Making parts for internal combustion engines has helped Linamar Corp. grow into a $5-billion-a-year business. Now, it's positioning itself for the age of electric vehicles.
Electric or battery-powered vehicles will represent just 30 per cent of vehicles on the road by 2040, but Canada's second-largest auto parts maker needs to be ready to make parts for them, Linamar chief executive officer Linda Hasenfratz told the company's annual meeting Tuesday.
"That's a significant part of the market and we need to be ready for that," Ms. Hasenfratz told shareholders, noting that 2016 is the 50th anniversary of the company's founding by her father, Frank, in a Guelph, Ont., garage. Mr. Hasenfratz is still chairman of the company.
Linamar has the potential to supply $2,000 worth of parts on every electric vehicle, Ms. Hasenfratz said, compared with its actual content of about $150 a vehicle now on all types of vehicles.
"I want to increase our content potential in every type of vehicle, whether it be internal combustion, electric, hybrids, so we've got a great business potential, regardless of where the market goes in terms of vehicle types," she said in an interview after the meeting.
Auto makers and suppliers are spending billions of dollars annually improving the efficiency of internal combustion engines, upgrading hybrid engines and developing battery-powered and fuel-cell propulsion systems.
The research and development is aimed at meeting fuel economy and emissions goals that will require auto makers' vehicle fleets to get 54.5 miles to the gallon by 2025 or, in metric terms, use 5.2 litres to travel 100 kilometres.
Linamar is spending between $100-million and $150-million annually on research and development, Ms. Hasenfratz said, with much of that aimed at making parts that are lighter and thus contribute to improved fuel economy.
"Fifteen to 20 years out, we think that pure electric vehicles will be a much more important part of the landscape [but] we think it's not going to happen tomorrow," she said.
The lure of the electric vehicle helped propel Linamar's joint venture with Georg Fischer Ltd. of Switzerland as well as its purchase earlier this year of Montupet SA of France.
Both GF and Montupet are capable of making cast-aluminum body structural parts, an area of the vehicle that is new to Linamar.
Linamar was awarded a $30-million contract during the first quarter to make such cast-aluminum parts for an electric vehicle, Ms. Hasenfratz said.
Although the opportunity for Linamar's traditional internal combustion engine parts is not as great on electric vehicles, many of them will still need gears, and the company makes almost 50 million gears a year, she said.
Electric vehicles will also provide a market for driveline products such as an electronic axle Linamar has developed that can be used on all vehicles.
Ms. Hasenfratz said the company is targeting sales of $8.2-billion annually by 2020, compared with $5.2-billion last year.
Auto makers are seeking suppliers that have a global footprint and the scale and financial capacity to invest, she said.