Sustainability

Case studies

The electrification of the powertrain is one of the major megatrends affecting the automotive industry today.

Stricter regulations on greenhouse gas and particulates emissions globally are leading to a fundamental change in the automotive industry: the electrification of the powertrain at the expense of the internal combustion engine, responsible for much pollution today. The European Commission has set 2021 emission reduction targets for car makers, to be phased in from 2020, implying a reduction of over 25% in emissions compared with 2015 targets.

This is resulting in a gradual shift from vehicles fuelled by traditional power sources such as diesel and gasoline, towards electric, fuel-cell or hybrid powered vehicles. This shift is further supported by targeted policies such as tax breaks for the purchase of electric or hybrid vehicles, parking priorities, access restrictions, the gradual deployment of charging points and fuel economy standards.

The efficiency of supportive policies is demonstrated in the uneven distribution of the electric car stock globally today. The top five countries account for 80% of the total stock, while the top ten account for 96% with Norway leading the way by some margin.

We expect the combination of regulation and targeted policies to lead to a rapid expansion in the production and sale of electric or hybrid vehicles. All sources agree that the market will continue to grow rapidly and many agree that, by 2030, the share of electric vehicles could grow to between 25% to 50% of new vehicle sales in major world automotive markets, from 2-3% currently.

3i has a strong track record of investing in companies that develop products and services to facilitate the electrification megatrend.

As with all fundamental technological changes, the shift to hybrid and electric vehicles will require the development of facilitating technologies, products and services.

3i identified the emerging electrification trend in the early 2010s, and invested in companies that contribute to enabling that shift, including, among others, ATESTEO.

ATESTEO – a global leader in drivetrain testing services

We first made the investment in ATESTEO in September 2013 and exited it in December 2017, realising a 4.8x money multiple. ATESTEO’s strong growth, and ultimately the success of 3i’s investment, have been driven by the increased testing requirements involved in the development of new hybrid and electric vehicle models. ATESTEO is the global market leader in independent automotive drivetrain testing services, with over three times more capacity than the next independent competitor and a large number of established and upcoming automotive customers.

The company’s services focus on lab- and road-based testing of newly-developed transmissions and other drivetrain components, with the objective of ensuring their durability and performance. It operates over 130 modular test benches globally, which have the flexibility to adapt to the parameters of the most complex electric and hybrid drivetrains.

ATESTEO developed the first endurance test of a complete hybrid powertrain in 2008 and the share of e-mobility as a percentage of its total testing business has been increasing rapidly since, driven by the global growth in low-emissions vehicle development.

During its period of ownership of ATESTEO, 3i was instrumental in supporting the growth of the business, by:

  • expanding the company’s testing service portfolio (with a particular focus on the growing electric and hybrid market) and disposing of non-core business activities;
  • growing the company’s presence in China, the world’s largest market for electric vehicles, by tripling its local capacity and commissioning a new testing site in northern China; and
  • encouraging innovation in its proprietary test bench automation system and investing into state-of-the-art testing equipment.

4.8x
The realisation of our investment in ATESTEO for a 4.8x money multiple demonstrates that there are significant value creation opportunities from products and services that facilitate the development of climate change friendly technologies.

The higher component/drivetrain complexity of electric vehicles requires the services of specialist testing providers such as ATESTEO.

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