Aptiv PLC (APTV) Earnings Call Transcript & Summary

Okay. Good morning, everyone. My name is Mark Delaney, and I cover U.S. autos and industrial tech at Goldman Sachs. I'm very pleased to be hosting Joe Massaro, the CFO of Aptiv; and Elena Rosman, the Vice President of Investor Relations, for this fireside chat. I know many of you are familiar with Aptiv. But for those of you who don't know the company well, Aptiv is a leading technology supplier, primarily tied to the auto market with products that address the electrical architecture of the vehicle, such as harnesses and connectors and also solutions for sensing logic and safety with products in areas like radar, vision and domain controllers. Aptiv have had more than $14 billion of revenue in 2019. Elena and Joe, thanks for being here today.

Thanks for having us, Mark.

Before we start, I remind everyone that this event is not intended for the media and is off the record. So if you are a member of the media, you should disconnect now. I do plan to take questions from the audience later in the session, and you can submit those via box in the webcast. And with that, let me jump into the Q&A.

One of the main focus areas in the investment community is currently on how to gauge the timing and magnitude of a recovery. In vehicle sales, one important variable, of course, is demand. Retailers in China did relatively well in April and are back near levels from the year prior. Joe, do you think the recovery in car sales in China is a good framework for how sales may recover in other countries as those countries come off with shelter-in-place restrictions. Do you think that the situation in China is unique?

Yes. Thanks, Mark. Yes. I think there's probably a couple of facets to that question. One, I think it's still early days to be calling the recovery in China. It is a month of full production after having lived through shutdowns in February and March. I know the numbers towards the end of April started to look somewhat better. April is a tough month from a vehicle sales comp perspective in China because there are some holidays in that time of year that do move around from week to week. So I think we've got still some time here over the course of the quarter to see how China does. Obviously, inventory levels are up. So I don't necessarily think vehicle sales directly transverse to vehicle production, at least over the course of Q2. We think vehicle production will be down about 30% in China in Q2 based on the schedules we have. So certainly early days, and I think we'll really need to balance. Our customers really need the balance of Q2 in North America and Europe to sort out views for the balance of the year. I think right now, as we see schedules coming from customers, starting to receive some restart schedules for really last week of May and June, which is good. It's progress. Still don't have confirmed schedules for the back half of the year. And I'd say even the schedules for June, I think, are -- I would expect to see some fits and starts as vehicle production starts back up, the industry works through having COVID in the system and just how restarts go from a flow perspective and an execution perspective. And then I think we'll see our customers as we get into June, really start to focus on some of the demand characteristics in the back half of the year. We are expecting a slow restart. I think internally, as Aptiv, we are preparing for a -- as we talked about in our call last week, vehicle production down somewhere between 20% and 30% for the year. And as we -- and I think folks know that we tend to plan for fairly conservative volume levels, don't count on vehicle production to help, and that allows us to really focus on our cost structure and our operational efficiency. And our expectations, we'll be doing the same. We'd much rather have the challenge of catching up to the higher-than-expected vehicle production and dealing with the other side of that coin.

Got it. That's helpful. And maybe just to follow on there. Can you help us understand what indicators Aptiv will be monitoring in the U.S. and Europe to gauge if auto demand is coming back in a more sustainable way?

Yes. For us, listen, we'll obviously look at some of the broader macros and form our views. For us, it's -- given the size of our auto operations, the SPS business has content on about 1 out of 3.5 vehicles manufactured globally. Our best indicators are really our customer schedules. And we get sort of the rolling 12-week production schedules, which, again, we'd expect to start to get sort of formalized approved schedules in June for -- get that process restarted. But we get a lot of both intermediate and longer-term production forecast from our customers, and we see a lot of platforms, given the breadth of our operations. So to us, that will -- that's one of the key indicators. I clearly think there are some give and takes in the market that I think you can have a view of how they might sort out, but it's still a little bit unclear, right? There's obviously an attractive financing environment in North America. But you're also going to be launching and restarting production with really unseen levels of unemployment. So I think our customers -- and we're very close to them from a discussion of the forecast and ramp perspective, again, I haven't seen the exact schedules yet, but I think that's really what they're focused on are what are some of those give and takes. There are some positive signs, certain spots in North America and Europe where inventories are low, so you can certainly see some production come out early on here in the restart to get production levels to keep -- or to get inventory levels to keep platforms back up. But then I think it's going to be a really a question of what that demand pull-through looks like. And I think all of that is going to be tied to the broader restart of the economy and sort of where the consumer comes out as part of this.

Okay. Are there any supply chain bottlenecks that Aptiv is concerned about that could potentially make an industry restart more challenging? Or any bottlenecks for Aptiv, in particular, that you guys are working hard to try and overcome?

Yes. There's a lot of work. I'd say there's no big bottlenecks that we're sitting there sort of implementing over. With that said, there's a lot of work, and we've been doing a lot of work over the past really 6 or 7 weeks now to maintain contact with our supply chain to make sure our supply chain -- even as you get down into sort of that Tier 3, Tier 4 level is sort of aware of, what I'll call, safe restart protocols, able to get amounts of PPE. We haven't been buying PPE for our supply chain, certainly, but there are -- there have been occasions where we've got a supplier who's having a hard time finding something from a PPE perspective, and we've been able to direct them to our sources. I think one of the -- and it's hard to use the word advantage in a time like this, but one of the advantages, I think we've had operationally, we saw this very early on in our China operations. Our first leadership call on COVID-19 response, where we had the leadership of the organization, including Kevin and myself, start to participate on daily calls. The first call was January 24, as we restarted to see the Chinese operations impacted. So a lot of learnings from China on sort of how to wind down production on the safe restart, very early on, actually well before the plants were closed. We had put in large PPE orders of masks and gloves and clean supplies for our large operations in Mexico, Eastern Europe and North Africa under the theory that if we saw what we were seeing in China, migrate to the other regions. We want to be prepared and that the supply chain for those things could get tight, and with the thought that if we were lucky enough not to need them, we could always find a worthy cause to donate them to. But we wanted to make sure the plants were prepared. So we've had a lot of that stuff in place. And we've been working with our supply chain to make sure they're thoughtful. Now I think the challenge for the industry -- and we talked about this in the February time frame when it was just China, the challenge for the industry is you can't build the car with 96% of the parts. So the whole supply chain has to come back. You would certainly think there will be some bumping and something along the way as we bring back the sort of -- as the industry comes back from a supply chain perspective. So with that said, I also think the industry comes together very well for those types of disruption. And there are playbooks that are applicable here. They've never had to have been applied to such a large-scale shutdown. But whether it's how to bring operations back up in North America or after something like GM strike or how to deal with earthquake in Japan and those types of supply chain disruptions. The industry does have good playbooks around the stuff. Now we're applying all of the playbooks across all of the locations at the same time, which is obviously unique. But I do think we'll, as an industry, figure out how to how to work through the more traditional supply chain disruptions, a suppliers down, et cetera. I do think one of the bigger challenges here, which we'll just have to learn. And I think you'll see this in the efficiency numbers, the productivity numbers, not just for Aptiv, but for the industry over -- really over Q2 and Q3, is how well do we operate with COVID-19 in the system and how disruptive is it on a sort of week in, week out basis and how much efficiency is lost. And we've got some early indicators of that in China, although China has come back at relatively lower volumes. So we're certainly not at a point where we've tested sort of the safe operating procedures at anywhere near sort of the 80% or 90% volume levels that we were at pre-COVID. So certainly, I think there's going to be a lot of work to do in Q2, Q3, but as sort of an immediate pending, this looks like a supply chain issue, nothing that we see at the moment.

That's helpful context. My understanding is that Aptiv spends a lot of time thinking about how to optimize its operations and where its factories are situated globally. Are there any changes the company is considering to its operational strategy or regional footprint that the company may want to institute more permanently now that you've experienced the COVID-19 situation?

I would go over the intermediate and longer term, some additional regionalization is likely. It's still early days for those assessments and decisions. We're very much, as an industry and as a company, focused on safe restart. We had some of that, as you may recall, with the tariff situations. We pulled some product out of China, moved it to our Korean operations to allow it to flow to the U.S. and Europe sort of tariff-free and get it out the U.S.-China tariff debate at the time. And we're fairly regionalized as is. Certainly from a production perspective, 90 -- almost 90% of what we manufacture in China is for the China market. So generally regionalized but I do think it's possible that you see some. I think it's a -- particularly as folks start to scenario plan for things like a second wave of COVID, potential regional disruption, I do think we're -- as an industry, we're going to take a step back and say, where are potential flat spots and where is it possible to regionalize products and manufacturing operations. There'll be a cost discussion. Presumably, the supply chain is -- and I think this is certainly the case for us. We work hard to optimize it from a cost perspective over the last number of years, which means the move would inherently be more expensive. And I think there'll be some trade-offs. There'll be discussions with customers around bearing those costs and -- but that sort of risk/reward discussion, I certainly think it's something you'll see in the back half of 2020 and early 2021 as an industry.

Yes. That's helpful. And in terms of your revenue growth, the company has a goal to outgrow auto production over time by 600 to 800 basis points. And that could be lumpy, that outgrowth was 1,300 basis points in the first quarter of this year. Do you think Aptiv shift into inventory in the first quarter? Or was the outperformance more fundamentally driven?

Yes. I think it was -- we didn't see a lot -- we didn't see any really -- any prebuying or shipping ahead on our -- to our customers. Now I think there's 2 reasons for that, and I do know there are folks in the industry that said they had experienced that. I -- there's 2 reasons. A lot of what we manufacture, particularly if you think of electrical distribution systems, are at a VIN level for our customers, meaning they're associated with a specific vehicle that's being built. And we get notification of exactly what needs to be built about 6 or 7 days out, build it and ship within 24 to 48 hours of the actual vehicle itself being produced. So that type of -- those types of products are hard to -- obviously hard to build ahead of time and ship ahead of time. They really need to be sequenced with the actual vehicle production. I think the other thing we did, which is a little less common in the industry than it might sound because it sounds fairly standard. Typically, when you get an OE plant shutdown, whether it's a weather issue, a labor issue, a -- even potentially a summer shutdown, a scheduled shutdown, a lot of times, the OEs maintain their schedules and expect the suppliers to build and ship. And the OEs want to do that where they can to ensure an easy start-up. And in our case, we'd actually get the VIN-specific customer schedules they plan to restart with. Given the level of disruption here, the plant closures, our view is when our customers started to shut down, we took a very formal approach to shutting our plants down basically right on top of the customer plants being shut down. And we actually notified our customers with a letter that we were doing that. We were sort of null and voiding the schedules. If there was something they really felt important that needed to be produced, they needed to let us know because in this case, what was a little different, at least the way we perceived it, if customers are shutting down their plants for employee health and safety issues, particularly where our plants are close to our customer locations, it's hard for us to argue we should stay open. So I think the combination of those 2 things, we did not see a lot of pull ahead or ship ahead. And I think that makes sense in hindsight because we're also seeing schedules change significantly from where we were running at the beginning of this. I think the growth over market, to go back to your original question, to your point, particularly on a quarterly basis, it's always going to be a little lumpy. We've seen -- we have not seen anything at this point that would take us off our long-term view that 6% to 8% -- I know we've been at or slightly above the high end of that range for a period of time. But anything would take us off the 6% to 8% outgrowth as things start to normalize here even to the extent they normalize at lower levels. I don't think that calculation is going to be very lumpy for a period of time. I think if you look at Q1, Europe was probably a clean count for the most part. Europe saw a little disruption in Q1 from COVID. Outgrowth was really driven by the high voltage and active safety businesses as well as just the natural content lift we've been seeing in SPS from, again, my comment earlier about just the size and scale of that business when additional electrical content is going into vehicles, it doesn't necessarily have to be our active safety system or even our high-voltage system for the legacy SPS connector business, electrical distribution systems business to see additional content. So I think Europe was a good indicator. North America was, I think, impacted a little bit by the timing of launches. We expected North America to -- outgrowth to be stronger in the back half of 2020 with some key customer launches. We still expect that, again, albeit at lower levels. I think China was the one where -- and I think you'll see this in Q2 and potentially Q3. The shutdowns and the restarts can really distort that growth over market calculation because it's then -- it becomes what we -- what content we were on relative to what it was actually produced. So in scenarios where we're on a high-content vehicle and the OE decides to focus restart operations on those platforms, we'll have a really good growth over market that's not necessarily indicative of normalized production. To the extent something like in China, where you see the local OEs where we don't have a lot of content on sort of less sophisticated platforms, restart maybe faster than the Chinese joint ventures. You could see it go the other way. So I do think it's going to be lumpy growth over market calcs, Q2, Q3 potentially, but certainly don't see anything at this point that changes our long-term view of our ability to outgrow the market in that 6% to 8% range.

That's helpful. The U.S. car companies have suggested they want to prioritize making trucks and SUVs as they resume production this quarter. Do you think this mix shift is positive or negative perhaps content per vehicle? Do you have any details that you can provide there?

Yes. Well -- and we've always talked about it. We, over the last number of years, 5 to 6 years, have really positioned our North America business to be about 75% truck and SUV, with bookings actually being slightly higher than that. And we've really deemphasized the pass car. Some of that's by our own view of where we wanted to play in the market. Some of it, quite honestly, tends to be where you see the higher-end content, the things we build go into high-end SUVS, the heavy-duty trucks. So that was my comment earlier. We are seeing -- that's what our customers are saying to us as well, very consistent with their public comments. Not a surprise that that's where they'd want to focus, limited production on those key platforms, and we'll obviously be ready to accommodate them. And that would be, to my earlier comment -- to the extent that happens in Q2, Q3, you can see much higher growth over market for us if those platforms are higher relative to their normal share of production. Again, I wouldn't expect that to go on forever, but obviously, be a strong restart for us.

That's helpful. Can you talk about the bookings environment? And if Aptiv has seen OEMs reduce the number of programs or do content any vehicles given the recessionary environment? And maybe I can tack on a similar question we got over the webcast, if you are seeing any areas where OEMs are cutting back between EVs and different levels of autonomous driving, where may you be seeing those reductions, if at all?

Yes. Yes, general statement, haven't had any large longer-term program cancellations whether that was awarded business or bookings that we currently have in process. So we're not in a situation where we have had a customer come to us and say, "Gee, you know that active safety system we're thinking about for 2022, we're going to wait until 2024." We have not seen any of that. Clearly, a lower bookings quarter in Q1. We had -- and again, bookings can be lumpy. Some of that was expected. We -- it's not a linear number that sort of goes off every quarter at the same levels. But there was clearly some, what I'll call, more mechanical disruption at the end of March with the work from home. And quite honestly, people's attention, both at our customer -- well, mostly at our customers, obviously, but even our own just focused on the immediate crisis. So I do think you had some actual awards that got delayed into the second quarter. You could see some that get delayed from Q2 to Q3, but it tends to be much more mechanical. People are focused on other things. There was some disruption in the normal flow of that as the industry went to work from home on a massive scale. But haven't yet seen any -- and we're obviously watching for it. We'll be mindful of it, but haven't seen anything along the lines of big program cancellations. There tends to be -- and I think this probably requires sort of a caveat. We've always focused, because we've got a lot of questions about low oil prices and the impact on the high-voltage market, particularly in North America. Our high-voltage business to date is 80% Europe and North America. And that's where we'd expected it to be. I'm sorry, 80% Europe and China. Very, very low expectations around North American high-voltage over the next, call it, 2 to 4 years. And I think that will continue. I actually think we've seen, if anything, an increase in interest around high voltage particularly in Europe. Customers have made some very positive comments around whether it's high-voltage awards, and we won about $0.5 billion of high-voltage awards in Q1 alone this past quarter -- or and comments even coming from our customers about just expectations to manufacture high-voltage at higher levels. I think some of that, if you followed the news in Europe, there have been a couple of large cities where mayors or local governments in Italy, France, Germany, have made sort of -- I think there's sort of a political and social side of, one, we got to do more to help the planet, given things like COVID. But you also had some very practical things like large cities, saying, "Gee, the air quality has improved significantly since the shutdown. Wouldn't it be nice if it was always this good? And how do we do more around electrified vehicles?" So high-voltage trend, at least everything we've seen, is as strong, if not a little stronger than maybe it was 6 months ago.

That's helpful. And maybe just remind us, high voltage versus low voltage. Is that -- as you mix shift into high voltage, is that margin accretive?

Yes. The high-voltage business within SPS is margin accretive. It's about $400 million in revenues that business and is already at segment margins. Couple of things drove that. And that was a product line that -- that's probably our product line to get to profitability and segment margins faster than any. We typically breakeven in a product line around $350 million to $500 million of revenue. And this product line get to segment margins that at those levels. A couple of reasons for that. One it's -- the way -- given the size and scale of our electrical architecture business, both the cabling systems and the connectors, high-voltage is more of a good thing. They tend to -- they're products that are built at the same plants. They're built -- they made by the same folks, designed by the same engineers. It's the same supply chain, but they tend to be bigger, more robust parts, physically larger parts. So higher price and -- but able to leverage the existing infrastructure, the existing cost base. The other thing, if you think it's just a high-voltage system, you tend to have about -- content-wise, about 50% connection systems connectors and 50% cabling versus a low-voltage system, which is typically 30% connector, 70% cabling. The connector margin is more than 2x round numbers the cabling margin. So you've got a product in an electrical architecture, electrical distribution system for high voltage that has a -- has got a more favorable mix of connectors and as a result, is a higher-margin product than a low-voltage system.

That's very helpful detail. Maybe just in the new world that we're in, at least for the time being with COVID-19, operationally, installing a harness can have a lot of labor involved. Can you just talk about how feasible it is to do harnesses with physical distancing?

Yes. It's -- there's a little bit a lot of work. Our health and safety teams, our manufacturing teams have been spending a lot of time on that really over the past 2-plus months now because remember, we did bring those Chinese plants back in the -- at the beginning of April. So we've been manufacturing these systems in this environment. It did require some process change. There's obviously a fair amount of personal protection equipment for the individual themselves. So just not a face mask, but they tend to be fully faced shielded to the extent they do have to get with them the 6 feet of each other. We have been able to redesign some of the processes. And if we've seen a large wire harness come together, they tend to be built on these boards and these layout boards. One of the things we've been able to do for a number of our builds is actually put up plexiglass between the workstations, which allows the folks to be at the table together but have a physical barrier. So we're -- it's obviously taking some time. We're losing a little bit of time per shift. We're still, quite honestly, need some additional data points to assess the impact of that, given -- particularly given we've come back at lower volumes. But we do know it is physically possible to manufacture those at scale with the necessary safety protocols. And again, we've been doing it for about a month now in China, and those learnings have gone into the Mexico operations as well as the big wire harness plants in Eastern Europe and North Africa. So you're right. When you first look at that process, you think that would be one of the challenges, but I think the team has done a really good job of figuring out how to address it.

Maybe we could talk about SPS content in an electric vehicle. I think the company has said in the past, it's about double the content per vehicle for a battery logic car compared to a traditional ICE vehicle. As EV scale and become a bigger percentage of the industry overall, did you think that content step up? Does it stay additive to an ICE vehicle? Or how do you see that content per vehicle and the BEV evolving over time?

Yes. I'll let Elena go through the detail, but it is additive. We lose very little content even as you go from full hybrid to full BEV. We lose what is typically the electrical connectivity to the internal combustion engine, but it's a positive throughout the run-up of electrification. Elena, do you want to go through it?

Yes, sure. So Mark, you alluded to the roughly doubling of content. So for us, it includes internal battery connections, it includes 12-volt battery monitors. The high-voltage shielded cables, which Joe referenced earlier, and high-voltage connectors, charging inlets and cables. Our content per vehicle also includes an onboard charger for plug-in hybrids and battery electric vehicles. So in total, yes, the -- what we say a total addressable market for a midsized passenger vehicle today in the low-voltage side is roughly $500. The total market for a like kind battery electric vehicle is in that range of, call it, $900 to $1,000. We do assume that over time, obviously, we have ASP declines. They tend to average, call it, mid-single digits. So it's still -- even you look 5, 10 years out, still significantly incremental content for us.

And one of the other areas the company has talked about in terms of how the car could evolve is the architecture, and the company has presented its idea for smart vehicle architecture. Can you talk about what SVA would mean in terms of content per vehicle for your SPS segment?

So that gets back to, I think, what Joe referenced earlier. So we commissioned a study, it's been a couple of years now, but when we launched the smart vehicle architecture initiative that looked out through 2032. And what that content gain included, so taking that average of $500 of -- again, for a midsized passenger vehicle, total addressable market, for every $300 of incremental content that you gain from -- the additional content from things like electrification, safety systems. The optimization of the architecture, you lose about $100. So it nets to roughly a $200 TAM increase over that time period. So it's one of the factors that we've talked about what the long-term growth of our market CAGR will look like as part of SPS, and that, call it, low to mid-single-digit range, that content piece of it drives roughly 1 to 2 points of growth over market.

Yes. I think, Mark, the way I would think about it, and I think this works for -- we're going to see it sort of to the run-up of SVA. But certainly, when we get to SVA, the systems themselves become more complex. So while you lose mass, which is mostly copper, something we actually don't make money on, we don't profit from copper, it's a pass-through. While you lose the physical mass of copper, you're gaining on the electrical architecture side, more complex circuitry, miniaturized connectors, different types of transmission cabling. So you go to ribbon cable, you go to some flex circuitry while losing copper. So the dollar content goes up. And obviously, SVA enables a tremendous amount of content addition in the other part of our business, ASUEX, where you'll be able to have greater levels of active safety, eventually autonomous driving, much more robust in-cabin experience via the infotainment controller, the cockpit controllers and such. So there's certainly a mass loss, which I think the industry is actually excited about. That mass loss has to happen. Physically, you couldn't get much more copper in some of these vehicles. But the dollar content, in our view, is -- the increase in dollar content is a positive certainly through 2030.

And -- yes, it kind of dovetails nicely. I wanted to dig a little bit more into the ASUEX segment. I know we're starting to get close on time. So if people have questions, please submit them through the webcast, and I'll go there next. But just one last one for me before I go to the webcast questions. You talked about separating hardware and software in this SVA world. Maybe just talk about how you think your business model evolves in ASUEX with this move to the new architectures and your ability to sell solutions and software?

Yes. That business and, in particular, this transition has a long run in with additional opportunities in this space. And I think for the next number of years -- and we tend to think that 2025 is sort of a crossover point just based on sort of when new models get introduced and like. But certainly, running up to that, the business does a very good job of putting out greater and greater levels of software-enabled functionality, still very much under the existing business model, which I'd describe as firmware, right? Larger and larger domain controllers with greater amount of software. The trend towards pulling software and functionality from the peripheral devices onto the large domain controllers is very much a positive for us because it requires much more robust -- just not the network solutions from an architecture perspective, but much more robust domain controllers, which is something we excel at. We really feel like we've expanded the moat significantly and really only see Bosch as a competitor from that perspective. I think as you get further down the road, OTA becomes more commonplace and at some point required. Really, our view when you get to something like a Level 3 system. OTA becomes a requirement because you can't allow for the normal service and warranty process to take care of something like a Level 3 system. As you get more OTA in the vehicles, there'll be greater opportunities to have, what I'll call, sort of stand-alone software revenue streams, whether that's a maintenance stream, an enhancement stream or sort of upgrade stream. And that's really, I think, where that business will -- you'll really start to see the acceleration of opportunities around much more robust systems with a software component that's not linked to sort of the incremental sale of one more vehicle. And that's a change that will take a while, and we've talked about this. We don't see the industry making that change right away, which is nice. That's one of the reasons we're very focused on this sort of continued -- continuation of continued development of robust firmware solutions, but being ready for when software as a stand-alone opportunity is accepted by the industry. And some of it, as I said, really going to be driven by OTA. Some of it needs to be driven by the OEs appreciating the value there and seeing a way to monetize that, whether it's the data that comes off the vehicles or the upgrade functionality of a software platform and allows the original hardware going into the vehicle to have enough headroom so that you could upgrade the system. And again, we're a few years out from that, but feel very confident in the business model we have today that runs into that and then very confident that we'll be a meaningful player, given our position in sort of the existing systems and the ability to take advantage of that opportunity as you get out into that 2025-plus time frame.

That's helpful. Maybe one from the audience to finish off the session today. The question came in about the opportunity for Aptiv to diversify more broadly outside of transportation. I think the company has like 1/4 of -- 25% target for nonlight vehicle sales by 2025. But the question is, could the company have a material presence outside of transportation more broadly? So outside of cars, outside of trucks, areas like industrial, aerospace, defense, medical, can that become a significant part of Aptiv's revenue stream? And if so, how do you imagine that taking place?

Well, listen, we've -- it's a great question. It's something we've been focused on really for the past couple of years. I -- as folks know, we really put forward sort of a strategy that allowed us to become a -- while continuing to have disciplined revenue growth, become a better performer through cycle, albeit we weren't expecting such an abrupt down cycle as we're currently in. A lot of what we did helped prepare us for this. And we think it was certainly a validation of the strategy. Big component of that was revenue diversification. When we first started looking at this 4 or 5 years ago, well below 5% of our revenues came from nonlight passenger vehicle sales. And we looked at ourselves critically as to why that was and where we thought we could do better. And there were some -- quite honestly, some very straightforward organic opportunities. We had -- and I'd be the first to say that we'd sort of let the commercial vehicle market, particularly around connectors and electrical distribution systems. We had never focused on that. We have the capability. They're very similar products to what we have for the auto business, so there was an organic approach to focus more on CV. And there was an inorganic approach to work our way into other end markets where we could see that our products had applicability, our engineering skills and our geographic footprint had the ability to serve those markets. But we didn't have a lot of end market awareness, and we didn't want to try to distract the auto business by moving into other end markets. We really thought it was appropriate to go out and acquire that insight. So things like HellermannTyton or Winchester, which are either half auto, half industrial or in the case of Winchester, entirely nonauto, really provided us some insights into those other end markets. We finished last year -- we finished 2019 with about almost 15% of our revenue coming from commercial vehicle and industrial. And we've all seen the benefits in Q1 and well in Q2, where a lot of those industries are deemed essential. If you think of telecom, power generation, Mil-Aero, they have remained open. We have capabilities where one of the Winchester divisions is actually manufacturing high-speed cable assemblies for a couple of medical devices now, including the ventilators being manufactured by GM. So again, skill sets and competencies that we thought would improve our overall business mix and help strengthen Aptiv, we've now seen that. And we certainly expect to continue down that road. We set ourselves a goal of 25% of revenue by 2025. That was to make sure that we gave ourselves enough time to do it thoughtfully. We weren't going to take a sort of a student body right and try something that we weren't comfortable with or weren't sure up to hit an -- just to hit an aggressive target. So I think we've still got plenty -- even in this environment, I still think we've got plenty of time to achieve that target. Obviously, I think M&A will be slowed here for, call it, 6 to 12 months, very hard to do price discovery. And whether if you're a buyer or a seller to do price discovery and really get comfortable with valuations in this kind of environment. But that will come back. And I think we're very well positioned when that does come back. And like I said, if anything, that part of the strategy has really been sort of proven out here as we've enjoyed the benefits of -- well, we -- there's not a lot of revenue diversification, but we have enjoyed the benefits of what we have achieved to date.

Great. Well, unfortunately, we have run out of time. Elena and Joe, I'd like to thank you both for taking the time out to speak with us today.

Thanks for pulling this together, Mark, and hope everybody stays safe. Thanks, again.

Thanks, Mark.

That ends the webcast.