(Bloomberg) — Apple Inc. coming into the electric-car race could possibly be a boon to Continental AG’s Vitesco Technologies powertrain unit because it makes an attempt a wrenching transition away from inner combustion engines.
Reports that Apple is engaged on a self-driving EV have ignited hypothesis about how the know-how large would pursue such a plan. Talks with carmakers together with Hyundai Motor Co. have fizzled, maybe due to reluctance to support a disruptive new rival. But for automotive suppliers keen to unlock contemporary income streams, it might be much-needed enterprise.
“An Apple car would certainly be an exciting development,” Vitesco Chief Executive Officer Andreas Wolf mentioned in an interview. “The more EVs there are, the better.”
Soon-to-be spun-off Vitesco can’t afford to be choosy. Car-parts makers are below strain because the business shifts towards battery-powered autos, which require fewer elements than gasoline and diesel-powered automobiles. Volkswagen AG final week grew to become Germany’s most beneficial firm after rapid-fire bulletins on the way it desires to supplant Tesla Inc. as the worldwide electrical chief. BMW AG shares surged after the producer mentioned it expects EVs to account for about half of gross sales by 2030.
Legacy Assets
The bolder plans recommend the top of the combustion engine is nearing. Vitesco recognized gross sales value 2.5 billion euros ($three billion) — based mostly on 2018 income — linked to the making of elements like turbochargers and injectors that it plans to exit or discontinue. Finding patrons for these belongings shall be troublesome, Wolf mentioned forward of a briefing with buyers on Thursday.
“Vitesco is currently one of the most pragmatic suppliers when discussing the shift away from combustion engines,” UBS Group AG analysts led by Patrick Hummel mentioned in a word. “There will be two areas of focus during the investor day: the planned cash injection from Conti into Vitesco (we assume 1 billion euros) and the timing to reach break-even in electrification technology.”
Vitesco seeks to shift a few third of its gross sales into elements for so-called delicate hybrids, plug-in hybrids and totally electrical automobiles over the following three to 5 years, the CEO mentioned. Many of its present merchandise, like engine controls, can be deployed in EVs, he mentioned.
“No matter what’s coming, we have the full range of hybrid and EV products, and that’s our great advantage,” Wolf mentioned. “We don’t focus on just one specific technology but we cover all options.”
Chip Shortage
There’s nonetheless room for development although. Powertrain gross sales fell 11% to about 7 billion euros ($8.three billion) final 12 months, in accordance to Continental’s annual report, when the pandemic shuttered showrooms and factories.
Like its friends, the enterprise has been affected by an industrywide scarcity of semiconductors that’s disrupted automotive manufacturing. Initially, Vitesco anticipated bottlenecks to ease through the second quarter, however they could persist the whole 12 months, Wolf mentioned.
Vitesco’s transition to turning into a separate firm has dragged on since early 2019. Continental was already trailing rivals in separating new applied sciences from legacy operations when it delayed — after which dropped — plans to promote shares in Vitesco to the general public. Europe’s second-biggest car-parts maker final week mentioned it would push forward with a derivative within the second half of the 12 months.
Profit Push
After the spinoff and subsequent itemizing is accomplished, Vitesco might think about cooperations to hold tempo with the shortly growing EV market, Wolf mentioned. One potential associate is Schaeffler AG, the German ball-bearings maker that owns a 46% stake in Continental, he mentioned.
After Vitesco struggled for years to elevate profitability, Wolf mentioned he’s satisfied that returns will rise after the corporate exits unprofitable companies and improves the event and manufacturing of electric-car elements whereas producing stable returns in sensors and electronics.
Vitesco’s monetary footing is “very, very solid,” and goes past bills associated to the turnaround and investments in future applied sciences, he mentioned.
(Updates with analyst remark in sixth paragraph)
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