Core Viewpoint - Schaeffler Group is advancing its "decarbonization" strategy by selling its internal combustion engine-related business in China, specifically the turbocharger operations of Weichai Technology, to Chengdu Xiling Power Technology Co., Ltd. This move is part of Schaeffler's ongoing efforts to divest non-core internal combustion engine operations and is a significant step in the integration process following its acquisition of Weichai Technology [2][8][10]. Summary by Sections Transaction Details - Schaeffler has signed an agreement to sell 100% of Weichai Automotive Electronics (Shanghai) Co., Ltd., which operates the turbocharger business in China. The expected revenue for 2024 is approximately €100 million, but the company is facing significant losses, with a net loss of ¥22.58 million in 2024 and a further increase to ¥46.06 million in the first three quarters of the year [3][5]. - The transaction will be completed through a cash payment, with a nominal base payment of ¥1, and the final price will be adjusted based on various financial metrics at the time of closing [5]. Strategic Implications - Chengdu Xiling Power views the turbocharger as a critical component in the mid-term power system, especially in the context of the automotive industry's shift towards hybrid and upgraded fuel vehicles. The company believes there is still substantial market potential for turbochargers [6]. - The acquisition is seen as an opportunity for Xiling Power to leverage Weichai's technological advantages in automated digital production lines and precision manufacturing processes, as well as its established relationships with major clients like Volkswagen [6]. Schaeffler's Business Restructuring - Schaeffler's divestment of the turbocharger business is part of a broader restructuring strategy following its acquisition of Weichai Technology, which is aimed at focusing on four core business divisions: electric drive, powertrain and chassis, vehicle lifecycle solutions, and bearings and industrial solutions. The electric drive division is identified as a strategic priority [8][10]. - The company has explicitly categorized the internal combustion engine turbocharger business as non-core and has initiated its sale to optimize resource allocation and free up capital for its core electric drive operations [10]. - Despite the divestment, Schaeffler acknowledges that internal combustion engine optimization and hybrid-related products will continue to be important for profit and cash flow in the foreseeable future [10].