Investor Presentation March 2018
The BorgWarner Strategic Difference Technology Leadership Customer, Geographic and Efficient Propulsion System Diversity Financial Strength and Discipline BorgWarner Inc. 2
Addressing Vehicle Mobility Trends autonomous driving shared cars and rideshare connected cars efficiency/co 2 emissions THERE WILL ALWAYS BE A NEED FOR A PROPULSION SYSTEM BorgWarner Inc. 3
Increasing Diversity of Light Vehicle Production Electric Hybrid Combustion 0.5M 3M 93M 2% CAGR 31% CAGR 34% CAGR 107M 21M 3.4M 90M -1.1% CAGR 83M *Source market data: IHS Light Vehicle Forecast (May 2017*). 2016 IHS UNITS* 2023 IHS UNITS* BorgWarner Inc. 4
Industry Propulsion Mix: Ongoing Evolution Electric Hybrid Combustion 0.5M 3M 93M 2.2M 102M 11M 107M 21M 3.4M 90M 89M 83M *Source market data: IHS Light Vehicle Forecast (May 2017*). 2016 IHS UNITS* 2020 IHS UNITS* 2023 IHS UNITS* BorgWarner Inc. 5
Accelerating Revenue Diversity by 2020 Electric Hybrid Combustion 0.6% 0.1% 2.2% 1.7% 3.0% 1.1% 10.8% 9.6% 96.4% 98.8% 87.0% 88.7% 2016 IHS UNITS* 2016 BWA REVENUE (USD) *Source market data: IHS Light Vehicle Forecast (May 2017) 2020 IHS UNITS* 2020 BWA REVENUE (USD) (As of 2017 Investor Day ) BorgWarner Inc. 6
2020 Revenue Outlook of $11.5B - $11.8B $1.4 <$0.1 $0.1 $8.8 7% CAGR 3% CAGR 102% CAGR 88% CAGR $11.5 $1.6 21M $0.2 $1.0 CV & AM Electric Hybrid Combustion $7.3 5% CAGR 83M $8.8 2016 *all values in billions 2020 (As of 2017 Investor Day ) BorgWarner Inc. 7
Combustion Propulsion* * Includes engines, transmissions and all-wheel drive systems with no electrification, includes stop/start. All prices are estimates, actual prices will vary. Combustion Products: Timing system Variable cam timing Exhaust gas recirculation Clutch plates All-wheel drive systems Enhanced starters Fans & fan drives Pictured products and many more Variable Cam Timing Exhaust Gas Management Boosting Technologies Transmission Technologies $45 $100 $250 $350 BorgWarner Inc. 8
Penetration of Key Combustion Products Continues to Grow Technology Penetration % - Combustion Only (includes S/S) - Gas & Diesel 2017 2025 Turbochargers 45% 58% Exhaust Gas Recirculation 26% 46% Variable Cam Timing 65% 71% Dual Clutch Transmission 9% 9% Stop/Start 42% 67% BorgWarner Inc. 9
Growth and Participation in Combustion acpv (Average Content Per Vehicle) Combustion Vehicles with BW Content 88M 89M 86M acpv $185 44% acpv $200 50% acpv $215 53% 2016 IHS UNITS 2020 IHS UNITS 2023 IHS UNITS (As of Sep 2016) (As of Aug 2017) (As of Sep 2016) BorgWarner Inc. 10
Hybrid Propulsion* * Includes mild, full and plug-in hybrid. All prices are estimates, actual prices will vary. Combustion Products PLUS Hybrid Specific Products Exhaust heat recovery systems Electric drive motors Disconnect clutch and controls Pictured products and many more ebooster $200 ibas Systems Power Electronics P2 Hybrid Module On/Off Axis Electric All-Wheel Drive $300 $700 $900 $1200 BorgWarner Inc. 11
Hybrids Use Highly Efficient Internal Combustion Engines Technology Penetration % - Hybrid Only - Gas & Diesel 2017 2025 Turbochargers 20% 65% Variable Cam Timing 63% 69% Dual Clutch Transmission 14% 31% Hybrids drive increasing demand for BorgWarner s efficient ICE products BorgWarner Inc. 12
Growth and Participation in Hybrid acpv (Average Content Per Vehicle) Hybrid Vehicles with BW Content 18M 11M acpv $140 3M 20% acpv $240 36% acpv $225 42% 2016 IHS UNITS 2020 IHS UNITS* (As of Sep 2016) 2023 IHS UNITS (As of Aug 2017) (As of Sep 2016) BorgWarner Inc. 13
Electric Propulsion* * Includes battery electric vehicles, range extenders and fuel cells. All prices are estimates, actual prices will vary. Electric Vehicle Products: Electric all-wheel drive Liquid heater Auxiliary coolant pump Fuel Cell air supply Transmission Chain Friction Products Pictured products and many more Cabin Air Heater egeardrive Electric Drive Motor Power Electronics Electric Drive Module $200 $500 $700 $700 $1100 BorgWarner Inc. 14
Growth and Participation in Electric acpv (Average Content Per Vehicle) Electric Vehicles with BW Content 2.2M 2.3M acpv $620 0.5M 3% acpv $285 26% acpv $285 29% 2016 IHS UNITS 2020 IHS UNITS* (As of Sep 2016) 2023 IHS UNITS (As of Aug 2017) (As of Sep 2016) BorgWarner Inc. 15
Excellent Balance by 2020 $200 $240 $285 Estimated 2020 Average Content Per Vehicle As of 2017 Investor Day C O M B U S T I O N H Y B R I D E L E C T R I C Note: Participation Rate 50% 36% 26% Note: Excludes Sevcon BorgWarner Inc. 16
$2.0 Billion - $2.4 Billion of Backlog thru 2020 50% 45% 5% 50% of Backlog Related to Hybrid and Electric Propulsion 2018-2020 Backlog as of January 17, 2018 Note: Excludes Sevcon BorgWarner Inc. 17
Mid-term Organic Growth Outlook Mid-to-high single digit BorgWarner Inc. 18
Recent Product Announcements On Axis P2 Module for comprehensive development contract with a Chinese automaker. HVH250 electric motor and egeardrive transmission for the initial launch of the FUSO ecanter truck. AWD Coupling with integrated ECU and software for Volvo s new XC40 compact SUV. BorgWarner Inc. 19
Competitive Landscape Average number of major competitors is similar for each product category Turbochargers Belt Alternator Starters Drive Motors VCT Hybrid Drive Motors Transmissions EGR Transmission Friction Transmission Controls ~6 Disconnect Clutches Hybrid Modules Power Electronics ~5 Power Electronics Battery Thermal Mgmt Cabin Heating ~6 Timing Systems ebooster Starters/Alternators All-Wheel Drive BorgWarner Inc. 20
Projected Operating Margin Growth by 2020 Low 13% Range 12.4% 2017 2020 BorgWarner Inc. 21
Capital Deployment Discipline ROI% 20%+ 19% 18% 17% 16% 15% 2017 2018 2019 SOP Year BorgWarner Inc. 22
Delivering Operating Margins * The acquisition of Remy was 90bps dilutive to operating margin BorgWarner Inc. 23
Our Strategy is Working Continued significant wins across C-H-E 2020 revenue outlook of $11.5B - $11.8B Margins set to improve through the end of the decade Ongoing confidence in long-term growth targets of mid to high single digits Approach our customers as a balanced propulsion partner BorgWarner remains at the forefront of evolving industry C-H-E-mix BorgWarner Inc. 24
Appendix
Diesel Transition Manageable Over the Mid-term Diesel Turbocharger Diesel EGR Module Glow Plug Gasoline Turbocharger Gasoline EGR Module Variable Cam Timing Revenue impact is neutralized by the end of the backlog period BorgWarner Inc. 26
2018 Full Year Guidance BorgWarner Inc. 27
Organic Sales Growth of 5.0% - 7.0% $ in millions BorgWarner Inc. 28
Operating Margins Modestly Improve $ in millions 12.4% Margin 12.6% - 12.7% Margin BorgWarner Inc. 29
2018 Guidance Other Items EPS Guidance $4.25 - $4.35 Free Cash Flow $525 - $575 million CapEx $575 - $625 million Share Repurchases ~$100 million R&D Spending ~4% of sales Tax Rate ~28% $ / Euro Exchange Rate $1.18 / $170M BorgWarner Inc. 30
Improved 2020 Revenue Outlook of $11.5B - $11.8B $ in millions $700-$825 $675-$800 $650-$730 2018 2019 2020 As of January 17, 2018 BorgWarner Inc. 31
Long-Standing Relationships Paying Off China 16% Americas 34% Ford FCA GM Asian OEMs Commercial Vehicles Other 9% 7% 5% 3% 4% 6% Europe 38% VW/Audi Daimler Renault Ford BMW PSA Volvo JLR CV Other 11% 5% 3% 2% 2% 2% 2% 2% 3% 6% Asia ex. China 12% Hyundai/Kia Other Asia ex. China VW/Audi Great Wall Ford SAIC GM SGMW Other China 7% 5% 2% 2% 1% 1% 1% 1% 8% Based on 2017 Sales excluding Sevcon BorgWarner Inc. 32
Combustion - Select Customer Awards Timing drive Americas (2019), EU (2019), Asia (2019) Variable cam timing EU (2019), Asia (2018, (3) 2019) Dual Clutch Module Asia ((4) 2019) Transfer Case & Disconnect EU (2020) EGR Cooler EU (2017, 2019, 2020), Asia (2018, 2019) Plug top Ignition coils EU (2020) Plug top Ignition coils Asia (2) (2019) Gas 2.0L turbocharger EU (2020, 2021, 2022), Asia (2020) Gas 1.5L turbocharger Asia (2018, 2019) BorgWarner Inc. 33
Hybrid - Select Customer Awards Chain drive for P3 Europe (2018) Wet disconnect and controls for P2 Asia (2018, 2019) 200V BAS for P0 EU & Asia (2019) P2 On-Axis Module EU (2020) CV P2 On-Axis motor N. America & EU (2018) Exhaust heat recovery system N. America (2019) 48V ebooster EU (2019, 2020) BorgWarner Inc. 34
Electric - Select Customer Awards egeardrive transmission Asia (2017, 2017, 2018, 2018, 2018) Electric Drive Module Asia (2018, 2018, 2018, 2019) Electric Drive Module N. America (2019) Cabin Air Heater N. America (2017) Cabin Air Heater China (2017, 2018) Electric Drive Motor N. America (2018) CV Electric Drive Motor EU (2019) Transmission friction plates EU (2019) BorgWarner Inc. 35
Hybrid / Electric Drive Motors Lamination Stacks / Magnets Housing Deep systems integration 18,000 rpm Bearing Rotor Stator / Windings Bearing Same motor used for both vehicle propulsion and battery regeneration Unique motor & power electronics applications BorgWarner Inc. 36
Wide Variety of Hybrid / EV Motor Topologies Awarded / Production H/EV Traction Motor Quoted Permanent Magnet Non-Permanent Magnet Neodinium Assisted Synch Reluctance Rectangular Wire Rectangular Wire Round Wire Hairpin S-Wind Round Wire Hairpin S-Wind Induction Copper Induction Aluminum BorgWarner Inc. 37