Nexteer Automotive Group Limited (1316) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to Nexteer Automotive Group Limited 2022 Interim Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] I would now like to turn the conference over to Investor Relations Director, Mr. Tony Wang. Please go ahead.

Thanks, Matt. Good day. Welcome, everyone, to Nexteer's 2022 Interim Results Call. We made the announcement of our interim results this evening Hong Kong time. And our conference materials were released earlier today and are available on the company's website. Joining us today is Robin Milavec, Executive Board Director, President, CTO and Chief Strategy Officer; and Mike Bierlein, Senior Vice President and CFO. Starting the presentation, we will have Robin provide an update of the company's business development for the first half of 2022. After that, Mike will lead us going through the financial details and wrap up with the company's consideration about the second half year and moving forward. Following the presentation, we will be available for your questions. The slides accompanying today's call are available at the company's website. Please be mindful of the safe harbor statement governing today's communication in the second page of the investor presentation package. With that, I'm happy to turn the call over to Robin.

Thank you, Tony. And good morning, good afternoon and good evening to everyone. Mike and I are very happy to be with you today to review our first half earnings and business overview. It was and continues to be a challenging environment impacted by inflationary pressures, commodity price increases, logistics, cost pressures and unexpected production disruptions due to microchip supply as well as ongoing COVID-related lockdowns. On the positive side, we continue to adapt to this new environment in partnership with both our supply chain and OEM customers to minimize the impact of these headwinds and continue to build value for our future. We're seeing very good results from our new technology pipeline in alignment to the industry megatrends, especially electrification. And during the first half of the year, we had a very strong launch and new business bookings performance that I'll discuss in more detail shortly. To get started, I'd like to share an executive leadership change with everyone. On June 21, Mr. Zili Lei was redesignated as Executive Board Director and appointed as Nexteer's new CEO, in addition to his role as Chairman of the Board. Mr. Lei previously served Nexteer as Non-Executive Board Director since June of 2021 and was appointed Chairman of the Board in March of 2022. Mr. Lei offers 25 years of experience in the auto industry and most recently served as the Chairman of AVIC Auto, the Chairman and General Manager of AVIC Hande Investment Holding Company, which is a non-wholly-owned subsidiary of AVIC Auto and the Chairman of Henniges Automotive Holdings. In addition, he has held positions of Chairman and General Manager of PCM China and the Director of Nexteer Hong Kong. Mr. Lei, Mike and I, along with the rest of Nexteer's management team are looking forward to working together to continue to support the interest of all stakeholders as well as continuing to execute our strategy for profitable growth. And speaking of growth strategies, we have a slide that shows the 6 strategies for profitable growth. Those remain unchanged. And today, I'd like to introduce you to our new company vision statement and then discuss the progress being made relative to the expansion of our revenue base and technology leadership. So we have a new company vision statement that was rolled out internally during the first quarter of this year, and it reads, we are the leading motion control technology company that accelerates mobility to be safe, green and exciting. Now this vision challenges us to create our future as a motion controlled technology company. It inspires us to make a positive impact on safety, sustainability and exciting product performance. It connects our skills and competitive advantages to future mobility megatrends, and it positions us for growth opportunities and margin enhancement with premium technology products. Now when we talk about motion control technology, we're referring to that technology that efficiently manages vehicle chassis forces to create a safe and exciting driving experience. Motion control also captures the current and future potential of all of our product lines, including EPS, columns, driveline, steer by wire, eDrive and software. We also discussed a lot about what it means to be the leader. And as a leader in motion control, we strive to have a leading position in 3 very specific areas. First, technology; second, market position; and third, profitability. This is our vision and the priorities that it is driving within our organization. So now we cover the linkage between the vision and our business priorities. Let's dive right into the business overview for the first half of 2022. For the first half, we successfully launched 17 new major programs across all regions with 1 in North America, 2 in EMEASA and 14 in Asia Pacific. Most of the new launches are Conquest business coming from incumbent and new customers. These Conquest wins are shown on the chart in red font. As you can see, the chart shows our launch for 8 new programs on electric vehicles marked with the green symbol. They include both hybrid and battery electric models that are supported by our products. The EV trend continues to accelerate, and we expect this to be reflected in our launches going forward. In addition to the Ford F-150 electric pickup truck launch in the critical North America full-size truck market, we're also pleased to see continued diversification in the APAC customer mix with more China local brands, as shown on the chart. Our pipeline of new products and programs continues to advance and mature and we expect significant additional new launch activity in the second half of this year. Next, I'll talk about our new business bookings. We had a very strong first half related to new business bookings with $4.4 billion in lifetime revenue for the first half. Of this amount, 83% represent new or Conquest business for Nexteer, which will incrementally add to our revenue profile once these programs launch over the next several years. On the chart in the deck, you can see some of the highlights of this strong booking half. It's led by the industry's first high-volume Steer-by-Wire program. This business booking is with a leading global OEM and is one of the largest revenue contracts in Nexteer's history. Next, we added another EV truck award in North America, continuing our trend in capturing both the ICE and BEV versions of the North America truck platforms. We booked several new steering business contracts with leading Chinese NEV OEMs. And finally, we added an additional product line content with a major global EV leader. Now with bookings of $4.4 billion compared to a target of $6.3 billion, you can see that we've already achieved about 70% of our annual goal within the first half alone. We have tremendous growth opportunities in front of us and a large pipeline of additional business bookings scheduled in the second half that will most likely meet or exceed our goal. On the right-hand side of the chart, you can see the bookings broken down into several categories. 85% of our first half bookings were with our EPS product line, and this includes Steer-by-Wire, 83% are Conquest or new business contracts. 50% of the bookings are from our EMEASA division, 30% from APAC and 20% in North America. And finally, 90% of our bookings are with EVs, supporting the acceleration of this powertrain choice by most of the OEMs. Let's take a deeper look into the NEV steering business in China. China's NEV market is a global electrification leader and it has increased its growth, thanks to a mix improvement and favorable government-backed stimulus policies. Many NEV businesses are emerging, including both traditional OEMs and nontraditional new players as well as global and local names. As this market segment is so dynamic and quickly evolving, we're being very strategic in our pursuits. We continue to see the results of our efforts with recent awards and continue to proactively work with well-positioned NEV players in China to seize these new opportunities with the potential growth leaders. On the left-hand side of the chart, the traditional OEMs shown are our incumbent customers, who are moving rapidly towards electrification. Given our alignment, with the electrification trend and our technology leadership, Nexteer will continue to be these OEMs strategic partner as they transition into the electric vehicle era. On the right-hand side of the chart, it's interesting to see our diversified coverage across pure EV players. We reference them as NEV OEMs because that's a phrase used by the Chinese government for the subsidy eligible vehicles. It's really exciting to see the impact that these NEV OEMs are having and how both traditional and nontraditional OEMs are moving quickly on electrification that is reshaping future mobility. These dynamic market shifts and new players can create extra market demand, and we're focused on capitalizing on these opportunities. Next, a few slides on technology leadership and the alignment with megatrends. Through the megatrends of electrification, software, automated driving features and shared mobility, the auto industry is reinventing itself at an increasingly rapid pace. These trends require technology solutions, and we've aligned our development pipeline with these megatrends in order to capture the growth and opportunities they will generate. Each of our product lines has alignment to multiple megatrends, but it's becoming evident that the dominant megatrend is the electrification of the powertrain. The electrification megatrend is creating opportunities for growth. More premium products and increased content per vehicle across all of our product lines and activities. And speaking of opportunities in premium products, as I mentioned before, Nexteer has been a Steer-by-Wire development partner and this goes back several years with OEMs since about 2017. Our investment over this time frame, not only with Steer-by-Wire technology, but also in our OEM relationships has yielded this record-breaking booking for Nexteer with Steer-by-Wire. In the first half of this year, we were firmly awarded high-volume Steer-by-Wire business with one of the largest global OEMs. This Steer-by-Wire application will be on a significant global platform that will quickly advance Steer-by-Wire technology into the market's mainstream. It's also important to note that the competition for this significant new Steer-by-Wire business award was very fierce. We went head-to-head with our most capable peers and came out on top in terms of both technology and commercial offerings. This gives us the confidence that we're well positioned to lead this technology revolution in the steering space and capture significant market share as the industry converts. And as a final note, Nexteer's Steer-by-Wire technology continues to earn industry recognition as well. For this year, we are a PACE Award finalist for our Automated Steering Actuator, which leverages our Steer-by-Wire technology, and will be featured on an upcoming launch of a fully autonomous people mover. And in last year, our Steer-by-Wire with stowable column earned a CES Innovation Award and a PACEpilot Award. Now in addition to Steer-by-Wire conversion, the industry is also moving from hardware-defined vehicles to software-defined vehicles. The slide in our deck shows the evolution of vehicle electrical architecture. Today, each electrical system typically has its own ECU that controls the function of that specific component. This is true for our electric steering system as it has a self-contained ECU that provides all the steering functionality, and communication with the vehicle. We're seeing a trend towards more domain controllers beginning in the middle of this decade. So as an example, there would be chassis domain controllers that coordinate the actions of the braking, steering and suspension systems together. This domain controller may also include a standardized version of some of the functions that currently reside in our steering controller. Looking into the next decade, we see a trend toward zonal-based central computing to further consolidate and efficiently coordinate the increasing complexities and processing speed needs of the future vehicles. Nexteer currently has valuable intellectual property associated with steering controls and those related functions. But we're also working closely with Continental through our JV partnership on broader-based chassis control algorithms with steering and braking in order to prepare for this trend. We are positioning ourselves to be a participant in this software trend in order to retain the competitive advantage that our software algorithms have within the vehicle chassis system. And the evolution from hardware to software defined vehicles is also leading a revolution in advanced safety, performance and convenience. Beyond our in-house ownership of all steering software design development, we continuously collaborate with our OEM customers on software features and vehicle integration. In addition, we collaborate with other valuable partners such as Continental through our CNXMotion JV and Tactile Mobility to continuously innovate software solutions for advanced vehicle performance and enhanced safety. First, on a chart in our deck, we can talk about brake-to-steer software expansion. So through our partnership with Continental, brake-to-steer software functions provide backup safety layers and was recently expanded to cover all variants of electric steering and Steer-by-Wire across all SAE levels of automation. So it now covers all vehicle types with and without a driver. Because brake-to-steer is a software solution, it can provide this additional steering safety layer without the cost and complexity of additional hardware. Brake-to-steer was launched back originally in 2020, and that function pioneered the use of electronic braking as an additional layer of steering control for high and full driving automation. This brake-to-steer function has earned Automotive News PACEpilot Innovation to Watch in 2021. Next on the slide is surface detection and tire health management. Our collaboration with Tactile Mobility provides 3 key benefits. First, it enables safer driving choices by providing drivers with new insights about their vehicle and the road conditions that were previously unavailable. Second, it improves overall vehicle health management, safety and performance, by detecting, changing road surfaces that could go from wet surfaces to icy, to gravel and the evolving tire wear conditions that can influence tires performance on these road surfaces. And third, it enhances the connection among the driver, the vehicle and the road through new advanced road and tire detection software. This breakthrough is also recognized as a finalist for the 2022 Automotive News PACEpilot Innovation to Watch. Again, I'd highlight these are purely software solutions that are integrated into the vehicle's existing systems, so no additional hardware is needed to achieve even safer, more reliable driving. Continuing with the electrification trend, in March, we announced our new eDrive product line with the development of our 48-volt integrated belt-driven starter generator. This product supports hybrid models of conventional internal combustion engine vehicles. We're successfully bringing this to market during the third quarter of this year with an expected launch with a domestic Chinese OEM. This launch creates a foundation and an entry point for our exploration into additional eDrive applications and customer expansion. Finally, I want to provide just a short summary on industry recognition. Nexteer received a range of industry recognitions for the work completed in the first half of this year. And rather than to speak to each one individually, I'd like to highlight 3 themes. They are excellence in manufacturing and product quality, innovation and customer responsiveness. I'd also mention we were awarded the GM Supplier of the Year for a third consecutive year. And with that, I'll pause, and I'll hand it over to Mike Bierlein, our Senior Vice President and Chief Financial Officer, to take us through the details of the first half financials. Mike?

Thanks, Robin, and good day to everyone joining us on the call. The first half of 2022 continued to be a challenging operating environment for our industry. Despite the challenging environment, our revenue growth outpaced market by 490 basis points as we continue to benefit from our significant new and Conquest customer program launches. Supply chain constraints remain and macro factors certainly impacted OEM production volumes in the first half of 2022. Global OEM production volumes were down 1.8% compared with the first half of 2021. COVID-related lockdowns resulted in lower-than-expected production in China. And Russia-Ukraine war caused customer schedule instability in Europe. The semiconductor shortages continue to disrupt production on a global level. The shortages have affected the industry for some time now, and we see it lasting into 2023. Inflationary pressures impacting commodities, energy and other input costs have significantly compressed our margins in the first half of 2022. Commodity price increases have raised our material costs and have only been partially offset by customer price increases. We are working through detailed negotiations with our customers to recover these inflationary costs and we are confident that we will be able to make progress in this area during the second half of the year. This slide summarizes our key financial metrics on both a year-over-year and a sequential basis. Revenue of $1.791 billion in the first half of 2022 is an increase of 3.3% on a year-over-year basis and an increase of 10.3% compared to the second half of last year. EBITDA of $158 million or 8.8% of revenue was lower year-over-year by 25.7%. This reduction is largely due to the challenging operating environment and significant inflationary pressures impacting our input costs. However, if you compare sequentially versus the second half of 2021, EBITDA increased by $10 million or almost 7% driven by higher revenue. Net loss of $11 million is lower than prior year by 113%. This includes a noncash unrecognized tax benefit expense of $49 million related to our U.S. deferred tax assets. Adjusting for this impact, our net profit would have been positive $38 million, which is slightly higher than the second half of 2021. Free cash flow was a slight use of $7 million in the first half of 2022. This is an improvement of $37 million compared to the first half of 2021 as we continue to focus on effective working capital management and a disciplined approach to capital spending. Revenue increased by $57 million or 3.3% in the first half of 2022. Unfavorable foreign currency lowered revenue by $29 million, mainly reflecting weakness of the euro against the U.S. dollar. The largest driver of the year-over-year revenue increase was volume and net favorable pricing, which provided an uplift of $54 million, rounding out the bridge contractual and negotiated recoveries from customers due to the increased commodity costs provided a $32 million benefit. On the left of the slide, we have highlighted the change in OEM light vehicle unit production comparing OEM production for the first half of 2022 and the first half of 2021. North America volumes were up 4.4%, EMEASA off 10% and Asia Pacific about flat, bringing us to the 1.8% reduction on a global basis. On the right of this slide, we adjust our revenue for foreign exchange changes and customer commodity recoveries. Our adjusted revenue is up 3.1% year-over-year, outperforming the market by 490 basis points. North America is slightly ahead of market and EMEASA is significantly outperforming, largely driven by the continued ramp-up of our Morocco facility. Asia Pacific is slightly lower than market as volumes were constrained by the COVID lockdowns in China. Moving forward, we expect our revenue to continue to outperform the market driven by our strong bookings and program launches weighted toward new and Conquest business. Our regional revenue performance is highlighted on this slide. On the left of the slide, the regional distribution of our revenue for the first half of 2022 and 2021 is provided. Our North America segment is the largest and in the first half of 2022 comprised 61% of our total revenue. Followed by Asia Pacific and EMEASA of 21% and 18%, respectively. Compared to 2021, the regional revenue distribution is relatively unchanged. North America revenue of $1.095 billion, $72 million or 7% higher than last year. Asia Pacific revenue of $378 million, $10 million or 2.5% lower than last year, driven by the China COVID-related lockdowns. EMEASA revenue of $316 million, about flat year-over-year. Adjusting for the unfavorable exchange impact and commodity recovery, revenue increased by 4.9%. As I noted, this region significantly outperformed the market as we continue to ramp up operations in our Morocco facility. Turning to our earnings performance. EBITDA for the first half of 2022 was $158 million, providing a margin of 8.8% compared with $213 million, providing a margin of 12.3% for the same period in 2021. Volume and net favorable customer pricing provided an increase of $10 million. The next 3 categories demonstrate the impact that the challenging operating environment had on our earnings. First, there was a significant impact relative to net commodities. In total, our material costs related to commodities increased $63 million. That was offset by $32 million of customer price increases, netting to $31 million unfavorable impact year-over-year. Next, logistics costs remain elevated and increased year-over-year, causing an unfavorable $5 million impact. Finally, inflationary pressures impacting material costs, largely semiconductors, energy and other input cost increases, have driven an unfavorable variance of $29 million. Overall, our EBITDA performance and margin profile were significantly impacted by the challenging operating environment and inflationary pressures experienced by the industry in the first half of 2022. This slide highlights our EBITDA and margin profile for each of our regions for the current period and the same period in 2021. North America posted EBITDA of $79 million, $39 million lower than 2021, with margins lower by 430 basis points to 7.2%. Margins were reduced due to commodity cost increases and other inflationary pressures. Asia Pacific posted EBITDA of $68 million, $13 million lower than 2021. Margins remained strong at 18.1% of revenue despite being impacted by the China COVID lockdowns. EMEASA posted $27 million of EBITDA, $5 million higher than 2021. Margins expanded by 150 basis points despite facing a very challenging operating environment, particularly in Europe. This slide provides our EBITDA to net profit bridge for the first half of 2022 and the first half of 2021. I would like to highlight just a couple of items. Depreciation and amortization expense of $136 million increased by $17 million on a year-over-year basis, reflecting an increase in intangible asset amortization of capitalized product development costs. Income tax expense would have been a benefit of $20 million, if not for the $49 million noncash unrecognized tax benefit related to deferred tax assets in our U.S. operations. This noncash charge reduced net profit for the period to a loss of $11 million. Excluding this impact, net profit would have been a gain of $38 million. Transitioning to the balance sheet and cash flow. On the left of this slide is our cash flow performance. Cash from operating activities of $122 million in the current period rose by $27 million compared with a year ago, principally a result of favorable working capital offset by lower earnings during the first half. Cash used in investing activities of $129 million comprised of capital investment and capitalized engineering and product development costs of $55 million and $74 million, respectively, in the first half of 2022 was lower by $10 million compared with the same period last year. Free cash flow was a slight use of $7 million in the current period, narrowing the use by $37 million compared with the first half of 2021. On the right of the slide, our key balance sheet metrics. We ended the first half of 2022 with a net cash position of $153 million. Adding the availability of our credit facilities of $312 million to our $317 million cash balance, we had $630 million of liquidity at the end of the first half. Our balance sheet remains strong, and we remain committed to maintaining a disciplined approach to our capital allocation as we move forward. Looking forward into the second half of the year, we expect the macro environment to remain challenging and dynamic. Although we are optimistic as we are anticipating certain tailwinds, which will provide opportunity, OEM production volumes are expected to increase. July IHS forecast expects a 9% sequential increase in the second half of 2022 versus the first half. Certainly, this volume increase is going to depend upon semiconductor availability as well as continued strong consumer demand. However, at this point, our customer schedules are also supporting the forecasted volume increase. In terms of commodity prices, as you can see on the bottom right of the slide, they remain elevated compared to pre-pandemic levels. However, they have begun to decrease in the last couple of months. As this trend continues that will also be a tailwind for us in the second half. We continue to work through detailed customer negotiations to recover inflationary cost increases. We are optimistic that we will make progress on these negotiations throughout the balance of the year. We expect to generate positive free cash flow in the second half. This is a result of the earnings tailwinds that I just mentioned, working capital management initiatives to lower inventory levels and maintaining a discipline in our capital spending. The auto industry is dynamic in light of the macroeconomic backdrop but between the improvements that we are seeing in the industry and the actions that we are taking, we are optimistic in the coming period. We remain committed to our long-term strategy for profitable growth, including leveraging our leading technology position as evidenced by our strong $4.4 billion of new business bookings in the first half of 2022. Thank you for your time today. We will now open the call up for questions. Operator, Matt?

[Operator Instructions] And our first question will come from Tim Hsiao with Morgan Stanley.

So I just have 2 quick questions. That's the first one. I just want to quickly follow up on the revenue outlook because despite the strongest outlook on or guidance provided by IHS, in light of the restocking demand and all the new project launches by Nexteer, should we expect the group top line can outgrow the overall industry in the second half more substantially? And in the meantime, despite all the tailwinds, we also noticed that the recession risk in developed market loom large in the following quarters. So how should we think about the impact from all these cross currents to our revenue outlook in the near term and long term? And how should we balance our investment and the project monetization against such a tough macro environment? So that's about the revenue. And second question is about the margin because on the gross margins in the first half as Mike just highlight, tougher combination of operating deleverage outside of the scale and high material and logistic costs. But all the headwinds in first half might gradually turn into tailwinds to the second half. So should we expect the gross margin to see more meaningful exponential recovery from third quarter onwards? If not, when would be the timing, we could see all these drivers to contribute meaningfully to the group's margin expansion. So one about revenue and one about the gross margin.

Thanks, Tim. Appreciate the questions. Let me start off here on the revenue side. So as we think about our revenue progression moving forward, you can see that in the first half of the year, we outperformed the market by 490 basis points. And as we continue to implement our backlog with our new and Conquest program wins, we expect to continue to outperform the market. So that's true as well in the second half of the year and as we move forward beyond 2022 as well. In terms of recessionary risk, certainly, that is something that we're watching as economies are tightening and there is certainly a risk around recession. But as I think about the auto industry, we've had, over the last 3 years, a pretty low level of production when you think about the COVID period starting in 2022. And now as we've been dealing with semiconductors constraints impacting production in the last couple of years. So we continue to see an underlying demand given the lower production over the last few years. So something that we are certainly closely watching, but anticipate volumes to continue to rise. In terms of margin recovery, as I noted, we are seeing several tailwinds that should lift our margins starting in the second half. We're planning on an improved picture as we compare sequentially. Certainly, the volumes will help lift margins but also on -- as the commodity costs have reduced, our material costs will also reduce and will improve our margins in the second half. Now we'll take some time, of course, to work through these inflationary pressures that we've seen, but we are optimistic and looking for an improved second half.

And Tim, this is Robin. I'll just add a couple more points to what Mike mentioned. On the revenue side, if you look at our bookings over the past few periods, there's been a lot of Conquest businesses that have been booked and that you now see beginning to launch. And a lot of those Conquest businesses are with EVs as well. So I think what you see in the EV market is initially, those programs are launching at relatively low volume. But certainly, we expect that trend to grow over the next few years as the EV adoption in the industry becomes larger and larger. So the combination of our ability to Conquest business and then capture this growth market with EVs I think is -- we're optimistic about how that will impact our revenue growth in the forward-looking years. In terms of margin, I think Mike highlighted the key points. The other thing I would add to that is, along with this electrification megatrend, it is truly giving us opportunities to provide more premium products. And we've talked about this in the past, but it has to do with these EVs being heavier, requiring heavier steering loads, heavier drivelines. So it increases the price point, but also the technology is increasing. So there's additional content in terms of electronics, in terms of software. And then you look at a Steer-by-Wire system. There's opportunities for both the handwheel actuator and a roadwheel actuator. So the content as well as the premium level of the products that we'll be able to introduce into this EV market should bode well for margin improvement going forward as well.

[Operator Instructions] Our next question will come from Rebecca Wen with JPMorgan.

So also 2 questions from me. And the first one is also following up on the GP margin that Tim raised earlier. Given all the tailwinds that you just mentioned earlier, do you think it's reasonable to assume that GP margin in the second half of the year somewhere similar to the level as first half of last year? Or it would be somewhat between first half last year and second half of last year? So that's the first question on GP margin. And then the second question, if you could just share your views on the IRA and how would that shape the EV industry in the U.S.? Any forecast on the potential volume or penetration for EVs in the U.S. and implication to us? Just these 2 questions.

Thanks for the questions, Rebecca. I'll give it a start here. So overall, the second half of the year, I still see as -- given the inflationary pressures, I do see some improvements compared to the first half of this year, but given the inflationary pressures, it will take some time for our margins to improve. We do see our margins on a longer term basis, returning to pre-pandemic levels, but it will take some time, again, to work through these inflationary pressures. In terms of EVs, we are seeing significant bookings as well with our customers as they are planning this powertrain transition to EVs. So that's a global megatrend that we're following, also driven in North America, including in the truck market. We, in fact, in this first half of the year, we won a key truck program for battery electric vehicle as well. So we certainly see the EV market growing globally as well as in North America market.

And Rebecca, this is Robin. Thank you for the question. I'll kind of add to Mike's response to the second question that you had about EVs, in particular, in the U.S. market. As you know, we dominate the U.S. market in terms of the full-size truck and large SUVs. And our strategy has been to kind of bridge this transition as the OEMs move from ICE engines to battery electric vehicles. We want to have our products on both ends. So continue to maintain our ICE engine content and then secure the battery electric version of those truck platforms as they convert. And we have been very successful in implementing that strategy. So we're very much looking forward to this transition. We've kind of mitigated the risk from our standpoint because we've got content on both the ICE engines and the battery electric vehicle. Certainly, the battery electric vehicles have more premium products, say, higher price points in general because they are larger products. So as that volume on the EVs grows, it positions us very well in that market.

Yes. Can I just follow up on that? So how does the Inflation Reduction Act change our forecast or view towards the EV in the next few years, if you could share that, please?

Yes, I think that the Inflation Reduction Act will continue to provide consumers with an opportunity for incentives. So that will further expand the volumes that we see on the EV side. So I think it further support for this transition from internal combustion to EVs within the U.S.

Our next question will come from Jessie Lo with Bank of America.

First, my question is still related to the revenue growth. So -- as we mentioned in the slides that are starting IHS forecast that second half of this year, we are expecting -- IHS is expecting to see a 6% half year over half year growth on the production. So what's our view on this number? So as we see that there is improving signal from the semiconductor shortage, is there more upside to this industry growth number? And then as we mentioned previously, that we will still be able to outperform the market by around low single digits. Is my understanding on this correct? And then my second question is related to the new order gain from a global leading EV maker. So is this referring to the client that we have already received in the drive and following in 2021? And then is this breakthrough more with the EPS product or the Steer-by-Wire product? So any color related to the scale or the market by the regions or the shares of the client?

I'll start with the first one, maybe, Robin, if you can cover the second question. So revenue growth in the second half of the year, we are -- we see the IHS schedules and the customer schedules at this point as well as the actuals are trending to those increased volume levels. And as you mentioned, we are also expecting to continue to grow our revenue above market. So as you described, the above market in the second half that's also what we are anticipating to come through. Now certainly, the market remains dynamic. We have seen some improvement relative to semiconductor supply, but it's still quite tight. So the market remains dynamic, but at this point, we are optimistic in the second half volumes coming through.

Yes. Thanks, Mike. And Jessie, thank you for the questions. I'll just reiterate what Mike said about the revenue outlook. It's very hard to predict. All indications are that there's support out there for an improvement in volume, driven by low dealer inventories, driven by consumer demand, driven by some easing of the supply chain. But certainly, it's been unpredictable, and I think it will continue to be somewhat unpredictable in the second half, but indications are that there should be an improvement. In terms of your question about this global EV leader in our business bookings with that customer, we have secured a column product on that platform that we announced last year. And this year, we are continuing to expand that with a driveline product. So our strategy with -- as we enter the market with new customers is to enter with one of our products, and then that kind of opens the door for us to expose the balance of our product portfolio with that OEM. And as we grow that relationship and we actually meet their requirements and deliver to their expectations, there's certainly opportunity for us to grow with our portfolio. And that's what's happening with this leading global EV. So as I mentioned, we've got a column contract with them, now a driveline contract. And we're also in discussions with them relative to EPS and Steer-by-Wire products in the future. So we're hopeful that will materialize. It's certainly some -- a customer that we have targeted and hope to grow with in the future.

Due to the limited time, we will take the last question. Our last question comes from Jia Lou with Bank of China International. Please go ahead.

Hello, can you hear me? Hello?

Yes, yes. Yes, we can hear you now.

Yes, yes. Yes, I have 3 questions. So one is about the revenue. I note that in the first half of the year, our region of APAC was much more new programs than other 2 regions. But its revenue growth was lower than the other 2 regions. So any special reason about it. What is outlook for the revenue growth by 3 regions going forward? Yes. The second question is about the order backlog. In the second half -- in the second quarter, we got USD 1.7 billion orders despite lower than the first quarter but still higher compared with the last period. So can management share with us more about -- more information regarding orders got in the second quarter. And what is the potential margin profile for these new orders, particularly new products, such as Steer-by-Wire compared with our current EPS products? So the third question is about our new product, eDrive, besides the hybrid of 48-volt starter, new products are adaptable for PHEV or BEV models? And what is the potential revenue contribution from these new products? Yes, that's all for my 3 questions.

Mike, do you want to start with the revenue and then I can pick up the second two?

Certainly, certainly will. Thanks for the question. So as you noted, our Asia Pacific revenue was slightly down first half versus first half. And I'd say the majority of that reduction was really related to these China COVID lockdowns, creating a lot of disruption for us in the first half. Going forward, as you noted, we have had significant program launches and particularly new and Conquest program launches within Asia Pacific. So that will fuel our growth in region. And I'd say based on our backlog of bookings, I would expect that our Asia Pacific division to continue to become a larger part of the total company as we move forward and implement these programs.

Thanks, Mike. And then regarding the second two questions, the first of those 2 was regarding our backlog of new orders. And I would just say the booking, we don't control the timing of the bookings, the OEMs determine their sourcing timing. And it's very -- we have an estimate of when they will make those sourcing decisions, but it tends to be pretty choppy in terms of how it finally comes through. But what we are seeing, the bigger trend is our products are certainly in demand by the OEMs, and we are having a lot more interest in terms of the opportunities that we have available to us. And one example is the Steer-by-Wire program that was booked in the first half. It was a major achievement for the team. And along the terms of those technologies, we are just seeing a flood of interest from all global -- from most global OEMs now looking at the Steer-by-Wire product. So it's very exciting for us. The Steer-by-Wire product itself, as you probably know, has 2 elements to it. There's a handwheel actuator and then there's a roadwheel actuator, and then, of course, all the system integration that provides the communication between those 2 and the vehicle. So there's significant additional content opportunity with Steer-by-Wire. Every OEM might have a different strategy on how they implement Steer-by-Wire. Some may decide to split sourcing of a handwheel actuator and roadwheel actuator, other OEMs want a supplier such as next year to do the full system and the integration as well. But nevertheless, there's tremendous opportunity for additional content. And the only thing I would say about the margin profile associated with that, we wouldn't expect anything less than our traditional steering margins on that product line. But we are very well positioned to be the leader in terms of the volume production and technology for the Steer-by-Wire system. So we would expect to have a very good opportunity for improved margins with our Steer-by-Wire product. The last question was relative to eDrive and the 48-volt belt starter generator product that will be launched very soon here in the third quarter. We see that as an entry point for next year into the eDrive. This first product, the belt starter generator leverages a lot of the competency that Nexteer has developed over the years with our electric power steering. So it's got an electric motor. It's got power electronics and software. So we were rapidly able to enter that market with this 48-volt belt starter generator and begin having discussions with our customers relative to powertrain. So we're excited to enter into the powertrain side. We're looking at other opportunities that eDrive might offer for us in terms of battery electric vehicle. But right now, our focus is on this P0 technology, completing our first launch successful here in the third quarter and then expanding our customer base with that 48-volt P0 technology in the short term. Thank you for the question.

Thank you so much for all the questions and today's participation. If there are any further questions, please contact us at [email protected]. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.