WirtschaftsWoche Exclusive

Continental Sees Electric Car Losses

  • Why it matters

    Why it matters

    If it can’t turn the corner with electric driving technologies, Continental will not be able to offset an expected decline in demand for traditional combustion engine products.

  • Facts

    Facts

    • Continental is the world’s second-largest car parts maker after domestic rival Bosch and ahead of ZF Friedrichshafen, Canadian-Austrian firm Magna and Japan’s Denso.
    • The Hanover-based firm, 46-percent owned by Frankfurt-listed rival Schaeffler Group, is also the world’s fourth-largest tire maker after after Bridgestone, Michelin and Goodyear.
    • The blue-chip DAX-listed company issued a profit warning in October due to additional development costs, anti-trust expenses and operational problems in Japan, forecasting an adjusted operating profit margin of more than 6.5 percent, down from more than 8.5 percent previously.
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Continental's CEO Elmar Degenhart. Source: Arne Dedert / DPA

Continental has invested more than one billion euro in electric car technologies the past few years, but has little to show for it so far. The auto parts maker expects losses to last until at least 2019, Chief Executive Elmar Degenhart told WirtschaftsWoche, a business weekly and sister publication of Handelsblatt.

Mr. Degenhart, who confirmed the Frankfurt-listed company’s full-year outlook, said in an interview that the world’s second-largest car parts maker would not make money with electric car products “before 2020.”

“Investments are increasing. The necessary development costs are the biggest challenge for our industry,” Mr. Degenhart said about e-car technologies. “The shift from combustion engines to electro-mobility will only massively take off between 2025 and 2030.”

Electric driving is seen as one of the biggest transformations affecting the car industry, in addition to self-driving vehicles. U.S. firms Google, Apple and Tesla as well as Chinese rivals such as BYD have made inroads in the industry.

“The German industry has acted intelligently with regards to electric mobility. Timing is important: if you are too early you burn billions, if you are too late you lose market share.”

Elmar Degenhart, CEO, Continental

The group’s Hybrid Electric Vehicles division once more incurred triple-digit million losses last year, as customer demand remains low. The loss dragged down the whole Powertrain electric drive products business.

The 57-year old executive suggested that was by design. He insisted that Continental, which has annual revenue of €39.2 billion ($41 billion) and supplies products to VW, Audi, Mercedes, Tesla and many others, was not late to develop electric car technologies, nor was the German auto industry.

“The German industry has acted intelligently with regards to electric mobility. Timing is important: if you are too early you burn billions, if you are too late you lose market share. I do not see either of these developments in this country,” Mr. Degenhart said.

Continental, in which German rival Schaeffler owns 46 percent, is open to invest in battery production, Mr. Degenhart said, if it saw an opportunity to make money and team up with a partner, which could be smaller, innovative firms focused on research and development. He ruled out partnering with Asian battery producers.

The Hanover-based company, which is also the world’s fourth-largest tire maker, was also interested in making acquisitions in the software industry and open to buying a stake in digital map maker Here, which carmakers Audi, BMW and Mercedes-maker Daimler bought last year for €2.8 billion in a bid to fend of U.S. tech rivals.

“We have been a partner of Here for 20 years and are interested to continue this very good partnership,” Mr. Degenhart said.

Continental bought a number of companies this year, including U.S.-based Hoosing Racing Tire, U.S. fleet management specialist Zonar and a U.S. laser sensor business from Advanced Scientific Concepts.

Mr. Degenhart reiterated Continental had not produced engine software capable of manipulating car emissions. The company has supplied around a third of VW’s European cars with engine software. VW admitted last year that around 11 million cars worldwide contain illegal software that artificially lowers pollution values during tests.

 

This article first appeared in business weekly WirtschaftsWoche. Gilbert Kreijger, an editor with Handelsblatt Global, contributed to this article. To contact the authors: annina.reimann@wiwo.de and hauke.reimer@wiwo.de

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