Valeo’s Q1 Performance

Valeo, a French car parts manufacturer, reported a slight dip in sales for the first quarter. The decrease was primarily due to a slump in high-voltage activity for electric vehicles (EVs), which overshadowed the company’s traditional powertrain business.

CEO Christophe Perillat expressed disappointment over the current sales volumes for EVs, especially in Europe where Valeo has significant operations. This resulted in the company’s EV high-voltage activity nearly halving during the quarter.

In response to these uncertainties, Valeo has strategically diversified its manufacturing plants. Instead of specializing solely in high voltage, the plants are now equipped to cater to both hybrid and EV markets.

During an analyst call, Perillat addressed questions about compensation from carmakers for lower EV volumes. He confirmed that Valeo had successfully negotiated necessary compensation for decreased volumes in 2022 and 2023. He further expressed confidence in securing similar compensation in 2024.

Despite the decrease in EVs, Valeo’s traditional and hybrid car businesses, along with its advanced driving assistance solutions (ADAS) and lighting, helped balance the scales.

The broader car parts industry is grappling with a slowdown in auto production, leading to excess capacity among suppliers. In response, companies are striving to cut costs, including workforce reductions, as Chinese EV manufacturers continue to expand their footprint in Europe.

Valeo, known for designing and producing components and integrated systems for vehicles, outperformed the automotive production by 2 percentage points in the first quarter. The company also reported a strong position with Chinese carmakers, contributing to 14% of its first-quarter sales, both domestically and for export.

Valeo’s quarterly sales amounted to 5.43 billion euros ($5.82 billion), slightly lower than the 5.48 billion euros reported in the same period last year.

The company remains optimistic about its outlook for 2024 and 2025, reiterating its previous forecasts.