BorgWarner (NYSE:BWA) expects its new turbine generator business to generate $300 million in revenue in 2027, as the automotive supplier expands into equipment for data centers and industrial power markets.
CEO Joe Fadool said the company is using technology developed for automotive products to address growing demand for power. The turbine generator, which BorgWarner is bringing to market with partner Endeavour, can be used for primary or backup power and is designed to run primarily on natural gas, with the potential to be hydrogen-ready.
Chief Financial Officer Craig Aaron said the priority is a high-quality launch in 2027. The company is targeting mid-teens conversion on turbine generator revenue in its first year of production, with potential for greater efficiencies in 2028 and 2029.
“Our reputation is critically important,” Aaron said. “We need to make sure that we are releasing quality product at scale.”
Expanding beyond automotive
Fadool said the turbine generator pipeline remains strong and that BorgWarner has visibility into demand through Endeavour. Although he cited short-term issues around midterms, he said the company has not seen a change in demand. Primary power has become the leading use case for the product, reversing the emphasis on backup power when the project began, he said.
BorgWarner also sees opportunities in Europe and parts of Asia, but Fadool said the company has room to grow within its announced capacity and is focused first on a successful launch. Any future capacity expansion could be located in the U.S. or overseas, he said.
The company is repurposing battery production capacity for data center energy storage, including capacity at its Seneca, South Carolina, factory. Fadool said BorgWarner is using existing battery pack designs and working with uninterruptible power supply systems. It currently deploys nickel-manganese-cobalt cell chemistry and is also working with lithium iron phosphate and other technologies.
Fadool said seven customers have received BorgWarner’s microgrid inverter within 10 months of the company beginning work on the product. The company is also developing power supply units for use inside data centers, leveraging its automotive power electronics technology, with production planned for 2027.
Aaron said BorgWarner is investing approximately $10 million to $15 million in incremental research and development this year across the microgrid inverter and battery businesses. He said the company wants to maintain financial discipline as it enters industrial markets, including a 15% return-on-invested-capital objective.
Automotive growth and cost pressures
Aaron said BorgWarner expects modest growth above automotive industry production in 2027, followed by improvement in 2028 and 2029 as new programs mature. The company has been navigating negative outgrowth because some previously awarded electrification programs either did not launch or launched at lower volumes than expected, he said.
China accounts for 20% of BorgWarner’s sales, Fadool said, with approximately 75% of its business there coming from local customers. He said the company has benefited from Chinese vehicle exports and is working with those automakers as they localize in other markets.
Aaron also cited inflation in electronic components used in both automotive applications and data centers. BorgWarner plans to work with suppliers and customers to manage and recover higher costs, though he cautioned that reimbursement could lag the initial expense.
Capital allocation
BorgWarner’s priorities include maintaining a strong balance sheet and funding organic investments, Aaron said. The company also considers dividends, share repurchases and acquisitions. Fadool said it has maintained a strong buyback program over the past 24 months because it had not found an actionable acquisition target.
Fadool said potential acquisitions must leverage BorgWarner’s core capabilities, be accretive in the near term and meet the company’s valuation criteria. “Patience is sometimes required,” he said.
About BorgWarner (NYSE:BWA)
BorgWarner Inc. is a global automotive supplier that develops and manufactures technologies for passenger vehicles, commercial vehicles and other applications. Its products support vehicles powered by internal combustion engines as well as hybrid and electric vehicles. The company’s offerings include turbocharging systems, transmission components, electric motors, power electronics, battery and thermal-management systems, and technologies that help control emissions. BorgWarner supplies automakers and commercial-vehicle manufacturers around the world, with operations serving markets across North America, Europe and Asia.
