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BorgWarner (BWA) Boosts EV Game With $500M Wolfspeed Investment

In a bid to obtain a reliable supply of silicon-carbide devices, BorgWarner Inc. BWA recently signed a strategic partnership with Wolfspeed, Inc. WOLF, a top-tier player in Silicon Carbide technology. BWA will invest $500 million in Wolfspeed’s financing transaction in exchange for a silicon carbide device capacity corridor. Per the multi-year agreement, BorgWarner will be entitled to purchase up to $650 million of devices annually to cater to its growing requirement.

As BorgWarner intensively participates in the cut-throat EV race, determined to clinch a top spot in the ladder, the demand for silicon carbide-based power electronics accelerates. Riding on the demand wave, BorgWarner is focused on ensuring a stable supply pool of these devices that are vital to the company’s inverter growth plans. BorgWarner is optimistic that the collaboration with Wolfspeed, its long-standing partner, will expedite its efforts toward the global transition to EVs and help the firm realize its vision for an energy-efficient automotive industry.

BorgWarner is intensively ramping up its EV game with its ambitious Charging Forward strategy, announced last year. The plan targets to generate $4.5 billion of electric vehicle revenues for 2025 compared with less than $350 million in 2021. In third-quarter earnings call, BorgWarner stated that it is on track to achieve nearly $4 billion of EV revenues by 2025, considering new business awards and acquisitions announced as of the earnings release. Also, BWA expects 2022 EV revenues to grow to approximately $850 million, more than doubling year over year.

In September, BorgWarner announced that it entered into an Equity Transfer Agreement with Hubei Surpass Sun Electric (“SSE”) by which it will acquire the SSE’s Electric Vehicle Solution, Smart Grid and Smart Energy businesses. SSE, with its electrification potential, will support BorgWarner’s Charging Forward strategy as well.

Wolfspeed also is focused on contributing to the industry’s transition to a sustainable mobility chain. Last month, it outlined a multi-year, $6.5 billion capacity expansion effort in North Carolina. This will immensely expand its existing materials capacity.

Shares of BWA have lost 11.7% in a year compared with the industry’s 36.5% decline.

Zacks Investment Research
Zacks Investment Research


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Zacks Rank & Key Picks

BWA currently has a Zacks Rank #3 (Hold).

Here are some better-ranked players in the auto space –CarParts.com PRTS, sporting a Zacks Rank #1 (Strong Buy), and Allison Transmission Holdings ALSN, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

CarParts has an expected earnings growth rate of 85% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 72.7% upward over the past 30 days.

Allison has an expected earnings growth rate of 26.1% for the current year. The Zacks Consensus Estimate for ALSN’s current-year earnings has been revised 3.8% upward in the past 30 days.


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