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BorgWarner plans 15X growth in electrification revenue by 2030

Tier 1 supplier will shed up to $4B in current business to lead electric curve

BorgWarner is planning to increase its electrification revenue 15X by 2030 with an expansion into commercial trucking. (Photo: BorgWarner)

BorgWarner Inc. (NYSE:BWA) plans to grow its electric vehicle revenue from less than 3% to about 45% of its top line by 2030. The Tier 1 supplier will shed existing businesses worth up to $4 billion to get there.

The Michigan-based supplier last October completed a $3.3 billion acquisition of Delphi Technologies, once part of the world’s largest automotive supplier. In February, it announced an $880 million takeover of European battery maker AKASOL.

“Now is the time to move away from a balanced propulsion strategy and accelerate our shift towards electrification,” Frédéric Lissalde, president and CEO of BorgWarner, said in a press release before the company’s Investor Day on Tuesday.

“We’ve been building toward capitalizing on this opportunity for years. And [we] are confident we have the scale, portfolio, financial strength and team to execute successfully.”

‘Charging Forward’

Lissalde told investors the “Charging Forward” effort would consist of profitably scaling electric light vehicles, expanding into electric commercial vehicles and disposing of internal combustion engine businesses worth $3 billion to $4 billion in revenue. 

“In most cases, these are still good businesses,” Chief Financial Officer Kevin Nowlan said. “They simply will be more valuable owned by someone else.”

BorgWarner projects $8 billion in revenue from light vehicle electrification by 2030, with an additional $2 billion from electric commercial trucks.

Evolving the business mix does not mean sacrificing double-digit profit margins, Lissalde said. BWA expects to generate $4.5 billion in free cash flow before any additional acquisitions between now and 2025, including about $1.5 billion it expects to gain from selling businesses.

All things to all customers

For BorgWarner to succeed as an electrification supplier, it must be able to offer components or entire integrated electric systems, Lissalde said.

The company’s acquisitions since 2015 position it to do that. In addition to Delphi and AKASOL, BWA in 2019 formed a 60/40 joint venture with commercial vehicle battery pack maker Romeo Power Technologies (NASDAQ: RMO). It also made two earlier acquisitions in the electrification space.

BWA expects to spend more than $3 billion on electrification research and development and acquisitions between now and 2025. It makes no money in electric vehicles today. BWA’s successful combustion-based businesses offset the cost of investment. BWA expects to be at breakeven or better in electrification efforts by 2024.

“Beyond that point, even with continued growth in R&D, we expect to drive increasing operating margins as the growth in revenue and gross margins accelerates,” Nowlan said. “We’re investing well ahead of program launches.”

Competitors charging into electrification

BorgWarner is not alone in shifting its business strategy toward supplying components and systems to electric vehicles. 

BorgWarner buying European battery maker AKASOL for $880M

Dana builds electrification vertical for commercial vehicles

Meritor readies integrated electric powertrain for heavy-duty trucks

Click for more FreightWaves articles by Alan Adler.

Alan Adler

Alan Adler is an award-winning journalist who worked for The Associated Press and the Detroit Free Press. He also spent two decades in domestic and international media relations and executive communications with General Motors.