Should BorgWarner prioritize developing advanced transmission technologies for internal combustion engines or shift more resources to electric vehicle components?

Introduction

The trade-off question at hand is whether BorgWarner should prioritize developing advanced transmission technologies for internal combustion engines (ICE) or shift more resources to electric vehicle (EV) components. This scenario involves balancing traditional automotive expertise with emerging EV trends. I'll analyze this trade-off by examining market dynamics, technological advancements, and strategic implications for BorgWarner.

Step 1

Clarifying Questions (3 minutes)

• Based on recent market trends, I'm thinking EV adoption rates might be a critical factor. Could you provide insights on the current and projected EV market share in our key regions?

Why it matters: Helps gauge the urgency of shifting resources to EV components Expected answer: EV market share growing rapidly but still <20% in most markets Impact on approach: Would influence the balance and timing of resource allocation

• Considering our revenue streams, I'm assuming ICE-related products still contribute significantly. What percentage of our revenue currently comes from ICE vs. EV components?

Why it matters: Informs the financial implications of resource reallocation Expected answer: ICE components still account for 70-80% of revenue Impact on approach: Would affect the pace of transition and risk management strategies

• Looking at our R&D capabilities, I'm curious about our current expertise distribution. How does our engineering talent pool compare between ICE and EV technologies?

Why it matters: Assesses our ability to pivot or expand into EV components Expected answer: Stronger in ICE, but growing EV expertise Impact on approach: Might necessitate talent acquisition or retraining programs

• Considering customer relationships, I'm wondering about our major automotive clients' EV strategies. Are our key OEM partners accelerating their EV production plans?

Why it matters: Aligns our strategy with customer needs and market demand Expected answer: Most OEMs have aggressive EV targets for the next 5-10 years Impact on approach: Would influence the urgency and scale of our EV component development

• Given the regulatory landscape, I'm thinking about emissions standards. How are upcoming regulations in our key markets likely to impact ICE vehicle sales?

Why it matters: Helps anticipate market shifts driven by policy changes Expected answer: Stricter emissions standards coming into effect, particularly in Europe and China Impact on approach: Would affect the long-term viability of ICE-focused strategies