As 2020 ended, Veoneer, the Swedish supplier of radar and driver-assistance software, was on track to post its first quarter of organic sales growth since being spun off from Autoliv in 2018. Looking ahead, CEO Jan Carlson, 60, says Veoneer sees big potential from its collaboration with U.S. tech giant Qualcomm. In a video interview with Automotive News Europe Managing Editor Douglas A. Bolduc, Carlson explained why the move to full autonomous cars is taking longer than expected. Here are edited excerpts.
Q: Are you still estimating a $250 million hit to organic sales for 2020 because of lower demand caused by the pandemic?
A: Yes, I think that we will be in that ballpark. We haven't seen that much of a hit lately. In fact, we have benefited from the same rebound as many companies in the industry. This is a bit strange given the circumstances caused by the second wave of the virus.
How much of an impact have the new lockdowns in Europe had?
We haven't seen any big declines due to the second wave as demand is holding up. But that is a bit odd given the severity of the second wave that is hitting all of us.
What is your outlook for 2021 for Veoneer and the industry as a whole?
For Veoneer, I think the first half will continue to be strong because of high global demand. This will further accelerate our organic growth in 2021. For the industry as a whole, IHS Markit is forecasting Western European sales will increase by 12 percent to 14 million units, and global sales are expected to rise 9 percent to 82 million.
Both increases come after big declines in 2020. A lot of this will depend on the distribution of the COVID-19 vaccine. Assuming that goes well, I think things will gradually go back to normal.
Veoneer cut $100 million from R&D expenditures to reduce the company's operating loss and conserve cash. Will that be enough, or will the cuts have to be deeper?
We will continue to drive efficiency at Veoneer so we can continue to reshape the company to make it more focused. This will include utilizing partners whenever possible for things such as application engineering and scalable types of activities. This has been fruitful for us. Therefore, we will continue to look for ways to increase our efficiencies, but we will do this without sacrificing on technology, because we need to maintain a technology edge.
How much of a hit did your work force take because of the pandemic?
We reduced our work force by about 500 people. The head count was approximately 5,000 at the end of the third quarter in 2019 and about 4,500 at the close of Q3 2020. We also outsourced some employees to subcontractors.
How is your collaboration with Qualcomm developing?
If you look to the overall ADAS market, it is estimated to grow to $40 billion to $50 billion by 2030 [from about $10 billion now]. We are trying to attack the market with a product that combines our drive policy and perception stack with the new generation of Qualcomm's Snapdragon Ride platform. We aim for start of production in 2024. To achieve that, we said in August that we will need to get our first order within 12 months.
What level of autonomy will your jointly developed product offer?
At the start, our focus is will be on Level 2 and Level 2-plus. But we expect to see some interest for Level 3, and we will go into Level 4 when we see that coming. But for the time being, we are seeing the greatest amount of interest for Level 2-plus.
What does Level 2-plus mean at Veoneer? Because it is not an officially recognized level of autonomy.
Although the car can do more — meaning the driver can be assisted to a higher extent at higher speeds — the driver is still responsible and remains in control at all times. We also believe Level 2-plus will require the addition of some type of driver monitoring systems to make sure the driver remains in control.
What about Level 3 autonomy?
We are not limiting ourselves to Level 2-plus. For the time being, that is where our customers predominantly are. When demand rises for Level 3, we will also move into that. But for the time being, it's the lower levels that have the bigger volumes and wider interest.
Did Veoneer need to collaborate with Qualcomm to replace capabilities lost when the Veoneer-Volvo software joint venture Zenuity ended last year?
I don't think it has replaced anything we had with Zenuity. Qualcomm had very little software capability at the level where we are, and we did not have any [system on chip] partner. It's a very complementary partnership.
Zenuity lasted for just three years. Does that mean it was a failure?
Zenuity was a great thing for Veoneer, and I believe it was also great for Volvo. We did something together that we couldn't have done alone.
For Volvo, it was important to develop a better, more advanced [autonomous driving] system as fast as possible, which they have and they will continue to develop. For Veoneer it was important to have the ability to have products that could be offered to the bulk of the volume market. Also, the joint venture was launched in 2017, and since then, the pace of the industry's acceptance of self-driving cars and the speed of development of the technology have changed.
Did Veoneer seek out Qualcomm, or vice versa?
When Veoneer announced it had the complete software stack [for advanced driver assistance systems], the interest came from Qualcomm to further explore a deeper collaboration. They realized that the combination of Veoneer and Qualcomm could become a leading player in this area in the industry.
You mentioned that the industry overestimated the speed at which autonomous driving would become a reality. What happened?
The industry got carried away with what the technology was capable of without fully realizing how much validation was still needed, how much legislation was needed and that we would need to manage people's behavior, likely with the addition of driver monitoring systems. Therefore, it will take longer for full autonomous driving to become a reality than what we originally thought. But this will come.
In the meantime, we as an industry are gathering a lot of the experience and data on how to support drivers and improve their experience. Overall, the pace of change is accelerating in the industry. We are getting used to more technology in the vehicle and that will push driver assistance systems into the vehicles at a higher pace. I'm optimistic and excited about this, even if it's cumbersome for the supply base.
What is the new timeline for full autonomous driving to become a reality?
While it's still hard to say, I think you will see some pockets of it on this side of 2025. That will grow in the second half of the decade.
Does Veoneer need to add long-range lidar to its portfolio?
We don't think lidar will be a very common solution in passenger cars for systems below Level 3. But we think lidar will come, which is why we have a nonexclusive relationship with Velodyne for robotaxis. We're also working in-house on short-range lidar. In addition, we continue to monitor the development of other technology in this space.
Sales are rising for your active safety. When will it become your sales leader?
For several years we have seen a higher order intake for active safety than for restraint control systems. About two-thirds of our order intake is for active safety. We have seen this with our 2020 launches, and this will be continuing in 2021. Therefore, active safety will pass restraint control systems soon.
What is the growth potential for active safety?
Between 2020 and 2025, we expect both the market and ourselves to grow by more than 20 percent annually, and we expect to gain market share. Meanwhile, the airbag controller [business] is growing more or less at the same pace as global light-vehicle production, which is a totally different number.
What are your top active safety products?
We have eight customers for our vision systems and 13 customers for our radars. We are also introducing software features that came from Zenuity and have been further developed by Veoneer.
Your 2019 order book was approximately $19 billion. Will that number be higher or lower for 2020?
The end of 2019 included our former brake unit, which accounted for about $4 billion in orders. Also affecting orders is the overall decline of about 10 percent in global light-vehicle production because of the pandemic. Therefore we expect the number to be lower. We will provide that number at the beginning of 2021.
Veoneer has completed a number of divestitures. Are you now back in the market to make acquisitions?
We are in a very strong execution mode right now with the technologies we have. We also have an interesting opportunity with Qualcomm that provides an ocean of opportunities for us. We have a strong product portfolio program in all our core technologies — radar, vision systems and airbag controllers. So I think we are in a good place. That being said, we have cooperations with Velodyne for lidar and with Seeing Machines for driver monitoring systems, and we are always scouting out new technologies both on the software feature development and sensor sides. So if anything of interest presents itself, who knows, we may take a look at one. But that is not our top priority today.