Sweden’s SKF 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 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.
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.
“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 , NSK and JTEKT 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.
source: Reporting by Johannes Hellstrom; editing by Niklas Pollard and Alexander Smith
