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Trading statements

Torotrak warns of shift in European car market priorities

30 January 2017 09:14

Torotrak says talks with passenger car Tier 1s and OEMs have revealed the priorities for new product spend for many players in the European passenger car market has profoundly changed in recent months.

Their focus was increasingly on electrification projects and regulation to reduce noxious emissions, Torotrak said.

"Both of these industry trends look set to materially reduce the mass market opportunity for V-Charge in passenger cars, particularly in Europe," the company said in a statement.

Nevertheless, directors believed there would remain important opportunities for V-Charge to be adopted in segments such as commercial vehicles, performance cars and markets where consumers will not pay for the increased costs of 48V hybrid electric vehicles, or where tax incentives promote the use of small highly efficient engines.

"These markets can still offer significant volume potential," it said.

Torotrak said the impact of this change in market opportunities was that it would take the company longer to engage with potential alternative Tier 1 partners and the licence value of V-Charge was likely to be lower than previously expected.

"We will continue our programme to license V-Charge, building on our increased market understanding and proven product performance."

Beyond this commercial effort for V-Charge, the engineering and financial resources of the group could now be focused exclusively on the continued development and commercialisation of the KERS technology, Torotrak said.

"KERS is making good progress, particularly in the off-highway markets, with the first product, a hydraulically connected flywheel-based energy recovery system (ERS) for excavators and wheel loading shovels, having achieved the cost reduction targets the Group set.

"The ERS product is on track to launch on excavators in H2 2018 and will give operators attractive fuel savings and a payback typically of 18 months or less. We continue to be well engaged with our OEM partners whom we expect to take the technology forward."

Torotrak added that it was also in talks with on-highway commercial vehicle OEMs about the potential to adopt the Group's KERS technology in an innovative new configuration that could materially reduce the installed cost, and improve operator payback times to less than three years.

Directors believed there was significant potential value to be generated from the KERS technology and value in V-Charge, if the appropriate market applications could be secured.

"The Board is also exploring other actions that could be taken to reduce cash operating costs."

At 9:14am: (LON:TRK) Torotrak PLC share price was -0.9p at 0.93p

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