Continental may end joint venture

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Continental may end joint venture


Continental AG said it may end a battery-cell joint venture with Korean partner SK Innovation because of slower-than-expected growth in demand for electric cars.

“The market for battery cells is less attractive than we thought two to three years ago,” Chief Financial Officer Wolfgang Schaefer said in a telephone interview today.

While there’s general interest expressed in battery-powered vehicles, “people are delaying their purchases.”

Continental, Europe’s second-biggest maker of car components, wrote down 77.9 million euros ($97.4 million) of the venture’s value in the third quarter after discussions on the financial viability of the partnership, which also faces competition from consumer-electronics manufacturers.

The German company plans to decide on the future of the battery-cell business by the end of 2014, Schaefer said.

Demand for batteries for electric vehicles has developed more slowly than manufacturers expected. Carlos Ghosn, head of French carmaker Renault and Japanese partner Nissan Motor and an adamant proponent of the models, dropped a goal last year for the companies to sell a combined 1.5 million electric cars by 2016.

Battery-powered vehicles will probably account for just 1 percent of the global car market by 2020, compared to 0.3 percent predicted for this year, according to estimates by research company IHS Automotive.

Continental and SK Innovation started working together in 2012 to develop, produce and distribute lithium-ion battery systems for cars. The companies agreed in 2013 on a joint investment of 270 million euros over five years.

Competitors include Korean manufacturer Samsung SDI, which has a deal to make batteries for Munich-based premium-car maker Bayerische Motoren Werke (BMW).

The German company yesterday reiterated a full-year forecast that earnings before interest and taxes, excluding one-time items, acquisitions and disposals, will total 11 percent of sales. Third-quarter Ebit on that basis fell 5.9 percent from a year earlier to 962 million euros while revenue advanced 3.8 percent to 8.67 billion euros.

The adjusted operating margin narrowed to 11.3 percent of sales from 12.2 percent.

Bloomberg



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