Summary of BorgWarner Conference Call Company Overview - **Company**: BorgWarner - **Industry**: Global automotive parts industry, focusing on traditional and electric vehicle components Key Points and Arguments 1. **Business Expansion Strategy**: BorgWarner has expanded its business through acquisitions, starting from mechanical transmission and gradually moving into the electric vehicle sector, particularly in powertrain and battery charging systems [2][3][4] 2. **Market Transformation**: The global automotive parts industry is undergoing a transformation towards intelligence and electrification, with Chinese parts manufacturers like Topu, Xinquan, and Bertley accelerating their international expansion [2][4] 3. **Revenue Contribution**: BorgWarner's four main business segments include Turbocharging and Thermal Management (41.7%), Transmission and Drivetrain Systems (39.5%), Powertrain Systems (13.7%), and Battery and Charging Systems (5.2%). Traditional businesses contribute the majority of revenue, while R&D is heavily focused on electric vehicles [2][6] 4. **R&D Investment**: The company’s R&D expenses are projected to exceed $740 million in 2024, maintaining a rate of about 5% of revenue, with 53.1% of R&D focused on powertrain systems [3][19] 5. **Future Development Focus**: BorgWarner aims to enhance investment and innovation in the electric vehicle sector, optimize global operations, strengthen local market collaborations, and pursue strategic acquisitions for diversification, particularly in the Chinese market [2][7][19] 6. **Sustainability Goals**: The company has set ambitious sustainability targets, aiming to reduce carbon emissions by 85% by 2030 compared to 2021 levels and achieve carbon neutrality by 2035 [4][21] 7. **Global Presence**: BorgWarner operates in 24 countries with 96 manufacturing and technology centers, allowing for rapid response to regional feedback and customer needs, with Asia accounting for 33.5% of its global business [4][24][25] Additional Important Content 1. **Acquisition Strategy**: The company’s successful acquisition strategy has allowed it to enhance its capabilities and enter new markets, particularly in electric vehicle technology [3][20] 2. **Financial Performance**: BorgWarner's revenue has shown an upward trend, with a revenue of 51.5 billion yuan in the first half of 2025, remaining stable compared to the previous year [12] 3. **Market Position**: BorgWarner is a leader in the turbocharging market, holding a 30% share in China, and is well-positioned to benefit from the projected growth in the global turbocharger market, expected to reach over 280 billion yuan by 2033 [15] 4. **Collaborative Efforts**: The company emphasizes collaboration with major automotive manufacturers to enhance its product offerings and market reach [9][10] 5. **Investment Recommendations**: Investors are advised to focus on high-value segments with strong competitive dynamics and companies that are well-positioned in their respective markets, such as BorgWarner [26]

Core Viewpoint - The article emphasizes the historic opportunity for the Chinese automotive industry to grow stronger through the electric and intelligent transformation, suggesting that Chinese automakers can achieve a leapfrog development compared to their Western and Japanese counterparts in the traditional fuel vehicle era [2][13]. Group 1: Overview of Global Automotive Parts Giants - German automotive parts giants are primarily technology-driven, having developed early mass production capabilities in the 1920s-1930s, with companies like Volkswagen and Mercedes-Benz originating from Germany [5]. - Japanese and Korean suppliers were supported by their respective automakers, emerging in the 1960s and gradually enhancing their R&D capabilities while expanding overseas [5]. - The competition among American automotive parts suppliers is relatively weak, with only a few making it to the top ranks globally, while Canadian company Magna serves as a significant supplier in North America [5][13]. - Tire manufacturers have a unique branding advantage, having established a monopolistic competition structure globally, allowing room for latecomers to grow despite limited scale effects among leading firms [5]. Group 2: Changes in Chinese Automotive Parts Suppliers - Chinese automotive parts suppliers are undergoing significant changes, with the rise of new energy vehicles (NEVs) since 2020, led by companies like Tesla and local startups, reshaping the relationship between automakers and parts suppliers [10][17]. - The emergence of cost-effective and responsive Chinese parts suppliers has been facilitated by the rise of domestic automakers, with notable examples including Top Group and Desay SV [10][17]. - Since 2022, there has been a marked acceleration in the globalization of Chinese suppliers, with companies like Top Group and New Spring actively expanding their overseas production capacities [10][17]. Group 3: Case Study of BorgWarner - BorgWarner has evolved from a mechanical transmission company to a global leader in both traditional and electric powertrain components through continuous mergers and technological innovation since its founding in 1880 [6][19]. - The company has made significant acquisitions, such as the purchase of Delphi Technologies in 2020 to enhance its electric powertrain capabilities and the acquisition of AKASOL in 2021 to expand its battery system business [6][19]. - BorgWarner's focus on technological breakthroughs in turbocharging and electric drive systems positions it as a pioneer in the electric transformation of the automotive industry [7][19]. Group 4: Key Success Factors for Global Parts Giants - The growth of overseas parts giants is driven by high-quality market segments and strong customer relationships, with powertrains, automotive electronics, and chassis systems being preferred areas for development during the fuel vehicle era [17]. - The transition from 1 to 10 in growth for these giants involves internal growth and mergers, with a focus on diversifying business and application areas [17]. - Successful companies often adopt a technology-driven approach, leveraging advanced technologies to drive industry changes, or rely on partnerships with major automakers to achieve mutual growth [17].

Investment Rating - The report maintains a positive outlook on BorgWarner, highlighting its leadership in the turbocharging sector and its strategic transformation towards electric vehicles [1]. Core Insights - The report emphasizes the historical development and strategic transformation of BorgWarner, showcasing its successful mergers and acquisitions, robust R&D investment, and global operational footprint [2][9]. - It identifies the shift in the automotive industry towards electric vehicles, presenting a significant opportunity for Chinese automotive suppliers to learn from global leaders like BorgWarner [2][3]. Summary by Sections Historical Overview - BorgWarner has evolved from a mechanical transmission company established in 1880 to a global leader in automotive components, with a focus on turbocharging and electric vehicle technologies [9][42]. - The company has strategically expanded through numerous acquisitions, enhancing its capabilities in both traditional and electric powertrain components [9][42]. Success Factors - The report attributes BorgWarner's success to its strong management, commitment to R&D, and a well-established global presence, with R&D expenses projected to exceed $740 million in 2024, maintaining a rate of around 5% [7][9]. - BorgWarner's proactive approach to mergers and acquisitions has allowed it to enter new markets and expand its product offerings effectively [7][9]. Industry Context - The report discusses the competitive landscape of the automotive parts industry, noting that German and Japanese suppliers dominate, while Chinese suppliers have significant growth potential [3][27]. - It highlights the transition from traditional fuel vehicles to electric vehicles, indicating that this shift presents a historical opportunity for domestic suppliers to enhance their market positions [2][8]. Future Outlook - The report anticipates continued growth for BorgWarner as it capitalizes on the electric vehicle trend, with a focus on developing advanced technologies such as electric drive modules and battery systems [9][42]. - It suggests that the integration of AI and robotics into the automotive supply chain will further enhance the competitive edge of companies like BorgWarner [6][9].