Interview: Mahle to put foot on investment pedal

Germany-based automotive and engine technology producer Mahle plans to expand its corporate venturing activities in future in order to secure greater access to innovation, and is particularly interested in the automotive sector, according to Kai Engelhardt, the company’s Head of Corporate Venture Capital.

“The plan is that we are more active in future, especially in the automotive segment,” Engelhardt told Global Corporate Venturing. “It is a new thing; we know we need more innovative products, and that innovation is key for the future.

“We have two strategies regarding external investments. On the one hand we try to improve our existing products, make them better and bring in unique selling points (USPs), with differentiation potential against competitors.

“On the other hand, it is to research new technologies and business models that are sustainable and profitable for us. We want to satisfy our original equipment manufacturer (OEM) customers and bring up new technologies. It also benefits us to have new business and innovative products, [to help fuel] a profitable business. I would not say it will bring big margins, but it is good to have new products in general.”

Mahle generally invests at a later stage, providing several million euros and reserving money for possible follow-on investments. It targets companies with either strong strategic partnership potential or those with promising technology.

“We are also doing early-stage investments if it is a really promising product that has real future potential,” Engelhardt added. “Then we go in early, but in general we are a later-stage investor.

“The ticket size really depends, it can go up to a two-digit million amount if we are really convinced by the technology.”

Mahle looks to fund automotive technology developers working on CO2 reduction, and combustion and electric powertrain technology, as well as companies specialising in cleantech and industrial innovation. In addition to direct venture capital investments, the company is also open to acting as a limited partner in other funds.

“We invested in [energy and water technology-focused venture capital firm] Emerald Technology Ventures and are about to invest in another fund, which is 100% dedicated to the automotive world. I cannot say who it will be but the deal will be completed next month,” Englehardt said.

“Those are two big fund investments, but we also do direct investments in companies and acquire companies, so it is not a typical venture approach, I would say it is more like a grey zone, with M&A.”

Many of Mahle’s past investments have been in the form of M&A rather than venture capital, and businessses it has acquired in the past few years include oil pump technology manufacturer Entec and water treatment technology developer InnoWa.

The company’s latest move in this area was to buy Amovis, a Germany-based company specialising in exhaust gas heat recovery technology that will be added to Mahle’s existing Organic Rankine cycle technology. Engelhardt revealed that the company had executed the acquisition over a two-year period by buying up shares gradually before closing the deal earlier this year.

“We have access to OEMs worldwide and this technology is very interesting in particular for trucking OEMs,” he explained. “They are all searching for technology that can reduce CO2 emissions and to save fuel. With this technology you can save up to 4% of your fuel, which [adds up] to a massive amount at the end of the year.

“Such a system has an amortisation time of roughly two years and it really pays off. On the one hand you can meet CO2 emission standards, and you also save money with the technology. The end customer benefits and the OEM benefits as well because it is a new system where they have a USP or differentiation potential.”

– Photo of Kai Engelhardt courtesy of LinkedIn