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Continental investing $326M in electric-car technology

Christoph Rauwald
Bloomberg News

Continental AG will scale back investments into 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.

Continental will invest an additional 300 million euros ($326 million) by 2021 on electric- and hybrid-car technologies, the Hanover, Germany-based car-parts maker said Tuesday in an emailed statement.

“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.

Continental held talks with U.S. peer Delphi Automotive Plc earlier this year about merging parts of their powertrain divisions as an anticipated shift to electric vehicles reshapes the car industry, people familiar with the matter have said. Negotiations ended without a deal to combine the operations, which make components including transmissions and fuel and exhaust systems for gasoline and diesel cars, said the people.

Continental is relatively well positioned to benefit from the shift, as it offers a range of components and sophisticated electronics systems that future cars need. The German company anticipates bringing in as much as 3,000 euros in revenue per electric vehicle it supplies parts for in 2025, about triple the revenue gained from each combustion-engine car last year, according to an investors’ presentation in January.

Continental said Tuesday order intake and profitability at the powertrain operation is improving and it targets 10 billion euros in revenue at the unit in 2019.