Valeo Bets on Multi-Technology Plants to Weather Powertrain Shifts

Valeo Bets on Multi-Technology Plants to Weather Powertrain Shifts

Valeo is reconfiguring its manufacturing strategy around a single principle: flexibility across multiple powertrain technologies rather than commitment to any one path. Holger Schwab, the supplier's Group President for Germany, told Automotive Manufacturing Solutions that the speed of market change—particularly the rapid expansion of Chinese manufacturers—has forced a rethink of how plants are designed and operated.

The clearest expression of this approach sits in Valeo's Power division, which now houses high-voltage systems from the former Valeo Siemens eAutomotive joint venture alongside conventional powertrains and 12V and 48V architectures. The reason is straightforward: while electrification continues to grow, hybrid and internal combustion engine lifecycles have stretched longer than many forecasts predicted. Suppliers must now manage several generations of powertrain technology simultaneously.

"If hybrids or combustion engines are stronger or weaker in demand, in some cases we can even balance that within the same plants," Schwab said. That flexibility must extend beyond the factory floor into the entire supply chain, he added.

Why it matters

Valeo's shift reflects a broader recalibration across the automotive supply base. As the transition to electric vehicles proves less linear than anticipated, suppliers face a choice: build dedicated facilities for each technology or engineer plants that can pivot between them. The latter approach carries higher upfront complexity but reduces exposure to demand swings and stranded assets—a critical hedge as OEMs adjust EV timelines and regional markets diverge.

AI moves from code generation to shop-floor feedback

Artificial intelligence now generates 35% of Valeo's software code, up from zero 18 months ago, according to Schwab. But the manufacturing applications are more immediate. The supplier uses AI in quality systems and image recognition to distinguish defective parts in fractions of a second and route feedback directly back to production lines.

The real value, Schwab said, is not automated inspection itself but shorter control loops: detection, assessment, and response happen closer to the running process, tightening quality and efficiency.

Valeo established a dedicated AI unit nine years ago and now employs more than 200 software engineers focused exclusively on AI applications. Schwab said the company has worked with artificial intelligence for roughly 15 years.

'China speed' requires organizational change, not longer hours

Schwab pushed back against the notion that matching Chinese development velocity means simply working more hours. A customer visiting Valeo's high-voltage R&D center in Erlangen remarked, "If I need China speed, I go to Erlangen," he recalled.

"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," Schwab said. He cautioned that China speed cannot be reduced to product development alone—validation, approval, and vehicle integration matter just as much. The entire route to series production must accelerate, not just the engineering phase.

Cross-segment technology reuse lowers commercial vehicle costs

Valeo applies similar flexibility logic across passenger cars and commercial vehicles. Technologies developed for high-volume passenger programs can be adapted to trucks, where development costs for automated driving or electrification would otherwise be difficult to justify at lower volumes. The knowledge flow works in reverse as well: truck applications expose systems to more demanding lifetime and duty-cycle conditions, generating lessons that feed back into passenger-car development.

Regional production tied to local value creation

Valeo's manufacturing footprint follows a "local for local" model, with production on every continent where customer demand exists. Schwab said he does not view the growing presence of Chinese vehicle manufacturers in Europe as a threat, provided local vehicle production is matched by meaningful local sourcing and industrial activity.

"Anyone producing vehicles here should also generate a relevant share of the value creation here," he said. For suppliers, that makes regionalization a practical manufacturing question: where components are produced, how closely suppliers are positioned to OEM plants, and how much of the industrial chain remains within the region.

The details were first reported by Automotive Manufacturing Solutions.