The shift in technology in the automobile industry is forcing traditional suppliers such as BorgWarner to reorganize and rethink how it handles the markets and deals with customers.
“We were a very decentralized company,” Scott Gallett, BorgWarner vice president-marketing, said recently during a conference organized by the University of Michigan’s Transportation Research Institute.
Gallett, however, said over the past few years BorgWarner, which reported sales of $9.8 billion in 2017, has formed combined teams from multiple centers of expertise to offer OEMs a full array of products for internal combustion engines, hybrids and electric vehicles.
Parts for hybrids and EVs account for 50% of the company’s order backlog for the next three years, according to a presentation company executives made in January at a Deutsche Bank automotive conference.
BorgWarner wants customers to know its overall portfolio includes products for vehicles with traditional gasoline or diesel internal-combustion engines, hybrids or powertrains with battery-electric drives, Gallett said.
“Internally it’s still a work in progress,” Gallett tells WardsAuto in an interview after the conference.
But the reorganization of BorgWarner’s marketing approach is designed to allow the company to address the industrywide changes that are re-aligning the way powertrains are developed, both in response to changing consumer preferences for technology such as stop-start and by new government regulations in places such as China, the world’s largest automotive market.
“We want to position the product portfolio for success no matter how markets evolve,” Gallett says.
BorgWarner has found it can charge more for components it supplies for hybrids and EVs, according to the Deutsche Bank presentation. By 2020, the average per-vehicle value of BorgWarner content for a vehicle with a combustion engine will be about $200. The value of content supplied for hybrid powertrains will be about $240 and $285 for EVs.
BorgWarner maintains a strong position as a maker of components for IC engines, he says. But the arrival of vehicles equipped with 48V technology, coupled with energy-storage systems and electric-boost motors, is blurring the line between conventional IC powertrains and hybrids.
One Foot in Present Drivetrains, One in Future
Gallett says BorgWarner decided to discuss its new business plan publicly about 18 months ago to avoid being classified on Wall Street as a company that merely supplied parts for old-line ICEs.
Roughly 50% of the supplier’s revenue still comes from engine components such as turbochargers, variable cam timing devices, exhaust-gas-management systems and transmission technologies.
But BorgWarner also has been a key supplier to Tesla ever since the first Tesla Roadster appeared in 2010. In addition, 36% of its revenue now comes from the components it supplies for hybrid systems. With the recent acquisition of Remy, General Motors’ old in-house supplier of electric motors, BorgWarner now estimates 26% of its revenue will come from electric drivetrains.
“We wanted the investment community to know we were in these markets, too,” Gallett says.
“What we’re seeing is, it’s no either-or” between IC and alternative powertrains.
The company supplies eGearDrive transmissions for EVs as well as electric-drive motors, power electronics and electric-drive modules that can be adapted for use in different vehicles. “We supply virtually an entire electric vehicle system” except for the battery, he says, adding new regulations in Europe and China have accelerated the company’s push into hybrid and electric powertrains.
At the same time, the new business follows BorgWarner’s longtime strategy to maintain a broad customer base and geographic diversity.
“There’s a part of it that’s strategic. We’re not smart enough to predict where the market will go,” he said. “We just know we want to continue to grow,” Gallett says.
Expanding into electronics has led to new ideas about how to use electrification of vehicles to improve fuel economy with conventional IC powertrains, he notes. The wider use of 48V batteries in future vehicles will only accelerate this trend because electric motors can be added at several positions along the drivetrain.
Changing regulations, particularly in China, where the push for electrification has been jump-started by new government mandates, have made a broad approach an absolute necessity, he says.
Turbocharged hybrids, electrically actuated turbochargers and electrically driven compressors to mitigate turbo lag figure prominently in powertrains’ future, company executives say. BorgWarner executives also believe engine downsizing will continue while competition in the turbocharger market from companies such as Honeywell, IHI of Japan and Mitsubishi Heavy Industries increases.
In 2006, 7.2% of light vehicles sold in the U.S. had turbocharged gasoline or diesel engines, and that figure has grown every year since, reaching 25.6% in 2016, according to WardsAuto data. The penetration rate of turbocharged engines in Europe is approaching 70%, Honeywell executives have said.
OEM customers have different levels of expertise in hybrid and electric vehicles, and suppliers such as Borg Warner should be ready to step in and help with the launch of new products. “Not all launches are equal,” Gallett says.