Delphi looks to capitalize on new technology with increased specialisation
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Delphi looks to capitalize on new technology with increased specialisation

Delphi Automotive was the world’s 11th largest automotive supplier, but late last year, it realised the danger of being a generalist in an increasingly specialised world. As a result, it divided into two: Aptiv, focusing on connectivity, smart vehicle architecture and self driving technology, and Delphi Technologies, which will make powertrain systems and components. This is part of a wider shift, and is reflective of the complexity of the modern automotive industry.

Aptiv and Delphi’s share prices both increased last week

graph 0504 delphi

 

SOURCE: Yahoo Finance

Michael Robinet, managing director at HIS Markit, said: "The supplier that was everything to everybody – that’s becoming a much more difficult business model. Even the larger suppliers are looking inward and saying: 'where can we see the added value? Where can we see the margins and return on investment that we targeted'? It's a good time to stand back and say: 'what do I want to be as I continue to grow? How do I best add value to the industry'? It's a good reflection time."

Aptiv has a very clear answer to that question: it wants to be at the forefront of the informational systems that will power tomorrow’s automobiles. As a result, it’s focusing on the kinds of technology that are revolutionizing the industry thanks to the emergence of the Internet of Things.

The auto industry has seen strong growth since the economic crisis: worldwide light vehicle production rose to more than 90 million in 2017, from about 60 million in 2009. But as other big names also see the value in specialisation, can Aptiv and Delph retain their respective pole positions?

Disclosure

Dominion holds Aptiv and Delphi Technology in its Global Trends Managed Fund.


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