By Nathan Gomes

(Reuters) – Aptiv said on Wednesday it would spin off its electricity distribution systems (EDS) business into a new company, as it looks to focus on advanced technology to assist the driver, sending parts to the auto parts supplier 5%.

The move comes as the Dublin-based company takes further steps to boost profitability, after cutting its annual sales forecast in October, as major automakers realign their electrification efforts to adjust to a bumpy market.

“We think the spin-off of EDS makes sense because it is a much lower margin business, with an estimated 2024 adjusted EBITDA margin of 9.5% compared to 18.8% for the rest of the business,” said CFRA Research analyst Garrett Nelson.

Nelson called the transaction a “value-creating move” and said the shares could warrant a higher multiple.

The EDS division, which makes key power and signal distribution systems for electric vehicles, is expected to be spun off on March 31, 2026.

Post-separation, Aptiv (NYSE: ) will focus on providing complete sensor-to-cloud technology, including advanced driver assistance systems and in-cabin software.

The company counts major automakers such as the Detroit Three, Volkswagen AG (OTC:) and BMW (ETR:) as key clients.

The auto industry faces a challenging second half of 2024, hurt by competition from Chinese companies and a decline in consumer demand due to inflation and economic concerns, leading to many manufacturer to prioritize higher margin SUVs and hybrids.

US President Donald Trump also revoked the previous administration’s executive order on EVs that sought to ensure that half of all new vehicles sold in the country by 2030 were electric.