Delphi Automotive: Reports of Its Death Are Greatly Exaggerated

Yesterday, Morgan Stanleys Adam Jonas cut Delphi Automotive (DLPH) to Underweight from Overweight citing the threat posed by electric cars (and not just Tesla Motors (TSLA)). Today, Bairds David Leiker and team offer a fuller defense of Delphi Automotive, as well as Borg Warner (BWA) and Lear (LEA):

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Aggressive buyers of Delphi and BorgWarner following another drive by hit on the suppliers of technologies for internal combustion engines (ICE). While mild/full hybrids are needed to meet fuel efficiency targets beyond 2025, full EVs are unlikely to exceed 2-3% of global demand without a breakthrough in the cost of electrification. Importantly, technologies to electrify vehicles reside among the OEM auto suppliers, many of which also supply ICE; as a result, these suppliers actually benefit from electrificationthey are not threatened as some analysts [I think he means you, Jonas. ed.] suggest…

BorgWarner. HEV/EV content expected to be 5-30% higher than ICE. Company supplies electric all-wheel drive, electric motor, cabin heater, single-speed transmission (eGearDrive), etc.

Delphi. HEV/EV content expected to be 4-8x higher than ICE. Company is the largest supplier of wiring and cables (higher content at higher voltages) and also provides power electronics around the battery/motor (controllers, converters, inverters).

Lear. 48V content expected to be 30% higher than ICE. Company supplies wiring, terminals & connectors, and electronics (converters, inverters).

Shares of Delphi Automotive have risen 1.9% to $64.66 at 1:56 p.m. today, while BorgWarner has jumped 4.2% to $35.89, and Lear has gained 2% to $130.64. Tesla Motors has declined 0.6% to $188.52.

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