquarters in suburban Troy, Mich.
Q: How does Delphi define active safety?
A: For us today, it's primarily radar and vision systems, but not yet lidar.
When will Delphi's solid-state lidar unit be commercially available?
We're making progress. Our lidar will be ready in 2019. We're talking to automakers today. If automakers get involved early, it could be ready [for public sale] sooner than 2021.
Delphi plans to launch a small fleet of self-driving cars next year for a ride-hailing service in Singapore. Will such vehicles be on display in January at the Consumer Electronics Show?
Yes, we'll have four fully automated vehicles [at the show] that will have essentially the same capabilities that our fleet will have in Singapore. You'll see those vehicles in an urban setting and on the highway.
Why are three types of sensors necessary?
We really believe you need vision, radar and lidar. The primary issue is redundancy. You have to ensure that in any environment, you [get data from] the optimal sensor. We're firm believers that you need all three.
Assuming automakers will want four lidars per vehicle, will they cost about $1,000 per car?
You can figure on about $250 per unit [or $1,000 per vehicle] to make it truly commercially viable for a typical consumer. For mobility on demand [ride sharing], the economics can work at a much higher cost per unit, [perhaps as much as $2,000 per vehicle].
Is that because ride-hailing services such as Uber or Lyft can save money by getting rid of the driver?
Exactly. That means something to them.
Is active safety Delphi's big generator of sales growth?
To be honest, we have several. We're focused on three primary areas that we call "Safe, Green and Connected." Those categories touch our three main product segments: electrical architecture, powertrains and electronics. How do you make cars safer? How do you reduce carbon dioxide emissions and increase fuel economy? And how do you increase connectivity?
In those categories, which components generate the most sales growth?
In powertrains, we have very strong growth in direct injection and variable valvetrains. We have strong growth in power electronics for electric vehicles. And we've been awarded three programs for 48-volt systems. Two of those will launch next year.
This year at the Geneva auto show, we saw an Audi SQ5 and a Bentley equipped with 48-volt electrical systems. Has this technology finally arrived?
We're having a tremendous increase of dialogues with automakers. [With 48-volt systems], you can get 70 percent of the fuel economy benefits of a hybrid vehicle at 20 to 30 percent of the cost.
A 48-volt system requires a starter-generator, a second battery and some power electronics. Which parts are made by Delphi?
We make the inverter and the power electronics. [For the other parts], we'd partner with other suppliers.
You've estimated the cost of a 48-volt system at $1,000 to $1,200? How much will that improve fuel economy?
Ten to 15 percent.
And you estimate that 15 percent of vehicles produced in 2025 will have 48-volt systems?
It could be higher. Based on dialogues we've had with automakers, that will be the case.
Delphi last year bought HellermannTyton, which supplies cable gear, and Ottomatika, which writes software for self-driving cars. Will it make more acquisitions?
Yeah, if they make sense. Primarily they would be bolt-ons.
But if the deal is too big, it's not a bolt-on, right?
To some extent, you're right. But I think there are some larger businesses where the overlap is significant and the integration is straightforward. So regardless of size, it could be a bolt-on.
Is Delphi still looking for software suppliers?
Definitely. That's a big piece of it: software for active safety, connectivity and powertrains. Software is a huge area for growth. Today, on a daily basis, we ship product with a total of 20 billion lines of code. By 2020, that will go up to 200 billion lines of code per day.
Is Delphi hiring more software engineers?
We have 20,000 engineers, and 5,000 are software or systems engineers. We will double that over the next four years. We have facilities in Silicon Valley, Pittsburgh, China and India where we are ramping up our hiring.
Donald Trump and Hillary Clinton say they want to renegotiate the North American Free Trade Agreement. Does Delphi want to preserve NAFTA?
Yes. At the end of the day, we need to be wherever our customers are. And when you look at North America today, a lot of production takes place in Mexico. So we'll be as close to our customers as we can, whether it's in Mexico or in the United States. Our customers need to be able to sell cars. The automakers and their customers -- the car buyers -- are very cost-focused. The automakers need to sell the highest-quality car that they can manufacture at the lowest cost. It's a competitive market. Our customers need to make sure they are competitive, and part of that is labor cost.
What does Delphi make in Mexico?
We can produce virtually any of our 33 products.
Delphi has a big presence in China. You've told industry analysts that you expect a slowdown there late this year. What's going on?
This year, our outlook for vehicle production in China is 4 percent growth. Next year, we expect production will grow 2 to 3 percent.
A year ago, China halved the purchase tax on small vehicles, which revived sales. Will the government allow that tax break to expire on schedule in December?
We expect by the end of the year, they will. But we've been impressed with China's ability to work through some of their economic challenges. There may be a slowdown for a quarter or so, but I don't expect a protracted downturn.
Will Delphi expand its technology portfolio, or will it stay focused?
I think we'll stay focused within the segments we operate in today. You'll see more software. That's an area we're actively growing. We spend 8 percent of our revenue on engineering. That's pretty high. That includes r&d, engineering and vehicle launch.
Has that percentage gone up?
It's gone up from 7 percent, and most of [the growth] is advanced engineering for product development.
Will Delphi's capital expenditures grow?
It's pretty consistent at 5 percent of sales. We'll spend about $800 million this year.