BWA Investor Presentation-07-27-2018 · 2018. 9. 18. · © BorgWarner Inc. 4 Increasing Diversity of Light Vehicle Production 93M 2023 IHS UNITS* 83M 2016 IHS UNITS* 90M 3M 0.5M

August 2018

Investor Presentation

© BorgWarner Inc. 2

� Technology Leadership

� Customer, Geographic and Efficient Propulsion System Diversity

� Financial Strength and Discipline

The BorgWarner Strategic Difference


THERE WILL ALWAYS BE A NEED FOR A

PROPULSION SYSTEM

Addressing Vehicle Mobility Trends

autonomousdriving

shared cars and rideshare

connected cars

efficiency/CO2emissions


Increasing Diversity of Light Vehicle Production

93M

2023 IHS UNITS*

83M

2016 IHS UNITS*

90M

3M

0.5M

ElectricHybridCombustion

-1.1% CAGR

34% CAGR

31% CAGR

2% CAGR

*Source market data: IHS Light Vehicle Forecast (May 2017*).

83M

107M

21M3.4M


Industry Propulsion Mix: Ongoing Evolution

2023 IHS UNITS*2016 IHS UNITS*

93M

90M

3M

0.5M

83M

107M

21M3.4M

11M

89M

2.2M 102M

2020 IHS UNITS*


*Source market data: IHS Light Vehicle Forecast (May 2017*).


2016 IHS UNITS*

96.4%

3.0%

0.6%


2016 BWA REVENUE (USD)

98.8%

1.1%

0.1%

2020 IHS UNITS*

87.0%

10.8%

2020 BWA REVENUE (USD)

2.2%

88.7%

9.6%

1.7%

*Source market data: IHS Light Vehicle Forecast (May 2017)

Accelerating Revenue Diversity by 2020

(As of 2017 Investor Day )



CV & AM

7% CAGR

$0.1<$0.1

$1.4$8.8

2020

83M

$11.5

2016

21M $0.2

5% CAGR

88% CAGR

102% CAGR

$7.3

$1.0

$8.8

$1.63% CAGR

*all values in billions

2020 Revenue Outlook of $11.5B - $11.8B

(As of 2017 Investor Day )


� Timing system

� Variable cam timing

� Exhaust gas recirculation

� Clutch plates

� All-wheel drive systems

� Enhanced starters

� Fans & fan drives

� Pictured products and many more…

Combustion Products:

Combustion Propulsion** Includes engines, transmissions and all-wheel drive systems with no electrification, includes stop/start. All prices are estimates, actual prices will vary.

$100 $250 $350

Boosting Technologies

Exhaust Gas Management

Transmission Technologies

Variable Cam Timing

$45


Penetration of Key Combustion Products Continues to Grow

Technology Penetration % - Combustion Only (includes S/S) -Gas & Diesel

2017 2025

Turbochargers 45% 58%

Exhaust Gas Recirculation 26% 46%

Variable Cam Timing 65% 71%

Dual Clutch Transmission 9% 9%

Stop/Start 42% 67%


aCPV (Average Content Per Vehicle) Combustion Vehicles with BW Content

53%

86M

44%

88M

2016 IHS UNITS 2023 IHS UNITS

$185aCPV

$215aCPV

2020 IHS UNITS

$200aCPV

50%

89M

(As of Aug 2017) (As of Sep 2016)(As of Sep 2016)

Growth and Participation in Combustion


$300 $700 $900 $1200$200

* Includes mild, full and plug-in hybrid. All prices are estimates, actual prices will vary.

Combustion ProductsPLUS Hybrid Specific Products

� Exhaust heat recovery systems

� Electric drive motors

� Disconnect clutch and controls


eBooster ® iBAS SystemsP2 Hybrid Module

On/Off AxisPower Electronics Electric All-Wheel Drive

Hybrid Propulsion*


Hybrids Use Highly Efficient Internal Combustion Engines

� Hybrids drive increasing demand for BorgWarner’s efficient ICE products

Technology Penetration % - Hybrid Only - Gas & Diesel

2017 2025

Turbochargers 20% 65%

Variable Cam Timing 63% 69%

Dual Clutch Transmission 14% 31%


aCPV (Average Content Per Vehicle) Hybrid Vehicles with BW Content

42%

18M

3M20%

2023 IHS UNITS

$140aCPV

$225aCPV

2016 IHS UNITS 2020 IHS UNITS*

$240aCPV

11M

36%


Growth and Participation in Hybrid


� Electric all-wheel drive

� Liquid heater

� Auxiliary coolant pump

� Fuel Cell air supply

� Transmission Chain

� Friction Products


Electric Vehicle Products:

$500 $700 $1100Cabin Air Heater eGearDrive ® Electric Drive Motor Electric Drive Module

$200

* Includes battery electric vehicles, range extenders and fuel cells. All prices are estimates, actual prices will vary.

Power Electronics

$700

Electric Propulsion*


aCPV (Average Content Per Vehicle) Electric Vehicles with BW Content

2023 IHS UNITS

29%

2.3M

$285aCPV

$620aCPV

0.5M 3%

2016 IHS UNITS 2020 IHS UNITS*

2.2M

26%$285aCPV


Growth and Participation in Electric


Note: Participation Rate

$285

$200

50% 36% 26%

$240

CO

MB

US

TIO

N

HY

BR

ID

EL

EC

TR

ICEstimated 2020 Average Content Per Vehicle

As of 2017 Investor Day

Note: Excludes Sevcon

Excellent Balance by 2020


$2.0 Billion - $2.4 Billion of Backlog thru 2020

2018-2020 Backlog as of January 17, 2018

50% of Backlog Related to Hybrid and Electric Propulsion

50% 45% 5%

Note: Excludes Sevcon


Mid-term Organic Growth Outlook

Mid-to-high single digit


Recent Product Announcements

eGearDrive® Transmissionfor the First Automotive Works (FAW) Group’s Besturn B30EV and JunpaiA70E.

Electro-Mechanical On-Demand Transfer Case for the Ram 1500 4x4 pickup truck.

Variable Cam Timing (VCT) Technologyfor the new Hyundai Gamma II engine.

2018 Automotive News PACE Award for its S-wind wire forming process for electric motors and alternators.


Competitive Landscape

Turbochargers

~6

VCT

EGR

Transmission Friction

Transmission Controls

Timing Systems

Starters/Alternators

All-Wheel Drive

Belt Alternator Starters

~5

Hybrid Drive Motors

Disconnect Clutches

Hybrid Modules

Power Electronics

eBooster

Drive Motors

~6

Transmissions

Power Electronics

Battery Thermal Mgmt

Cabin Heating

Average number of major competitors is similar for each product category


2017

12.4%

2020

Low 13% Range

Projected Operating Margin Growth by 2020


15%

16%

17%

18%

20%+

19%

ROI%

2017 2018 2019 SOP Year

Capital Deployment Discipline


Delivering Operating Margins

* The acquisition of Remy was 90bps dilutive to operating margin


Our Strategy is Working

� Continued significant wins across C-H-E

� 2020 revenue outlook of $11.5B - $11.8B

� Margins set to improve through the end of the decade

� Ongoing confidence in long-term growth targets of mid to high single digits

� Approach our customers as a balanced propulsion partner

� BorgWarner remains at the forefront of evolving industry C-H-E-mix

Appendix


Diesel Transition Manageable Over the Mid-term

Diesel Turbocharger

Gasoline Turbocharger Variable Cam TimingGasoline EGR Module

Diesel EGR Module Glow Plug

Revenue impact is neutralized by the end of the backlog period


2018 Full Year Guidance


Organic Sales Growth of ~6.0% - 7.0%$ in millions


12.4% Margin 12.5% - 12.6% Margin

Operating Margins Improve YOY$ in millions


� EPS Guidance $4.45 - $4.50

� Free Cash Flow $550 - $575 million

� CapEx $575 - $625 million

� Share Repurchases $150+ million

� R&D Spending ~4% of sales

� Tax Rate Low 26% range

� 2H’18 $ / Euro FX Rate ~$1.15 / ($90)M

� FY’18 FX Revenue Impact ~$220M

2018 Guidance – Other Items


$650-$730

$675-$800

$700-$825

2018 2019 2020

As of January 17, 2018

$ in millions

Improved 2020 Revenue Outlook of $11.5B - $11.8B


Based on 2017 Sales excluding Sevcon

VW/AudiDaimlerRenaultFordBMWPSAVolvo JLRCVOther

11%5%3%2%2%2%2%2%3%6%

Europe 38%

Hyundai/KiaOther Asia ex. China

7%5%

Asia ex. China 12%

VW/AudiGreat WallFordSAICGMSGMWOther China

2%2%1%1%1%1%8%

China 16%

FordFCAGMAsian OEMsCommercial VehiclesOther

9%7%5%3%4%

6%

Americas 34%

Long-Standing Relationships Paying Off


� Timing drive Americas (2019), EU (2019), Asia (2019)

� Variable cam timing EU (2019), Asia (2018, (3) 2019)

� Dual Clutch Module Asia ((4) 2019)

� Transfer Case & Disconnect EU (2020)

� EGR Cooler EU (2017, 2019, 2020), Asia (2018, 2019)

� Plug top Ignition coils EU (2020)

� Plug top Ignition coils Asia (2) (2019)

� Gas 2.0L turbocharger EU (2020, 2021, 2022), Asia (2020)

� Gas 1.5L turbocharger Asia (2018, 2019)

Combustion - Select Customer Awards


Hybrid - Select Customer Awards

� Chain drive for P3 Europe (2018)

� Wet disconnect and controls for P2 Asia (2018, 2019)

� 200V BAS for P0 EU & Asia (2019)

� P2 On-Axis Module EU (2020)

� CV P2 On-Axis motor N. America & EU (2018)

� Exhaust heat recovery system N. America (2019)

� 48V eBooster® EU (2019, 2020)


Electric - Select Customer Awards

� eGearDrive® transmission Asia (2017, 2017, 2018, 2018, 2018)

� Electric Drive Module Asia (2018, 2018, 2018, 2019)

� Electric Drive Module N. America (2019)

� Cabin Air Heater N. America (2017)

� Cabin Air Heater China (2017, 2018)

� Electric Drive Motor N. America (2018)

� CV Electric Drive Motor EU (2019)

� Transmission friction plates EU (2019)


Hybrid / Electric Drive Motors

� Deep systems integration

� 18,000 rpm

� Same motor used for both vehicle propulsion and battery regeneration

� Unique motor & power electronics applications

Bearing

Lamination Stacks / Magnets

Housing

Bearing

Rotor

Stator / Windings


Permanent Magnet Non-Permanent Magnet

InductionCopper

InductionAluminum

Neodinium Assisted Synch Reluctance

Round Wire

Rectangular Wire

Hairpin S-Wind Round Wire

Rectangular Wire

Hairpin S-Wind

H/EV Traction MotorAwarded / Production

Quoted

Wide Variety of Hybrid / EV Motor Topologies

Documents

BWA Investor Presentation-07-27-2018 · 2018. 9. 18. · © BorgWarner Inc. 4 Increasing Diversity of Light Vehicle Production 93M 2023 IHS UNITS* 83M 2016 IHS UNITS* 90M 3M 0.5M