BorgWarner profit soars as auto supplier eyes EV break-even point

Jessica Thompson

Automotive supplier BorgWarner Inc. exceeded sales and profit expectations last year as it entered an “inflection point” in its bet on electrification, spinning off its fuel systems and aftermarket business and hitting break-even on the EV side as soon as this year, executives said Thursday.

Full-year sales increased 6.5 percent from the previous year to $15.8 billion for the Auburn Hills, Michigan-based company, while gross profit increased 7 percent to $3.1 billion.

For the fourth quarter, BorgWarner’s gross profit soared 33 percent to $833 million on $4.1 billion in revenue, up 11 percent from the same period last year.

“We think last year heading into the beginning of this year was really the inflection point of the business from an electrification standpoint,” CFO Kevin Nowlan said on a call with investors.

The company plunged $150 million into electrification research and development last year and will see a return on that investment in 2023 as revenue comes through and contribution margin growth outpaces R&D spending, Nowlan said.

That puts BorgWarner on pace to break even on its EV side — where it sees the future of the automotive business — by the end of 2023 or beginning of 2024.

At the same time, the company is working to spin off its fuel systems and aftermarket segments into a separate publicly traded company. Executives have no intention of neglecting its legacy internal combustion engine, CEO Fred Lissalde said.

“We’re also looking at a lot of R&D efficiency on the combustion side … not constraining the e-growth but also making sure that we’re doing the right thing on the foundational products,” Lissalde said.

In tandem with its financial earnings report, BorgWarner announced a contract win to supply an undisclosed global OEM with 800V silicon carbine inverters, complementing its current deal to supply the automaker with 400V inverters.

Additionally, the company will supply a major German vehicle manufacturer in the U.S. and Europe with battery cooling plates for the carmaker’s next generation of EVs, BorgWarner announced. The name of the customer and terms of the contract were not disclosed.

Investors responded positively to the supplier outperforming the market and its projections.

BorgWarner saw its price per share shoot up 8 percent to $50.46 late Thursday morning.

The company said it expects $17.5 billion in sales in 2023 as it taps into rapid growth on the EV side. It is projecting to potentially double EV-related sales this year, with $1.5 billion to $1.8 billion in revenue.

Executives said they are still looking to expand manufacturing in the U.S. and take advantage of federal tax credits for EV battery production, which is driving the majority of BorgWarner’s organic growth outlook for its EV business.

The company completed last year its $788 million acquisition of German commercial EV battery pack maker Akasol AG, which has two plants in Germany and one in Hazel Park. The company had just less than $300 million in revenue last year but is expected to hit $1 billion by 2025, Lissalde said.

“What we see though also from the customer side, what we see is they want to partner with someone who can be impactful on the e-side but also on the foundational side, so that we pivot together,” he said.

Leave a Reply

Your email address will not be published. Required fields are marked *