Our Corporate Strategy.
We firmly believe that in the light of global societal megatrends such as urbanization, sustainability, digitalization and mobility, the markets for rail and commercial vehicles offer good prospects for sustainable long-term growth. As the world market leader in braking and other systems for rail and commercial vehicles, Knorr-Bremse is a strong global partner to vehicle manufacturers and operators. Through joint ventures with our customers and partners, we aim to maintain our steady and profitable growth trajectory. Targeted acquisitions and investments in startups will also help us to expand our portfolio and strengthen our systems competencies.
1. Capturing Megatrend Opportunities
Knorr-Bremse offers sustainable system solutions that meet the mobility needs of the future. Along with regulatory requirements and government investment programs, global societal megatrends such as urbanization, sustainability, digitalization and mobility are driving up the demand for our systems. Knorr-Bremse is ideally placed to play a significant role in shaping these global trends and in doing so, generate profitable growth.
In 2020, the resilience of our strategic approach was confirmed once again. Owing to the impact of the Covid-19 pandemic on people’s lives around the world during the past year, two megatrends in particular – digitalization and sustainability – assumed even greater significance and relevance. Despite some temporary restrictions, the desire and demand for mobility and logistics remain undiminished. Even at the height of the pandemic, local public transit systems all over the world continued to run more or less without interruption, while freight transportation played an even more important role in keeping the public supplied with goods.
Growing populations in metropolitan areas are causing inner-city traffic volumes to rise, which in turn is boosting the demand for Knorr-Bremse’s safe, efficient and reliable solutions for local mass transit services. Similarly, our efficient, safe entrance systems for rail vehicles are speeding up the flow of embarking and disembarking passengers, helping to ensure that light rail vehicles, metro services and commuter trains operate more efficiently and reliably. As a result of the Covid-19 pandemic, the concept of safety has acquired a broader meaning, and now includes safeguarding the health of passengers and staff. Knorr-Bremse’s advanced HVAC technology is making a significant contribution here. With our driver assistance systems, including a blind spot assistant for retrofitting to trucks, Knorr-Bremse is also helping to improve road safety in cities.
Sustainability, and above all climate protection, are among the most important issues of our time. Reducing levels of private transportation while encouraging wider use of various forms of mass transit is an important step toward creating a sustainable, climate-friendly society. This calls for effective, efficient, long-term solutions for both the rail and commercial vehicle industries. For instance, reducing the weight of individual components and systems greatly helps to cut fuel consumption and, as a direct result, lower the carbon footprint of trucks.
Digitalization must generate tangible benefits for customers. We continue to deploy digital technologies to more thoroughly interconnect and automate both our systems and our internal business processes. Among other things, our systems are helping to improve traffic safety and streamline vehicle operation and maintenance. Sophisticated driver assistance systems – all the way through to fully automated driving – are set to become increasingly important, especially in the freight transportation sector.
An increasingly mobile and interconnected global population is driving demand for safer and more efficient mobility and logistics solutions. Our product range across both divisions is making a decisive contribution in these fields. Even though the Covid-19 pandemic resulted in temporary restrictions on individual travel, we see an unbroken demand for mobility in the medium and long term.
All these societal megatrends are manifest in the industries of greatest relevance to Knorr-Bremse. Developments in the rail vehicle sector focus on improving the transportation capacity of existing rail infrastructure, improving the availability of vehicles and systems, enhancing eco-friendliness, and streamlining product life-cycle management. In the commercial vehicle industry, as well as improving road safety and reducing emissions, we are concentrating our efforts on e-mobility, automated driving and connectivity.
2. Expanding Our Technology Leadership
In our target markets, Knorr-Bremse is a global innovation and technology leader. We implement innovative solutions that deliver clear customer benefits; we set industry-wide standards for safety, efficiency and reliability; we guarantee top levels of quality and product availability.
We aim to continually extend and strengthen our technology leadership. Consequently, we invest between 5% and 6% of our annual revenues in innovation. We work closely with our partners and customers in development partnerships to create solutions that add significant value.
In our Rail Vehicle Systems division, we are developing solutions for automated train operation (ATO) that meet the need for increasing transportation capacity on existing rail infrastructure. For our customers, improved rail vehicle availability is crucial for ensuring that investments are both efficient and effective. Using sophisticated data models, our condition monitoring solutions avoid system downtimes and enable optimized maintenance. At the same time, in line with the trend toward end-to-end lifetime management of our systems, we are extending our range of products and services to provide customers with optimal support over the entire product life cycle.
Through our Commercial Vehicle Systems division, we offer our customers solutions and systems in line with technological trends in the commercial vehicle industry. Knorr-Bremse’s advanced safety technologies are helping to improve road safety. Following the expansion of our product portfolio to include steering systems, we are working with our partner Continental AG to develop a range of driver assistance systems and automated driving solutions specifically for commercial vehicles. Paying greater attention to sustainability aspects ties in with the industry trends of e-mobility and emissions reduction. Knorr-Bremse offers customers around the world a range of solutions for ensuring compliance with the growing number of regulatory requirements for reducing fuel consumption and CO2 emissions in the various markets. Aiming to provide our customers in the commercial vehicle sector with the best possible support as they transition to e-mobility, since early 2020 we have pooled our skills in an interdisciplinary “eCubator” development unit to further boost the development and expansion of our portfolio.
As well as developing technologies in each of our two divisions, we also leverage the synergies between them. Over the next few years, we intend to systematically develop these synergies by, for example, setting up joint research centers and facilitating interdivisional technology transfers. We believe there is considerable potential for synergistic developments in digitalization, for instance in the form of applications such as predictive maintenance. This will make our innovative product solutions more efficient and generate additional benefits for manufacturers, operators and users alike.
3. Leveraging Our Global Presence
With 100+ operating locations in over 30 countries, Knorr-Bremse has a strong local presence in all relevant international markets. This proximity to customers, local market expertise and business presence, coupled with global product and systems excellence, makes Knorr-Bremse the preferred partner to all major customers worldwide.
Asia continues to be one of the biggest growth markets in our target industries. The rail vehicle industry, and consequently Knorr-Bremse’s Rail Vehicle Systems division, is benefiting from high government spending on infrastructure and a strong urbanization trend in China and India in particular. We also expect to see rail investment programs in Europe as part of climate protection programs such as the “Green Deal” or government stimulus measures in the wake of the Covid-19 pandemic; this should greatly boost demand for Knorr-Bremse’s system solutions.
The worldwide presence of our Commercial Vehicle Systems division provides an excellent basis for further developing content per vehicle in all markets, hence the ongoing expansion of our OE business. In regions such as North America, China and India in particular, we are anticipating further increases in content per vehicle once disk brakes, electronic brake control systems and modern driver assistance systems are introduced. New safety and emissions regulations are helping to drive technology upgrades for trucks and buses.
4. Growing a Profitable Aftermarket
As well as supplying original equipment for rail and commercial vehicles, Knorr-Bremse offers comprehensive aftermarket products and services on a global scale. Thanks to the large installed base of vehicles equipped with our systems, along with our global presence and proximity to customers, we are well placed to leverage this potential and further expand our service offerings.
Rail vehicles benefit from a long life cycle – 40 years or more. In our experience, over their entire life cycle, the aftermarket potential of rail vehicle braking systems could be two to three times higher than the value of the original equipment. Regulatory bodies worldwide are prescribing regular inspections and fleet modernization, both of which directly contribute to our business volume. We will also offer aftermarket services based on new data-driven business models that support, for example, condition-based maintenance and remote diagnostics. As these concepts become increasingly established as market standards, they are both set to drive further profitable growth.
We are also seeking to leverage our large installed base in the aftermarket segment for commercial vehicles. The aftermarket offers attractive opportunities to sell specific replacement and spare parts which need replacing multiple times over a commercial vehicle’s lifetime. In addition to our global aftermarket platform TruckServices, our AllTrucks service network with its extensive customer base, high availability and numerous service facilities enables us to maintain a strong local presence. Thanks to this, we can supply independent aftermarket solutions that also fit our competitors’ systems.
5. Continuous Efficiency and Excellence
In a market increasingly driven by consolidation among our OEM customers and unremitting pressure to cut costs, it has become more important than ever to consistently maintain cost discipline, cost-effectiveness and profitability, while ensuring that processes remain efficient and management practices sustainable.
To ensure that we continue to grow, we have prioritized the sustainable and ongoing improvement of our productivity, the streamlining of our process efficiency (including the implementation of global process standards such as our Knorr-Bremse Production System, optimized supply chains, harmonized procurement standards and further automation), and the leveraging of our robust balance sheet. In our efforts to optimize costs, we always take care to achieve a geographical balance between our global manufacturing footprint and our R&D activities.
Sustainable business management also means being agile enough to respond quickly to changing circumstances. In the wake of the economic slump caused by the global Covid-19 pandemic in fiscal 2020, Knorr-Bremse took prompt steps to introduce wide-ranging measures to safeguard our income and cash flow. Consequently, we succeeded in significantly mitigating the pandemic’s impact on our results.