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Safer, Smarter, Greener

Aptiv is making autonomous vehicles safer and creating environmental efficiencies in
its manufacturing.

October 2020

Many drivers benefit from Aptiv’s parallel missions to make vehicles safer and greener by developing new safety technology for vehicles and improving manufacturing systems and processes to make vehicles lighter and more fuel- efficient. One example of new technologies that make a safety difference: a new sensor that detects if an infant is left in a car. The company’s impact is multiplied by its size: Aptiv sells parts to most of the world’s largest vehicle manufacturers in the world.

The $14.4 billion company, a successor to the possibly better-known Delphi from which it was spun off in 2017, has been in the vanguard of driver-assistance technology for 20 years. Many of its safety innovations have come with its developments in advanced driver-assistance systems (ADAS). Known in the industry as ADAS, they include systems that are enabling autonomous vehicles, i.e., self-driving cars. As it works at the forefront of driver safety, Aptiv also creates environmentally friendly efficiencies within its manufacturing, such as using lighter-weight wiring in its vehicle components.

Aptiv’s business is split between two related segments: Advanced Safety and User Experience, and Signal and Power Solutions. The first comprises the software and computing platforms for ADAS, and the latter entails building the hardware for the networking framework of integrated systems. In 2019, the Signal and Power Solutions segment generated $10 billion in bookings, while Advanced Safety and User Experience captured $4 billion in bookings. For the first half of 2020, amid the pandemic-induced global economic contraction, bookings totaled $5.9 billion, of which $5 billion was for Signal and Power Solutions.

Safety First

Aptiv focuses on safety over convenience. Its systems can provide drivers with an extra half-second of reaction time to hazards by combining radar detection and other sensors, including lidar (using a laser to measure distances) with AI to provide drivers with an extra half-second of reaction time to hazards. This is an example of how Aptiv combines radar detection and other sensors. Information is relayed to a centralized computing platform rather than each sensor in effect making independent decisions.

What does this look like on the road? Aptiv categorizes the levels of ADAS on a range of 1 through to 5, with levels 1 and 2 providing safety backup—such as the autonomous emergency braking feature— to an engaged driver, such as the autonomous emergency braking feature. Level 2 adds auto lane change, and highway assist, and traffic jam assist, which allow the driver to take their hands off the wheel and their foot off the pedals. An example of level 3 functionality would be traffic jam “pilot,” which would essentially let the driver take their mind off driving in such a scenario. Levels 4 and 5 would layer on AI functions, including neural networks. Aptiv partnered with Lyft to deploy “self-driving” vehicles in Las Vegas. A human driver remains ready to take the controls, but the ride experience shows passengers what autonomous vehicles do.

For the moment, the market currently supports the higher end of level 2 and the lower end of level 3 in terms of affordability, according to Aptiv. This is the “sweet spot where the benefit from these advanced safety systems can be maximized while minimizing the cost,” it says Aptiv. [need footnote?]

Greener Manufacturing

Helping the world shift to greener vehicles, Aptiv has designed a new architecture system, called Smart Vehicle Architecture, for its Signal and Power Solutions segment. The new architecture removes a significant amount of weight, mass, and low-value/raw materials from a vehicle, and replaces them with satellite architecture and more central computing. This is its goal for all vehicles; the shift over time will substantially reduce the environmental impact of vehicles. The new architecture system can be used for electric vehicles, fuel cell vehicles, or traditional cars, with electric vehicles expected to become the most common of the three over time.
Aptiv’s smart vehicle framework is likened to a brain and nervous system, with sensors serving as receptors for the controlling brain. In this architecture, multiple sensors report data to the cloud rather than having separate hardware boxes for each function in a vehicle. Aptiv refers to this complete offering in its Smart Vehicle Architecture as “sensor to cloud,” starting with a vehicle sensor that transmits information to a computer and then a connectivity device to upload data.

Aptiv also supports electric vehicles and hybrid design through its high- voltage wiring segment. Aptiv is focused on next-generation high-voltage architecture for faster charging with reduced mass and lower weight. In another example of its commitment to sustainability, Aptiv emphasizes sustainable sourcing to build its products at 126 manufacturing facilities. This tactic avoids long-distance shipping, reducing the cost and time to deliver products to its customers. Another way Aptiv helps sustainability is by lowering the weight of wiring harnesses through, switching from copper to aluminum; Aluminum’s mass is only 30 percent of cooper’s. To prevent corrosion, Aptiv uses selective metal coating for aluminum wiring. While this helps reduce the weight of current vehicle designs, it will also support advancements, such as the redundant systems needed to develop better autonomous vehicles, i.e., self-driving cars.

Sustainable Development Goals

The Sands Capital six investment criteria tend to lead us to businesses that are innovators or vital
facilitators of change in industries undergoing significant transformation. Many of these businesses operate in high-impact spaces, such as technology and life science.

Aptiv is one of many portfolio businesses that create impact by addressing at least one major social and environmental challenge identified by the United Nations Sustainable Development Goals. Aptiv addresses U.N. SDG 12: Responsible Consumption and Production; and U.N. SDG 13: Climate Action.

Disclosures:

All data is for fiscal year 2019 unless otherwise noted. The business profiled was selected based on its reported alignment with one or more U.N. Sustainable Development Goals.

The views expressed are the opinion of Sands Capital Management and are not intended as a forecast, a guarantee of future results, investment recommendations, or an offer to buy or sell any securities. The views expressed were current as of the date indicated and are subject to change. Past performance is not indicative of future results. A company’s fundamentals or earnings growth is no guarantee that its share price will increase. Forward earnings projections are not predictors of stock price or investment performance, and do not represent past performance. The specific securities identified and described do not represent all of the securities purchased, sold, or recommended for advisory clients. There is no assurance that any security will continue to be owned by Sands Capital Management. You should not assume that any investment is or will be profitable. All company logos and website images are used for illustrative purposes only and were obtained directly from the company websites. Company logos and website images are trademarks or registered trademarks of their respective owners and use of a logo does not imply any connection between Sands Capital and the company. GIPS®-compliant presentations and additional disclosures for the related composites may be found at Sands Capital Annual Disclosure Presentation.

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