The US-headquartered supplier of powertrain parts is betting big on electrification in the coming years.
20 Oct 2021 | 4504 Views | By Murali Gopalan
The interview with Shawn Li is happening while he is in China, a challenging time by his own admission since his family is in the US and Covid-19 continues to make the news.
China is also the core of his company’s electrification strategy but Li, who is BorgWarner’s Vice-President ...
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The interview with Shawn Li is happening while he is in China, a challenging time by his own admission since his family is in the US and Covid-19 continues to make the news.
China is also the core of his company’s electrification strategy but Li, who is BorgWarner’s Vice-President and General Manager, PowerDrive Systems Asia, says other countries are also embracing e-mobility in a big way.
Now with BorgWarner for 18 years with his latest Asia business responsibility into its 11th month, Li insists that electrification is happening everywhere in major automobile markets. “Carbon neutrality is the big goal in different countries, especially China and Europe,” he says.
The US government is perhaps not pushing as hard but OEMs like Ford and General Motors are “moving very fast” and customers are also keen on using new energy vehicles. Most OEMs, says Li, are rolling out their electrification plans and there is interest coming in from buyers too.
“It is a lot of money for OEMs and governments in electrification since it involves creation of infrastructure but on the other hand this is inevitable and has to happen,” he adds. Yet, every region and country is different as also OEMs which have their own strategies.
Hence, continues Li, there is no single solution that can fit with every country / OEM. Even in China, it is not as if the battery electric vehicle is the only answer since the internal combustion engine and hybrid will coexist in the foreseeable future. BorgWarner also sees a role for hybrid electric vehicles in the world’s largest automobile market.
Government policies, resources and infrastructure vary from country to country which means different solutions are imperative and not a single one, says Li. “At BorgWarner, we will accelerate our electrification strategy globally and not only in China . . . our expectation is to have 25 percent of sales from electric by 2025 and further up to 45 percent by 2030,” he adds. This global strategy goes beyond China even though it is an important market but Europe and the Americas are as critical.
Aiming for business synergies
Clearly, these are ambitious numbers which clearly show that the company is keen to rev up its electric plans even while this scaling up will have to be profitable and sustainable. “We see large synergies in our competencies to be able to take this forward and in the future we will scale up our electric business both organically and inorganically,” says Li.
BorgWarner will also expand into electric light commercial vehicles and optimise its combustion portfolio in the years to come. “We will continue to benefit from this move because combustion will exist for a long time to come. In the past, all of us tried to find a balance in combustion, fuel cells, hybrid, electric and we are accelerating our electrification strategy,”
he says.
From BorgWarner’s point of view, its combustion product will be a big part of the business while fuel cells are important too and “we can leverage our skills here”. Diesel, according to Li, is relevant in commercial vehicles because of performance and fuel economy but in passenger cars, there is a definite decline when it comes to customer preference.
“I still believe that diesel and gasoline will coexist with electric vehicles while hybrid is a market that we are looking at with great interest since it fits in with both combustion and electric,” he says.
Slower EV drive in India
The topic shifts to Asia which is “pretty big” and diverse and BorgWarner is of the view that while the combustion engine and hybrid will coexist in China along with electrification, Korea and Japan will also see a similar push for electrification. India is a “little bit different” from the Chinese, Japanese and Korean markets since the electrification drive is still some time away even while the policymakers in Delhi would like this transition to happen a lot faster.
“I think the two- and three-wheeler segments are very big and a little bit easier to electrify. We could have a lot of arguments on numbers and projections but I believe these vehicle categories will see a lot of action on electrification in the coming years,” says Li. The outlook is also based on the fact that in two- and three-wheelers, “we don't need to rely on charging infrastructure since we can swap batteries” which is a lot easier than cars or commercial vehicles.
According to him, it still remains to be seen how fast electrification will take off in India but it will happen sooner than later especially in these two segments. Battery costs will eventually come down because of scale and investments in new technologies as well as creation of new capacities by a host of players.
Electrification will also happen rapidly in last-mile delivery in the e-commerce arena in a host of regions beyond India. Li admits that the challenges ahead will mean thinking out-of-the-box which could mean working more closely with start-ups and so on. Yet, the drive towards e-mobility is inevitable especially when clean emissions have become an almost obsessive subject with governments across the world.
In an interview with this writer during the 2019 Frankfurt Motor Show, some months before the world went into a tailspin with Covid, Frederic Lissalde, President and CEO of BorgWarner, said it was only natural for the company to be upbeat about China.
“It is our biggest market and this is where the music is playing from an electrification perspective. We are pretty happy about that,” he said while pointing out that “50 percent of our backyard is Chinese”. In contrast, BorgWarner was “not seeing a lot of movement in India from a BEV (battery electric vehicle) standpoint and at least not one that we are involved with”.
Lissalde made it quite clear that India still had some way to go in the e-mobility space. “To push for BEVs, there is a lot of infrastructure that needs to be put in place from an electric production standpoint as also availability of charging stations,” he said.
The BorgWarner CEO was also of the view that India is unlikely to become a major BEV market for the next 5-7 years but there was“no good or bad” about this since the ultimate goal was to get “the right and most efficient” architecture to clean up cities.
“There is a lot of improvement in Euro 6 engines and as long as the world is migrating to cleaner and more energy-efficient architecture, whatever they are, I think it is the right thing,” he said. Lissalde added that it was equally difficult to predict how the mobility landscape would pan out in the mid to long-term.
“We know a little bit what is going to happen in the next 3-5 years but 10-15 years is a long shot and the truth is that we don’t know," he said. Hence, it was important for the company to focus on a balanced portfolio even while attempting to constantly stay ahead of the technological curve.
“We have a strategythat I am very comfortable with and this lies in being balanced from a product portfolio point of view,” elaborated Lissalde. Simply put, it meant that BorgWarner’s revenue across combustion, hybrid and electric should ideally represent/reflect the market share of each of those segments (in five years).
Hence, if combustion is 65 percent of the globe, BorgWarner would want a similar share in its products. Likewise if hybrid is 25 per cent, “we want to be 25 percent too” and if electric is 5-7 percent, the same analogy applies.
“We believe in the trend of electrification except
that we don’t know (how fast it will take). If combustion lasts longer, so be it and if electric grows faster, we have the portfolio to handle it,” said Lissalde. BorgWarner, he added, would rather look at the changing landscape over a five-year timeframe since “we have a fair good idea of how things will pan out then”. He said electric cars would account for five to seven percent of the market by that time.
Additionally, one would need a good internal combustion engine (ICE) in any hybrid application. Looking at the volumes of combustion/hybrid with electric on the side, Lissalde reiterated that growth would continue to happen for the ICE.
This feature was first published in Autocar Professional's September 1, 2021 issue.