Chuhee Lee, VP Strategy & Technology, Volkswagen Group of America

Ali Tabibian: Welcome, welcome, welcome everyone to this episode of Tech, Cars, Machines. My name is Ali Tabibian, and I’m with GTK Partners, and you can find out more about me and the firm via the links in the episode notes.

Now the opening sound you heard this time, you may have noticed, is a little different from what you’d heard before. This time, what you heard was a Porsche 911. [00:00:30] That’s because today, we’re going to be talking to a member of the Volkswagen group, and Volkswagen, one of the largest, if not in many years, the largest automobile producer in the world, owns a number of story brands. Obviously, Volkswagen, but also Audi, and Porsche, and hence that sound you heard at the opening of this episode.

In particular, we’re going to be talking to a senior member of the Volkswagen of North America Electronic Research Labs. Now, that’s a long way of saying, this is Volkswagen’s [00:01:00] research arm in the United States, in Silicone Valley. They’ve been here for about 20 years, and they’re responsible for a number of firsts.

For example, it was this unit that drove the first integration in a commercial vehicle of Google Maps and Google Earth, and they also sponsored a lot of success in the early autonomous car races that you hear about in this episode.

Let’s take a brief moment to talk about VW Group, and give you a sense for the company overall. You remember a couple episodes ago, we talked about how big this industry [00:01:30] was. Well, very few people represent that bigness any better than the VW Group. Here’s some statistics, all of them which I find startling, even though I’ve been covering this industry for quite a while.

250 billion dollars in revenues, derived from the sale of 10 or 11 million vehicles, depending on which year you happen to be looking at. Over 600 thousand employees at 120 different locations, selling cars in about 150 countries.

Essentially, they’re producing and selling and employing people everywhere. [00:02:00] Generally, the VW Group winds up being tied for first with certainly Toyota and occasionally Renault Nissan, and sometimes somebody else for the top position in the number of units produced in any particular year.

As another example, VW Group is about a third larger than each of Ford and General Motors. Massive, massive numbers, and definitely, talking to this company will give you a really good idea of what’s in store, and [00:02:30] where the major manufacturers are trying to take this industry.

Most automotive manufacturers have a research facility now in silicone valley, and that particular facility has become increasingly important in their research universe to the future direction of the technology in their vehicles. Generally these labs, and especially in the case of the German auto manufacturers, are headed by someone who’s on a rotation, typically about three [00:03:00] years from the mothership. They obviously have a substantial permanent staff, a couple hundred, in the case of Volkswagen ERL, just this particular unit here, and Chuhee Lee, who we’re about to interview in this series, is the senior most permanent member of VW ERL.

Now, with this type of scale, with the type of scale VW has, what will be really interesting about the audio you’re about to hear, is that you’ll notice that it doesn’t really focus exclusively on automotive technologies, but that Chuhee [00:03:30] and his team spend a lot of time thinking about driver experience. What is the definition of luxury, and how’s the definition of luxury changing? What is the future of human technology interaction? What is the association an individual wants to have between the vehicle and their lifestyle?

I wanted to explain a few terms and acronyms that you’ll hear during the interview, so that you’ll have some background when you get there. One is the DARPA challenge. D-A-R-P-A. DARPA [00:04:00] stands for Defense Advanced Research Projects Agency, and it’s an arm of the United Stated Department of Defense, that for quite some time, maybe getting close to 20 years now, has sponsored a very famous race, where experimental vehicles and research teams, and sometimes corporate sponsored teams, come to show off their self driving vehicles.

Another phrase you’ll hear is MMI. In particular, I think that phrase is used in connection with the Audi brand. MMI stands for [00:04:30] Multi Media Interface, and it generally refers to the infotainment dashboard and user experience inside that brand of vehicle.

You’ll hear a phrase called Audi on Demand. That’s an experimental service at this point, I think is the right way to call it, which is a combination car rental and valet service in a few major cities, including San Francisco, dedicated to the Audi brand, and run by the VW Group.

You’ll also hear the term VAIL, kind of like the ski resort. V-A-I-L, [00:05:00] and that stands for the VW Automotive Innovation Lab, which is otherwise known as the Stanford Auto Lab, and it’s an automotive research unit at that university.

With that background, I hope you have a great time listening to the wisdom of Chuhee Lee, of the Volkswagen North American Electronic Research Lab.

Voice Actor: Tech, Cars, Machines. Subscribe here or at TechCarsMachines.com and GTKPartners.com.

Ali Tabibian: [00:05:30] So, we’re here with Chuhee Lee, of Volkswagen Electronic Research Labs. Chuhee, thank you so much for taking the time.

Chuhee Lee: Thank you. Thank you for having me here.

Ali Tabibian: Great. I know we’ve had some great conversations one on one before. I know you’ve attended our conferences, which we very much appreciate, and so, I thought it would be great for a lot of our listeners to hear directly from you about many of the things that are affecting the auto industry. Maybe take us through, and just tell us a bit about [00:06:00] the genesis and the history of the Electronic Research Labs, here just south of San Francisco, in Silicone Valley, and then give us a sense for which brands within the very large Volkswagen universe you interact with.

Chuhee Lee: The Volkswagen Group of America Electronic Research Lab was founded about 20 years ago. 1998 is the time when we had the first couple of people from Germany [00:06:30] sent to Silicone Valley to look into what’s happening in the valley.

If you go back in time, 20 years from now, you find it, this explosion of internet based innovation, and the internet is changing our lives, and so on and so forth. So basically, that’s a time that the ERL was founded, and the reason for that foundation comes from the high-level management decision [00:07:00] about the new electronic strategy within the Volkswagen Group.

Already back then, our management realized that most of the innovation would come through the electronics, not from the traditional mechanical engineering that really drove mainly the car industry. Therefore, they were highly interested in it, especially in Silicone Valley, where all this kind of digital related stuff was happening. That goes back about 20 years ago.

[00:07:30] We’re mainly interacting with three major brands within the Volkswagen Group. Volkswagen Group has a total of 13 brands, but the main one that this office is mainly engaged with is Volkswagen brand, the car brand, and Porsche, and also Audi. These are the three major brands that we work with, however, our collaboration goes to other brands, like we do have smaller projects with Bentley. We had [00:08:00] some projects with Bugatti in the past. Even Lamborghini, we had a project. Skoda, which is not in the US market, very strong in Europe and other parts. We also do have some projects like those brands as well.

Ali Tabibian: Excellent. If I recall correctly, one of the interesting things about ERL, is it’s a combination of projects that are sponsored by the business units, and projects that are basically chosen [00:08:30] by the unit itself to work on, which I think is a little different from the other … Certainly the other German related auto labs, which are more sort of directed from back in Germany. Do I have that right? And if I do, explain that a little bit please.

Chuhee Lee: Yes. So, at the beginning, when the lab was founded about 20 years ago, it was merely doing tech scouting. There was basic funding to do tech scouting, meaning that the team had great freedom, because they were simply saying, ” [00:09:00] Hey, we are here, mainly in Germany in the headquarter, but we’d like to know what’s happening in Silicone Valley and what’s happening … Actually, we also have a research laboratory in Tokyo. We have other places obviously in Europe, but also [inaudible 00:09:14] and so on and so forth.”

But at least mainly from Silicone Valley, they wanted to know what was going on, therefore, we started with such freedom. I joined the ERL in 2002, at the beginning of the expansion of the Volkswagen’s [00:09:30] presence in Silicone Valley, because before 2002, there were only three people writing some newsletters of what’s happening, what they observed in the valley. But in 2002, the board decided to actually grow the presence by hiring local engineers and designers to be able to build a functional prototype before we can actually kind of tell them, “Hey, we found this shiny new objects. Why don’t you take a look at it.”

Because if you’re in a serious [00:10:00] development, it’s very hard to do innovation at the same time, if you’re already kind of engaged into some startup production for the next goal, for the next … You know, Audi A4. I mean, you were really putting all your focus into that. Therefore, if I just go, “Hey, why don’t you look at a company like Google, or some search engine?”

They would say, “That’s great, but how relevant is that for me right now to look into them?”

Therefore, the strategy was to be able to really not only be able to identify, discover new technologies, but being able [00:10:30] to really build a functional prototype so we can do much better evaluation of those companies and technologies. That’s kind of the beginning, where we had our funding pretty much with freedom to do projects on our own, and present those results back to Germany.

Around the 2005 timeframe, we were being asked about, “Hey, we’ve been already investing for [00:11:00] many years from Germany, and quite expensive Silicone Valley. What is return on investment?”

And return on investment is not about how many companies or how many prototypes that are built, it’s really the impact to the product. We started looking into more of our project portfolios, and identify how many of those can actually have a real path to the actual product impact.

[00:11:30] Examples like, Google Earth’s navigation, which actually we started in 2005, after Google acquired key hold, and rebranded Google Earth and launched the tested version of it. We imagined the award with like, “Hey, what about in-vehicle navigation is online, and not onboard.”

Ali Tabibian: The in-vehicle navigation?

Chuhee Lee: In-vehicle navigation. This is like 2005. Before the 2007, the famous year of the iPhone. [00:12:00] People who had navigation was like maybe your personal navigation device that you will remember before the smartphone era, that people had a dedicated small consumer devices, or have quite an expensive in-vehicle navigation system. But you’re still updating your data using your CD or DVD’s and they’re not really connected, but once we saw the Google Earth in the navigation, for like the desktop version, imagine the world [00:12:30] of having a completely online navigation system.

That was the Google online navigation project that we started in 2005, and then we showed at the CS in 2006, and from there, we worked on the actual development of the project here at ERL to launch the production version of the Google Earth embedded. The first time in the auto industry to really have that in the vehicle, and that was the previous generation of the Audi A8.

Ali Tabibian: [00:13:00] That’s interesting. I hadn’t realized it had such a long history. In fact, in my Audi, I have a Q5 today, and I noticed the Google Earth integration. It still gives you a choice. Do you want Google Earth or not? I didn’t realize there was that long of a history, well ahead like you said.

Chuhee Lee: Yes. Imagine if you have to store all the satellite images. It’s not about database up to date. That’s one thing, but the Google Earth shines because it gives you those [00:13:30] gorgeous looking satellite images, to help you to also orient yourself a little bit better. You know, like where the mountains are, and the buildings kind of in and around. These are all from different levels of the zoom. You can go from 30 yards to like 5, 10, 15 kilometers. You can not really store that on any onboard system, so you definitely need the server.

Today, everybody talks about the cloud. The cloud, you know, connected cloud computing, already like [00:14:00] 2005, without even calling it the cloud, that was like a server based, online navigation system, and something that we actually introduced. We are very proud of that.

Ali Tabibian: That’s incredible. That was probably … The connectivity solution was what? A 2G network at that point probably.

Chuhee Lee: The time that it was launched, in 2009, 3G was really just started out there. Yeah, so like 3G. We took advantage of the 3G cellular network.

Ali Tabibian: Chuhee, that great example, I think touches on two areas [00:14:30] of focus of ERL. One is infotainment, which is probably that navigation, probably in your nomenclature, sits under infotainment, and also, connectivity. Maybe touch on other areas of focus at ERL, and then we can come back and talk about each of the categories.

Chuhee Lee: Yes, absolutely. This connectivity, infotainment, or connected cars, is one very strong pillar of the ERL, with a very long history. Another long history is also back in 2005, we did DARPA program challenge. [00:15:00] That’s when the US Defense Research Agency put out … Actually, it started really in 2004, saying, “Hey. We want to give one million dollars for the team who can actually go through the desert.”

And then the very first challenge that they put out, there was no winner, because nobody could make more than 30 meters or something like this. The second time, when they actually doubled the price to two million dollars … [00:15:30] Stanford back then, with Sebastian Thrun, from their AI lab, Stanford actually decided to participate in the race, and asked us if we could be a corporate sponsor, therefore we had the race [inaudible 00:15:48] called Stanley, and that is one of the early integration of the Touageg. We worked together with Stanford to really join that grand challenge.

[00:16:00] Luckily, we actually, the team won. So our history in autonomous driving goes back really starting in 2004. After that, we did an urban challenge in 2007. We did the Audi Pacific, around 2009 or 2010 timeframe. And more recently, a couple years ago, we drove an Audi we named Jack, from Palo Alto to Las Vegas for the CS. That’s another big [00:16:30] area where the ERL is very proud to be able to work with all our colleagues from Germany. From Group Research, from Audi brand, from Volkswagen, to really make those important milestones.

Ali Tabibian: Great. We have infotainment, connectivity, autonomy. Any other segments?

Chuhee Lee: Yes. More recently, we’ve been looking into 3D printing technologies, especially for the 3D technology that can actually [00:17:00] do mass production. We’ve been using 3D printers for a long time for our own prototyping, but we have been recently looking into other 3D technology that enables a speed of scale, where you can actually do 3D manufactures of bigger parts that can go directly into a product, and not just kind of have that as a prototype stage.

We do actually have one of the [00:17:30] 3D printers from one of our partner companies, actually in our building, and we’re printing out actual bigger parts for different types of evaluation, to see if that actually meets our quality requirement and so on and so forth. This is very interesting, because once the 3D printing goes into kind of mass production, you can really imagine the world where things can be highly personalized, but at the [00:18:00] mass market scale.

The challenge of personalization is what you like might not be the same as what I like. If you like one, and what I like, it looks different, if the tooling has to be different, it’s very expensive. But imagine if it’s 3D printing parts that allow us, even in the same printer, that can actually have a part that’s optimized for your like. Like trim pieces. Imagine that I can have a door, like a trim [00:18:30] piece, with my name on it, or the initials on it, that’s really something affordable, or that I can even change depending on my mood. It’ll be a really interesting business value proposition. We’re looking into those 3D printing capabilities.

Ali Tabibian: You know, in this country, there’s an enormous after market industry that does just those things, either just the aesthetic modification after the fact, or even, let’s say, adding your favorite sport’s team’s logo into the seats and all that. The margins of that business are [00:19:00] enormous, so it’s a good business to be focused on.

Chuhee, let me ask you this. You cover a lot of price points. If I think of Volkswagen, Audi, Porsche, and then eventually some of the other even higher end brands that you mentioned, what is the … Is there a difference between how individuals in those different price points consume the types of things that ERL touches on? For example, are they all [00:19:30] essentially, primarily looking for a better stereo, or is it the case that the person who buys the Bentley, for some reason, is much more focused on autonomy and safety features?

Chuhee Lee: I think there are certain needs of the customer, which works regardless of how much they can afford. Like having a very safe and reliable car, I think this is also regardless of what price points. It doesn’t really matter. [00:20:00] The higher ended car can save lives, and the others not. We want to make all our product to really save lives and so on and so forth. There’s certain things that we believe it’s more about kind of the baseline, but the … Even the definition of luxury, especially in more recent days, I believe that it’s very interesting to kind of define what that actually is, because in the traditional sense of the luxury, was very much of [00:20:30] a hand crafted leather wrapped something, or very much of a high end audio sound, and things like this. There was a lot more of the physical aspect.

But today, we are living mostly a digital lifestyle. For example, let’s put an example on an iPhone. Yes, iPhone is also a very desirable item. Everybody needs a phone, and wants to have a [00:21:00] phone. By the way, iPhone can be a luxury, but is that really a luxury item, or maybe the case makes you stand out, that you’re actually more luxurious than the same iPhone that I was also able to buy through a two year plan out of AT&T or somebody.

It’s quite different in terms of defining luxury into the digital, not only the hardware. Let’s look into the software, the apps that I can have in my phone and in your phone. [00:21:30] We don’t know what’s the final answer to it, but it is interesting to see how … Especially also the newer generation of the highly … People define their own luxury. Maybe the luxury for them is just to have more of their own time, maybe have much more personalization, is the kind of interpretation of the luxury. Freedom, and that kind of being able to express [00:22:00] yourself, more than just a status symbol that it used to be. Kind of having like a Bentley emblem in front of the car is, “Oh, that person must be very successful.”

With the phones, you might have a phone, I have my phone. We just put both our iPhones on the table. It might not be that easy. This is kind of an interesting topic that we look at into, and try to figure out, like how can we provide this type of freedom, and then [00:22:30] that’s a sense of personalization into our new product.

Volkswagen Group, we do have certain technology modules that’s led by one of the brands. This is to really maximize our synergy within the group. We do so much development and capabilities, from different brands, and we try to have different lead [00:23:00] of the top leader in electrification, automation, or even some other aspects to really define these enabling technology modules that any brand actually, can use as a tool kit.

Then, let’s say I’m on Bentley, or Bugatti, for very ultra luxury, very special kind of customer segment, I can actually build my product on top of those [00:23:30] basic modules. That’s another point of the Volkswagen Group’s strengths, to be able to adapt to ever changing the customer expectation across all segments, from volume to very much of a high end ultra luxury.

Ali Tabibian: That’s a very, very good description. I appreciate that, and it’s fascinating that if you look at the app example you gave, how often you wind up getting that for free, [00:24:00] but if you want to customize the picture, or customize the background, customize the color pattern, that’s what you wind up paying for. It’s interesting because you seem to be saying that a lot of the customers, that’s a potential path for them to purchase additional capabilities inside the vehicle, and it’s mainly about the customization of that interaction. Did I understand you correctly?

Chuhee Lee: Yes. Someone told me, [00:24:30] if you’re really at the top-notch of very ultra, let’s say ritzy level, then they don’t want to even carry a phone, so the luxury here is not to really have that, the need to carry a phone, because it’s all taken care of by your, let’s say assistant, or somebody else, your staff. So imagine that, like today we’re talking about, [00:25:00] does my phone have a brighter screen, more resolution than yours, and we kind of look into who paid more for the phone, but if you pass a certain level, maybe it’s not about actually having the phone, the luxury, the most expensive one in the world, but actually not having to carry a phone is the true luxury.

It’s very interesting how people also find themselves, and then again this is really piece of mind, or not having to worry about anything has become definition of luxury, and not [00:25:30] like what you have is actually luxury.

Ali Tabibian: I see. So the connectivity, some of the sensing, etc., let’s say, is used to deliver a managed service. Instead of helping you maintain your own vehicle, for example, it becomes an embracing service, and you have the least amount of interaction with the vehicle itself, is actually what you’re –

Chuhee Lee: In the early days of internet, there were … Let’s say when Yahoo was actually indexing all the webpages. Let’s say 1.5 million websites that Yahoo was able to categorize in sports and so on [00:26:00] and so forth. Today, we have two million apps in the app store of iOS, or two million apps on the Android, roughly speaking, and how you browse them when you go to the app store, it’s by category. It’s almost like how the web pages were categorized like 15 years ago or 20 years ago from Yahoo.

But then what happened? With Yahoo’s model of that category, came along Google’s one single search bar. It was much easier to kind of type in [00:26:30] what you want, find out, rather than going into the category, and trying to kind of find the webpage that you want.

Same phenomenon for the app store market. It’s like, you go through the browsing, but what’s happening? All this digital assistant, is actually trying to answer the question or trying to provide a service that you want directly rather than you going through the app store and downloading the app that you want and so on and so forth. They’re making this digital assistant [00:27:00] to develop more and more so called skill set, which is basically the concept of downloading an app. This whole use of the AI, to automate, and really being able to get you directly to the service or goods that you want to have, it’s becoming more of the actual desire, the item, than what used to work before.

Does that make sense?

Ali Tabibian: It makes a lot of sense. [00:27:30] I’m a subscriber to Audi on Demand, and one of the great things about it, I don’t take care of the car. It gets dropped off, and it’s picked up, and honestly, it’s much more expensive in a lot of ways than owning the vehicle, but I’m paying for a lot of the things that you were just describing.

Chuhee Lee: Or, let’s take an example of the Silvercar, which is owned by Audi of America, and the Silvercar is another example of really providing a different type of user experience when it comes to a rental [00:28:00] vehicle. With a rental car, typically, what do you do? When you arrive at an airport, you go to the rental place, and you find a car, and then get out, and so on and so forth. With the Silvercar, it’s like, yes to begin with, you have all the same Silver Audi’s, so you know exactly what kind of car you’re going to get.

Ali Tabibian: Oh, so it’s called Silver, because all the cars are silver.

Chuhee Lee: Yes. And then, it’s like really hassle free. You just go to the car with the app. They can [00:28:30] unlock it. You get in and drive and drop it off. It’s really like going through that, not to necessarily having the user to manage many of the steps or components, can be a really good selling point, where a lot of services itself, starts to become more of a commodity, because everybody can actually maybe offer similar services, but what’s going to really make a difference is the user experience itself. How can we really eliminate all of the friction points [00:29:00] that you might encounter in that transaction? And if I’m really good at eliminating all that friction point, and probably the one that you’ll probably be happy, even to spend some more money on my product and service.

Ali Tabibian: How much of that Audi MMI, the interface, was developed here at ERL, what components were, how was that done?

Chuhee Lee: We didn’t develop the hardware of the [00:29:30] MMI, but in terms of the product contribution, Google Earth’s navigation, that I mentioned, [inaudible 00:29:36], and later on, we also brought online speech services, so that you can actually search the … Today it’s so common that you can just ask Siri or Alexa or some other POI, I’m talking about also, 2009 timeframe … 11 actually, in the car, to have an embedded online server based speech [00:30:00] recognition to search the POI’s. This is also very industry first, where we actually made the impact.

Even the Google street view that we were able to offer. These were really the projects that ERL was able to push there. This might be a little bit old, because about 2009 and 11 timeframe, but more recently, we worked on a product called the predictive navigation, and that’s where you can … [00:30:30] We have an algorithm in the car navigation system that monitors the places that you actually drive. If you opt-in for the service, the next time that you come into the car, the navigation system will give you the three most likely places that you will be driving to.

The difference to what you find in your phone, because your phone also kind of gives you the places that you might be driving to, the phone gives you the information based [00:31:00] on your final destination. In our case, we actually look into that even more closely, and our calculation of trafficking zone is based on the actual route that you usually take, and not only based on the destination, and try to calculate the route that you might take. This is based on the actual route that you take, compared to something like calculated version. It’s a lot more personalized in that sense.

Ali Tabibian: Interesting. For me, when I get into [00:31:30] an Audi, the work and the tradition of that MMI, and all the interface, and all the componentry is very clear. Even today, I know speech recognition has been around for a long time, I’m always impressed by how good the quality of the speech recognition is.

As an example, today I said, “Go to 500 Clipper Drive … Drive me to 500 Clipper Drive, Belmont, California,” and it was flawless. I don’t always have that experience in vehicles.

What is your view, or the group’s view on [00:32:00] what should be developed internally, and what should really be sourced externally? With this kind of volume, are you more biased toward owning the solution, than just integrating it?

Chuhee Lee: Really, it’s hard for me to speak for the whole group, but I guess I can tell you a little bit about how we approach from this office in Silicone Valley. Because it’s also a continuous question to ourselves, to say, “Should we use something that’s already [00:32:30] existing out there, or should we develop on our own. Should we buy one or should we make it on our own.”

When it comes to the actual algorithms that affects the user experience and also touches the customer behavioral data, we would like to actually have much more insight, and even control over those. So, it depends. If somebody can really [00:33:00] give me the full service of exactly what we want, then yes, it might be even business wise, more viable, but usually, there is no such thing. When you’re really developing on your own, like a product, and you’re defining your own user experience, you start doing a lot of tweaking and changes.

We, even here at the ERL, developed our own digital agent, but using all the tools that’s existing. We didn’t actually reinvent [00:33:30] for example, things like speech recognizers or any other things like that you can actually buy. The intelligence layer to understand, once we understand your intent, and being able to connect that with the actual in-vehicle actuator, or any type of service, for [inaudible 00:33:50], it’s something that we would like to kind of hold in our hands, so that we can actually define and have ownership about the user experience.

[00:34:00] Even this predictive navigation example that I mentioned to you, we developed that algorithm in house, and the beauty of it is, whenever we see … We actually get data over the usage, we can make our algorithm to become better and better, and this whole intelligence, and the ownership of that AI, needs to stay in house, rather than having a dependency.

That’s also in your strategic positioning. Do I want to be dependent [00:34:30] on somebody else to have this part of the core selling point of the user experience, and also understanding the data point, like a customer data point, or do I really want to be able to have much more full oversight on it? It doesn’t mean that every single bit is just invented in house, but being able to manage the stack and understand it will really make one brand or one [00:35:00] company to stand out, compared to others.

Ali Tabibian: Chuhee, one thing that we’ve heard a lot from both the auto OEM’s themselves, and really the tier one suppliers, more than anybody else … I just wanted to see if it matches your own views. Consumers care about standard safety features. They compare standard safety features when they buy a vehicle, but generally, they’re not paying for optional safety [00:35:30] equipment.

For example, some of the advanced collision assistance, especially when it’s integrated with modest self-driving capabilities that most of the OEM’s have, that those generally are flagship type of options that help to sort of really present the brand and show off the brand, but they’re not frequently selected options, on the part of the consumer. Is that consistent with what you’ve seen as well?

Chuhee Lee: I don’t have all the data of what are the options that’s [00:36:00] being selected or not. I can connect you to our sales and other departments for the details, but what I can imagine is, the customer expectation of paying for something that … There are two types of things I believe that will be important, at least for me, putting myself as a consumer. If I use a feature at least twice a day, it might be worthwhile to pay some money. If it’s something that I just pay as more [00:36:30] insurance, hoping that it will never happen, like let’s say airbags, or something like this, yes there’s a certain point that you want to make it part of, “Okay, I want to just check off, so I can cover my basic insurance,” but when it comes to even insurance offering, what other options do you like to kind of get into?

The way that I like to see it is, it’s not so much of people want to pay for this single [00:37:00] feature or not. It needs to be a little bit more of, can I offer you a product with the settings that matches with your lifestyle. Imagine, let’s say, a family, maybe a new couple who have a newborn, their attention and their lifestyle is pretty much very well around this newborn baby. I can have not only a product, but even a service offering of let’s say, like a product with [00:37:30] integrated child seat, with monitoring. There might be a higher chance, I guess for me, that maybe for that couple, for that moment, it might be much more appealing, that I can just simply say, “Would you like to buy automatic braking?”

And they’re like, “What does it really do for me?”

Can I actually make some kind of package that’s more appealing to the lifestyle and the individual’s need, rather than just having some almost like a [00:38:00] survey style, like, check this box if you want it or not.

Ali Tabibian: It’s interesting you say it that way. It’s consistent with what we’ve heard too. For example, blind spot assist, first of all, it’s a few hundred bucks instead of two or three thousand, but people are interacting with it all the time, so they select that feature. But the feature that’s going to save them once in a lifetime, when you’re cost constrained, you go, “I’ll buy the better stereo, or the blind spot assist, or something.”

Chuhee, on the autonomy [00:38:30] side, you brought up the DARPA challenge, and your participation in ’05, and I think actually the Stanford Auto Lab is actually a Volkswagen branded auto lab, essentially if I’m not mistaken.

Chuhee Lee: The VAIL. The Volkswagen Automotive Innovation Laboratory.

Ali Tabibian: Exactly. So, it’s about 13 years from the time when those experimental vehicles, essentially, could complete a course laid out by DARPA, to the point today where, the car can do most of the pedal [00:39:00] work in sort of straight ahead conditions, and do some of the steering in fairly simple driving conditions. What’s your view on … Within the constraints of cost and form factor of a typical consumer vehicle, what’s your view on how many more years before sort of George Jettson’s car, the car that drives itself, is much more of a reality than it is today?

Chuhee Lee: I do get this answer quite often. The answer could be [00:39:30] sometimes is, how long will it take for a car company to have a car that can be autonomous, and so on and so forth, and the answer is straight forward. The question is straight forward, but the answer is always a little bit more complicated. Sometimes, I actually even answer, it’s the question about where, than when, because based on those conditions … For example, we are talking about the highway only, [00:40:00] yes we do have a certain level of automation already there for certain speed limits.

There is just more of a gradual incrementally introduction of the autonomy. For example, today, in Audi Q7, and other more recent Audi’s … I’m not sure which other year, but also the Q5 has it. It’s a traffic jam pilot. It’s like if you’re just stuck in a traffic jam, it already kind of steers for you. [inaudible 00:40:29]. [00:40:30] It is somewhat autonomous. Yes, we’re still required to pay attention to what’s happening as an overall responsible person. There is this type of introduction that we see today, and going from a year by year, you will start also seeing more and more autonomy coming naturally.

It’s very hard to kind of answer that simple question without kind of defining [00:41:00] what type of autonomy, what type of condition.

Ali Tabibian: Let’s say good weather, from entry into the highway, through exit through the highway, where I can theoretically take a nap. How long before that’s the case?

Chuhee Lee: You say, you want to take a nap, which means that you want to really rely on the car to give the [inaudible 00:41:29]. That’s going [00:41:30] to take obviously much longer than you having to actually having to monitor the car or take over the car. I cannot really give you … It’s like 10 years, eight years. To be honest, I don’t have that answer. Obviously, that is a little bit of a … Not only the technology constraint, but also how the regulatory, and society acceptance will be. That’s why it’s also hard to give you an answer. Maybe [00:42:00] from the technology from the laboratories, we can say that yes, let the car loose. We drove experimentally from Palo Alto to Las Vegas, for a long time period, with the journalist in there, and [inaudible 00:42:12]. You can have this type of demonstration.

Just making sure that there will be already the whole reliability thing sorted out when things come into an accident, and [00:42:30] if people will actually accept that in the same highway that you’re driving a non-automated car, that there’s another automated car, without actually driver monitoring on it. Would you accept it or not? There’s a lot other kind of related topics, that makes this whole timeline to be much more unpredictable. But we’re all working toward an introduction of this technology as soon as possible.

Ali Tabibian: So, if you don’t mind, let me tighten up the constraint a little bit. Let’s say, nothing unusual, no sort of earthquakes, [00:43:00] fires, accidents, stuff like that on that same stretch of highway. Let’s just make it a five to ten mile distance from the point you get on the highway to the point you leave the highway. So, people will be changing lanes, they’ll be accelerating, decelerating, sometimes a little unpredictably, you’ll have to manage traffic merging in, occasionally you’ll have to automatically change lanes, and accelerate past the car in front of you. How long before a typical five or ten mile [00:43:30] stretch-

Chuhee Lee: This is really kind of an endless game, because I be telling you earlier saying, okay that’s kind of interesting whatever constraint, but again, what type of failure, and what is the acceptance, regulatory rules that I can release a product with a certain level of the failure rate or not. This is quite complicated. We can just go all day long trying to argue each other, like what type of constraints, [00:44:00] and you can just … But again, just looking at the demo, yes, demo, you see many demos today. If you want to grab one of the Google cars, and close your eyes for five miles, I mean, I’m sure that it might work, hopefully you don’t get into an accident. But what you’re asking, that’s probably without any accidents probably guaranteed, and that is much harder to kind of predict what level of … Every [00:44:30] puzzle needs to come into place to be able to answer that question therefore, sorry not having an answer for that.

Ali Tabibian: Chuhee, I’m glad you said what you did, and I apologize for maybe taking the game a little bit too far, but I wanted people to hear the insights directly from an expert in the field, because if you just read newspaper articles, you think that this stuff is around the corner, and nobody will have a driving job in two years, right, and that’s not really the case. In fact, we did a pretty extensive study for the insurance companies about two and a half years ago, [00:45:00] talked to people like yourselves, from a lot of different things, and basically even from a technical point of view, people said, “I can’t even really give you a good answer for five years.”

This was two and a half years ago. We just don’t really know what that environment is.

Let me maybe start … I don’t want to overstay our welcome here, but let me maybe start by asking you to comment, whether it be on autonomy, artificial intelligence, changing customer preferences, do you see any inflection points [00:45:30] that have either happened recently or are coming up in the future? Is there a breakthrough in AI technology and the cost or capabilities of autonomy componentry or dramatic changes in how millennials like to consume vehicles, that have really caught your attention?

Chuhee Lee: I think this whole notion of artificial intelligence, being already here, when it comes to let’s say, non-safety [00:46:00] related topics like digital assistant. We are really living in this era of having a digital assistant. You might have Amazon Echo, or a Google Home, or like a Pod. There are these digital assistants in our lives through our smartphones and other things like this. When I look into this more from the perspective of mobility, it’s not about what kind of car that [00:46:30] we want to build for the future. We need to think about, and we’re looking into how does the future mobility needs could look like, and if we look into this whole … Almost like an explosion of the AI based application from autonomous driving car, to digital assistant, to like business intelligence robot, and data analytics, I think in the future, either [00:47:00] we will go into the future where no mobility is needed at all, because maybe everything will just come to you, and you don’t even have to travel, because the virtual reality will be so good, that you don’t actually have to physically move.

Or, I’m more a believer that we will be still, even in that case, appreciating more of the actual physical movements, and physical meeting, or let’s say actually being to Hawaii, like personally, versus [00:47:30] having these virtual reality goggles, and it feels like I’m in Hawaii, but I’m not really in Hawaii.

There will still be a continuous need for mobility, and now the desire for the mobility might be evolving, therefore we need to really incorporate technologies like 3D printers, the ARVR, and even the AI and everything, to be able to provide not only the product, but also the service from the Volkswagen Group, that I can make your every journey an enjoyable [00:48:00] one.

Ali Tabibian: That’s a very fluctuating target to hit. Sometimes it can be congestion in urban areas that are suddenly increasing, that requires one set of services. And some of them, like you said, it’s the question of I don’t mind sitting in traffic, but I want to be dissociated from the … I want to be able to do everything I can in my own office. That’s a really good point.

Chuhee, let me start maybe wrapping up, by offering you up [00:48:30] some time. Is there anything else you’d like to mention, a question that we should’ve discussed, something that ERL is doing that you’d really like to go back and point out? Anything like that that we need to cover?

Chuhee Lee: This year is our 20 year anniversary in Silicon Valley, so we are asking questions to ourselves looking back at the past 20 years of how we’ve been part of Silicon Valley, and things that we were actually [00:49:00] able to contribute back to the Volkswagen Group. Like, what is the next 20 years? And it goes back a little bit of all those technologies that I mentioned from the 3D printing to the whole AI, and maybe new materials that will be obviously a breakthrough, and bury technologies that we’ll have much higher, like energy and so on and so forth.

And [00:49:30] really, being able to continuously be an integral part of the Silicon Valley community, because it’s very different to be in Silicon Valley as a tourist, compared to a real Silicon Valley community member, and we believe that we do have a good track record of demonstrating that we are more of a community member than tourist. And really leverage that factor to be able [00:50:00] to really have a high impact of the Volkswagen Group, of defining the new mobility experience that we can actually offer. That’s something that we are actually having at some internal reflection points of just kind of looking back at those 20 years, and looking into the future, at the next 20 years, and we are more engaged than even before, because it’s quite a milestone to spend [00:50:30] some time … An office outside of the mother ship, but at the same time, being able to have a high impact on product input.

We’d love to be able to actually continue to do that even more than before, and that’s what we’re really excited about.

Ali Tabibian: You know Chuhee, I’ve always been struck by how driver centric you are. You’re obviously an accomplished technologist and couple, few hundred people working here, but you always have the driver very strongly in mind, and that’s always [00:51:00] been striking to me, and that’s one of the reasons I wanted to make sure we had your comments on tape here, so to speak.

If you don’t mind, I’ll make a feature request. And really, it’s this, which I’ve noticed … It’s just anecdotal, but I’ve noticed in my own particular demographic, we like features, and we used to have to get them by buying a big car. Just because of traffic, because of concerns over fuel economy, etc., we [00:51:30] all want the same emenities and the same features, but we’d like them in smaller packages. That’s why for me, it’s really welcome that in a sort of a Q5 mid-size SUV package, you can get a lot of the same things I could get out of an A8 or a Q7, both in terms of aesthetic and other luxuries, but also sound proofing, as well as critically in my own case, all of the electronic features and the traffic jam assist and all that, which you used to have to reach for the bigger model.

Chuhee Lee: Yeah, thank you for being a great customer of [00:52:00] one of our products. If you look at for example, the Volkswagen, how the company was founded, it’s a people’s car, right. That’s really in our philosophy, to be able to actually being able to provide the best quality product that you can access. This goes … It’s not about the question of luxury volume and sense of force, but in all … Like whenever I’m in discussion with any of the brands, the colleagues from different brands, there looking at this [00:52:30] whole DNA of trying to build a best product and service, so that we can actually kind of give you the best experience, that’s always universal in a person.

I’m very happy to hear that you were able to appreciate one of those things. It’s not about only the flagship and the people who can actually pay. We have those, but as soon as we can actually open that up to even more number of customers, we are always looking [00:53:00] into those opportunities.

Ali Tabibian: Great. Chuhee, it’s been a real pleasure.

Chuhee Lee: Thank you.

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