It is a nice turn of phrase that Frederic Lissalde uses to describe his company’s outlook for electric mobility in China.

“It is our biggest market and this is where the music is playing from an electrification perspective. We are pretty happy about that,” says the President & CEO of BorgWarner, the US-headquartered manufacturer of powertrain products with a presence in many countries.

China accounts for a significant part of the company’s business and it is only natural for Lissalde to be effusive when he refers to “50 per cent of our backyard is Chinese”. This only means that the sky is the limit when it comes to growth in revenue even if the market is in the midst of its most severe slowdown in recent times.

On electric drive

The BorgWarner chief pauses longer when asked about India’s standing in the electrification space. “We are 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,” he says.

While BorgWarner is more closely involved with the new Bharat Stage VI emission regulations that come into force from April 2020, Lissalde believes that there is still some way to go when it comes to making an impact in e-mobility. “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 says. Yet, there is good reason to feel upbeat about BS-VI which will also do its bit in cleaning up the air while making engines “leaner and cleaner”. To that extent, says Lissalde, BS-VI is a big step forward for now in the Indian context.

Infra issues

For electrification, however, there are infrastructure issues and it is still a million dollar question if carmakers can afford to make the transition. “You will get cleaner engines with BS-VI but if you talk of BEVs thereafter, it depends on a host of issues,” says Lissalde.

India has been articulating its intent to embrace e-mobility far more aggressively during the course of the following decade but has to grapple with a host of challenges. It is in recognition of these obstacles that the Centre has also decided to adopt a more pragmatic approach instead of the initial bluster of going 100 per cent electric by 2030.

A recent instance also saw its think-tank, NITI Aayog, proclaim a deadline of 2025 for all two-wheelers under 150cc to go completely electric (2023 in the case of three-wheelers). As manufacturers protested, this diktat was withdrawn even while it remains quite clear that electric is a subject that has caught the eye of policy makers in New Delhi.

“We do not see India becoming a major BEV market for the next 5-7 years,” reiterates Lissalde. Yet, as he adds, there is “no good or bad” about this since the overarching objective is 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 says. From BorgWarner’s point of view, all technologies and fuels will have a role to play in the future be it diesel, gasoline, hybrid or electric. In the process, each of these will translate into a business opportunity for the company. Lissalde is also candid enough to admit that it is impossible to predict how the mobility landscape will 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 says.

Given this uncertainty, the key is to focus on a balanced portfolio even while attempting to constantly stay ahead of the technological curve.

“We have a strategy that I am very comfortable with and this lies in being balanced from a product portfolio point of view,” explains Lissalde. Effectively, this means that the company’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 per cent of the globe, BorgWarner would want a similar share in its products. Likewise if hybrid is 25 per cent, “we want to be 25 per cent too” and if electric is 5-7 per cent, 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,” says Lissalde. By the end of the day, BorgWarner 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”.

The CEO is reasonably confident that electric cars will account for 5-7 per cent 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 believes growth will continue to happen for the ICE.

The majority of electrification coming in the next five years is a hybrid proportion while BEVs, in turn, are only a proportion of electrification. “Beyond the next five years, we have the right portfolio to handle the challenge for BEVs,” says Lissalde. China is a case in point where Great Wall Motors’ new BEV is fitted with BorgWarner’s transmission and motor.

The competitive advantage

With assured competencies in making the electric transmission, motor and powertrain, its CEO says the company has a distinct “competitive advantage” in bringing them together smartly since it is better placed to “understand their interaction”. As a result, “we can work efficiently in the process and understand what it takes” to strive for optimal productivity.

“In this business, you don’t want to be too late or early but need to understand the system in order to optimise the efficiencies of components. That is how we are positioned going forward,” explains Lissalde. Beyond mobility disruptions, the world is also facing its own set of geopolitical challenges in the form of trade wars, emission legislations and so on. All this is leading to a great deal of uncertainty all around but BorgWarner believes it can cope with changing demand patterns. “While there are different global dynamics, it does not matter and that is the beauty of having a balanced portfolio in combustion, hybrid and electric,” says Lissalde.

He also points out that the company is “not attached to where a customer sells but attached to where we sell”. For instance, the US market could be behind the curve on electrification but the fact remains that a carmaker in the US is a global player that “cannot be behind the curve since it wants to continue selling in Europe and China”.

Lissalde concedes that there are some areas of concern going forward especially on the overall market volumes globally under pressure because of a slowdown in key markets like China. While this could cause stress on the supporting ecosystem of suppliers, he says that such ups and downs are inevitable “which means we need to manage the situation well”. There is really no other option by the end of the day.

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