Continental boosts electric car spend as combustion era peaks

Bloomberg

Continental AG will scale back investments in traditional motor components and allocate more funds for hybrid and electric powertrains as the auto-parts maker prepares for the eventual decline of combustion engines.
Europe’s second-largest component supplier will invest an additional 300 million euros ($326 million) to develop and expand its offering of electric- and hybrid-car technologies by 2021, the Hanover, Germany-based company said in a statement. While Continental won’t entirely abandon fine-tuning traditional motors, it sees electric and hybrid vehicles accounting for 40 percent of the car market by 2025.
“We have to expect gradually falling demand for newly developed mechanic and hydraulic engine components,” Jose Avila, head of Continental’s powertrain unit, said in the statement. “This is why we will reduce our expenses into these technologies step by step.”
Global automakers and their components suppliers are investing heavily to develop electric-car technology to comply with tightening emission rules across the globe. Balancing these investments is key to mitigate the financial burden of having to pour money into both electric and combustion engines for years to come as the tipping point at which battery-powered cars overtake gasoline and diesel engines remains difficult to predict.
“Large chunks of today’s powertrain revenue streams are simply obsolete in battery-electric vehicles,” Victoria Greer, an analyst with Morgan Stanley said in a note to clients. “We continue to struggle with the companies’ message that electric vehicles will be a content multiplier.” Continental stock declined 1 percent to 204.60 euros at 9:22 a.m. in Frankfurt trading, paring its gain this year to 11 percent and valuing the company at 41 billion euros.