Two key trends that are transforming the auto industry – electrification and full, self-driving technology – will not be evident in a majority of vehicles until well after 2025, but Magna International Inc. is positioning itself to be a crucial supplier of parts for what it calls the vehicle of the future.
Magna has developed several technologies that can be used in electric and autonomous vehicles, and whose value could exceed the value of parts the company has on many vehicles now on the road, executives told shareholders at Magna’s annual meeting on Thursday.
To be successful as the car of the future turns into the car of the present, Magna needs to continue what it’s already doing, chief executive officer Don Walker said, which is investing in research and development and making strategic acquisitions.
“We’re spending a lot of time developing products, bringing them to market, and as the market grows, hopefully we’ll be one of the successful ones,” Mr. Walker said in an interview after the meeting.
The Aurora, Ont.-based auto-parts giant is forecasting that fully autonomous vehicles – requiring no driver – will represent less than 1 per cent of the market by 2025. Electric vehicles are expected to grab between 3 per cent and 6 per cent of a global market that will be about 107 million vehicles annually.
The value of Magna parts in a battery-powered electric vehicle could be as high as $2,500 (U.S.) by 2025, while its technology on a fully autonomous vehicle could fetch $1,200 to $1,500, chief technology officer Swamy Kotagiri told the meeting.
The value of its parts on the current Chrysler Pacifica minivan, which is one of the company’s highest-content vehicles, is $4,000. That includes three rows of Magna-made seats as well as other Magna parts.
If all the internal-combustion-engine components Magna makes now were on a single vehicle, its content on that vehicle would be $2,000.
“We have a whole range of powertrain products that not only address the needs of the market today, but are a good road map to address the future,” Mr. Kotagiri said.
As new technologies are developed that take vehicles closer to what is known as level five or full autonomy, Magna’s content should grow.
On the autonomous-vehicle front, Magna entered into a joint venture earlier this year with Israel-based Innoviz Technologies Ltd. to develop LiDAR, or light detection and ranging systems, which are an essential technology on autonomous vehicles.
The purchase of Germany-based transmission maker Getrag, made last year, was also aimed in part at giving Magna more components available to be used on the car of the future.
Magna expects to generate free cash flow of $5-billion by 2019, chief financial officer Vince Galifi said.
The money will be used to invest in technology that will lead to future growth, make acquisitions and returned to shareholders through dividends or share repurchases, Mr. Walker said.
“There’s still a lot of room for leap-frog technology” when it comes to development of autonomous vehicles, he told analysts and investors on a conference call about the company’s first-quarter financial results.
Magna reported sales of $9.37-billion in the three months ended March 31, up from $8.9-billion a year earlier. Profit rose to $586-million or $1.53 a share, compared with $1.22. The share profit was a record.Report Typo/Error