BorgWarner (BWA) investor relations material

Tariffs and regulatory environment

• Tariff exposure reduced from 1.6% to 1% of sales due to favorable regulations and mitigation efforts.

• Agreements now cover 70% of tariff exposure, with the remainder expected to be addressed soon.

• Tariffs are seen as manageable, but North American production volumes are being closely monitored.

• Improved industry cooperation has helped mitigate tariff impacts, supporting volume stability.

• Teams are actively working on long-term solutions to further reduce tariff impact.

Electrification and product growth

• Electrification outlook varies by region: China leads, Europe follows, while North America remains focused on combustion and hybrid.

• E product revenue outpaced market growth, driven by over 30 new launches and competitive technology.

• Customer intimacy and speed to market, especially in China, are key growth drivers.

• Market share gains are expected as smaller competitors struggle to keep up with scale and investment.

• Outgrowth targets have been set across the portfolio, not just for e products.

Margin performance and cost management

• Q2 EBIT margin reached 10.3%, exceeding expectations despite tariff headwinds.

• Margin strength attributed to productivity, restructuring, supply chain savings, and lower warranty costs.

• Cost of poor quality reduced by 20%, supporting sustained margin profile above 10% for five quarters.

• Consistency and discipline in financial performance are emphasized as ongoing priorities.

• 10% margin is targeted as a sustainable floor, with mid-teen conversion rates as a goal.