Leading US-based automotive supplier BorgWarner is amping up its electrification journey – encapsulated in the “Charging Forward” initiative – and its commitment to sustainable mobility solutions. In early December, the company announced its intention of cleaving its fuel systems and aftermarket segments into a separate, new entity.  This strategic step is seen as a way to allow the company to reinforce its combustion portfolio, enhance its electrification agenda, and explore growth prospects in alternative fuels like hydrogen.

A three-pronged approach – combustion, electric and hybrid – reflects BorgWarner’s understanding that the automotive will continue to use diverse systems as it transitions to a zero emissions future.   Accordingly, it foresees combustion engines dominating the global vehicle parc till 2040 even as the industry moves over the long-term to clean, energy-efficient mobility.  Therefore, a comprehensive portfolio that uses advanced technology is being leveraged to create more efficient combustion engines as well as support propulsion solutions for varied hybrid and pure electric vehicle (EV) architectures.

Electrification is key on the company’s transformational priorities. Project “Charging Forward” which was announced in March 2021 highlights the company’s plan to boost EV generated revenues to 25% by 2025 and then to around 45% by 2030. This ambitious roadmap is tethered to scaled up and strengthened technology solutions for electric light vehicles and electric commercial vehicles as well as an optimized combustion business.

The spin-off which seeks to fast-track “Charging Forward” will see the emergence of two, discrete entities.  BorgWarner will concentrate on e-Propulsion & Drivetrain and Air Management segments, while the new company, NewCo will focus on fuel systems and aftermarket distribution. This will allow both companies the flexibility to capitalize on growth opportunities in their respective domains.

For more information, please access our research report, Category Management: Class 1-3 Replacement Turbochargers Aftermarket in North America and the forthcoming Category Management: Class 4-8 Replacement Turbochargers Aftermarket in North America or contact sathyanarayanak@frost.com for information on a private briefing.

Our Perspective

The decision by BorgWarner to create a separate company focused on Fuel Systems and Aftermarket goods is an interesting one. Although it is obvious that EVs are the industry’s driving force and the company is clearly pivoting towards this trend, the recent announcement emphasizes that there is still a lot of room for business in terms of replacement demand from relatively traditional parts. In 2022, the company’s estimated revenue from fuel systems and the aftermarket will end up being more than $3 billion, which should be sufficient justification for forming a specialized business.

Having said that, it will be crucial to see how the firm manages and successfully administers different organizations to ensure maximum use of the company’s resources. As it currently stands, BorgWarner is already extremely diverse due to recent acquisitions including that of Drivetek AG, Delphi Automotive, and Rhombus Energy Solutions.

Such a strategic split might very well emerge as a template of the future.

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Anuj Monga

Global Research Manager, Aftermarket Mobility, Automotive & Transportation

Amrita Shetty

Amrita Shetty is Communications & Content Senior Manager within Frost & Sullivan's Mobility practice.

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