Frederic B. Lissalde
President and Chief Executive Officer at BorgWarner
Thank you, Pat, and good day, everyone. We're pleased to share our results for the third quarter 2023 and provide an overall company update, starting on Slide five. With approximately $3.6 billion in sales, we delivered double-digit organic growth in the quarter. Our margin performance was strong. Our free cash flow was modestly positive in the quarter, which we believe sets us up nicely to deliver on our full year cash flow outlook. Our Charging Forward progress continued on multiple fronts. As I will discuss in a moment, our long-term Scope one, two and three emission targets were validated by the Science Based Target Initiative, the SBTi. We secured multiple new eProduct awards during the quarter.
I'm encouraged to see these awards across several parts of our portfolio both for BEVs and for several types of hybrid architectures. I continue to be impressed by the sourcing pool for our products and the strength of our EV and hybrid portfolio globally. BorgWarner continues to focus on the long-term growth opportunities in our eProducts. We remain encouraged by the high intensity of the new business quoting activities in spite of the fact that we're seeing some near-term pressures on the industry production ramp-up of electrified vehicles. Gaining scale now and growing profitably on EV and hybrid architectures globally is our strategy, and this remains unchanged. We're proud to be in production or launching eProducts for seven out of the 10 leading OEMs in the electrification area as well as several other OEMs outside this top 10.
Now let's turn to Slide six, which summarizes our commitments to reduce emissions through the end of the decade. Building on our previous commitments to achieve carbon neutrality by 2035, late last year, we submitted Scope one, two and three targets to the SBTi. In August, the SBTi validated those targets in which we have committed to reduce Scope one and two emissions 85% by 2030 and Scope three, 25% also by 2030. BorgWarner's Charging Forward strategy is expected to play a pivotal role in reducing Scope three emissions as the portfolio shifts towards our e-mobility products.
We will also focus on how we design and purchase those products and components. From a design perspective, we're expanding our circularity efforts and placing a greater emphasis on lightweighting. Within the supply chain, BorgWarner is working to enhance our green material sourcing and supplier contribution to our goals. We're proud to have our targets validated by the SBTi as it affirms the direction we are headed and the positive impact we're making in furthering our vision of a clean, energy-efficient world.
Now let's look at some new eProduct awards on Slide seven. First, BorgWarner will supply a bi-directional 800-volt onboard charger to a major North American OEM. This onboard charger will be on premium passenger car BEV platforms with an expected SOP in early 2027. The technology leverages BorgWarner's silicon carbide power switches for improved efficiency and delivers superior power density and safety compliance.
This is a big accomplishment for the BorgWarner team, highlighting our first major eProduct win with this OEM and also our first onboard charger win in North America. Second, at the IAA in September, we disclosed that BorgWarner will supply silicon carbide inverters for Volvo cars' next-generation electric vehicles. Next, BorgWarner entered into an agreement with a major global OEM to supply its 400-volt high-voltage coolant heaters for the automakers' European light vehicle program. We anticipate the start of production in 2026. This business win marks the second recent contract secured with this global OEM over the course of just a few months with wins spanning different regions.
Finally, a premium European OEM has awarded BorgWarner a program to supply combined inverter and DC/DC converter for use in the customers' all-wheel-drive B-and C-segment hybrid applications. Production of this program is expected to start in 2025. By combining the inverter and converter elements, we can manage both the electric drive and the accessory systems of an electrified vehicle, in this case a hybrid, in a lighter, smaller and more cost-effective package. Our knowledge, scale and production experience on inverters, DC/DC converters and onboard chargers or what I would call power conversion technology is a key enabler for BorgWarner to be adding value to our customers by combining these technologies into efficient system packages.
Now let's touch on our eProduct sales outlook on Slide eight. Today, we're reducing our 2023 eProduct sales outlook by about $300 million. The two largest drivers of the adjustments are launch delays and forecasted slower volume ramp-ups from customers. We now expect eProduct sales to increase about 40% year-over-year. As we have seen these continuing near-term pressures on electrified vehicle production in the marketplace, we have taken the opportunity to reassess what that might mean looking out over the next few years. Looking through that lens, we do believe this has the potential to impact industry-wide new energy vehicle production over the next couple of years.
As such, we now expect our eProduct sales to be in the range of $4.5 billion to $5 billion in 2025. As we have looked at the situation program by program, it is our view that the headwinds we are seeing are likely to be short to midterm in nature. As we look further out, we continue to believe that the long-term trends towards electrification remains strong. That is why our view of overall industry penetration of electrified propulsion is unchanged looking out to 2027. I would make the following three additional observations. First, we have seen no meaningful changes in the world of quoting activity from our customers. We continue to secure new business awards that are very much supportive of our long-term revenue objective. The pace of new business development has not slowed.
Second, our estimated midterm exposure to eProduct customers and regions is well diversified. As we are in the early stages of eProduct revenue growth in 2023, BorgWarner does tend to be currently more exposed to a handful of important launches and ramp-ups of customer products, particularly in China. As we look further out and announce many additional programs over the next two years, we expect to benefit from more diversity in the portfolio. Our 2027 eProduct revenue expectations are fairly balanced across customers, across regions as well as across vehicle sizes. Third, we believe our long-term profitability objectives are still intact.
As we've told you previously, the biggest driver of our improving eProduct profitability is our ability to leverage the rapidly increasing scale of the business. Since that ramp-up is not happening as quickly as we previously anticipated, it means the path to our ePropulsion segment achieving break-even margin is slightly delayed. As we look ahead to next year, we will assess what, if any, actions are necessary to appropriately balance near-term margins relative to our long-term objectives. Regardless, break-even margins remain in sight and our 2027 outlook remains unchanged, both from a revenue perspective and a profitability perspective. The takeaways from today are these: BorgWarner's third quarter results were strong. We delivered strong organic growth and margin performance.
As we wrap up 2023, we expect to finish with another year of strong top line growth, top-quartile margins and solid free cash flow generation. As we look at our Charging Forward strategy, which is focused on aggressively positioning the company to win in the world of electrification, we do see some near-term, industry-wide challenges that we will manage through. We remain convinced in the long-term prospects for electrification and believe we are successfully executing on our strategy in that regard.
I have stated on multiple occasions that the industry growth in BEV and hybrid will not be a straight line. The near-term volatility, while frustrating, is not entirely surprising given the magnitude of the industry shift. As we highlighted in our Investor Day in June and as you can see evidenced in our Q3 results and full year guidance, we believe that we have structured our portfolio to be resilient and to deliver strong earnings under wide range of BEV and hybrid penetration scenarios. That is true today, and we fully expect that this will also be true going forward.
With that, I will turn the call over to Kevin.
