Sweden's SKF feels power of China's electric car drive

NSK

22/05/2018 07:00

By Johannes Hellstrom
    GOTHENBURG, May 22 (Reuters) - Sweden's SKF  SKFb.ST  is
seeing increasing demand for its bearings from China, where
demand for electric cars means it is winning at least one new
contract a month, as suppliers adapt to changing automobile
technology.
    SKF Automotive head Bernd Stephan said that while electric
car sales were also rising in Europe, China was surging.
    "We have a huge gain of new business in this area ... There
are so many projects popping up, and we are in a permanent
discussion with these customers," Stephan told Reuters.
    Electric cars are having a big impact on bearings
manufacturers as they typically contain about half as many as a
combustion engine car.
    While SKF is focused on parts such as bearings and seals,
rivals including Germany's Schaeffler  SHA_p.DE  are developing
full electric drive lines. But SKF is largely shielded because
only 4 percent of its products go into combustion engines and
wheel bearings are its biggest product.
    "What we are losing on the combustion engine side, we are
gaining on the electric motor side," Stephan said, with the
intermediate stage of more hybrid cars also a positive.
    
    CHINESE RIVALS
    The automotive bearings market is intensely competitive and
price sensitive and the rise of Chinese rivals has added to
concerns over long-term profitability.
    Stephan said he saw no reason why SKF should not be able to
handle the Chinese rivals, saying it could use cheaper steel and
different components to bring down manufacturing costs for
bearings which were not top end products.
    "Why should we be less competitive than they are? We have
the same production as they do, we are not producing bearings
only in Europe."
    SKF Automotive, which also competes with Japanese firms NTN
 6472.T , NSK  6471.T  and JTEKT  6473.T  and Chinese companies
such as C&U Group, accounted for 31 percent of SKF's 2017 sales.
    Although the business has been a problem for the group, a
2015 turnaround plan has started to work and it nearly hit an
elusive 8 percent margin target in the first quarter. Its
primary focus is on highly customised bearings and seals.
    But while the automotive unit also sells standard bearings,
they are made at SKF's industrial business plants, benefiting
the group due to a high volume load.
    Looking ahead to fully self-driving cars, Stephan said this
would bring further changes, with wheel bearings likely to need
longer lifetimes due to more intensive usage.
    "People aren't aware of what it means if we go to autonomous
driving. In theory you can reduce your fleet to one third," he
said, adding that it was important to prepare for this.  

 (Reporting by Johannes Hellstrom; editing by Niklas Pollard and
Alexander Smith)
 ((johannes.hellstrom@thomsonreuters.com; +4687001008; Reuters
Messaging: johannes.hellstrom.reuters.com@reuters.net))