Written by Nathan Gomes
(Reuters) – Aptiv said on Wednesday it would spin off its electric distribution systems (EDS) business into a new company as it looks to focus on its advanced driver assistance technology, sending the auto parts supplier’s shares up 5%.
The move comes as the Dublin-based company takes further steps to boost profitability, after cutting its annual sales forecast in October, as major carmakers focus their efforts on electrification to adjust to a bumpy market.
“We think the EDS spin-off makes sense because it’s a much lower-margin business, with an estimated 2024 adjusted EBITDA margin of 9.5% versus 18.8% for the rest of the business,” said CFRA Research analyst Garrett Nelson .
Nelson called the transaction a “value-creating move” and said the stock could warrant a higher multiple.
The EDS division, which makes key power and signal distribution systems for electric vehicles, is expected to be spun off by March 31, 2026.
After the spin-off, Aptiv (NYSE: ) will focus on providing complete sensor technology to the cloud, including advanced driver assistance systems and in-cab software.
The company counts major automakers such as the Detroit Three, Volkswagen AG ( OTC: ) and BMW ( ETR: ) among its key clients.
The auto industry faced a challenging second half of 2024, hit by competition from Chinese companies and falling consumer demand due to inflation and economic concerns, which saw many manufacturers favor higher-margin SUVs and hybrids.
US President Donald Trump also rescinded the previous administration’s executive order on electric vehicles that sought to ensure that half of all new vehicles sold domestically by 2030 would be electric.
