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transformation

The automotive industry is undergoing a transformation of considerable scope. Against the backdrop of rising CO₂ emissions and global commitments to reduction under agreements such as the Paris Climate Accords, many countries have introduced a range of regulations – some extensive – targeted specifically at the automotive industry. In 2023, for example, the EU Commission imposed a ban on the registration of new combustion engine vehicles from 2035. Meanwhile, the signatories to the Glasgow Agreement have pledged to phase out combustion engines by 2040.

In Europe, and notably in Germany, the regulatory measures outlined above have been the central focus of debate in recent years. On the one hand, calls were made to relax or defer the implementation of these legal provisions. On the other hand, proponents stressed that the trajectory of global climate change had made a reduction in carbon emissions imperative. In the context of these discussions, the EU Commission introduced a modest relaxation of the original ban in 2025, while upholding the goal of fostering the use of alternative drive technologies. In the United States, meanwhile, a number of regulatory and supportive measures have been lifted, while China continues to rely on binding regulations and state-led incentives for alternative drive technologies.

Regardless of any adjustments to these regulatory provisions, market experts such as S&P Global Mobility anticipate that the share of battery electric and hybrid vehicles in the various regions will continue to grow until the end of the decade. Battery electric and hybrid vehicles are expected to account for around 70% of the total number of vehicles produced worldwide in 2030. This percentage is set to rise significantly in China in particular – a trend underpinned by consumer behavior. In fact, according to a McKinsey survey, only 18% of respondents in the Chinese market intend to buy a combustion car as their next vehicle. In Europe and the United States, this proportion is significantly higher at 49% and 70% respectively.

This process of transformation also brings change to ElringKlinger. The Group is honing its profile with a view to reinforcing its overall competitiveness. This objective forms an integral part of the SHAPE30 transformation strategy, encompassing the five success factors #1 Product Transformation, #2 Sustainability, #3 Performance & Process Excellence, #4 Digital Transformation, and #5 Corporate Culture. In an effort to achieve its overarching goal, ElringKlinger is focusing on its highly competitive product groups for the purpose of strengthening the Group's profitability, particularly in the Original Equipment segment, and generating sustained cash flow. At the same time, the proportion of revenue generated by products unrelated to combustion engine technology is set to grow significantly, which will also coincide with a change in the Group's revenue structure. By 2030, this share is expected to be around the half. For ElringKlinger, the transformation process is visible both across the industry and within the Group, as reflected in every area of the Management Board’s responsibilities, as the following pages illustrate.

Mr. Jessulat, the automotive industry is undergoing a profound transformation. In which areas are you experiencing this at ElringKlinger?

Throughout the Group, the process of transformation and its effects are tangible on a daily basis, from evaluating markets and developing and manufacturing our products to advancing the Group in strategic terms. From a personal perspective, my focus is on the implementation of our SHAPE30 strategy, which serves as a blueprint for successfully guiding ElringKlinger through its transformation.

How do you intend to leverage this change for ElringKlinger?

In the context of SHAPE30, we reaffirmed what lies at the core of ElringKlinger: a global Group driven by innovation and technological expertise. We were quick off the mark in addressing issues of the future and developing solutions. As a result, we are now able to offer a compelling product portfolio across various drive technologies: innovative solutions built on our core competencies in electromobility – with market-leading components from the field of combustion engine technology forming the backbone. Our transformation is underpinned by a strong market position anchored in well-established products.

What indicators demonstrate the Group’s transformation?

SHAPE30 is aimed at strengthening our competitiveness. We have already taken key steps to achieve this over the past two years. This includes the divestment of two subsidiaries in Switzerland and the United States as well as the closure of sites in Thale that would have required substantial investment. However, it is essential that we continue to advance along this path. We must maintain a position that allows us to respond swiftly and efficiently, with a clear market-oriented focus. In the current landscape, this is critically important.

Where do you see the major challenges for the future?

For us, the principal challenge in implementing SHAPE30 stems from navigating the interplay between honing our profile and driving revenue growth in electromobility. Successfully addressing this requires finding the right balance. To this end, we have already streamlined our activities, as just mentioned: We have sold companies, decommissioned sites, and discontinued unprofitable product groups. At the same time, however, we are tasked with managing the ramp-up of high-volume production orders in the electromobility sector. We have laid the necessary foundations in the form of targeted investments over the past two years and are now entering the next phase of our transformation.

What is at the heart of this phase?

Following the substantial investments of recent periods, capital expenditure is expected to return to more normal levels again. The forthcoming phase of transformation will be dominated above all by revenue growth. In this context, we will be looking to meet our profitability and cash flow targets as part of SHAPE30 and thereby increase our enterprise value. We are on track to achieve this.

Mr. Jessulat, thank you.

Ms. Damen, where do you as CFO observe the transformation on a daily basis?

Within my area of responsibility, I encounter the transformation directly at multiple touchpoints. Beyond IT, this is particularly evident in the field of Finance. It is in this area that we are building on the success of our strong market position with well-established products to unlock opportunities for new product solutions.

What does that mean in specific terms?

In recent years, we have secured several large series production contracts for the Group in the E‑Mobility segment. Obviously, we also had to be in a position to finance preparations for the associated ramp-ups. Most of the steps have already been completed. Our achievements in the other business units provided the room for maneuver necessary to implement the investments and development measures for these orders in recent years, while simultaneously meeting our financial targets for 2025.

How is the future path charted in this respect?

Production for one of these orders was ramped up last year, with additional projects scheduled to follow. As anticipated, this means that we are generating significant revenue growth in this area. This will support us in our efforts to reach break-even in the E‑Mobility business unit and achieve our medium-term targets for the Group. With a view to bolstering our competitiveness, we want to improve our profitability, particularly in the Original Equipment segment, and generate sustained cash flow. In the medium term, this translates into an adjusted EBIT margin for the Group of around 8% and operating free cash flow of around 2 to 4% of Group revenue.

Why are these goals of such importance?

We are committed to enhancing the value of the enterprise in order to ensure our resilience to market changes and to help shape the future of mobility in 2030 and beyond. Having sufficient scope for action is of critical importance to us. This also explains our strong focus on the net debt-to-EBITDA ratio.

And it…?

...it, i.e., the ratio of net financial liabilities to earnings before interest, taxes, depreciation, and amortization (EBITDA), was 2.0 in 2025 and 1.6 when adjusted for the exceptional effects of transformation. This is fully in line with our target for 2025; it also represents a comparatively low figure when viewed against the backdrop of substantial investment. Over the medium term, we are targeting a range of 1.0 to 2.0.

You mentioned IT. To what extent is the process of transformation evident here?

Digital transformation has been defined as one of our success factors within SHAPE30 and is therefore central to our successful transformation. Our aim is to drive digitalization forward, embrace innovation, and harness the associated benefits – for our customers too. A case in point is product traceability, which represents a key element in our ongoing development efforts. It is important not only in the delivery of our products but also, of course, in the procurement of raw materials and intermediate goods. At the culmination of this journey, the ultimate goal for the future is the digital factory.

Ms. Damen, thank you.

Mr. Drews, in your role as COO of the ElringKlinger Group, where do you observe the transformation most directly within your area of responsibility?

We are engaging with the transformation and its effects at every level of our operations. My focus is on shaping change at an operational level – through efficient processes, a high level of quality, and scalable structures. First and foremost, we are currently laying the groundwork for production associated with large-scale orders in the field of electromobility. Here, we are familiar with the product properties, materials, and processes. We have established the capacity to handle the large volumes of these orders on a global scale. At the same time, our focus within the operational corporate units is on ensuring that quality standards are met and that supply chains for the new products function smoothly from the outset. Uniform standards, transparency, and consistent performance management are central to our daily activities.

How do the requirements for future mobility differ from those of today’s solutions?

Take cell contacting systems, for example: in terms of the core competencies involved, there are clear parallels with cylinder head gaskets. The processes of coating, punching, and embossing spring to mind. At the same time, however, we also have to meet purity requirements for some of the battery components. There are additional requirements: in the future, key information will be consolidated in a digital product passport and made accessible to all relevant partners, including details on the raw materials and intermediate products used. This applies not only to production but also to purchasing. Overall, the trajectory is moving toward the digital factory. The ElringKlinger Operating System offers a structured framework for the consistent and efficient implementation of these requirements worldwide.

Do you need a new approach to procurement as a result of the transformation?

Within the purchasing function, we are well equipped to handle the transformation. That said, we are also encountering new circumstances in this area. We have established new supply relationships across the regions of the world to support our operations centered around innovative electromobility products. It is also essential that we enhance the transparency of procured goods with regard to the carbon emissions they cause so that we can consolidate this information and pass it on to our customers. In future, understanding one’s own supply chain will become even more important.

What other challenges do the business units in your area of responsibility face?

Within the R&D functions of each business unit, future efforts will have to focus more intensively on the process of transformation. As early adopters in the field of new drive technologies, we have been supplying e‑mobility components in series production for over a decade. But it is imperative that we make even greater use of our expertise to meet the future needs of our customers. We also have to ensure that our products meet sustainability requirements in terms of environmental performance, especially with respect to the materials employed. The path of transformation will remain demanding.

Mr. Drews, thank you.

Mr. Willers, as CSO, where do you observe the transformation of the automotive industry taking shape within the Group?

We see it in our daily interactions with our customers. We have established ourselves as a trusted partner when it comes to components associated with combustion engine technology. At the same time, the focus is on our innovative product solutions in the field of electromobility. This reflects the transformation of our customers, who are introducing a larger number of electric models compared to previous years.

In which areas do you see especially strong demand for ElringKlinger’s electromobility products?

This extends across our entire product portfolio. The focus is of course on cell contacting systems but also on metal-elastomer seals and gaskets that can be used in electric drives. Or rotor/stator components, where we are able to apply our knowledge of materials and processes specifically to electric drive applications.

Essentially, we leverage our core expertise to develop solutions for our customers and in collaboration with them. This aligns with our vision of being the preferred and indispensable partner for innovative technologies. As we ramp up series production in response to incoming orders, we will increase our revenue share from products beyond combustion engine technology. This is our stated objective, and the route mapped out by our SHAPE30 transformation strategy is designed to achieve it.

Which direction is mobility expected to take in the future?

The direction of the market is clearly defined: fossil fuel supplies are finite, and elevated carbon emissions have to be scaled back globally to protect the atmosphere. This is also set out in national regulations, e.g., in the European Union. The bottom line is that electromobility is expected to continue growing in importance, which tallies with forecasts from market experts such as S&P Global Mobility. However, two points merit attention: the pace of change and the varying developments across different regions of the world. Our activities must be aligned to address this.

What trends are emerging in the respective regions?

Given the significant uncertainty surrounding geopolitical and trade policy conditions, making a reliable forecast is extremely challenging. We are witnessing significant transformation in China, where electromobility has become firmly established. In hybrid vehicles featuring both electric and combustion engines, range extenders play a key role. China is also undertaking extensive research to improve battery efficiency. Europe will have to act wisely and capitalize on its strength in innovation to avoid falling further behind in terms of global competition. North America, meanwhile, has experienced a moderate slowdown in the pace of transformation, to put it mildly.

What direction are you taking in response to these divergent trends?

ElringKlinger maintains a strong market position in combustion engine components. At the same time, we have established ourselves when it comes to components in the field of electromobility. In this regard, we are well positioned to navigate the transformation process, irrespective of potential variations in its pace.

Mr. Willers, thank you.