Aptiv at Wells Fargo Conference: Strategic Shifts Amid Industry Challenges

On Tuesday, 10 June 2025, Aptiv (NYSE:APTV) took the stage at the Wells Fargo Industrials & Materials Conference 2025, providing insights into its strategic direction amid a dynamic automotive industry landscape. The company highlighted its adaptability in addressing both opportunities and challenges, such as electrification and supply chain management, while outlining plans for a significant business spin-off.

Key Takeaways

• Aptiv plans to spin off its EDS business by Q1 next year to enhance focus and flexibility.
• The company is reinstating guidance after addressing tariff uncertainties, with production trends aligning with expectations.
• Management is focusing on operational excellence to mitigate risks like labor inflation and semiconductor shortages.
• Aptiv is enhancing its presence in China, with a significant share of revenues now from local OEM platforms.

Financial Results

• Q2 production trends are on track, with full-year light vehicle production anticipated to decline by 1-2%.
• Aptiv plans to reinstate its guidance in the Q2 earnings call, having previously removed it due to tariff uncertainties.
• The company has maintained strong margins in China through strategic cost structures and supply ecosystem development.

Operational Updates

• The spin-off of the EDS business is scheduled for Q1 next year, with a Form 10 filing expected this summer and investor days planned for November.
• Aptiv is addressing corporate overhead dis-synergies through aggressive cost reduction plans.
• The company is actively managing its supply chain and regionalizing production to mitigate risks like labor inflation and semiconductor shortages.

Future Outlook

• Aptiv is poised for growth in its ECG and ASUX businesses, with significant non-automotive opportunities for the EDS business.
• The company is focusing on open platform solutions to offer customers flexibility in semiconductor supplier choices.
• Electrification growth in the US market is expected to be low, with a shift towards hybrids and plug-in hybrids.

Q&A Highlights

• Aptiv noted that automakers are struggling with in-sourcing efforts, leading to a preference for Aptiv’s open platform solutions.
• The company is ensuring customers have optionality and are not locked into expensive ecosystems.
• Revenue drag in the ASUX business is expected to resolve by the end of the year, with a focus on cockpit digitization.

In conclusion, Aptiv’s strategic initiatives and operational adjustments underscore its commitment to navigating industry challenges and delivering long-term shareholder value. For a detailed account, refer to the full transcript below.

Full transcript - Wells Fargo Industrials & Materials Conference 2025:

Colin, Host: I’m excited to host the next fireside chat. It’s one of the few overweights.

Most of you probably know I’m fairly cautious on the sector right now. But I think there’s good catalysts here with Aptiv spinning their EDS business, I think, to focus on the connectors, software and active safety, which are sort of the higher higher growth areas and sort of, I think, make a favorable sum of the parts comparison when that happens. And it’s also one of the few companies that I think has still has a pretty good secular growth story, which I think is pretty key from my perspective in this sort of challenged production environment, which I guess we could talk about fairly shortly. So I’m happy to kick it off today with Aptiv’s CEO, Kevin Clark and CFO, Varun LaRoya. If you have questions, definitely jump in, but I’ll just kick it off.

Maybe to start, I mean, obviously, last quarter, you removed guidance because of the tariff uncertainty. What do you need to see to sort of reinstate it? And how are things currently trending from your perspective since you reported?

Kevin Clark, CEO, Aptiv: Yes. So thanks for having us here. Appreciate it, Colin. Yes, as we look at the year and we look at our announcement from a Q1 standpoint, so we gave guidance in February following Q4 for a full year outlook. And then in Q1, obviously, we went through that period where there’s a lot of discussion about trade, a lot of discussion about USMCA and I would say a diminished visibility into the probably the back half of the year really.

We felt like we had very, very solid visibility to the second quarter. We had a sense for where, the US administration was headed and what they were sensitive to, priorities for Mexico, EU, and to some extent China, but we needed to see all that play out. And obviously, with, what you’d read about in the newspaper, was tough to predict from a day to day basis. And quite frankly, our customers weren’t really quite sure, which at the end of the day, to Colin’s earlier point, vehicle production is what drives our revenue growth. So we gave guidance for Q2, which we had a high level confidence and we could tell you, we still have a high level of confidence.

And so we had very solid visibility to near term production schedules, but it was really the back half of the year and how that plays out. So for us, time has passed, so that’s been beneficial. I’d say there’s more visibility with respect to The US and what the Trump administration wants from USMCA standpoint, so that’s been helpful. Obviously, there’s still a lot of dynamics between U. S.

And China, U. S. And EU that need to play out. So we just need to get a bit more visibility to that. But we’re hoping on our Q2 earnings call, we’re in a position to give better visibility in the back half of the year and more clarity

Colin, Host: I mean how are you thinking quarter Q2 production trending as you kind of expected heading into the quarter? And any thoughts about how the rest of the year might trend?

Kevin Clark, CEO, Aptiv: So Q2 production, pretty much trending as expected. Back half of the year, we’ve seen some movement of schedules. We’ve seen relative to when we gave full year guidance in February, North America schedule is a bit weaker. Some small changes in EU principally in and

Varun LaRoya, CFO, Aptiv: around EV

Kevin Clark, CEO, Aptiv: platforms. And quite frankly, China, stronger. But net net, I’d say, by and large, all of them washing each other out. So I think a slight mix change from a regional standpoint, from an OEM standpoint. But the industry looks like it remains relatively on pretty decent footing at this point in time.

Colin, Host: And initially, were guiding light production down 3%, North America down 5%? Correct. So down three seems like it might be still good on down 5%.

Kevin Clark, CEO, Aptiv: Think if we were sitting here today for the full year, we’d probably say, just given the uncertainty, the down 3% is down a point or 2% for the full year. I think that’s where we’ll likely end up. But again, we need to see how things play out.

Colin, Host: And the very positive news last quarter was that you said you’re 99 plus percent USMCA compliant. Do you for that 1%, do you have to move anything? And is that a competitive advantage? Do you think you could take maybe share from people who aren’t compliant and may be disadvantaged as they bid on business in the future?

Kevin Clark, CEO, Aptiv: Yes. So over the last probably over the last decade, we’ve been very focused on how do we regionalize our supply chain as geopolitics change. So that’s something that’s been underway for an extended period of time. So we manufacture and supply, and we’re almost matched up 100% of demand versus supply in region for region. So that’s China for China.

That tends to be Eastern Europe, North Africa for Europe. And then for us, Mexico into The U. S. So we’re pretty well matched. I think that USMCA position where we are today, and it varies a little bit by product.

So when you think about wire harnesses, for example, in North America, everybody is in Mexico. That’s where that’s produced. So I wouldn’t say our footprint is a competitive advantage, our capabilities are. But when we look at our ADAS solutions, our user experience solutions, our interconnect solutions, we’d have some competitive advantage. That’s certainly something that we’re having discussions with customers about, especially those that are non U.

S.-based customers that actually are trying to have more USMCA content. So we’ll see how it plays out.

Colin, Host: So there is some opportunity maybe on the Active Safety Obviously, a big part of the story has been growth over market. That obviously softened last year more than we’ve seen. How is that tracking? I mean, obviously, you withdraw guidance, but you were initially expecting to return to growth over market. Any factors that might

Kevin Clark, CEO, Aptiv: Think need to recognize kind of growth over market and the underlying the denominator in that, right? That’s global vehicle production. There’s 100 plus OEMs across the globe, all with different mix and on a quarter by quarter basis, quite frankly, all with different growth profiles based on their platforms. So you can have really strong revenue growth and have lower growth over market. I think we got to move from this growth over market concept to growth Because there’s an aspect of OEMs out there that in reality, especially China as an example, investors, you don’t want us on their vehicles.

They’re not high volume. They’re not going to be successful OEMs. It’s not profitable business. So I think when you look at holistically, we really need to transition to growth. Are you growing?

If vehicle production obviously, we update investors on a quarterly basis with respect to current quarter and our outlook for the balance of the year. But that in and of itself, I think we need to back off that a little bit. And are we winning business? Are we growing? Are we expanding margins?

Are we generating cash flow? Get to a KPIs more consistent with that. Okay.

Colin, Host: What about kind of factoring on that as one of your issues has been the China local mix. I think it’s pretty much almost all the suppliers have had a fair index there. Where are you today? Because I think you’ve kind of caught up a pretty big step last year. And then when do you kind of get in line with the market in China So from a

Kevin Clark, CEO, Aptiv: booking standpoint, when you look at our mix of revenues versus mix of industry production by class of OEMs, so multinationals, Tesla and local OEMs. We’ve been roughly increasing our share of locals, so BYD, Geely, Cherry, Great Wall can go through the list. Roughly from a bookings rate, roughly 10 points per year over the last three years. So we’ll exit this year at roughly 70 of our revenues will be on local China OEM platforms, some of them for the China market, some of them export, all really focused on the top kind of eight or 10 OEMs in China. We don’t pursue business below that, just given concerns about sustainability of that sort of business and profitability.

So we’ll exit this year that basically industry mix.

Colin, Host: And last year, you were like, was that like 5054%.

Varun LaRoya, CFO, Aptiv: At the end of 2020. Yeah.

Colin, Host: So you’re closing I think our revenue,

Varun LaRoya, CFO, Aptiv: The trajectory based on the bookings and the awards that essentially are, you know, SOP, that’s the kind of run rate exit is called 70%, which is which is market parity.

Colin, Host: Okay. Why that? Is that because the the product cycle is so much faster in China that you’re

Kevin Clark, CEO, Aptiv: able to catch up? It usually takes three to five years to that like a Listen. China, your awarded programs, and they tend to launch within a twelve month time frame, even less, you know, nine to twelve So a much faster launch period.

Colin, Host: And you’re not finding any concerns about wanting to use local competitors and Chinese competitors? That’s a a top concern I hear among investors. Are we are are Chinese locals more biased to use their their local supply chain?

Kevin Clark, CEO, Aptiv: No. Let’s focus what we’ve experienced. Well, let me back up a little bit. I and just just the commercial for our China business. We’ve been in China for thirty five plus years, and we have local capabilities from an engineering development manufacturing supply chain standpoint and a China management team.

So when you meet with our teams in China, it’s it’s a local Chinese automotive supplier but has the benefit of the scale of a global organization like our own. Obviously, our products need to be competitive from a performance standpoint. Quality needs to be competitive. Pricing or value needs to be competitive. And as long as you have that, you’re in a solid position.

Now with players like BYD, Geely, Cherry, others, we’re very active on their either their export platforms or some of them, as you know, are launching production outside of China. A global player like ourselves with the supplier ecosystem is well positioned to support them in doing that because we have the relationship in China as well as the capabilities outside So that uniquely positions us.

Colin, Host: What about the margin profile with Locals in China? Because I’ve heard from other when I go to industry conferences, a lot of suppliers are actually worried about how profitable the local China business is at a possibly lower margin than traditional supplier business. The market’s competitive.

Kevin Clark, CEO, Aptiv: You have to choose your spots. You have to have a very competitive cost structure, which we do. So we’ve been very focused on rotating footprint, for example, in China to Western China manufacturing as well as, engineering. We’ve been very focused on developing the China supply ecosystem. So using a China supply base, right, that that is more cost effective than some of the western players.

And because of that, we’ve been able to maintain our margins in China while growing. But it’s something that each unique pursuit, we look and we watch very, very closely.

Colin, Host: Let me switch to the EDS spin. Is that still on track for Q1 of next year? What are the sort of next milestones we should be looking out for when maybe we get the management team or stuff like Yes.

Varun LaRoya, CFO, Aptiv: Great question. So we announced the spin of the EDS business January the January 22, actually. And, you know, as you can imagine, a lot of work has been taking place. We have a full stand up separation management office. We’ve supplemented it with some external resources also, but largely by the team that essentially did Project Drive, which was the spin of the powertrain business in 2017.

So we had the old muscle to be able to work through the entanglements and work through the separation process And that work is on track. That work is on track. The Form 10, the carve out financials, those are on track also later this summer. We’ll begin this is kind of getting to the more nitty gritties of it, but the kind of mock close for the spin business, for example. So all of those pieces are as expected, right?

Same thing with the cap structure, and getting in place, the broader management team. As you can imagine, we have a tremendous set of operational management team, and that’s the way each of our businesses operate, a series of activities which are done by corporate, tax, treasury, IR, things along those lines. So we do need to supplement certain functions you know, from that perspective for, the spin. But other than that, we feel comfortable and confident about the timeline that we’ve committed to. And should we

Colin, Host: expect, like, an investor event later in the year or something like that?

Varun LaRoya, CFO, Aptiv: That’s right. So thank you for the form. That 100

Colin, Host: That would be the end of the summer, end of Correct.

Varun LaRoya, CFO, Aptiv: An investor It’s the public form 10. We essentially, you know, would like to announce, you know, alongside our third quarter earnings, so subsequent to that, and then hold two investor days, one for EDS and a one for RemainCo or new Aptiv, the November. Okay.

Colin, Host: From my perspective, the spin sort of highlights some of the parts, particularly with connectors maybe comping to much higher value companies. What are the operational benefits that you get from investors? What is helping the business operationally from the spin? And are there any dis synergies with the spin that we should be considering?

Kevin Clark, CEO, Aptiv: There are some dis synergies related to corporate overhead, right? Large organizations bringing to the small organization. Verint is leading that activity, so in terms of of eliminating any of the of the stranded costs. So we have an aggressive plan on that that the that’s a part of the separation office that that that that Verint was talking about. So that’s something, obviously, we’re all over from a from a you know, synergies tied to the separation, really, comes down to focus.

It comes down to more flexibility for the EDS business to focus on its product strategy, its customer strategy. Similarly for the ECG and and and ASUX businesses, we’re positioning both for growth, both organic as well as as inorganic. And as separate entities, it’s easier quite frankly, easier to do to to to do m and a just given the financial profiles and the nature of those those two businesses. From a dissynergy standpoint, we run our our businesses as global p and ls. Right?

So global P and Ls, balance sheets, and and and operational responsibility. We don’t have shared very few shared facilities, none in the manufacturing side, very little on the engineering side, some from a corporate or group overhead standpoint, but it’s small. So from that standpoint, the separation is actually pretty pretty easy.

Colin, Host: So when we think of the spin, EDF, there’s not much of acquisition there. So where the focus would allow the remain co to do more activity there? Well, listen. I I I

Kevin Clark, CEO, Aptiv: we think there’s opportunity in both. So when you look at the EDS business, it’s the number one or number two by region global wire harness company across the globe. Principally, full service, business where where that business is designing and optimizing full body, full wire harnesses for OEM customers. It’s well north of 50% of our revenues. So very little sort of build to print.

It’s a great platform to build off of, within the automotive space. There should be opportunities to consolidate and bring others into that. But we also think there’s some fairly meaningful nonautomotive opportunities there too. So so there is a growth focus there too and opportunity for M and A. Now when you look at the ECG business and the ASUX business, higher margin profile, naturally higher growth profile for those businesses.

Path towards software defined and vehicle connectivity obviously remains very strong. So obviously, they’re both organic and inorganic opportunities for those two businesses as well. But just both are going to be positioned for growth.

Colin, Host: And then when I look at the at least the segment margin for EDM, they’re much higher than sort of wiring comps that I’ve seen, and there’s not many. Why do you think they’re stronger than It’s

Kevin Clark, CEO, Aptiv: to that business mix I talked about in terms of that full service that the value that we bring to our customers from a full service design as well as manufacturing of wire harnesses. So we bring more value. Therefore, we receive more value. So, obviously, it’s it’s a business where those of you that are familiar with it, it’s low cost, you know, country manufacturing. Right?

You need to run your manufacturing facilities effectively and efficiently. We do that well. To be transparent, our our our strongest competitors do that relatively well too. It’s really about that mix of business and the value that we bring to our customers where we save the money and we’re able to share in some of the benefits that we bring to them. It makes a real difference.

Colin, Host: Were you referring to the the fact that you don’t do build to print? Some of your peers do, which would be lower margin because you’re not adding any engineering. Okay. You talking about margins, last year, you actually on relatively flat sales, expanded margin. How should we think about that going forward?

I mean, is there more restructuring opportunities and cost savings that could continue that? Or is it really now just we got to grow and you got the leverage on growth that typically drives the margins? So listen, it’s not a question of either. It’s an and.

Varun LaRoya, CFO, Aptiv: We’ll grow the business, right? And as you think about some of the comments Kevin mentioned earlier this morning in terms of where we see higher margin growth, within our businesses, those continue. So it’s growth and then also the margin side of things, right? And so revenue growth remains a focus for us. And then from a margin perspective, yes, clearly with a higher top line, it gives you more opportunity.

But having said that, as you’ve seen, the operational excellence muscle that the company has across each of our businesses across every region is tremendous, right? And we’ve talked about footprint rotation. We’ve talked about footprint consolidation. We’ve talked about best cost location for engineering talent, where are the cars being made and hence how do we get them closer to where the markets are. That activity continues.

The one piece that we don’t talk enough about, our Wind River business for example and within that if you think about the engineering tool chain, which allows engineering, departments to be able to develop that much more on a cross border basis more real time and that much more efficiently. We are eating our own cooking, right? And so we’ve actually deployed that piece across our engineering teams on a global basis and that continues to proliferate based on when new platforms get ramped up. You can’t put them mid program, but as those come on, we’re deploying we are seeing, efficiencies come through there and we’re certainly seeing that take place with our customer set also. So again, there’s more opportunity.

The final one is, listen, with regards to higher productivity, we’ve done a GSR at the end of twenty twenty three you know, and the vast majority of it came through in 2024, some into ’25. And then for ’25, we’ve done a further 5%, in GSR. Some of it will come through in 2025 and then, you know, the run rate will really be coming through in 2026. Said differently, there’s a series of opportunities and levers, but growth remains a priority. Okay?

And then, you know, it’s an and rather than an either. Actually, the other thing

Kevin Clark, CEO, Aptiv: I’d add to Verint’s comment is just supply chain. So those of you that are really familiar with us, those are are very well aware. 2020 COVID, cost that came into the system, supply disruption that lasted into 2021, overlay on top of that semiconductor disruption, 2021, 2022, 2023, and that impact on our supply chain and our operations and the inefficiencies that it created. I I’d say a a big part of that, Colin, I think we’ve talked about it to you in the past, was also in ’24 kinda getting all that inefficiency out, getting back to normal, driving, you know, performance, whether it’s in manufacturing, whether it’s in material, those sorts of things. So we went through this period where it was kinda hand to mouth in terms of keeping our customers connected, our employees safe, and we’re past that.

So

Colin, Host: Talking to some industry experts on active safety, there’s a concern about where a traditional Tier one supplier might fit in the supply chain because you have the automakers keep talking about how they want to take a more active role in active safety and, I guess, external architectures as well. And then you do have the NVIDIAs and Qualcoms of the world also taking a larger role. So how are you managing that dynamic to make sure you still have an important role, and where do you see that evolving going forward?

Kevin Clark, CEO, Aptiv: Yeah. Listen. I I think, you know, we we it’s tough for us to react to what people are saying. We can we can certainly tell you what we’re seeing. Right?

We’re seeing the exact opposite. Right? We’re seeing with those OEMs, whether they’re European or US based, who are more most vocal about they’re going to bring certain activities in house. The reality is they’ve tried it, and more often than not, they failed. And they’ve spent a lot of money trying to do certain things that, for some reason, for some period of time, they deemed core.

And after they tried to do it, they spent a lot of money, and they’re they’re, they’ve kinda changed their objectives. So, there are several OEMs that, quite frankly, I I would say, whether they were existing customers or or conquest customers, where we’ve seen them do a one eighty. Now having said that, I just having said that, our our our approach has been we need to give customers choice. We need to give them what we they want. So we’ve we’ve built an open architected solution so they can contribute to that if they’d like.

They can take all of it if they’d like. It’s chip agnostic. So if if they’re focused on on using a, you know, for a controller, an NXP chip or a TI chip, or in China, an XERRA chip, they can do that. From a vision standpoint, it’s fairly vision agnostic where if they wanna use a mobileized solution, if they wanted to use an Arriver solution for Qualcomm, we can we can do that. We use we use as our our base solution for our Gen six ADAS solution, a StradVision solution, a company out of Korea that we have an investment in.

And then in China, it’s MaxiEye for a China based solution. So we’re going to them with very open platforms where we can partner with them, we can give them flexibility, we can give them choice. We like the full system solution that we provide because our view is it’s 20 to 30% lower cost at at equal or better performance. But, you know, customers are looking for choice. So

Colin, Host: What about the the semi supplier side of that? Because, to be honest, I I have your hesitation about the automakers and their ability to kinda do some of the more complicated software. But, you know, the NVIDIAs of the world seem like quite, you know, competitive know, compelling threats, and then there’s this sort of view that they might be, becoming, like, tier half or whatever. Like, kind taking a more integrated role with the OEM. No.

Kevin Clark, CEO, Aptiv: I I think, listen, I think there are elements of of some of the semiconductor players are trying to put more software on their semiconductor chip. That’s obviously under understandable. But from a cost standpoint, from an integrations capability standpoint, and from a lock in standpoint. So we’re very focused on how do we make sure our customers have optionality, the choice. They’re not locking into a particular ecosystem that is very expensive to unlock.

And that’s been our approach in terms of going to going to market with them. And and so far, it’s it’s been pretty successful.

Colin, Host: Any update on smart vehicle architectures? We saw last year with the Rivian Volkswagen deal. It’s quite caused a lot of concern. How has your sort of backlog trended? And are you seeing kind of hear more talk on the same type of in sourcing concern?

Are you seeing mixed OEM.

Kevin Clark, CEO, Aptiv: I think let’s start with I think the here and now, all the discussion about tariff trade, our customers are focused on that. That is where our customers are focused. So I think it’s dragged out ultimate decision making on, quite frankly, a number of different things. I think as it relates to smart vehicle architecture, we’re working with several OEMs, global OEMs. We’re working with several China based OEMs, local OEMs, on their smart vehicle architecture approach.

So the demand is there. I think it’s transparently with the slowdown in electrification in North America and then the trade situation, it’s slowed a little bit in this market, moving faster in China than or in Europe versus North America. And then China, would say a relatively stripped down version of zonal controller usage. When I say stripped down, not fully optimized, not at the same level of content removal from a wire harness standpoint that we’re talking to our European and U. S.

Customers about. When do

Colin, Host: you think these platforms hit in sort of scale that will stay notable uplift? It’s scale sorry.

Kevin Clark, CEO, Aptiv: In the late end of this decade, 2829 period. Maybe

Colin, Host: talk a little bit about user experience. Experience. That has been I think it was down double digits last year. What is the trajectory there? How strategic is that long term from your perspective?

Has been sort of

Kevin Clark, CEO, Aptiv: a drag on so the drag on growth principally relates to two very large, very legacy infotainment programs, one in China with a multinational JV and one in Europe. That business is transitioning, so we’ve won a number of programs that will start to come online end of this year. The mix of that product is, in addition to what we used to call parts of infotainment, there’s a bigger piece that’s in cabin sensing now, broadly speaking, or cockpit digitization. We’re starting to see in China the fusion of the ADAS controller and the cockpit controller, so they’re coming together. We’re working with a few of the semiconductor folks on a few semiconductor chips that serves both.

If you were at our CES show the last two years, you’ve seen that. Actually, a Chinese chip manufacturer, Black Sesame, that we’re working with for the China market. So it has strategic importance as those domains kind of come together ultimately, and you have a consolidated hardware stack and you have consolidated software stack. So it’s important. The revenue drag we’ve seen or growth drag in the ASUX business when that space is, again, it’s two programs.

So that should be behind us by the end of this year. Any questions in the audience

Colin, Host: before I kind of figured people would

Varun LaRoya, CFO, Aptiv: raise their head. Any update on Wind River? You mentioned it earlier. How is that progressing versus your initial plans? And listen, core business performing well now.

Q4 was a strong quarter. Q1 was a strong quarter. It’s on track to grow double digit in 2025. I think if I were to double click on the background, the question behind the question, Colin, perhaps was, was it a slower start since the time we acquired it just over a couple of years ago? Yes.

But I think predominantly going to the rollout of five gs, for example, right? But the business is more than holding its own. We’ve invested from a sales perspective, from a product perspective and the business is, beginning to win some new logos. In addition to areas where they were strong in aerospace and defense and telecommunications, The auto side is coming along nicely also. So yes, overall, we feel good about it.

And as I mentioned, products such as Studio Developer, which actually helps businesses optimize engineering tool chains, coming along well.

Colin, Host: What is your view currently on PHEV? I mean, is that I mean, that was a drag last year, which no one expected. Is that starting to pick back up? I mean, it doesn’t look like EV sales are that great in The U. S, but I guess you’re turning a little bit.

Kevin Clark, CEO, Aptiv: Yes. Listen, we’ve we had headwinds on EV growth in North America given program timing last year. We never viewed I think 70 plus of our bookings were Europe and China for EVs historically. So outlook for electrification in The U. S.

Market, I’d say, is relatively low growth, but we continue to see our North American OEMs adopt electrification. They’re all working on BEV platforms. I’d say there’s more focus on hybrids, plug in hybrids. And they’re doing that because, again, they work on product life cycles that are beyond election cycles. And in reality, the industry will say it’s headed toward electrification.

It certainly is in Europe at a much faster pace than The U. S. At a slower pace than what we originally anticipated, but you’re seeing EVs grow, certainly seeing plug in hybrids grow. So to be relevant in those markets, the North American OEMs have to have electrification capability. And in China, the Chinese OEMs are all in.

I mean, that’s the fastest growing sector from an overall product standpoint. So we see significant opportunity. It’s important we’ve talked about this in the past. When you look at our content, our vehicle architecture content on an ICE vehicle, it averages about 600 or $700 That’s on average. You look at it on a plug in hybrid, it’s close to $1,300 You look at it on a bev vehicle, it’s north of $1,400 so over 2x.

So the unit growth is helpful, but also that content growth is really helpful. And that’s consistent by market, China, Europe as well as North America. So that’s a tailwind in Europe and China that certainly our ECG business as well as our EDS business is well positioned to benefit from. And it’s an opportunity to drive incremental growth. And again, we view it as a secular trend that’s going to continue.

May see a pause in North America, but it’s going to continue. Any

Colin, Host: color on labor inflation? That was a big issue for the last couple of years. I haven’t heard much about it. Is that much more moderate at

Kevin Clark, CEO, Aptiv: this point? Is it still an issue? Yes. We still see it in Mexico. We still see it in North America.

Mexico over the last couple of years has been the biggest challenge. Our wage rates in Mexico, hourly wage rates over the last five years have increased, I think, 2.5x, so between 2x and 3x. So massive labor inflation both from a wage rate as well as social benefit standpoint. So the prior Mexican administration was very, very focused with all the onshoring, given some of the geopolitics, how does the administration take advantage of it? It slowed this year, but it’s still relatively significant.

It’s double digit inflation. And from a wage rate standpoint, we’re watching in terms of incremental holidays, vacation pay, things like that. And that’s factored into our longer term guidance. And that’s part of our rationale about how do we drive more efficiency, more facility consolidation, how do we bring more automation into aspects of the wire harness production. So those are areas that we’re investing in so that we actually reduce our dependence upon, you know, low cost labor and we’re less impacted by them.

Colin, Host: All right. I think we’re actually out of time, so I’ll wrap it up there. So thank you very much. Great. Very much.

Thank you for having us.

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