Auto-Parts Giant Continental Slams Brakes on Engine Parts Amid Shift to Electric -- Update
07 August 2019 - 10:34AM
Dow Jones News
By William Boston
BERLIN -- One of the world's biggest car-parts makers is saying
goodbye to the internal combustion engine -- the machine that has
been at the heart of the auto industry for well over a century.
In a major strategy shift, Continental AG said Wednesday that it
would cut investment in conventional engine parts because of a
faster-than-expected fall in demand as major auto makers accelerate
their shift to electric vehicles.
The move by the Hanover, Germany-based maker of tires,
lubricants, powertrains and other core components shows how tougher
regulation of greenhouse-gas emissions is pushing the industry
toward electric models and forcing manufacturers to redraw their
supply chains.
Continental said its board had voted to halt the expansion of
its hydraulics components business, largely focused on fuel
injectors and pumps for gasoline and diesel engines, to shift its
focus and future investments to components for electric
vehicles.
"The future is electric. We are convinced of this," said Andreas
Wolf, head of Continental's powertrain division, which is
reorganizing under the name Vitesco Technologies.
Although Continental is shifting its focus on electric mobility,
the company said it had also decided not to build solid-state
batteries and battery cells for electric vehicles, saying that the
field was already too crowded to justify investment in the
technology.
"Continental can no longer set up an attractive business model
with the solid-state technology," Chief Executive Elmar Degenhart
said in a statement.
Continental made the announcement as it released earnings for
the three months to the end of June, reporting a 41% drop in net
profit to EUR485 million ($543 million) and a 1% decline in sales
to EUR11.3 billion. It attributed the weakness in the second
quarter to a global slowdown in automotive production.
Mr. Wolf said that although the auto industry would continue to
use conventional internal combustion engines for many years, it was
becoming difficult to justify the high cost of improving components
to make gasoline and diesel engines less polluting.
As car makers accelerate development of electric vehicles and
demand fewer components for combustion engines, the traditional
business of suppliers like Continental promises to offer "only
selective growth opportunities" in the future, the company
said.
"Investments in research and development and in production
capacity for innovations are becoming less profitable," Mr. Wolf
said in a statement.
Write to William Boston at william.boston@wsj.com
(END) Dow Jones Newswires
August 07, 2019 04:19 ET (08:19 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
Continental (TG:CON)
Historical Stock Chart
Von Mär 2024 bis Apr 2024
Continental (TG:CON)
Historical Stock Chart
Von Apr 2023 bis Apr 2024