Valeo puts flexibility at the heart of manufacturing

What has surprised Holger Schwab most is not the direction of change, but its speed. Chinese manufacturers in particular have expanded far faster than expected, both in their home market and through exports. For Valeo, that increases the pressure to make engineering and manufacturing more flexible rather than committing too narrowly to a single technology path. The clearest example is in its Power division, where the supplier has brought together the high-voltage expertise of the former Valeo Siemens eAutomotive business with conventional powertrain technologies and 12V and 48V systems.

The reason is simple: while electrification continues to grow, the lifecycles of hybrid and ICE technologies have also extended. Suppliers therefore need to manage several generations of powertrain technology in parallel. As Schwab puts it: “If hybrids or combustion engines are stronger or weaker in demand, in some cases we can even balance that within the same plants.” That flexibility cannot stop at the factory gate. “This flexibility has to extend through the entire supply chain.” Even mature technologies will still require further development and efficiency improvements, he adds, even if entirely new generations become less common.

AI shortens production feedback loops

At the same time, Valeo is moving AI further into both engineering and manufacturing. Artificial intelligence is not a new topic for the supplier: Schwab says Valeo has worked with it for around 15 years and established Valeo AI nine years ago. More than 200 software engineers now focus exclusively on AI applications. The pace of change in software development has been particularly sharp. “35% of our software code is generated by AI today; 18 months ago we were at zero.”

In the plants, however, the applications are more directly tied to production. Valeo uses AI in quality systems and image recognition, allowing systems to distinguish good parts from defective ones in fractions of a second and feed that information straight back to the line. “That increases efficiency and quality.” For manufacturing, the real gain is not simply automated inspection, but shorter control loops: detection, assessment and response move closer to the running process.

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‘China speed’ is more than faster development

That same emphasis on speed shapes Schwab’s view of ‘China speed’. He recalls a customer visiting Valeo’s high-voltage R&D centre in Erlangen and saying: “If I need China speed, I go to Erlangen.” Schwab is clear that this is not achieved by simply asking people to work longer. “We do not achieve that by working Saturdays or simply doing more hours. We achieve it through the right organisation and through the consistent use of AI tools.” He also cautions against reducing China speed to product development alone. Validation, approval and integration into the vehicle are just as important.

“The actual development is often only one part of the overall process.” For manufacturing and industrialisation, that shifts the benchmark. It is not enough to shorten engineering lead times if validation, production readiness and release processes cannot keep pace. The entire route to series production has to accelerate.

Passenger cars and trucks share technology

Valeo applies a similar logic across passenger cars and commercial vehicles. Many technologies developed for high-volume passenger-car programmes can be transferred into trucks, where development costs for areas such as automated driving or electrification would otherwise be difficult to justify at lower volumes.

Valeo can take a system developed around a large passenger-car programme and adapt it to the higher environmental, load and durability requirements of a commercial vehicle.  The knowledge flow also works in reverse: truck applications expose technologies to far more demanding lifetime and duty-cycle conditions, creating lessons that can feed back into passenger-car development.

For Valeo, the industrial advantage lies in reusing technology, engineering and know-how across different vehicle segments rather than building separate solutions from scratch.

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Local for local becomes a manufacturing question

Regionalisation is another important part of the production strategy. Schwab describes Valeo’s approach as firmly ‘local for local’. “We produce on all continents where the demand from our customers arises.” That is intended to support shorter supply chains, security of supply and stronger industrial value creation in regional markets. Schwab therefore does not see the growing presence of Chinese vehicle manufacturers in Europe primarily as a threat, provided local vehicle production is matched by meaningful local sourcing and industrial activity. “On the contrary, that is a great opportunity – as long as these do not become pure assembly plants where vehicles are only put together.”

His position is equally clear on value creation: “Anyone producing vehicles here should also generate a relevant share of the value creation here.” For suppliers, this makes localisation a practical manufacturing issue: where components are produced, how closely suppliers are positioned to OEM plants and how much of the industrial chain remains within the region.

Flexibility becomes the core manufacturing strategy

Schwab’s core manufacturing message is therefore less about choosing one technology than about building enough flexibility to absorb several developments at once. EVs are gaining ground, while ICE and hybrid lifecycles are proving longer than expected. Development cycles are shrinking, but validation and industrialisation have to keep pace.

AI is moving from software engineering into quality control and process feedback on the shop floor. And as production networks become more regional, factories and supply chains have to sit closer to the markets they serve. Valeo’s answer is to embed flexibility as deeply as possible across plants, technologies and processes, while speeding up the complete industrialisation chain.