Kenny and Carrie get the latest industry scoop on the navigation from traditional gasoline engines to EV in the automotive market from our Strategic Account Manager Bryan Monty and our Senior Director of Technology and Strategic Sales Jeff Hall.

And again, as Bryan said, the government mandates the tax incentives that people get. And overall, there's just a more conscious awareness of people everywhere that EVs can be a healthier, cleaner, more environmentally friendly product to operate.

Welcome everyone to the Operation Automation Podcast by Omron, where we are talking all things factory automation. My name is Carrie Lee. I'm the Product Manager for Sysmac Studio, NJ/NX controllers, and NX I-O.

I've been with Omron for about two and a half years and have about 15 years of experience in automation.

Sitting here with me is Kenny Heidel.

Hi everyone. I'm Kenny Heidel and I'm a National Account Manager focusing on channel engagement. I've been with Omron for over three years now and have 12 years of combined factory and industrial automation experience.

Kenny and I are neighbors at our Omron office, and we would often have conversations at the coffee machine or in the hallways where we would talk about products, new technologies and trends, and of course, the Chicago White Sox.

We hope to recreate that time here in our podcast and share it with listeners so that you can learn along with us. So whether you are pouring yourself the first or fifth coffee of the day, driving to your first appointment, or walking the dog, we hope to help you start your day off right, with a little fun and hopefully, you'll learn something new.

So Kenny, we have a pretty exciting topic today. Do you want to give a little teaser for what we're going to talk about?

It's electric. (singing).

My tone deafness on my humming, right?

But yes, we are going to be talking all things electric vehicles and what's happening in the automotive market, and nobody better to discuss that with us is our pair of guests today.

We have two guests, Jeff Hall, who's our Senior Director of Technology and Strategic Sales, and Bryan Monty, who is a Strategic Account Manager in the automotive market. So welcome guys.

Thank you.

Thanks for having us.

All right. So if you guys know, we always start off the podcast with the hardest questions possible. So, Bryan, what is your go-to takeout food order?

Sushi, all day long. I love sushi.

All right.

How about you Jeff?

Pizza.

Now, are you Detroit style pizza, the square, spongy stuff?

I love Detroit style pizza because I'm a Detroit homer, but I love all pizza. There's no bad pizza.

Jeff would eat lunch at Buddy's every day if we let him.

Buddy's, future sponsor of the podcast.

My problem is like all food. I like them all but pizza comes to mind with that question. Top of the list.

Absolutely. Can never go wrong, right?

Second hard hitting question for Jeff and Bryan is if you have a lot of work to get done, what is your gym music choice that you're going to put on?

It's Bon Jovi for me. I grew up on Bon Jovi. My first concert. So '80s hair band, Bon Jovi's definitely in the mix if I'm going to fire it up a notch.

Nice. Did you ever have the Bon Jovi hair?

Close to a mullet, but not quite Bon Jovi hair.

Awesome. How about you Jeff?

Wow, that's a tough one. I would say Bon Jovi is up there, but probably Kiss, believe it or not. I'm an old Kiss guy, right there. Rock and Roll All Nite is still one of my favorite songs. And even my children, I have two that are 19 and one is 22, and they love that song because I've played it so much in their youth.

Awesome. You're a big Strutter guy?

Oh yeah. Love it. Just listened to it yesterday.

Nice.

Nice.

All right. So finally, Jeff, what's your favorite hobby?

Dozen hunting.

Oh, okay. So where do you... [crosstalk 00:04:12]

I've been doing that since I've been a child and with my father, and now my best friends, and I have dogs, and I travel around the country. I mostly do it in Michigan, but it's a hobby and a passion of mine.

Awesome. How about you, Bryan?

Well, outside of kids as my number one hobby it seems, I like to build anything. Here in the sales side, we don't do too much with our hands, but when I'm at home, I'm home improvements, build, cut, do anything that I can actually use tools, and I'm pretty efficient and well rounded with my home improvement skills.

It's going to all those automotive plants too. It inspires you to build something of your own, right?

No doubt.

So Bryan and Jeff, while this has all been very interesting, we have you here to talk about some topics where we consider you guys as subject matter experts from an automotive industry. You both have a ton of experience with automotive, and we wanted to talk about some of the exciting things that are happening in automotive with electric vehicles.

And I guess to kick it off, you guys are dealing with our customers every day. What kind of challenges, from a production standpoint, do you see our customers and manufacturers have transitioning to making an EV as opposed to a combustion engine?

I'll start it off, and then I know Bryan will comment because we have a very similar views on the topic.

There's a lot of challenges. This is a new set of vehicle platforms for manufacturers, so they have plant capacity challenges. They have to make sure they have places to build the vehicles and people to build the vehicles. They have to train new skill sets to their labor force because there's new technologies being deployed.

New platforms mean new and different manufacturing processes, and there's a whole piece of that that becomes a capital outlay because they're still making traditional internal combustion engines, so that variability becomes very complex for them and very costly, but needed based on the market trends currently.

And I would comment on that that the volumes are very different. You don't have the historical estimates of how many of a certain model vehicle you're typically going to build in a year, so they have to be very scalable and flexible. What might start out as low volume, demand might come up and peak very quickly. And then they have to ramp up and adjust to how do we handle the difference of volume and production, maybe retooling, maybe manpower, and all the other things Jeff talked about, but they don't have the historical data to tell you what these volumes are going to be and what the sales are going to look like. It's really just a guess in the beginning.

Yeah. Do you see them on certain production lines? Obviously, they all have physical constraints of how big their factories are but do you, do you see them trying to build areas that are just focused on EV, or even potentially having lines and say, from a simplified term, "Monday and Tuesday, we're going to make this EV model. And Wednesday, Thursday, Friday, we're going to go back on that same line, but make a combustion engine."

I think it depends on the platform, Kenny. If you look at a plug-in hybrid, for instance, many of those platforms are common to an existing platform with internal combustion engines, and then so there can be some crossover there on the existing lines, even though they obviously have to add stations or sections.

If it's a complete battery electric vehicle, that's a completely different line because the whole vehicle structure is different, and so they would either put in a plant for that based on the volumes that they're projecting, or they would put a line in an existing plant specifically dedicated to that battery electric vehicle.

Got you. Interesting. So a couple different approaches, depending on type and volume, right?

Sure, absolutely.

The second question, obviously, with the emergence of the EV and more and more manufacturers coming out with their own individual models, even different types of models within that manufacturer, are you seeing any collaboration between these different manufacturers on best production practices, how do we optimize and get the most out of our production lines on the EV side?

And collaboration. I would say the primary place you're seeing that is in the battery manufacturing piece of EVs. If you look, not too long ago, the domestic auto manufacturers and many of the global manufacturers were talking about outsourcing their batteries to the existing manufacturers like LG Chem and Panasonic, and others. Now, most of them are going down the vertical integration path. So they will be forming joint ventures and partnerships with battery companies, those same battery companies and some new battery companies. And there's new ones emerging all the time.

You look at what Ford's doing in Kentucky and Tennessee with investing with SK Innovation and with GM and LG Chem, and the list goes on. And there's a number of European companies forming their JVs as well. So a lot of collaboration going on between different companies in the supplier community, along with the actual manufacturers of the vehicles.

And, of course, there's a lot of technology development going on between manufacturers and that's been going on for a long time, just because the cost of change is so immense in the automotive industry. And the technology now is shifting, not just as it relates to EVs, but to just multiple technologies in terms of... Look how electronic cars have become internally. You have to be a cell phone expert to drive your car anymore. And since I have to have my kids teach me most of the features on my damn car.

So I think that the JVs will continue, the collaboration will continue. But again, where we've seen it the most, is probably on the battery side of the business.

And I would agree including the powertrain side of that, what we refer to as today in the electric vehicle or the battery vehicle, the skate, or the skateboard is the reference of the drivetrain system where a typical hybrid is an intermix, and they're going to handle that additional piece of that on the EV side. But what's changing in powertrain on the battery side is very different, that you're building a base, that's an electric base and then building the rest of the vehicle on top of it. And a partnership is very often happening that you might not only third party out the battery, but might buy the whole skateboard or the platform chassis side.

So, Jeff, you mentioned a shift towards vertical integration. What's the impetus for that as opposed to using, like you said, the original thought of using third party battery suppliers?

I would assume, probably pretty accurately I hope anyways, that it's financially driven because... It's financially driven and quality driven.

It's like internal combustion engines. Sometimes in low volume vehicles or commercial vehicles, those companies will outsource the engine manufacturing, but all automakers around the world, the major automakers, all make their own engines. And they do that for scale, they do that for quality, and they do that for economic reasons because they've been able to scale their operations in order to be able to make money in those volumes and those products, and make that a separate profit center underneath the overall vehicle.

And so I think the same thing is probably the driving factors. The volumes of EV pickup and the knowledge that this market is here to stay, that they're trying to have better control on their cost, and let's face it, less reliant on outside suppliers that may have other interests that don't coincide or don't support the interest of the manufacturers themselves.

I think much more control over your production as well, for sure. Anything you build that you can build yourself and you can control the production process without potentially waiting on another vendor to supply product to you, maybe a special in this supply chain market right now, that's a big factor to control what you build by building it yourself, might be a benefit.

That was going to be my exact comment too.

So the next thing that comes to my mind when I hear that they're each going to make their own battery, any standardization for charging? We see those charging stations at grocery stores. I wonder if there's going to be a separate one for each manufacturer, or do you guys see that kind of a standard methodology moving forward?

Well, we're going to hit the touch on the regulation side of things in some of our further conversations, I think. But is it in place yet? I don't know the exact answer, but will there be regulation? Absolutely. Especially, I think, when it comes to power. The infrastructure side of that is going to be important. There's all kinds of regulation for the infrastructure side of any power or energy, and we'd have to do a little bit of research to find out what specifically it is, but I would guarantee there is regulation wrapped around that.

Yeah. And you talked about standardization, so that's a little separate from regulation. Regulations will drive the standardization and to build the infrastructure around the nation, around the world, ultimately. Much like there are standard size fuel nozzles, there will have to be a standardized plug mechanism, plug standards, dimensions, all that, so that you can truly build an infrastructure because otherwise, every single company's going to have a charging station somewhere.

So you see a world someday that maybe the instead of gas stations, you have charging stations. Or maybe you have one gas pump or two gas pumps and 20 charging stations. But for that to work there, there would have to be standardization. So there's consortiums, there's trade organizations, there's government standards groups, automotive standards groups, all working on that.

Awesome. So we can keep seeing more and more commercials and it seems like EV is top of mind, all the major manufacturers are putting commercials out about what's coming as far as EV. What would you guys have seen as the tipping point to have more manufacturers investing in EV?

Yeah, I think there's multiple things. I think, again, the regulation is a big one. When there's regulation in place, any industry has to follow or is smart to follow because that's where money is sometimes.

Over and above the regulation, I think there's a lot of auto manufacturers that care about sustainability, and green energy, and a better globally eco-friendly environment. So those are factors as well. And I think the auto manufacturers do care about that.

But my opinion is regulation is a leading driver. With regulation changes and we change of the standards for fuel economy and you have to adapt to that. It gives a little bit of a push into driving that market, for sure.

Yeah. I'll add on to that. Government regulations or mandates are always going to drive a market. You look at Europe for instance, where they're trying to disallow any petrol or diesel based vehicles after 2035. Whether that's achievable or not, that remains to be seen.

Norway is leading the world in its adoption of EVs right there. I think their sales last year were 92% EVs. So there's the visibility of those other regional areas around the globe adopting the technology quickly.

I also think that the automakers have learned that and they now understand they can actually make money, and I believe maybe even more money on EVs than they can on internal combustion engines, ultimately as they scale their operations. Because if you look at the complex content of a powertrain of an internal combustion engine versus an EV, there's a lot of processes, a lot of parts that don't exist on an EV that do on an internal combustion engine. So when they scale their operations and you're charging the same amount or more for EVs that have a lot less content or manufacturing complexity, I think there's a huge windfall there from a profit standpoint. Let's face it, that's why everybody's in business. So I do think that's becoming a piece of it that has helped.

And again, as Bryan said, the government mandates, the tax incentives that people get. And overall, there's just a more conscious awareness of people everywhere that EVs can be a healthier, cleaner, more environmentally friendly product to operate.

Yeah. I remember in my career, probably 15 years ago-ish, the big buzz and boom was, "We're building ethanol plants. We're going to build them everywhere. We were going to use corn as a primary means of fuel for the ethanol."

And I was working with all kinds of customers in the Detroit market that were in that industry, working at how do we do that, the machinery to produce it, building the plant infrastructure. So that was a big boom for a while. And that's been multiple different things, but they're always looking at different, more efficient, eco-friendly, cost-effective alternatives to combustion engine.

Yeah. And it seems too almost like your cell phone too. Initially when EV cars came into the market, they were probably so expensive where the battery technology was. In the last five, 10 years, those technology advances from the different manufacturers have been so vast and great that on the profitability side, similar to what you mentioned, Jeff, it's put it on par now with traditional combustion engines.

Not to mention, you talked about less components. That's less components they have to manufacture as potential spare parts. So it just trickles down.

It does. And I don't believe they're there yet. I think they'll get there though. But I think they see the writing on the wall where they can get there now that the technology continues to develop and evolve. And they have more choices of suppliers now too, so they can do more competitive bidding and it's becoming, I should say, its own market.

And I think there's another factor of the concern of, can we repair these vehicles? Do we have an infrastructure of repair and service stations that can handle a battery electric or people concerned, if you get an accident, are they going to explode?

I think over the course of the last 10 year years, we've put out a lot more better messaging on how that market's changed and yes, the infrastructure's there. And just like Jeff said, now that you have so many different companies playing in that space, and they're the big ones that you trust that have been doing this for a very long time, that yes, they're going to have a network to a service that vehicle. And yes, that that battery is going to stay on the road for 10 years, or whatever that life expectancy is, and they're going to support it if it doesn't.

Absolutely. Another area to touch on too in this whole transition, I think is obviously, the automotive industry, as well as the ecosystem of suppliers that feed up to the automotive manufacturers is huge. How have you guys seen that ecosystem and those traditional tier type suppliers change their business methodologies or their focus as EV has become more prevalent?

Yeah. I have a particular customer of mine. I won't mention any names. It's an investment. Is it a gamble? Maybe. That you're going to decide as a tier supplier that, "Hey, this EV thing's coming and I'm going to invest in it." And then there's the other customer that says, "No, you know what? I think combustion engine are going to stick around for a very long time, so I'm just going to keep heading down that path." But I've seen some very specific examples of, "Hey, in the next five to 10 years, I believe that 60% of my business, minimum, is going to be in the EV space, and we're going to ramp up design and manufacturing of a heavy fleet of EV components and scale with that plan."

So I think it depends on the supplier, but it is an investment and you're taking a prediction and an estimate of what you hope the market ends up like. I think we're a bit safer now that we know there's real evidence on what direction this is going in, especially by announcements by the bigger guys and the investments they're going to spend in the EV space.

I think there's a better comfort factor that the tier suppliers know that, "Hey, this is happening because this guy, this guy, and this guy is already committed to it, so I better adapt and rethink my plan of the type of components that I'm going to supply in the future."

Yeah. Almost like a, "You better get on board because that train is going and it's going strong," right?

There's enough other aspect to it as well. So, Bryan mentioned the tier one suppliers. They are manufacturing parts that go into the EVs and they certainly have huge investments and decisions to make. And they're making them, obviously, if you look at how they're diversifying their base into the EV space, it's very significant. And there's another piece of that, is the machine builders that supply equipment to the tier ones or the manufacturers themselves. If you looked at a traditional manufacturer of engine lines or for internal combustion engine, heavy, heavy manufacturing, metal turning, drilling, honing, all those operations, much of that goes away. So those companies that have made a living for 100 years doing those kind of operations, they have to scale those operations back because many of those operations don't exist in the EV space.

And I know one particular, that's a very large global manufacturer of metal turning or power train equipment, let's say, machinery that is now purchased and building their capability for winding machines, because they're all the coils you need now, and all the electrical windings that are involved in electronic transmissions or e-car transmissions, EV motors and those kinds of things.

So Kenny mentioned earlier, the trickle down effect. It's a trickle down effect in every aspect of the auto industry, because again, it's a different process. There are different products and there's a lot of change that significantly impacts many of these companies.

Again, a machine builder that's has its expertise and the infrastructure built around something that's been extremely high volume and high capital expense for that many years, they have to relook at their business, rescale their business, and there's challenges there to doing that because you're always making some predictions. Until it gets really running to scale and it gets running in some type of predictable pace, it's an interesting dynamic to watch.

And we see it every day with our customers of changing their direction, or let's say opening up their minds to what other things they can manufacture to offset the loss or the potential loss of their traditional business.

Yeah. So it's quite a bit of change, and whenever I think of change, I think of opportunities for innovation. So what have you guys seen with our customers or trends within the industry that... How is automation? Are there any trends that help enabling this transition?

Yeah, I think I can comment on that. We're following industry 4.0, and some of the big buzzwords we talk about, IIoT, all these different things we hear, the buzzwords, or maybe the acronyms, but I think flexible manufacturing is a key. We need to be able to adjust and maneuver. And we looked at a historical assembly line for automotive and you go all the way back to the beginning where we're pulling that on a rope and then it becomes a chain conveyor, but automotive plants had to be built to be in a straight line. The facilities were picked and built to have a very long connected line, and in today's world and where vendors or manufacturers like us into play today with AMRs and corbotics, and other smarter technologies for connected factory, the ability to make your mind line modular, move it around, bring material to the line versus everything has to be connected, it's a huge change. And it allows them to handle the different volumes of short run, high run, maybe even intermix multiple vehicles in one plant, and it's a huge benefit. But those are the type of technologies that are out there today that are a game changer. But flexible manufacturing and being able to adapt on the fly potentially, is a huge piece.

Yeah, Bryan nailed it. Flexibility and all the solutions that automation providers can supply to their customers, and help them in that flexibility drive because it's not only multiple vehicles, but the technologies within the vehicles. And there's a term that people like to use called mass customization.

We all like our vehicles in a certain way, a certain color, a certain option package. It's becoming more and more diverse, and it varies globally, and it varies even regionally within certain countries of what... You don't need heated seats in the south, necessarily. And so I think the flexibility is probably the biggest single key to being able to allow manufacturers to achieve the targets they need to because they have so many more manufacturing considerations now than they've ever had. And that's going to continue.

And there's other factors that go on top of that too as well. What country do you build them in? When you're looking for a lower cost vehicle versus the Cadillac or something with the higher quality standards, where in the world do you build those? How do you look at the plants you already have where you have production costs or labor costs that can meet the market to stay competitive for the particular type of vehicle.

But I think to Jeff's point, we had plant examples, you're building over 4,000 vehicles in a day. Every one of them is pre-ordered and every one of them is different, and it could be down to the stitching on the seat, so think about how they have to adapt and be able to be flexible.

Well, and on top of that, the automotive industry is no stranger to labor issues in our current market today, so that's where automation can come into play as well. There's those historical activities that potentially a worker did. And unfortunately, within the labor shortage we just might not have the same pool of workers that we had previously, or we're trying to train that pool of workers to do other higher value activities. That's where automation really helps enable those customers, like Jeff said and Bryan said, to completely be flexible, but still be able to hit production goals and things like that.

Yeah. You made a good point though, Kenny, and it's something that sometimes is a difficult subject to broach, but there's an impression out there that automation replaces people. And it doesn't. It augments the workforce because the workforce is in such great need right now. People had multiple skills, and they don't have that. If we can have automation do tasks so that people do get deployed to do other tasks that are more challenging or that can't be done by automation or, technician roles, or servicing roles. There's lots of examples. And so that was really good point. Flexibility is great, but just labor availability, and creating that labor availability, and redeploying those resources so that that companies can achieve their targets because, let's face it, none of us are finding all the people we need as manufacturers

To come and add to that too. The health and safety piece is a big piece of that movement and initiative. They're looking at ergonomics, and they want to keep their workers safe, and companies are using virtual reality to ergonomically lay out their plants and tying in that flexible manufacturing piece of laying out the plant different than they would of the past, but the health and safety thing for those mundane tasks or what might be hurting people and taking them out of work over and above the labor shortage is another piece where automation comes in very valuable.

To, I guess, bring it back full circle, if you're now have worker that maybe had traditionally been part of combustion engine assembly lines, doing a certain task on that line, now you're asking them to change what they're used to and manufacture a different type of platform and vehicle altogether with an EV. So all those manufacturing processes, they're different, so it probably allows the manufacturers the opportunity to say, "Hey, is this a better opportunity for us to use an automated machine to do that action? Or is it something that we can provide an opportunity to that worker to train them up on how to manufacture that different process?"

And there's a lot of analytics, and AI, and tools of this smarter factory that come into play with that too, like what operators trained and capable of running or doing this piece of assembly or an application. Those are the big scale automotives. They're looking at all of that.

"Hey, operator A doesn't show up for work today, who else in the plant or in the company can do his job?" And now you're talking a job where you need to retrain in the first place already, but train on a new skill set. But the skill level is going up in automation. It's going to be a task with a little bit more skill. You might run a line instead of doing that mundane job, but reallocating those resources into a better job could help them out ergonomically is one piece of it for the health and safety side, but it's to empower them. It's not to replace them.

Yeah, exactly.

So, I've heard us talk quite a bit about, automotive industry leading the way with automation and we even know that. PLCs, the history of them came from automotive. I heard you talk about flexible manufacturing and things. Another concept that's top of mind in manufacturing is quality, and we're typically used to very high quality standards within automotive, and so can you talk a little bit about how quality standards may be shifting with this new type of vehicle going to EVs?

Yeah. I think that I'll comment on that, that the quality standards are going up quite a bit. So you have electronic components, electrifications, circuit boards, and a lot more technology. Critical components versus, potentially the combustion engine. So we've already seen there's high quality standards previously because there's regulation wrapped around it. Those vehicles cradle the grave when the material comes in, when they get assemble, all the way through, potentially 10 years plus on the road that you need to track recalls, and quality controls, and be able to service anything that goes wrong during that time window.

But in the electric vehicle side, it's higher. What was okay in the '90s potentially, quality control, hoping to get to a 100. They're looking for a 100% quality control and traceability where companies like Omron, our inspection systems for circuit boards, potentially x-ray technology, of course, sensors, vision, and some of the other products we do.

But I believe for sure the quality control is going to go up substantially. Don't know exactly what the regulation to that's going to be yet, but for sure, we're going to be a key player in that space, and we've already seen a major shift of how we approach customers that are doing anything in the EV space.

Well, this has been really interesting. I've really learned a lot. Always love listening to Bryan and Jeff talk, and it's fun to see how manufacturing and automation is really hitting home with the things we do every day, such as driving cars. So really enjoyed this conversation. Thanks guys. And I think it was a good talk.

But wait. We can't let them leave without trivia. Because there's two of them, I have two trivia questions. So Jeff, this first one be for you, because I teased it a little bit with you. How many electric cars were sold in the world in 2021? And your options are A, two million, B, 50 million, C, 6.5 million, or D, 15 million.

If I had to guess and based on my extensive knowledge of the automotive world and EV market, because I read about it every single day, 6.5 million would be my answer.

Boom. Cue the applause.

I don't know if you can answer what's in the US and what's overseas.

Yeah. Exactly. All right. So Jeff knows the answer to this one, but Bryan, this one is for you then. Since we are a Japanese company, what was the first Japanese electric car to be introduced in the United States?

That's a tough one.

Jeff's the reader. I'm not the history buff, and he's got a few years on me too so he might know.

So I'll give you multiple choice. I did have that ready.

So A, Toyota Prius, B, Honda Civic, C, Nissan Leaf, D, Mitsubishi Eclipse.

Mitsubishi. Eclipse.

No.

Incorrect. The answer... [crosstalk 00:36:04]

I've two years on you. I knew the answer. Well, I got it on the second choice. I think what I practiced, but...

What was is it?

Correct. The Nissan Leaf was the first Japanese fully electric car to be introduced to the United States.

Oh, the Eclipse wasn't electric. You're tricking me there. I'm [crosstalk 00:36:20] to market.

Correct. I threw that one in there.

Good job though.

Yeah. Thank you again. This has been a fantastic conversation. I learned a lot about what auto manufacturers are doing to make this transition easier and really start to ramp up that production. I think it's fascinating and it'll be interesting to see where it goes in the coming years.

Absolutely. Thanks guys.

Thanks guys. [crosstalk 00:36:43]

All right. Well thank you so much. I really appreciate the opportunity. I enjoyed it.

Thank you everyone for joining Carrie and me for the Operation Automation Podcast. If you have topics you'd like to hear discussed on future episodes, please send them to our email address. omronnow@omron.com with 'Podcast Idea' in the subject line.

Finally, all the cool things you learn on this podcast can be found at automation.omron.com.

So until next time, we put the fun in factory automation.