Strong Hybrid and Battery Electric Vehicle Demand to Be a Long-Term Tailwind for Denso

As one of the largest global automotive component suppliers, Denso has a diverse portfolio of products, ranging from traditional powertrain/thermal components for internal combustion engine vehicles to relatively newer technologies such as electrification/mobility-related components. To adapt to a “once in a hundred years” transformation in the automotive industry, the company has been spending high amounts on research and development in recent years. In Japan, Denso has been engaging in various projects with its main original equipment manufacturer customer, Toyota Motor, as well as other components supplier companies in the Toyota Group, to jointly develop various technologies (including semiconductors, electrification, and advanced driver-assistance systems). We expect these initiatives will prevent commoditization of its key technologies, thus allowing the company to maintain its narrow moat.