One of the Automotive industry’s largest suppliers, Delphi Automotive, plans to spin off operations tied to internal combustion engines and wants to start to focus on technology for electrically powered and self-driving vehicles. This is believed to boost its share price and helps highlight the challenges for old school auto industry players. Many of the investors who provide the financial means to support the industry are starting to flock away from internal combustion engines, which is beginning to show with Tesla achieving a market cap larger than both Ford and General Motors, despite Tesla never having achieved a full year profit and the Detroit giants staying extremely profitable.
After the announcement that the company was going to split into two entities, one focused on internal combustion the other on electric and automated cars, Delphi’s shares rose an impressive 12 percent.
Other big auto suppliers are making similar calls to move away from internal combustion engine supplies. German auto supplier Robert Bosch said it had sold its starters and alternators business to a Chinese mining company and Germany’s Rheinmetall also tried to hand off its unit which focused heavily on internal combustion parts, mainly on the “development, manufacturing and aftermarket supplying of pistons, engine blocks, and plain bearings. ” (automotive news)
Other than losing the support of investors on combustion engines, many regulators are cracking down on combustion engines and their emissions especially in Chinese and European markets with some areas even calling for outright bans on diesel engines. The Chinese government is also aggressively pushing electric cars on to its people by putting high targets in order accelerate electric vehicle production.
Delphi’s Ceo Kevin Clark has even said he expects diesel production to decrease by 3% for the next few years. But with the divide between the two sides of the company Delphi’s powertrain company could seize the opportunity to consolidate other players in the combustion market and capitalize on the continued demand for internal combustion while using the regulatory pressure to make them cleaner.