Powertrain supplier Vitesco Technologies, which spun off from Continental in September, will phase out much of its internal combustion engine business in the coming years as it bets big on long-term growth in electric vehicles.
The dramatic change speaks about both the evolution of Vitesco, formerly known as Continental Powertrain, and the future of Continental itself, a company that has been morphing from a leading world tire maker into a new titan of advanced electronics.
As a result of its repositioning strategy, Vitesco will shed nearly 40 percent of its current business in the coming years. By itself, Vitesco reported about $9.38 billion in revenue in 2020. Contract manufacturing for Continental, most of which will be phased out by 2025, accounted for $1.28 billion, and sales of noncore internal combustion engine technologies, such as injection products, totaled $2.32 billion, according to the company.
"We saw that those products will not have a future beyond 2030, and we consciously decided to step out," Vitesco CEO Andreas Wolf said during a media briefing ahead of the company's initial public offering last month. "Losing money for those products — it didn't make any sense to continue."
Despite its plans to send part of its portfolio to the chopping block, Vitesco is betting that as dozens of EVs and hybrid vehicles are being prepared to go to market over the next several years, it can become a major supplier of key electric components, including electric axle drive systems, inverters, converters and battery management systems.
It is already engaged in the market for the power electronics that control the give and take between the vehicle's battery and its motor. Those technologies are critical to the powertrains of upcoming EVs and plug-in hybrids.
Vitesco expects that business to grow substantially, making up for its phased-out Continental and combustion engine products in the medium term and eventually growing beyond its 2020 revenue levels, Wolf said.