ABB’s electromobility is growing so fast that it is to be listed on the stock exchange. A conversation with division head Frank Mühlon about drivers’ fear of breaking down, the problem with large batteries and why he needs less money from investors than initially planned.
Marking for a charging station on the shell of an apartment building in Tübingen (photo from 2020).
The market for electric vehicles is growing rapidly, setbacks are rare. ABB got it anyway. The industrial group actually wanted to list its charging station business on the Swiss stock exchange in the second quarter. The global stock market correction has spoiled investor sentiment. ABB now wants to wait until a better price can be achieved when it is listed. You can afford to hesitate: “We don’t get into trouble financially,” says Frank Mühlon, head of e-mobility, in an interview with the NZZ.
Electromobility will not run out of juice anytime soon: Mühlon would like to achieve sales of at least 450 million francs in the current year. That would be an increase of at least 39 percent compared to 2021. The ABB division’s revenue has increased by an average of around 60 percent per year since 2017. But the sales target is conservative, they say. In any case, the growth of the parent company lags behind by miles (see addition).
There is a need to catch up in Switzerland
The need for charging stations is great, also in Switzerland. What Frank Mühlon calls “range anxiety” still prevails here: the concern of not being able to drive far enough with the electric car because it cannot be charged on the way. According to Mühlon, there are currently a good 8,000 public charging points in Switzerland. “That would have to be at least tripled so that you no longer have to plan a route based on charging points and based on the assumption when a station is free,” he says.
When it comes to electromobility, Switzerland is an “emerging market”, according to a recent assessment the management consultancy Roland Berger – and gave her 39 out of a possible 100 points. Countries in this category are lagging behind in terms of vehicle penetration and infrastructure development. Germany landed in the “Champion Markets” category with 69 points, alongside the USA and China, among others.
Frank Mühlon, Head of E-Mobility at ABB.
As long as there are not enough charging stations, the car industry will counter this with ever larger batteries. Economically, that’s not very efficient. According to Mühlon, a small battery is sufficient for 90 percent of the trips in many cases. In order to increase acceptance of the smaller, more economically viable batteries, charging would have to be made easier on the few longer journeys, such as on vacation.
There is another hurdle here: when charging quickly, as is necessary at rest stops, for example, large batteries charge relatively faster than small ones for technical reasons. This also makes the larger batteries more attractive. “When it comes to loading speed, it’s the weakest link in the chain that decides,” says Mühlon. That’s the battery at the moment.
No more maneuvering at the charging station
On the other hand, charging stations offer a performance that the vehicles are often not even able to access. For example the Terra 360, the world’s most powerful charging station, which ABB presented last year. Their 360 kilowatts are rarely required. However, this also means that the column does not become obsolete as quickly and customers do not have to replace it as quickly.
ABB also wants to score points in terms of usability: Four cars can charge at the same time at the column, and the charging cable has a range of five meters thanks to the sophisticated cable suspension. The driver does not have to make sure that he is maneuvering his car with the charging socket close to the column. “It almost doesn’t matter how you park,” says Mühlon.
ABB imagines the use of the Terra 360 as in this computer model.
Despite such innovations, the hardware is not the crucial point for the ABB manager to differentiate himself from competitors like Tesla and Siemens. That’s the software. “It’s not just about setting up more and more stations,” says Mühlon – but about intelligent management. This ranges from the analysis of the charging data, which enables predictive maintenance of the columns, to complex tasks that go far beyond managing the required power load. For example, the charging of a fleet of company cars can be linked to the energy management of the company building.
ABB wants to have a broad presence in the lively industry. The market is developing extremely quickly, says Mühlon. The needs are also covered by niche companies. ABB’s strategy: acquisitions. “If you don’t fill some niches with takeovers, you may lose market share later on,” explains the manager. Likewise in some regions. That is why the division, for example, planned to take over a digital platform in India at the end of May, which drivers use to book charging stations.
650 instead of 750 million dollars are enough for the IPO
When the initial public offering (IPO) takes place, two-thirds of the proceeds should flow into acquisitions and one-third into internal growth. Out of caution, ABB is not naming a new deadline for the IPO, but it should raise at least $650 million. Previously, $ 750 million had been mentioned. The difference corresponds to a loan that the e-mobility division received from the parent company. The money was needed for a takeover in the US and was to be repaid with the IPO proceeds. Because that is a long time coming, the business unit has now paid the amount from its own resources and no longer has to borrow it from investors.
The fact that e-mobility is going public – with ABB wanting to retain the majority of the shares – is justified by the different priorities in the group. “The electromobility business works differently than ABB’s core business,” says Frank Mühlon. His division is more focused on growth and the result is initially of secondary importance. ABB as a whole, on the other hand, is measured more in terms of profit. You are more agile on your own feet. E-mobility is hovering around zero in terms of operating profit (Ebitda), held back primarily by high investments in software.
ABB splits off Turbocharger and abandons Russia
bet. · ABB is waiting when it comes to e-mobility, but the industrial group is making progress in the turbocharger business. The production of parts for combustion engines is no longer part of the core business, which is characterized by electrification and automation. The division, which had sales of $756 million in 2021, will be spun off and listed on the SIX Swiss Exchange in early October. It has already been renamed Accelleron. Shareholders will be offered one Accelleron share for every 20 ABB shares.
Unlike electromobility, it is not about attracting new investors and raising capital. Those investors using the exchange can trade their shares through the exchange. The future will show how the securities will be valued there, said ABB CEO Björn Rosengren on Thursday when the quarterly figures were presented.
Farewell from Russia weighs on profit
ABB has decided to leave Russia entirely because of the Ukraine war. No orders have been accepted since spring. The decision will result in a write-off of $57 million. This contributed to special effects that pushed the net profit in the second quarter to 382 million francs and thus to half of the same period last year. Sales shrank 3 percent to $7.3 billion. Without exchange rate effects, it would have grown slightly. The order intake increased again clearly. The operating margin (EBITA) of 15.5 percent was better than market expectations.
Mühlon sees little that could stand in the way of switching to electromobility. Electricity prices are currently rising, but so are fuel prices – the weights are not shifting. The industry is also unlikely to run out of the raw material lithium, which is needed to manufacture the batteries: “We would have long since run out of crude oil if the forecasts from the 1980s had come true. It’s similar with lithium,” says the manager.
It takes a little longer for the combustion engine to fall behind in the cost calculation
However, the fact that lithium is becoming more expensive is not leaving the industry unaffected. For the year 2023, it was predicted that an electric vehicle would be cheaper to buy and consume than a car with a combustion engine, explains Mühlon. “This turning point is likely to be delayed by two or three years because of battery prices,” he says. In the long term, however, the trend is completely intact. Wait a little longer, that now applies not only to ABB’s e-mobility on the stock exchange, but also to e-mobility on a large scale.
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