Will electrical Vitesco vitalize mechanical Schaeffler?

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Schaeffler AG has offered a cash bid to fully acquire Vitesco Technologies AG. According to Automotive News, the combined sales of Schaeffler and Vitesco in 2022 were $19.8 billion, close to being a top ten supplier by revenue. Schaeffler already owns 49.92% of Vitesco’s shares, the bidding price is satisfactory, and no regulatory barriers are expected, so it’s nearly a done deal.

People in the automotive industry can easily recall years of entanglement between Schaeffler and Continental. Continental also spun off Vitesco. With its assets in powertrains, Vitesco has quickly embraced the electrification transformation with both innovative technologies and flexible business strategies. Although Vitesco still has portfolios for Internal Combustion Engines (ICE), it is an early adopter among tier one (T1) part suppliers worldwide. Let’s check two perfect examples in the areas Yole Group covers.

Vitesco’s rear inverter for Hyundai’s Electric Global Modular Platform (E-GMP) is one of the first to operate at 800V. Compared to many Yole Group inverter teardowns, this is among the most compact units, with a neatly designed two-board layout.


Another secret sauce that Vitesco has is its extension to power module packaging, truly making it a trendsetter, now followed by more vehicle-making original equipment manufacturers (OEMs) and T1s. Its high-power switches are the heart of electric powertrains, literally. Yole Group analyzed a Vitesco module that utilizes silicon insulated-gate bipolar transistor (Si IGBTs). It nicely demonstrates multiple packaging technology trends including silver sintering, ribbon interconnect, integrated sensors and an active metal brazed (AMB) substrate.


Top managers from Vitesco say that since leaving Continental the company has the resolution and speed for a fully electrified future. The name Vitesco comes from vita, the Latin for life, fitting its new life transformed from mechanical powertrains to electric ones well.

The other side of the deal is the renowned giant in various exquisite mechanical parts, Schaeffler. It  also offers electric axles and components, along with more profitable key engine and transmission parts. In the announcement, Schaeffler says that it has already aligned and found synergies with Vitesco.


We fully endorse this new Schaeffler. Apart from that, we take this deal a reflection of the tough transition the automotive industry is experiencing. For T1 powertrain suppliers, it is inevitably painful to downscale the profitable ICE business, while investing heavily in competing electric vehicle (EV) powertrains.

Another level of pain comes from fast-evolving Chinese players. After more than 10 years of incubation, the EV supply chain in China is gaining global competence. Although we see barriers for them to excel in Europe or the US, just losing the lucrative Chinese market is already a headache.

Yu YANG Senior Technology and Market Analyst – EV/HEV & Power Electronics
In China, it is even more integrated: OEMs are making tier-two (T2) component suppliers’ power modules. Is this only Chinese OEMs?

Last but not least is the trend of more vertical integration of OEMs in the electric powertrain. Yole Group has found that OEMs are increasingly bringing what would have been T1 business in-house. In China, it is even more integrated: OEMs are making tier-two (T2) component suppliers’ power modules. Is this only Chinese OEMs? Yole Group finds this highly doubtful, which will translate to an even more squeezed available market for traditional T1s and T2s.


All these difficulties make the transition for existing powertrain T1s, especially those with significant assets in engines and transmissions, much more difficult. Yole Group expects deals to expand new businesses and divest old ones.

Will the more electrical Vitesco vitalize the more mechanical Schaeffler?  We believe it is a right strategy for Schaeffler, but it requires exquisite execution to achieve success.

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