Aptiv PLC (APTV) Earnings Call Transcript & Summary

Great. I think we are ready to kick things off. We are delighted to have Aptiv back with us at the Conference from which would be a very informative session in a fireside chat. The company just hosted an Investor Day last week in Boston. So lots to go through, lots to follow-up on, and we're super excited for this conversation. From the company, we're very pleased to have Kevin Clark, Aptiv's CEO; and Joe Massaro, the company's CFO. We'll keep it kind of pretty fluid. [Operator Instructions] And with that, we will kick things off. Kevin, Joe, great to see you both. Thank you so much for being here.

So I thought we would begin with some follow-ups post the Investor Day on technology and product, and then we'll get into some of the financials that you talked about last week. And I thought we could start with this journey we're seeing across the industry in electrical architecture, domain controller zonal and SVA. And one of the things I really liked about how you dimension the investor communication last week was, you didn't just talk about your content growth, but also your customers benefit from a cost per unit, revenue per unit basis as they upgrade these architectures. I was hoping we can kind of review that in terms of ultimately what is driving their journey to upgrade these systems with you more software? What does it unlock from a cost and revenue perspective?

Okay. It's a pretty broad question.

That's all-Investor Day drafts.

Yes. So we -- maybe we should start with our view had been, continues to be, when you think about the megatrends of safe, green and connected that they certainly have big implications for the auto industry. And over the last decade, they've certainly accelerated, and we expect them to continue to accelerate. So that's one. Two, on that path, it presents a lot of opportunities for our customer base, right? It presents opportunities for them to electrify their platforms. It presents opportunities to have vehicles that can be managed through the life cycle, which create incremental revenue and profit opportunities for them new business models. However, the reality is, the industry was stuck in kind of an old methodology in terms of how vehicles are architected. And oftentimes, I think when we talk about Smart Vehicle Architecture, maybe partly given our roots, it sounds very hardware centric. We've been talking about Smart Vehicle Architecture and software-defined vehicle for about the last 5 or 6 years, and as a result of having direct experience in autonomous driving, direct experience with advanced ADAS, user experience systems, direct experience as it relates to architecting battery electric vehicles. And our view was to enable customers to do what they want. We needed to completely rethink, turn the traditional model upside down, and we need to start with software-defined and software architecture first, and then what is the resulting hardware architecture that needs to be put in place. Now our industry tends to think of things first from a hardware standpoint. So we've been on this path of what is it that the industry needs from a technology solution, what do our customers want from a flexibility standpoint, and what do they absolutely have to have, which is technology solutions that are lower cost, not every advance in technology being higher on cost. That is a model that doesn't work for them. So just given where we come from and where our industry is, it was more natural to start with that from a hardware standpoint. So it started with domain consolidation and more recently, when you look at PDC or zonal controllers, CVC, central vehicle controllers, OSVs, much more interest in and around that sort of activity, principally garnered driven by Europe, principally European OEMs, principally driven by OEMs in Asia as well. Part of that being driven by our advanced development programs with those customers. So you'll see more -- certainly, a lot more on the hardware side. You've all read a lot about several OEMs having real challenges as it relates to software, right? Program delays, launch delays, challenges from a quality standpoint, warranty standpoint. So for someone like ourselves, as we're talking about vehicle architecture, it's an opportune time for us to be in talking about software architecture as well. And when we look at -- when we -- the way we approach that, sorry, for drawing out a little bit, is kind of twofold: one, what's on vehicle from an operating system standpoint, from a feature building block standpoint. So on vehicle operating systems, hypervisors, features would be ADAS, user experience, all those sorts of areas. How do we structure something on vehicle that is contemporary from a software standpoint, that is open, that give our customers flexibility, it's really important? A different approach versus a lot of others who is, how do we lock them in on hardware and software, it's how do we give them choice. And then from a DevOps standpoint, because all of our OEM customers struggle from an engineering standpoint and to the extent we can give them a cloud-native DevOps solution that enhances their software development capabilities, that provide them with life cycle management as it relates to the vehicle, so it enables that new business model, that additional revenue opportunity. On top of the hardware aspect, it solves a lot of the problems, and it enables a number of things to happen. So again, we've been working on it for the last -- over 5 years. Obviously, with the push towards electrification, which is an opportune time for customers to revisit and how their vehicles are architected with battery electric vehicles. We've really seen an explosion as it relates to interest in the solution that we developed.

Absolutely. And to that point, historically, automakers were reluctant to upgrade electrical architectures because of development costs and risk associated with that. To your point, Kevin, EVs seem to be changing that. Is there anything else that's driving adoption or could even accelerate adoption from here? Is it sort of when you go to Level 3, let's say, from Level 2, does that drove triggered as well or software revenue?

Listen, I think it comes down to enablement, right? At the end of the day, it comes down to how do they enable better electrification, and then how do they enable the life cycle management that they're looking for, and how do they take cost out. So at our Investor Day last week, we talked about 2 aspects of -- one, the content opportunity for Aptiv, which is given where the industry is headed, we're probably one of the very few that aren't in a situation where there's an element of our business that's being decontented, and then there's an opportunity. There really isn't an area where we see significant change in vehicle content that's affecting us. So we get a massive benefit on the hardware side, one. Two, from a customer standpoint, based on the work we've done, our view is, on an apples-to-apples basis, we can lower overall vehicle architecture cost by 10% apples-to-apples. And then when you overlay on top of that, things like manufacturing automation, manufacturing footprint, productivity within the assembly plant, other items, it's 2 or more times that. So significant savings on the cost side, while at the same time, tremendous opportunity for Aptiv from a revenue standpoint. Then on the software side, when you look at DevOps, when you look at on vehicle, based on the programs we've done in the past, roughly, a 20% to 30% overall savings in DevOps to on vehicle operation to ultimately warranty and life cycle management opportunities. And again, an area where it presents a new revenue opportunity for Aptiv and a software sort of revenue model versus our more traditional revenue model approach.

Perfect. One of the questions we received after the Investor Day was on a topic of insourcing. You made a very compelling case. It was a great chart with a color-coated chart showing your end-to-end capabilities, certainly, where Wind River fits into the equation. Not being a significant competitive advantage for you, but historically, automakers don't like to give one supplier so much content or "control". Could your enabling software is well for your customers? But how do we think about -- is that changing now because it's just too much to lose by doing it the old way, and you become the one-stop shop, that's a win-win for you and your customers or are there some challenges around that?

Yes. I think the supplier customer relationship, if anything, for some suppliers, unfortunately, they're going to be on the bad end of this up-integration trend, the software trend. I think for other suppliers, the reality is, the relationship with the OEM becomes larger and more strategic. So that would be from a supply base standpoint. From a customer standpoint, I think the thinking 3, maybe 4 years ago about we need to do more was directly in response to a sense that they had a broad supply base doing a number of different things that all need to be stitched together, that created complexity, that created cost, that created warranty problems. And to the extent that you can eliminate that amount of stitching together that you can reduce those costs. So some OEMs have gone down that path and have attempted it. We would tell you most, if not all, if they came from a legacy standpoint, created massive problems because they didn't do on vehicle software. They didn't do systems integration. The way they develop software was in a very legacy methodology. So we took an old way of doing things and through a lot of their own resources at it. It really didn't get the benefit that they were looking for. So a lot have pulled back, a number of talks to us about it. We would say where most OEMs are focused on, they want to do the software where it has a look and feel of a particular OEM, a performance OEM, drive OEM. And those tend to be certainly small features. It's not in the areas of middleware. It's not in the areas of building blocks. It's not in the areas of software or engineering development tools. So we would say that in reality, although a lot were talking about it, more were coming to us, asking us to do more of the software activity as an example. A number of publicly stated that they're going to do less of it. So the VW Group, I think, is a great example, and we think you'll see more of that. Having said that, the solution that we talk about, we try to be very open and flexible. Reflexively OEMs don't want a closed system. They don't have some visibility or control over, whether they need that control or not. So what we're trying to do is provide our OEM customers with low-cost solutions that give them choice.

Excellent. [Operator Instructions] One more -- one other interesting tidbit that was in one of your slides, you mentioned post-SOP hardware upgrades to docks and locks. I know that over time, your business model will evolve that you can actually generate revenue over the life of the car on the software side. Could there be hardware opportunities as well through different upgrades of compute and other parts of the architecture?

Yes. It could be.

How big could that be over? Because it seems to make sense that you would upgrade the compute once you have the architecture over time. Is that...

Yes. Yes. Listen, I think that's a staged activity. I think, initially, you'll build in more compute than what you naturally need at that given point in time, right, with to some extent, and then grow on the software side. When you reach a particular point, your point on our dock and lock solution. It provides you the opportunity to actually switch out hardware -- old hardware provider put in place new hardware.

Perfect. So I want to shift gears to ADAS. There's a lot of buzz at CES on your Gen 6 platform. So I had a number of questions there, and then we'll shift to some financials. But maybe talk a little bit about that platform, what makes it unique? And maybe the content per vehicle opportunity. I think there's sort of 2 systems, depending on the radar, the front radar content, sort of how to think about CPV for Gen 6 relative to your current generation?

Yes. For an L2+, it's -- I don't know, it's 1,000 to 1,400 hours of overall content. I think what's special about the Gen 6 ADAS solution is, it's vision agnostic. So very high-performing radar solutions that reduce the need for high-performance vision compute requirements, which tend to be costly. Radar that performs, in our view, better across multiple environments whether that be glare, like the lights we're looking at now glare or fog or smoke or snow or things like that, where we can get them to perform at a much higher level. And again, given the OEM choice, they can select whatever vision provider they wanted. At CES, we used a company called StradVision that we have an investment in, but you could use others. Our overall assessment of the performance was as good or better than any of the high-end vision-only solutions at a cost that was roughly 25% less. So again, we're trying to provide ADAS solutions, not radar solution, not vision, ADAS solution that ultimately is affordable and can scale for our customers.

The -- is Gen 6 a statement that imaging radars become this new primary sensor? Or is it Aptiv's imaging radar and your software stack that's superior to other imaging radars out there? Because it sounds like there's a lot leaning on that system. How are you benchmarking your radar and the software versus other imaging radars out there?

Yes. Listen, I think for us, it's a system. So we talk about being a full system supplier. Again, we provide flexibility. So it's the strength of the radar solution, but then it's the capabilities from a sensor fusion standpoint. It's the capabilities as it relates to that ADAS compute. It's the capabilities as it relates to integrating that into the vehicle and the vehicle performance. I don't know, we've had 7 or 8, right, ADAS platforms that we've launched, and we've launched in total over 20 programs. So we have a lot of experience in the ADAS space going back actually to 1999. So really more than anyone else out there. So I think it's both performance of the perception system as well as how do we bring it together and maximize performance.

Interesting. And 2 more questions on this topic, then we'll switch to financials. What also struck me with Gen 6 is that it seems like the ODD under Level 2+ will migrate outside the highway into urban or tibial roads. That seems to be the new forefront of where the competition is going. Do you expect that would be ready to go on day 1 of post-SOP? Or is that sort of contingent upon software upgrades by either you or your customers to enable the outside the highway ODD for that?

Well, it's -- versus what we had in Las Vegas, it requires further software upgrades. But 2025, Level 3 urban, 2026 Level 3 highway, which is a part of the -- basically, the road map for the underlying solution.

Perfect. And one more on this topic. Is consumer AV or Level 4 highway, does sound like there are some development projects and other companies looking to launch that in mid-decade. I think in your Investor Day slides, that seems to be upside to 2030. I'm hoping you can maybe talk about that. Is that just, hey, you're leaving that sort of next step presumably as an upside to your forecast with which we'll get to in a minute. Or are you just kind of more bearish on anything outside of Level 2 or 3?

No. Listen, it's definitely an opportunity. We've always approached autonomy as a part of the continuum of Aptiv's safety. So 95% of accidents are human error. To the extent we can augment the driving experience or remove the driver in certain safe situations, there's a safer outcome there. And we've always been on a scalable Level 0, moving all the way up ultimately to Level 4 and someday, Level 5. And that was the rationale for our original investments in Ottomatika and nuTonomy, which ultimately became Motional. We're excited about the opportunity. Like decade, there certainly is opportunity as it relates to consumer autonomy in the right ODD under the right situation.

Perfect. Maybe we'll shift to financials, and we'll look -- if we have time, I'll come back to some of the technology questions just a little fascinating. But maybe, Joe, how is Q1 going in terms of just production? And maybe more importantly, volatility. We've heard January was kind of rough, February might be a little bit better, but kind of your observations there. And I guess maybe even beyond just the short-term observations, is the industry view by and large at second half gets better from a volatility perspective? Kind of just kind of hope or is it back by sort of more tangible visibility into that?

Yes. Listen, I think we've been on a relatively consistent path through 2022 of, what I'll call, sequential improvement, right? We sort of at the lows in a supply chain disruption perspective, Q3 or Q4 of 2021. And supply -- and I think production consistency has gotten better, but it's still not where it was obviously before 2020. I think there's an opportunity at the start of each year when schedules get reset to -- and there's a view, and this is sort of just not an Aptiv thing, an industry thing, there's sort of time to build the required level of production in a year. The schedules tend to start out a little bit more even in balance, right? January is -- again, we're seeing sequential improvement, but what you have now are very acute problems, particularly around semiconductor availability that tend to pop up very quickly. And again, they can impact us. They can impact most of our -- most of the impact we've seen haven't been direct Aptiv impacts. We don't have the chips. But as that saying, you can only -- you need 100% of the parts to build a car. So if anywhere that falls out, customers get disrupted and that disruption tends to impact everybody in the supply chain. So getting better, I'd say, the start of the year is in line with what we've expected. Although, as we talked about in our Q4 earnings call, we were expecting a back-end loaded year, right? Things would get -- things would increase from a production perspective, from a supply chain parts availability perspective over the course of 2023. So 6 or 7 weeks into the year, I'd say that continues to play out that way.

Perfect. Of course, the other kind of thinking beyond the near-term, the other big news from your Investor Day was the acceleration of the growth over market, or GoM, to 10% plus beginning 2026. You're coming off a very strong year for bookings or forecasting another year of about $32 billion. Does the $32 billion bookings have to grow from here to support the GoM acceleration in 2026? Or this $32 billion kind of start to get you there already?

Listen, it's a big step up. And as Kevin talked about, some of these awards that are coming in are larger, right? They're platform awards. They're full systems awards. We had a Level 2+ Aptiv Safety Award that we won a global system for a European OE. That was almost a $3 billion single award, right? A very large award, Aptiv Safety Awards had historically been, call it, maybe close to 1/3 of that. So the bookings have gone up. It went from $24 billion to $32 billion in 2022 to 2023. A big step-up -- sorry, from 2021 to 2022, a big step-up. We expect them to stay around this range as we get into '23, but yes, I would think there's growth over time from that level. I don't think you're going to necessarily see those make step-ups every year. Obviously, that was unique around some of the program awards, and -- what was coming out from customers, but I would certainly expect to see that continue to trend upward over the coming years.

Absolutely. Maybe a 2-part question on M&A. I think there were a fair amount of mentions at the Investor Day of Aptiv continue to look for M&A. So hoping maybe you can give us a bit more kind of where you're looking. And on the -- to that point, on the auto versus non-auto. Non-auto has not reached the original mix you anticipate it because auto has been so strong. And so is it almost -- how committed are you to driving on auto growth given all the acceleration you are seeing in SVA and Gen 6 ADAS? And how does M&A maybe play within that?

Yes. Listen -- certainly, listen, the adjacent market business remains important to us. It's accretive from a growth perspective. It's accretive from a margin perspective. In a lot of ways, it's taking our know-how, our advanced technologies and putting them to work in other industries where there's a need around -- really around the same sort of safe, green and connected megatrends. So it's a very natural place for us to be. There's resources in the company that are focused on it and focused on those markets specifically. So you don't really deal with any type of sort of distraction. We had an aspirational goal of being 25% nonautomotive by 2025. That's the goal we outlined in 2017. We always said, at the time, we weren't going to do something just to hit that number, right? It needed to be logical. It needed to fit within the strategy. And at this point, we're going to be right around 20% on current trajectory that I think there'll be more M&A opportunities. You're right, though, that percentage of being shy of that 25% is at least in half part due to how quickly automotive grew, particularly things like the high voltage and active safety product lines since that original -- since we originally laid out that goal. But again, we're not going to do something just to hit a number, but we still remain very committed to it. And we're starting to see some, I think, some relevant know-how and technology transfer. We got a quick leg up, I think, as it relates to our high-voltage product line, in terms of both how to manage and design some of those high-voltage systems in a vehicle from some of Hellermann Tyton expertise on high voltage and other industries. And we have some high-voltage interconnect expertise primarily serving semiconductor from an acquisition of Winchester Interconnect that we did in 2018, which fed some of our know-how around high-voltage interconnects for automotive as well. So -- and I think you'll see more of that on the ASUX side with Wind River. So very much committed to it, continue to grow it. I think the company is -- I think from a management perspective, we're well set up to do both. The M&A pipeline remains very strong. There's always a bit of a lull as public market valuations move. It takes some time for the private side to catch up. I think we're working our way through that. I think Intercable is a great example of a really solid acquisition for the [ SP&S ] business. It is a high-voltage interconnect business based in Europe that specializes in modular bus bars or taking power off of the battery. We historically and our systems have distributed power through from the battery throughout the vehicle. Intercable's technology actually takes power directly off the battery and feeds our existing systems, so very complementary. And as I mentioned at Investor Day, we closed on that transaction in end of November last year. We've already seen a 40% increase in funnel opportunities, so pre-bookings activity. And that really, in part, is driven by customers in China, customers in North America. I'm appreciating that Intercable is now part of Aptiv. Intercable historically done most of its manufacturing out of Europe with a small plant in China. It made that purchasing decision somewhat difficult for particularly North American OEs. That's a very long supply chain coming out of Europe, but we've already commissioned a manufacturing plant in North America that have started work on it for Intercable, and we've seen the customers already respond. They're familiar with Intercable's technology and having sort of addressed -- our customers have confidence that we'll address that supply chain issue or concern with the plant in North America. So I think there's other opportunities out there, and I think you'll continue to see us take advantage of those.

Perfect. Maybe stepping towards the margin bridge for 2025. You guys did -- as we get a lot of questions around that, particularly on the performance side. So how were you able to find kind of incremental performance to offset a lot of these cost headwinds that you faced and are facing through 2025? And maybe specifically to that, if COVID costs don't go away next year entirely, are there other offsets in that bridge such that you still be able to kind of get to those targets?

Yes. Really, what you see in the '22 to '25 bridge, you're absolutely right. On the performance side, there's 2 big things. We spent about $315 million in 2022 on COVID and supply chain disruption costs. The assumption is that's gone away by the end of 2024. We saw a significant run rate improvement even in the back half of 2022. The Q4 improvement was $25 million alone year-over-year in Q4 of '22. We're assuming we improved by about $135 million of that $315 million in 2023, and then the remainder goes away. Certainly, if COVID and supply chain disruptions stay within the environment longer than we expect -- and again, we have seen sequential improvement each quarter, that would be something to address. But at the moment, we're seeing the run rate improvements on a quarterly basis, and as best you can with sort of a -- trying to forecast sort of external disruption, we feel confident in that outlook. The remaining performance, which is about $1.4 million over that 3 year -- $1.4 billion over that 3-year period really is a -- us getting back to a normal cadence of leaning out the manufacturing operations, continuing best cost country rotations where it makes sense from either a manufacturing perspective or just as importantly, an engineering perspective, and we're doing a lot on that front. And also starting to get return to a more normalized material performance cadence with our supply base -- and Kevin mentioned something earlier and I talked about the bookings. One of the advantages we have with the supply base or 2 of the advantages. One, we're running a tremendous amount of new business, and we tend to identify suppliers that will participate with us in that business as part of the award process, and that results in much like -- we provide price downs to our customers. There is a mechanism within our supplier community to get economic benefit and the more awards you have, the more new business you can show your supply base. I think the stronger you are in being able to agree to terms on economic benefits, and we've again had a good history of doing that. The other advantage we really have, we talk about being a supplier of choice to our customers, but in a lot of ways, we're a customer of choice for our suppliers, not only because of all the new business awards, but as Kevin mentioned, we really don't have a decremental content issue in the business, right? We are seeing significant opportunities with incremental content, but given the portfolio moves, some of the product line rationalizations, we've really done over the past 5 or 6 years, there is no internal combustion business that's going away. There is no -- this up-integration is going to exact a toll on the number of smaller domain controllers that are in the vehicle, right? We're seeing customers looking for -- we have one customer who's RFQ for their SVA on their Smart Vehicle Architecture program, their goal was a 75% reduction in smaller domain controllers. We don't have that decremental content, right? We're moving to the larger content, the larger controllers and that makes us a better customer for our suppliers, right? Because they don't have to manage, okay, you're growing here, but you're going down here, and there's only so much economics we can share as a result. We have the benefit of really strong growth from a -- as a customer to our supply base.

Perfect. That's a great point. Thinking -- one more question on margins. Pre-COVID, one of the biggest issues in the supply base was this -- the requirement creep that suppliers have talked about, some of it was called launch costs that were coming in. And as vehicles become so much more complex, how are you thinking about that over the next few years? Is it pretty rock solid in the contract kind of who bears certain things if the OEM wants to change something? Or is this just something you're going to have to manage through and kind of bit-by-bit negotiation as issues arise?

Yes. Listen, I'd say, there's a -- regardless of what the contract says, sometimes there's commercial relationship management that needs to work through. I think maybe -- and it will take a little bit of time, but maybe what you're hearing us say and maybe what you're hearing our customers say, we need to reduce complexity and we need to simplify. And that comment I made about stitching hundreds, hundreds of suppliers into a solution. Ultimately, maybe from a purchasing scorecard standpoint might imply a financial return when you factor in engineering, when you factor in manufacturing, when you factor in warranty cost, it certainly doesn't. And if you look at those OEMs who are referenced now in the newspaper in terms of their cost of hardware and software in it being thousands of dollars less expensive than their legacy competitors, a lot of that is because their focus is as much on simplification as it is innovation, and how do they drive standardization, how do they drive simplification. So that's something that we're working really hard to do. Again, it's critical that we give our customers choice. They want an element of flexibility, but how do we take out as much complexity effectively as we can. And when you do that, I think upfront, you're defining what your roles are. And then obviously, depending upon the situation and the customer, a supplier can decide how people line in the sand, do they want to draw. Now last year, from a supply chain standpoint, was obviously -- last year 2021 had their challenges at -- during 2021. Our real focus was on how do we keep our customers connected. Part of '22, that was a real big focus as well. But as we got into -- later into 2022, a real pushback on overall cost was absorbing costs. Did that very effectively, did that while booking $32 billion in business. So we feel like as long as we're bringing value, as long as we're working with our customers to enable them to produce vehicles, enable them to optimize vehicle architecture and software architecture, we're in a good position to certainly push back on those -- that creep.

If a customer chose to go down this path without Aptiv, why would you make that decision? Is it purely -- is it just competition? Is it because I mean you made a very compelling case for your competitive advantage, is it more in-source? Is it just look it happens and is what it is kind of? Or is there something more if that were to happen?

Yes. Listen, we won't win all business. I think OEMs will make whatever decision they need to make. Again, we feel like given where we sit from them, we refer to it as a brain and nervous system of the vehicle. There really isn't another player out there, just given our experience across regions, across OEMs, across domains. So we think we're the logical best solutions, but OEMs will make their choice. I think it will be less about Aptiv versus someone else, I think it will be more about hey, where are they in their kind of vehicle life cycle, where are they in their program launches? And when is it the right time for them to take this rearchitecting on?

Absolutely. Let's make a question on Motional. You mentioned, I think, at the Investor Day, $0.25 billion in revenue by 2025. I was hoping that maybe you could talk about at a high level, what this business could look like in 10 years? And of course, I asked because the competitive environment, at least from one competitor seems to be better now in the U.S., Motional has 2 agreements with major ride share companies, including a 10-year deal. We, of course, don't know what that agreement really entails, but how big could this opportunity be for Motional, and of course, for you as well?

Well, the Motional focus is on building the tech stack for autonomy, and our view -- and I think you could confirm this, our view was near-term that was not going to be a big revenue opportunity as it's related to Mobility on Demand. We viewed it as an opportunity, an opportunity that would certainly continue to evolve and increase. Again, as I mentioned, benefits near-term for Aptiv as it relates to validating some of our technology, one; and two, using some of the learnings and technology that Motional develops for existing ADAS solutions. But when you look at broader autonomy, whether that's for moving people, moving products, moving goods, whether it's in ag or it's in supply chain, warehouse distribution, it's a big market with a very big opportunity. And when you put it into perspective in terms of what we've invested to get Motional where it is, it's a fraction of what others have, and we've got significant benefit out of it. We'll -- on a regular basis, Joe and I sit on the Motional Board, we have great partners in Hyundai. And on a regular basis, we'll evaluate capital allocation and what we fund and what we don't fund. But where we sit now based on fully driverless vehicles in 2 ride-hailing companies in 2023, we feel very good. Joe add to it.

No, I think that covers it. I mean Motional, from the pure funding question we get, Motional has cash through the second half of 2024. As some may recall, the cash went into the business as part of the Hyundai joint venture. Hyundai put about $1.6 billion into the business at the time. That's the money that's being spent over the next, call it, 6 to 9 months. We'll have a funding decision to be made. Our expectations now with the 2 partners would fund the next year of operations. We've talked about that before. There's no minimum funding requirements or anything. And look forward into 2024 and 2025 as the capital markets perhaps get better for those types of investments, looking at alternatives, but we remain very committed to the business and very committed to the technology.

Perfect. We got about a minute or 2 left. I did want to sneak one more in on your 2030 target. So there's a lot to like in the revenue and margin targets you laid out, but one thing that stuck out was your EV penetration forecast. I think we're below some of the -- at least one of the third parties out there. And I was curious, is that conservatism? Is it your view of customer plans, maybe a mix of both? Just kind of curious a bit more about that number?

Yes. Obviously, we don't have customer schedules that go that far out, right? So there is an element of our estimates and our extrapolations. We're assuming 35% of vehicles manufactured in 2030 of battery electric. The car numbers are around 45%, 50%. We do think at some level, whether it's 45% or 50%, we're not sure. We do think at some level, you may see some supply chain constraints and, call it, that midterm that either limit the amount of materials you need for battery electric vehicles or put it at a cost where it may be adoption is slower. So we plan for a forecast that has a tremendous amount of growth. Our high-voltage business is growing 30% annually and will continue north of 30% annually, and we'll continue to do so for a number of years into the future. Well, we -- as we thought about the long-term target, I wanted to pick something that we thought was achievable in addition to be a significant step forward. And certainly, if there's been news out of Europe since our Investor Day. Certainly, if things change, I think we've got a really good muscle within the company to be able to adapt to that change, and if capacity needs to be added as you get into that '28, '29 timeframe, we'll figure out a way to do that, but we felt that was a fairly balanced forecast at this point.

Absolutely. I think we are out of time. So please join me in thanking Kevin, Joe for participating.

Thank you.