I'm Manveen Rana here at Davos 2024, and I'm joined by Paul
Farrell, who is the Executive Vice President and Chief
Strategy Officer at BorgWarner.
Welcome, Paul.
Thanks for joining us.
Thank you very much.
Tell us about the world of e-mobility at the moment.
I mean, how much has changed recently, and where do you think
we need to get to?
Yeah, it's a great question.
I mean it's the space, it's changing a lot, right.
There's really been a lot of growth.
Just to put it into context, if you go back just three years, so
2020, 3% of vehicles produced, light vehicles produced were
electric vehicles, just in 2020.
We fast forward just to last year, that's now up to 12%.
So really significant gains in a relatively short period of time.
So you know I think we've moved from early adopters and we're
starting to get into it being more of a mainstream technology.
So and we expect that growth to continue in the coming years.
What do you think the challenges have been? You know, why has it
been so slow for people to adopt and what are the challenges that
still exist?
How do you get past that 12%?
Yeah, I think, I mean there were a lot of challenges early on,
that's clearly evolved, but there's still those challenges
that still exist.
And if you take a step back and you think about the internal
combustion engine, it's been around for over a century, right.
All the infrastructure and just consumer adoption, all that is
people are comfortable with that.
And so now in a very short period of time, we're trying to
make a big change.
Maybe it still feels like it when you're driving down the
road that it's the same, but it's quite different.
So in the auto industry itself, changes to the products you have
to engineer, changes the production processes, changes
all the supply chain.
So it's a big shift all while you're still doing all the other
things you were doing before.
So there's a big change in the auto space. Consumers.
So, consumers have to get comfortable with one: slightly
higher price points, at least for now.
And also with charging, you know, that's an area where
everybody's still like, all right, is this really going to work?
And so that's on the consumer side. And then you've got the
infrastructure question, which ties back into charging and other things.
So all those things have to come together and it ebbs and flows, right?
So I think it's natural that you would have these mismatches in
supply and demand, but I think the trend's very clear and
where, you know, you ask where we need to go.
You know, the EU just recently put out regulations last summer
that said, all right, by 2035, all new vehicles will have zero
CO2 emissions.
So they've probably set the bar.
Others, that trend has been in place for a long time, improving
fuel economy, reducing CO2.
But I think that's the direction different spaces will go, or
different regions will go faster or slower.
But that's clearly the ultimate, I'd say, endpoint in terms of
decarbonizing transportation.
Have the infrastructure changes been fast enough?
I think that's actually probably one of the bigger lags.
You know, you can see it with Tesla, for example, where they
have an established infrastructure and it works
fairly well.
But if you you don't have a Tesla, there's anxiety there, right?
And even just in terms of uptime, reliability, are also challenges.
And so that's where I think there's a lot of work to do.
The vehicle manufacturers are now putting out a lot of new models
There's a lot they're starting to pick from.
But still people have to get comfortable that, OK, I spent a
lot of money on this car.
Can I actually use it in a practical way, day in and day out?
So I think that's an area where you'll see a big uptick and a
big emphasis, just in the coming years.
I mean, you see it with the IRA in the U.S. and I'm sure it's
similar in other parts of the world.
And for you at BorgWarner, how are you sort of combating these
challenges, whether it's sort of the consumer and how they view
it or whether it is infrastructure.
So for us, we're propulsion companies.
So whether we like it or not, we're in the middle of all of this.
So we're a company that has over 100 years of history very much
tied to the internal combustion engine.
And so it's a big shift also for us.
And we started that journey a little over eight years ago.
And I actually came to BorgWarner with one of the
acquisitions that was really foundational to support that
journey, that electrification journey.
But in 2021, we announced our Charging Forward strategy which
is really focused on, one is growing our portion of our
business that supports the electric vehicle space, both
organically and through M&A, and also reducing our exposure
to combustion vehicles or the combustion business.
And so we've been making steady progress on that.
We've been very successful I think in leveraging the assets
we had and growing the business organically.
And then we've made in the last three years, six acquisitions
and also announced a JV, all supporting that strategy.
And then in parallel, we spun off a portion of our business
last last summer to reduce our exposure on the combustion side.
So it's a very high priority for us as you would imagine.
Again I think we're making good progress, a lot of work to do,
big focus on execution.
You know now the rubber is really hitting the road but we
really feel like we're well positioned for the e-mobility future.
And if you think about the change that's already occurred
in the last five years, where would you like to see this
industry end up in five years' time?
Five years...so what are we looking at? Or ten. Ten?
Well, we can pick 2030 or something, right?
2030, yeah. You know, I think as we look out, we would expect
you'll get different views, right?
And it's hard to predict the future, but you know, probably
close to 50%, high 40s of EV penetration, it won't all be done.
And even at the same time, if you look at all the vehicles
that are on the road today, there's a lot of vehicles on the
road that have internal combustion engines.
So there's a lot of work to do to continue to support those vehicles.
Half in the future will have an internal combustion engine in
2030, but that, you know, in terms of growth and just
transition and technology, electrification is clearly the
major trend and a top priority for us.
That's great.
Thanks so much for joining us here to tell us all about the
future of e-mobility.