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Why FAW-Volkswagen and ESI Group Bet on Developing New Intelligent Simulation Technology in Automotive

CURRENTLY on PLM&ERP News: "Paving the way for a cleaner, safer and more productive future." One of the most interesting business deals in the area of simulation and analysis in recent weeks is that ESI Group and FAW-Volkswagen TE entered into a strategic partnership to develop intelligent simulation technology for vehicles. FAW Volkswagen is a large-scale joint venture between China Faw Group Corp, German Volkswagen AG, Audi AG and Volkswagen (China) Investment Co.
What the companies have done more precisely is to sign a memorandum of understanding, MoU, where ESI Group and FAW-Volkswagen defined a partnership aiming at developing intelligent simulation technology in the automotive industry. Among other things, they intend to tackle the challenges posed by China's car safety regulations and, on top of this, also generally push for innovation within the industry. In the press material it is noted that the aim in this is set on “intelligent simulation and establishing a local material database for the automotive industry.” When this local effort has resulted in useful models and relevant factual backgrounds, the intention is to spread this with intelligent simulation technology across the entire industry. All to pave the way for a cleaner, safer and more productive future. Under the MoU, a joint material testing and intelligent simulation laboratory has been established, marking a significant step forward in intelligent simulation, innovation and research in the automotive sector.
ESI Group is widely known for sharp solutions in virtual prototyping for industries, above all in advanced and technology-heavy industries such as automotive, aerospace & defense, energy and industrial equipment. In other words, generally complex areas where the point of the development work is to, under a sustainability focus in terms of materials, product properties and production processes, drive product performance above future technology thresholds for things like vehicle and aircraft design, self-driving passenger cars, e-mobility and a world where electrification and hydrogen operation will radically change the energy solutions. ESI's flagship Virtual Reality software IC.IDO for human-centered process validation and product integration: facilitating agile design processes, robust manufacturing and safe maintenance operations. Other solutions in the portfolio are the VA ONE vibro-acoustics program for aircraft interiors and electric aircraft as eVTOL concepts.
The background also includes that ESI Group and Volkswagen Group have been working together for a long time, 40 years, while the VW-FAW collaboration started later, in 2007.
It is also clear that commercially ESI does not belong to the industry's biggest players, but it is in any case on the top ten list, according to analyst CIMdata's 2023 reports. The revenue level in 2022 was around 145 million dollars. The list was then of course topped by the now Synopsys-owned Ansys at just over $2 billion before MathWorks's $1.25 billion. In 2023, ESI was bought by Keysight Technologies.

The position as a commercial world leader does not prevent ESI Group from developing a series of technologically strong solutions in virtual prototyping and can be seen as a very strong player in its special areas, above all in the automotive segment. PLM&ERP News has previously reported that Volvo Group, the truck manufacturer, used state-of-the-art solutions from ESI – industrial metaverse kind of solutions – in connection with the development of one of its latest electric vehicles, the VNR Electric.

Two decades of fruitful cooperation
Commenting on the collaboration, Deng Guohui, Technical Development Director at FAW-VW, says that the collaboration between the companies is not only a milestone but two decades of fruitful collaboration:
“Today’s MoU also begins a new era of innovation in virtual vehicle simulation with ESI. This partnership means more than a formal agreement; it is a testament to our shared vision and commitment, which aims to pioneer intelligent simulation and materials research, set new industry standards and drive vehicle safety and efficiency forward.”

Francis Griffiths, EVP and Chief Revenue Officer at ESI Group, also commented on the partnership, saying:
“With over 40 years of collaboration, ESI Group and VW Group have built strong ties, including a fruitful partnership with FAW-VW since 2007. This marks a significant milestone in our commitment to advancing virtual simulation technology in the automotive sector. Together with FAW-Volkswagen, we strive to drive innovation and efficiency in intelligent simulation, material research and development.”

Imagine truly experiencing building, operating or maintaining a vehicle – without physically constructing a single thing. In this immersive, immersive virtual reality, you can walk around your product in a lifelike environment on a 1:1 scale, look at it, search for necessary tools and interact with your new product concepts as you or your customers would in real life. In this way, any unforeseen installation, operation and maintenance challenges that are not acceptable can be experienced in time to identify them and fix them. Completely digital, virtual and before decisions are ”cast in stone”. This is roughly how ESI Group describes the capabilities of its flagship software on the VR side, IC.IDO.

ESI is strong in automotive
As noted in the introduction, ESI is strong in automotive and other transport-related areas. It is also clear that automotive is the largest user side of simulation and analysis (S&A). According to CIMdata in 2023, the domain had around a 27 percent share of the market investments (based on the respective market actor’s revenues) in CAE software and services, corresponding to roughly 2.5 billion dollars of a total value that in 2023 amounted to around 10 billion dollar. The automotive segment is thus the biggest right after Aerospace and Defense, which land on just over 2 billion dollars invested.

In Europe, VW’s home country Germany is the largest investor in software and service on the CAE side with roughly 30 percent of the investment market. In Asia, Japan dominates CAE investments with just over $1.2 billion invested, with China a close second with roughly half as much investment in software and services, according to CIMdata 2023.

An industry with relatively low service revenues
An interesting observation regarding the share of the service side of each CAE player’s total revenue, the simulation and analysis area averages a low 11.5%. This is because the software revenue is therefore at about 88.5%. The S&A market thus differs from the overall PLM market in its distribution of revenues between software and

services. A good example is the cPDm segment of the PLM market where software

represents about 40% of the total revenue of the CAE market players, while services of various kinds represent 60%. For the S&A segment, services accounted for 11.5% of total revenue in 2022. This could be an indication that the user collective on the simulation and analysis side generally has a relatively better grasp of how the software should be used and interpreted.

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