Interview with SinterCast’s CEO Steve Dawson

For those who have not heard about SinterCast, could you tell us about your business, what you do, and what markets you are active in?

SinterCast is a technology provider specializing in compacted graphite iron (CGI), a stronger, more efficient material for engines. Although CGI was discovered in 1948, its series production only began in 1999 due to challenges in maintaining the material’s stability during manufacturing. We developed a technology in the early 1990s that earned foundries’ confidence in reliably producing CGI.

CGI is particularly suited for applications that face both mechanical and thermal loads, making it ideal for engines. It is approximately 75% stronger and 50% stiffer than conventional iron, allowing automotive companies to enhance engine performance through increased pressure and temperature. This results in more efficient fuel combustion and greater power output while ensuring reliability, as Original Equipment Manufacturers (OEMs) require assurance that their engines will not fail under stress.

Notably, this year, Scania received the Green Truck Award for their new engine, which features our CGI cylinder block and cylinder head produced at their new foundry. Their latest engine model is reported to be 8% more fuel-efficient than its predecessor, exemplifying the benefits of our technology. Furthermore, last week, MAN, a sister company of Scania within the Traton Group, won the Truck Innovation Award 2025 at the Hanover International Automotive Exposition, for the Traton Group’s new hydrogen engine, with our cylinder head. These accolades highlight the significant fuel efficiency improvements attributed to our technology.

In summary, our engines are smaller, lighter, more efficient, and cleaner, resulting from their ability to operate under higher stress. Currently, 53% of our production serves commercial vehicles, 29% supports large super-duty pickup trucks in North America, and 10% full size pickup trucks with notable applications including the Ford F150. We also cater to midsize pickup trucks and off road, each accounting for 4% of production. While many express concerns about the future of electrification in the automotive industry, it is important to note that our focus is not on passenger vehicles.

Can you elaborate a bit on your products, and how they hold up against competitors?

In terms of competition, we are the clear leader in our segment. Focusing on the western world, Europe and the Americas, around 60-70% of the CGI engine castings produced in these regions use our technology. This solidifies our position as market leader.

We offer a range of equipment for different production needs. On the lower end, we provide smaller units for product development and small-volume production, with a price point of approximately 1 MSEK. At the other end of the spectrum, we offer fully automated high-volume systems, which are priced between 6-7 MSEK. The key element of our offering is that our equipment carries our know-how and is supported by consumables that are integral to the production process.

A foundry using our technology samples liquid iron using our ”sampling cup.” This sample, which is about the size of a golf ball and weighs around 200 grams, is analyzed as it solidifies. It takes roughly three minutes for this process, and based on the way this small sample behaves, we can predict how the entire batch of 2 or 3 tonnes will perform. This sampling method ensures that the foundry maintains tight control over the production quality, and it’s a high-volume operation—currently, more than 500 samples are taken every day.

In addition to the sampling cup, we also provide the thermocouple, a temperature-measuring device that is inserted into the cup. These two consumables are essential to our process, and this ties into our business model, which is royalty-based. For every casting a foundry ships, they pay us a small production fee. Additionally, there is an annual software license fee. About 95% of our revenue is recurring, with two-thirds coming from the production fee and one-third from the sale of consumables.

When it comes to competition, this is largely a thing of the past. Most foundries have already defined their technology partner and path, and the market for cast iron cylinder blocks and heads is quite specialized. Although there are 100 million vehicles produced annually, only about 50 foundries are involved in the production of these components. This makes it easier for us, as a relatively small company, to engage with the entire supply chain. We know all the key players, and while not all of them have chosen our technology, we have solid relationships across the industry.

The peak period of competition was between 2005 and 2015. During that time, we faced significant challenges, but we came through as the leader. Competition isn’t really a core concern for us anymore. The main competitive threat now comes from foundries that opt to develop their own in-house technology for producing CGI. In these cases, it’s often a matter of philosophy rather than technology, sometimes driven by the “not invented here” mindset, where emotional factors play as much of a role as technical ones.

Looking at our growth over the past decade, we’ve achieved a 9.4% compound annual growth rate, and over the last 15 years, that figure is 14%. While the market will continue to grow, our share may dilute slightly, but we expect to remain at around 60% market share, maintaining our clear leadership position.

Given that the closure of your high-volume programs is estimated to reduce annual motor equivalent output by 500 000, what is your strategy for achieving 5 million motor equivalents by 2026?

Every product, including engines, has a lifecycle, and sometimes that cycle ends. For instance, when the Navistar 13-liter engine for heavy-duty trucks reached its end of life in 2012, we experienced a 25% volume reduction. Currently, we face a reduction of about 500 000 engine equivalents, or 12.5% of our volume, as we produce approximately 4 million engine equivalents. While significant, this is smaller in percentage terms than the Navistar reduction.

The revenue impact is about 10%, considering our additional income from installations. Historically, we have overcome bigger challenges, such as the 50% volume drop during the global financial crisis in 2008 and again during COVID in 2020, both of which we recovered from within 18 months.

We are confident about recovering from the current reduction, bolstered by a strong pipeline of new projects. A key driver is the new 13-liter engine program developed with Scania and the Traton Group, expected to contribute an additional 1 million engine equivalents. Production began in January 2022, and we’re not quite halfway through the ramp, so we’ll get another 500 000 engine equivalents from this program alone.

We are also collaborating with FAW in China on a new engine family, initially set for launch in 2022 but delayed due to unfavorable economic conditions in China. We expect it to launch early next year, contributing several hundred thousand engine equivalents at full volume.

Currently, about 40-50% of commercial vehicle engines in the West use CGI, and we anticipate that share will increase to around 80% in the heavy-duty sector by 2028-2029 due to upcoming emissions regulations. Although not all of this growth will be captured by SinterCast, we are confident in maintaining a strong market share. 

Our involvement in the auto industry allows us to foresee developments within a 3-4 year cycle, giving us visibility into growth projections until 2027-2028. We aim to reach 5 million engine equivalents by 2026, marking just one milestone on our broader growth trajectory, with a projected annual growth rate of around 10% through 2030.

In recent years, market sentiment has increasingly shifted towards EVs. However, companies like Volvo have announced that they are investing more than ever in internal combustion engines. What is your perspective on the direction of the market in coming years and your role in the market?

I believe we have moved beyond ”peak sentiment” regarding electrification. Two years ago, discussions were solely about electric vehicles (EVs), but now companies like Volvo are offering a range of options, including petrol, diesel, hybrid, and electric vehicles. There is a growing recognition that the transition is more complex than initially thought, with challenges such as battery material availability, driving range concerns, and charging infrastructure costs. A recent McKinsey survey found that 46% of U.S. EV owners may revert to internal combustion engines (ICE) for their next vehicle, indicating a shift from initial enthusiasm to realism. Globally, the number was 29%.

While electrification will grow, it won’t completely dominate the market. Our lighter and cleaner internal combustion engines contribute significantly to reducing CO2 emissions—approximately 10 million tonnes annually from our production of 1.5 million engines. 

The 2020s are the ”decade of development and decision” with various industry approaches. Traton is focused on electric vehicles, Daimler on hydrogen, and Volvo supports a mix. However, all manufacturers are exploring electric vehicles, fuel cells, and cleaner ICE options. I believe the internal combustion engine will remain dominant for the foreseeable future.

 Last year, only 441 of 276 400 heavy-duty trucks sold in the U.S. were electric, and Scania sold just 246 electric trucks out of 97 000 globally. This indicates we are still early in the transition, and a mix of technologies will persist.

The internal combustion engine benefits from established infrastructure and operator trust. In Europe, discussions around charging infrastructure timelines are ongoing, with OEMs indicating they will need more than currently planned. In contrast, infrastructure for internal combustion engines is already in place, enabling the use of clean fuels like renewable diesel.

With over 500 million vehicles on the road in Europe and the U.S., introducing a few million EVs won’t solve the CO2 problem. We need clean fuels for the existing fleet, shifting the focus to energy. Clean fuels in internal combustion engines can significantly reduce emissions.

In conclusion, I am confident in the future of the internal combustion engine. Changes in the EU’s emissions legislation, such as delaying Euro 7 from 2027 to 2029, indicate that the internal combustion engine will continue to play a vital role in the future mix of vehicle technologies.

More emphasis has also been put on the development of hydrogen engines. Could you tell us about your thoughts on this and how important hydrogen engines will be?

We are currently engaged in three hydrogen engine programs, reflecting the industry’s growing interest in hydrogen combustion. One of our notable projects is the MAN 16.8-liter engine, which recently won the Truck Innovation Award at the Hanover show. We collaborated with Tupy on the cylinder head for this engine, which will enter series production next year as the first hydrogen engine for the Traton group.

There are two primary methods for hydrogen combustion: spark ignition and compression ignition. Currently, all market-ready hydrogen engines utilize spark ignition, which achieves about 37% thermal efficiency. In contrast, diesel engines operate at around 47% efficiency. The breakthrough lies in hydrogen engines using compression ignition, which can achieve thermal efficiencies of around 52% by operating at higher pressures (240 to 250 bar) compared to spark ignition systems (around 170 bar). This efficiency level is considered the “holy grail” of hydrogen combustion.

Furthermore, hydrogen engines can outperform fuel cells, which generally operate at around 40% efficiency. Under heavy loads or highway driving conditions, fuel cell efficiency can drop to 35-36%.

While adding a spark plug to a hydrogen engine is relatively straightforward, developing compression ignition hydrogen engines represents the true innovation. Currently, no compression ignition hydrogen engines are in series production, only prototypes. Our focus is on collaborating with OEMs to bring this technology to market, as it offers the highest efficiency and clearest benefits for hydrogen combustion. 

Asia represents a significant opportunity for your CGI technology. With contracts already secured with companies like FAW, how would you assess the market potential in Asia?

SinterCast have been present in Asia for a long time. We currently have 14 installations in China, most of which are smaller systems used for product development, though we do have a few full-scale systems in place. We’ve also built a strong track record in Korea. However, Asia still only accounts for around 1% of our total production.

That said, we’ve recently secured a significant deal with FAW, which I mentioned earlier. The FAW project involves the development of a family of engines, starting with the 13-liter model, as it’s the ideal size for heavy-duty trucks. There will also be an 11-liter version, and they’ve already attempted to sell a 16-liter version, despite the economic difficulties of 2022. FAW is typically the second or third largest truck manufacturer in China, so this represents a major opportunity for us.

In addition, we’re working with Dongfeng, which is also one of the top five heavy-duty commercial vehicle manufacturers in China. Last year, we installed our system with Dongfeng Auto, the parent company, and they’ll be competing for production for the Dongfeng Truck Group. So, we’re now engaged with at least two of the top five manufacturers in China.

We also have a full system in place with a foundry called Asimco, one of the largest independent foundries in China. What makes Asimco particularly interesting is that, unlike most foundries in China, which primarily produce for the domestic market due to its size, Asimco also exports. This gives us an additional foothold in China’s growing export market.

In Korea, we’ve partnered with Hyundai, which is the dominant player there. We currently have seven different components in five of their engines, and we’ve seen great success in that market.

Overall, our pipeline in Asia looks promising, particularly in China. We expect our presence there to grow significantly. By 2029, we’re forecasting that we’ll reach 7 million engine equivalents globally, and I anticipate that China will account for around 1 million of those. That would mean China will grow from just 1% of our current production volume to roughly 15% by 2029.

Where do you see SinterCast in three years?

Looking ahead, we’re on track to reach 7 million engine equivalents by 2029, maintaining our steady growth path. Over the past decade, we’ve achieved 10% annual growth, and over the last 15 years, it’s been closer to 15%. We anticipate continuing this double-digit growth trajectory through to 2030.

In terms of environmental impact, we’re currently saving about 10 million tonnes of CO2 per year, which is quite significant when you consider that the entire Swedish domestic transport sector emits around 14 million tonnes annually. Over the last 20 years, we’ve accumulated savings of just over 60 million tonnes, and within the next three years, I expect us to hit our goal of 100 million tonnes of CO2 saved.

Operationally, I don’t foresee any changes to our headcount. We’ll continue to grow production, but our costs will remain relatively flat. Last year, we had an operating margin of 31.8%, and in the next three years, we expect to surpass 35% on our way to 40%.

Regarding market opportunities, despite the growing focus on electrification, I don’t anticipate any negative impact on us within this three-year period. Electrification won’t affect us in the near term, and we’ll continue to seize the opportunities available in our current markets.

Could you give reasons as to why SinterCast is a good investment today?

• Track Record: The technology is mature, and we have consistently grown at a CAGR of over 10%.
• Scalability: As we are not manufacturers, we are able to grow sales, with costs staying the same. SinterCast is among the most profitable companies on Nasdaq Stockholm, aiming to increase operating margins from the low 30% range to 40%.
• Sustainability: It is not obvious that we as an engine company are green. But the fact is that there are 100’s of million engines out there, and more will be produced. As we are able to make the engines better, and fuel-efficient, we are making a large contribution.