HIGH QUALITY AND A SUSTAINABLE FUTURE

ANDREAS LEHE

President of Audi México

Q: What are your plans for Audi’s manufacturing operations in Mexico and how do they relate to Alfons Dintner’s previous administration?

A: We just celebrated our sixth anniversary in Mexico in 2019. Alfons Dintner was responsible for the construction and ramp up of this plant. 2018 was the first full-production year. My plan is to stabilize production and to have a look at the things that did not work and the processes we have to review to make this one of the best Audi facilities in the world. We want to

show that after just five years, Mexico is delivering optimum production costs and quality and that we are prepared to produce more models in the future.

At this moment we only produce the Q5, which is one of the most important cars for the Audi brand. Our daily production is already the highest for a single car in the whole Audi group. We are very proud because we deliver this car to the entire world: to Europe, to the US and to Asia. Moreover, for the last two to three years, Mexico has reached the same quality standards as Germany. This is even more impressive considering this is the first plant outside of Germany that handles an entire assembly line. Hungary, for example, had an assembly plant for 25 years, which depended on Germany for bodyshop and paintshop operations. We started in Mexico from scratch and we found many people were involved with the automotive industry, which made it easier for us to ramp up our operations.

Mexicans are also highly motivated to accelerate or to move things forward while trying new approaches to their work and processes. They are young, motivated and they want to show the world that Mexico can produce world-class quality.

Q: What are your expectations regarding the development of the global automotive industry in terms of demand and how it will impact Audi’s production forecasts? A: There are worldwide discussions about climate change, CO 2

emissions and sustainability. This is a strategic pillar for us, as we understand that future mobility means not everybody will buy their own car and some may use a shared or an electric vehicle. Nobody knows at this moment where we are going and what is the right decision to make. A 100 percent electric car might not be the solution for the future. I think you have to adapt different issues to different regions. Maybe in large cities like Mexico City, where there are 20 million cars circulating every day, urban mobility based on shared cars might be the right solution.

Audi presented four different concepts of future mobility based on sports cars, long-distance cars, small cars for urban mobility and off-road vehicles. These concepts will adapt to the user of the future. Combustion engines will still be needed for long distances, while in urban settings hybrid and full-electric vehicles might be the norm. The company is prepared to participate in all these markets. This year we ramped up production of the Q5 hybrid, which is the first step to transitioning traditional cars into hybrid. Audi also offers the e-tron, a 100 percent electric vehicle. Our offering will depend on customer demand. The company might even decide to produce full-electric cars in Mexico and we are prepared for that. As a company, we should be prepared for what the market will need in the future.

Q: How is Audi’s strategy changing to adapt to the future of mobility? A: Our strategy is to be a mobility company. This could also imply the possibility of having Audi on-demand, where clients can choose to use an Audi vehicle for special occasions., which would require a change in people’s mindset, however. At the moment, most people use their car as a status symbol. But younger generations are moving toward a new dynamic and a new mobility scheme.

Sustainability is one of our main targets. As a German company in Mexico, we have the possibility to generate a true impact and make this a relevant topic in the industry. Water is one of our priorities, because it can be scarce during certain seasons. We are the first entity to be waste-water-free in Puebla. Last year, we earned this recognition thanks to our lagoon, where we use rain water for our processes instead of fresh water. We are also advancing toward clean energy. At the end of August 2019, we started working with 50 percent green energy coming from Chihuahua, which turned to 100 percent on Jan. 1, 2020. These initiatives have reduced our carbon

Audi Training Center, San Jose Chiapa, Puebla

footprint and our goal is to be a CO 2 -neutral facility by 2025. We still use gas for painting processes but we are working to replace this with biogas. We are talking with Gov. Barbosa to explore solutions to build facilities to produce biogas, since at the moment we cannot get it in Mexico. This might be a sustainable project for the region as farmers can collaborate in biogas production. Moreover, we have 260 buses that travel daily to bring our people to the plant. If we can use biogas to fuel the buses, it would reduce our CO 2 emissions greatly.

It is our responsibility to be sustainable and to promote sustainability in the region. Through our communications team, we have created two strategies for this, one internal and another with our stakeholders. We also hold training sessions with young people on environmental issues. It is called Audi-Habitat. In this training, we show visiting students what it means to save energy, to separate waste and to manage water.

Q: What do you think the federal government’s priorities should be to support the automotive industry? A: Besides security, training should be the top priority. We started our dual-education system in Mexico to train our apprentices for three years. Some wonder why we are spending so much money on them and the answer is that training will lead to good qualifications and a higher level of education. If we produce premium quality, we need premium workers. This also has a ripple effect across the entire industry. If somebody leaves Audi, they could get a good job in another company. By increasing the quality of our people, they have more chances to work in a global industry designing new products and new engineering processes. Once our apprentices finish their stay here, they have the possibility to enroll at a university in Puebla or they can start working at our plant to save money so they can enroll later. When they finish university, they come back to Audi. Due to their experience in the plant, they can participate in more advanced activities. We also started the Mexican Students in Germany program (EMA) that allows students enrolled in university to visit Germany for up to two years to study and practice at an Audi center there.

There is an opportunity to replicate these kinds of apprenticeships in other companies and regions in Mexico. People here are hard-working and they are very good at their job but if their training were better, their impact would be greater at Audi and in other companies. Training is equally important for smaller companies. They have to spend money on young people so they can grow in the future.

The government also should be prepared for new technologies, digitalization, innovation and green energies. We have almost 300 days with sun but we do not have heating or air conditioning. People freeze in winter, even though it is easy to use solar energy for small heating systems in houses to produce energy. New technologies are also about giving young companies the possibility to grow. Maybe the government could have a program for startups to help them start their business.

Q: How ready do you think Mexico is to become a technology rather than a manufacturing hub for the automotive industry? A: Technology development demands a higher degree of knowledge. We have to focus on training our people, so the country can start developing other businesses. Regarding digitalization and innovation, I think Mexico is well-prepared. There are people all over the country focused on the automotive industry, but we need to get them together.

Audi’s operations in Mexico began in 2013 with an investment

of over €1 billion (US$1.1 billion). The plant produces around

HIGH QUALITY AND A SUSTAINABLE FUTURE

ANDREAS LEHE

President of Audi México