EV delays, changing plans dim suppliers' financial outlooks

Some of the world's biggest suppliers said automakers' dialed-back electrification plans will weigh down future earnings as they make fewer parts for electric vehicles than they were banking on.

"The market has shifted drastically," said Magna International Inc. CEO Swamy Kotagiri.

Automakers are altering their EV plans because of lower-than-expected sales, particularly in North America. Adjustments include delays in EV product rollouts, cuts in production targets and a shift to smaller, more affordable electric models or hybrids.

Kotagiri's comments came as Magna, North America's largest supplier, disclosed its second-quarter financial performance Aug. 2 and lowered its 2026 outlook.

It now expects about 10 percent less revenue than it previously anticipated for 2026. It was an unusual move by Magna, which does not typically update its multiyear guidance in the middle of the year but was compelled to given how quickly the EV landscape is changing. Other suppliers also are lowering their financial guidance targets.

Quick shifts in electrification plans could leave many suppliers financially exposed, particularly those that were banking on high EV production to justify high capital spending on new or retooled factories. While large Tier 1 suppliers should be able to handle changing market conditions, smaller companies in lower tiers are at risk, said Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions.

"Those companies invest in the near term," he said. "And if that near-term plan included electric vehicles and it doesn't anymore, that could be very costly for these small companies — and could potentially put them at risk of going out of business."

Magna said it expects about $2 billion less in 2026 revenue from EV parts sales than it originally expected, a figure that includes between $800 million and $900 million in additional combustion engine-related business.

Other suppliers also pointed to slowing EV business as a roadblock moving forward and detailed plans to address it.

BorgWarner Inc., for example, said it wants to save $100 million in the next couple years by cutting head count and spending in its e-products division as part of a restructuring plan that started in June. The supplier, whose net income rose more than 40 percent to $317 million in the quarter compared with the same period a year earlier, reduced its full-year sales outlook by $400 million because of lower production and slow battery-electric vehicle sales growth.

"A lot of our combustion products go into hybrids and are a key element of making the combustion side of hybrid lean and efficient," CEO Fred Lissalde said on a July 31 earnings call. "When you think about BorgWarner, I don't think you should try and split combustion, hybrid and BEV."

Likewise, Lear Corp. pinned its guidance cut in part on slower EV sales growth and changes to customers' EV plans. Lear, which reported modest gains in second-quarter net income and revenue, now expects adjusted net income of between $630 million and $760 million on the year, down from its previous projection of between $730 million and $840 million.

"Our adjustment to the second-half outlook is greater than we had anticipated," CFO Jason Cardew said. "That really reflects the ramp-up in announcements, and also our extrapolation of what that may mean into the fourth quarter, particularly on electric vehicle platforms."

Suppliers cautioned that global new-vehicle production is likely to be lower than previously expected in the second half of the year, causing some to alter their outlooks for the rest of 2024.

Mirror supplier Gentex lowered its full-year revenue outlook to between $2.4 billion and $2.5 billion, down about $50 million. CEO Steve Downing pinned the company's 21 percent year-over-year drop in net income in the second quarter on reduced production in North America, Europe, Japan and Korea.

"The quarter began with sales coming close to forecast for both April and May, but then saw a significant change in June that left us well below our forecast for the quarter," Downing said on a July 26 call with investors.

Still, some suppliers reported strong second-quarter earnings, even in the face of the industry's headwinds.

Tech supplier Aptiv said its net income surged to $943 million in the quarter ending June 30, more than three times what it made in the same period a year earlier, even as its revenues slipped.

That largely reflects the company's improved profit margins, which returned to pre-pandemic levels, CEO Kevin Clark said on an Aug. 1 call with analysts. Aptiv reported an adjusted earnings margin of 15.6 percent on the quarter, up from 14 percent a year earlier.

Working through supply chain problems "took a little time," Clark said. "The reality is we've gotten through that, and it's reflected in our results last quarter."