GKN PLC (LON:GKN) is throwing everything but the kitchen sink at developing electric vehicle technology to respond to demand for lower emission automobiles.
The aerospace and automotive engineer is expected to incur higher material costs and capital expenditure in the second half as it boosts investment in its eDrive products for hybrid and all-electric vehicles.
READ: GKN boosts investment in electric vehicle technology as it reports rise in first half profits
A shift in focus towards electrified drivetrains has started to pay off for the group, having secured two major orders from BMW and Volvo.
“The group is alive to the dangers a shift to electric vehicles might pose and an early move into the market has given it a strong position, with 400,000 systems already delivered to the group’s global customer base,” said Nicholas Hyett, equity analyst at Hargreaves Lansdown.
GKN faces potential challenges in electric vehicle market
However, some analysts have voiced concerns about potential stumbling blocks.
Liberum analyst Ben Bouren said the automotive division, GKN Driveline, is faced with disruption from electric vehicles as it has set out a number of ambitious targets.
GKN has agreed to supply its new lightweight VL3 constant velocity joint on the new BMW series and its eAxle hybrid-electric technology for the Volvo XC60 and V90 models.
The company is also providing its Family 2 eTransmission system to the new StreetScooter pure electric van, used by Germany’s postal operator, Deutsche Post.
GKN has chosen China as it global production hub for electrified driveline in 2018, when the latest output of its eDrive technology begins.
GKN expects another year of growth in 2017
Following the actions taken in 2016, GKN expects this year to see continued growth. Chief executive Neil Stein said a focus on key areas such as electrified drivetrains and additive manufacturing is paying dividends and “underpins our confidence in the longer term”.
“Our reputation for technological leadership in our key markets, our focus on driving flexibility and productivity through our manufacturing plants and our market leading position in all three divisions mean we are well placed for the future."