It manufactures at more than 312 sites globally, employing 155,000 people. Ian Simmons, a Brit who began his automotive career as a mechanical engineer with Ford in the UK nearly 40 years ago, is charged with running Magna’s “all-tech” venturing strategy, which is designed to keep it in the vanguard of automotive design and manufacturing. He drives a Ford Edge and a BMW 335i, and for fun a 1980 MGB and 1973 Triumph TR6.
Explain Magna’s venturing strategy.
We are looking at early-stage technologies that could complement or enhance Magna’s current product portfolio. So we are a strategic partner not a financial investor. And bearing in mind that we have a very wide product range, our appetite for new technology is very broad. In addition, we look outside the automotive industry because innovations we may need are just as likely to be found in medical, aerospace and software. I want the venturing and innovation world to understand that Magna is an active player in the transformation of the vehicle and the automotive landscape in general.
Give some examples of what you mean by going outside the automotive industry.
Many of the light-weighting composite technology and materials used by the automotive industry today came initially from aerospace. The biometric security technologies that we are increasingly exploring came initially from the medical industry. And as connectivity increases in transportation, the technology required for cybersecurity and the effective use of big data is coming from the software industry. We are now an all-tech industry and Magna has an all-tech venturing strategy.
That is ambitious and demanding. How do you source investments?
We manufacture all over the world so we have a global footprint which we have used to cultivate relationships with the best universities, venture funds, startup community and accelerators, and even with individual innovators. We have invested alongside other VCs and accelerators to increase dealflow. For example, we recently backed companies in Israel, Canada and the US.
We also seek innovation internally, not just through traditional R&D, but by challenging our employees to generate new business and technology ideas. And we co-invest too of course. We are increasing our venturing efforts and you will hear more about them in due course.
What about disruption in the automotive sector – car-sharing, electrification, connectivity, autonomous vehicles, and the demand for mobility-as-a-service? As a tier-one supplier to the OEMs, do you feel less vulnerable to this disruption than the OEMs themselves?
Not really. We are happy that our markets are growing and we have more customers. We certainly expect more vehicles to hit the road, particularly in Asia, in the short and medium term, even as new industry players enter the market and traditional automakers adopt new business models and evolve. But – and it is a big but – the very same disruptive forces impacting the OEMs also affect us, particularly in the heart of our business, in how we design and manufacture.
Give some examples of the impact at the design and manufacturing level.
The connected and autonomous vehicle is going to need much greater computing power and generate a lot more data. So a vehicle’s electrical architecture may have to be completely changed. And if vehicles are getting more usage because they have multiple owners, that is going to force some radical changes too. Today, cars in many urban and semi-urban environments might be used for 10 hours per week. If they are going to be consistently used over 10 hours per day, then they are going to have to be designed differently and made differently. And we are going to be making a wider range of cars. Our product is going to become more and more complex, with more features and functions. So we are going to have to manufacture with greater flexibility, efficiency and advanced processes.
As a corporate VC, are you as interested in innovations in the factory as you are in innovations on the road?
Of course. Just like the car, manufacturing is now a part of the Internet of things, with all the same challenges and opportunities around analytics, security, computing power, robotics and machine learning. As a result of our global footprint – 312 facilities – we can serve as a source of information and implement some of these technologies. New models of transport and mobility are bringing changes to Magna’s definition of the smart factory which could enable new models of mobility. It is a symbiotic relationship.
Talk about some of the direct venture investments you have made.
There will be 50 billion items connected to the Internet by 2020 and this creates big security challenges. A lot of personal information will be going through your car. We invested in Argus Cyber Security because car users will expect their vehicles to be protected from cyberattack just like their other smart devices. We believe that Argus is the world leader in this field. We also invested in Zubie because it is a pioneer in adding connectivity to the whole automotive supply chain, which is going to impact us very directly. Another investment is with Peloton, a company leading the way in introducing autonomy to transportation, starting with trucks and haulage (see case study overleaf). We do not manufacture extensively for trucks, but by investing in Peloton we can learn how autonomy is likely to be adopted in mobility overall. The venture firms we have backed extend our pipeline of potential investments and provide a window on innovation across several industries.
Magna is seen as one of the largest companies in the world that no one has heard of. Do you think this will change? Will you ever become a consumer-facing brand?
No, we will not have a Magna-branded car. My job is to make sure that the best technologists and innovators know Magna, our value proposition and know of our readiness to partner and invest. We have an unrivalled track record in technology commercialisation so we can be a very good corporate venture and technical partner for early-stage businesses. Magna International will be ready for whichever way the automotive industry evolves.