Good morning. Welcome to the Lear Corporation Third Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask question. To ask a question, you may press star then one on your telephone keypad. If you wish to withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Alicia Davis, Senior Vice President of Corporate Development and Investor Relations. Please go ahead.
Thanks, Andrea. Good morning, everyone, and thanks for joining us for Lear's third quarter 2020 earnings call. Presenting today are Ray Scott, Lear President and CEO, and Jason Cardew, Senior Vice President and CFO. Other members of Lear's senior management team, including Frank Orsini, President of our Seating division, and Carl Esposito, President of our E-Systems division, also have joined us on the call. Following prepared remarks, we will open the call for Q&A. You can find a copy of the presentation that accompanies these remarks at ir.lear.com. Before Ray begins, I'd like to take this opportunity to remind you that as we conduct this call, we will be making forward-looking statements to assist you in understanding Lear's expectations for the future.
As detailed in our safe harbor statement on slide two, our actual results could differ materially from these forward-looking statements due to many factors discussed in our latest 10-K and other periodic reports. I also want to remind you that during today's presentation, we will refer to non-GAAP financial metrics. You are directed to the slides in the appendix of our presentation for the reconciliation of non-GAAP items to the most directly comparable GAAP measures. The agenda for today's call is on slide three. First, Ray will review highlights from the quarter and provide a business update. Jason will then review our third quarter financial results and provide a full year 2020 outlook. Finally, Ray will offer some concluding remarks. Following the formal presentation, we would be happy to take your questions. Now, I'd like to invite Ray to begin.
Thanks, Alicia, and good morning, everyone. Please turn to slide five. I'm going to provide some business highlights. We posted strong financial results in the third quarter, with both of our business segments recording margins in the high 7 % range. Our sales grew faster than industry production, with especially strong growth over market in E-Systems of 12 percentage points. In March, in an abundance of caution, we drew $1 billion on our revolving credit facility. In the third quarter, based on our strong cash flow generation and our confidence in the business, we repaid all amounts outstanding on our revolver. We're also recognized by JD Power for the quality of our seats. We won two first-place awards this year and received more top three rankings than any other seat supplier.
Earlier this month, we were proud to announce our pledge to continue our efforts to help create a cleaner environment. By 2030, we are targeting to use 100% renewable energy and cut carbon emissions in our manufacturing plants by 50%. By 2050, we aspire to be carbon neutral with net zero emissions. Looking at our performance this quarter, I couldn't be more proud of the team and their accomplishments during these very challenging times. Please turn to slide six. I'm going to provide a brief update of our industry-leading Seating business. In Seating, which is our largest business with 75% of our total sales, we have a demonstrated record of delivering strong margins and significant free cash flow. The investments we have made to increase vertical integration and develop new technologies have driven profitable growth and increased market share.
As the chart shows, our financial performance in Seating has been very consistent, even with lower volumes in recent years and during program changeover cycles. Looking forward, we are very well positioned to benefit from the secular trends of being a market leader in luxury seating and with a strong position in the European EV market and in higher content CUVs and SUVs globally. We have the most complete capabilities of any seat supplier and a long history of operational excellence. Our customers continue to choose Lear, as evidenced by our $700 million in net conquest awards this year. As discussed in our second quarter earnings call, we are continuing to invest in new technologies to expand our competitive advantages within the segment. Two examples of our advanced product technologies that continue to gain traction with customers are INTU Seating and ConfigurE+.
INTU is an intelligent seating system that provides advanced solutions for wellness, comfort, sound, and safety. Interest is continuing to grow from our customers. We have been awarded an advanced technology production contract. Engineering development programs are underway with multiple global OEMs. In ConfigurE+, our tetherless electrified rail system will launch in 2021 and 2023 with two global automakers. Our Seating team has done a remarkable job separating Lear from the competition and extending our clear leadership position in this segment. Okay, slide seven shows our E-Systems portfolio simplified into three focused product areas. Electrical distribution and connection systems, electronic systems, and software and connected services. Today, about 75% of our business is in electrical distribution and connection systems, with the balance in electronic systems.
We expect the relative mix of our business in electronic systems to increase over the next several years as the industry shifts to electric vehicles and connected cars. I will talk more about this in a few minutes. We have a long history in electrical distribution and connection systems, with capabilities to produce products both in low voltage and high voltage applications. We also have many years of experience producing and innovating in electric systems. We were the first to bring printed circuit board junction box technology to market in 1989. In 2012, we received a PACE Award for our development of the first solid-state junction box. Today, we are the only Tier 1 supplier with a full range of capabilities and expertise to be a full architecture solution provider for both electrical distribution systems and power electronics.
Building upon our rich heritage in body electronics, we are concentrating our efforts in electronic systems on power distribution, battery management, and onboard charging systems for electric vehicles, as well as a high-performance computing gateway and 5G communication modules. In addition to embedded software that enables our electronic s ystems hardware, we have enhanced our positions in software-only offerings through the acquisitions of Xevo and EXO. Software within the vehicle is rapidly growing as a key element of technology innovation, as well as a cost-effective way to provide new features and functions. Our global team of software engineers is working to expand capabilities in vehicle networking, control algorithms, cybersecurity, and connectivity platforms and protocols. Slide eight depicts the key components required for high voltage electrical architecture. As described on our last earnings call, we have narrowed our E-Systems electrification portfolio based on a detailed analysis of the market.
We have targeted specific areas where we have the right to win and which have a strong growth potential in order to leverage our capital and our engineering investments. For Lear, this includes high voltage wiring and connection systems, power distribution boxes, onboard chargers, DC-DC converters, and battery management systems. Similar to the approach we have followed in our body electronics business, we are concentrating on providing our customers with tailor-made solutions for difficult problems. Our strategy is to focus on niche areas where we have deep expertise, such as network architecture, power distribution, and power management. We also are investing in areas to move up the value chain from component specialists to broader systems and domain experts. Over time, we expect the vehicle electrical architecture will evolve as more content is integrated into multipurpose boxes and as software replaces some of the functionality in today's architectures.
As these trends develop, we will continue to be laser-focused on customizing product solutions to help our customers achieve faster charging times and longer vehicle ranges. Turning to slide nine, I want to highlight the significant growth rates expected in the electric vehicle market. Today, full hybrid and electric vehicles account for 9% of all vehicles produced globally. Over the next five years, the market for these vehicles is expected to more than triple. While many auto suppliers have legacy products that will shrink with the decline of the internal combustion engine, Lear's product portfolio in both Seating and E-Systems is powertrain agnostic. The story gets even better for Lear. As the shift to electric vehicle provides a unique content growth opportunity, we see an opportunity for our E-Systems content to increase over three times.
Our low voltage wiring and connection system content will remain largely intact with the shift to electric vehicles. The engine harness will no longer be needed, but electric vehicles still require low voltage wiring and connection systems for many other applications. Lear stands to benefit from growth in the EV market, regardless of the propulsion system involved. Slide 10 shows what these positive trends could mean for Lear. This year, our electrification-related sales are forecasted to be about $250 million. By 2025, we expect our sales will grow to approximately $1 billion. Sales growth in our electrification business through 2025 is expected to add 300 basis points to our growth rate in our overall E-Systems business. We have already booked approximately 70% of the $1 billion in sales expected in 2025.
Based on our quote pipeline and our average win rate, we are very confident we will meet this target. We are experiencing increasing levels of quoting activity for electric vehicles. We're also seeing opportunities to expand our customer base, both with traditional customers and some of the newer EV companies. Electrification is a platform that we expect will continue to improve our customer diversification. As architectures are being redefined, this opens the door for Lear to both broaden its customer base and accelerate growth in E-Systems. In a short period of time, we have been very successful growing our electrification business, which is driving significant E-Systems growth over market. Looking at our 2025 estimated sales mix in electrification, we expect that about 60% of our business will be in electronics, with the remaining 40% in high voltage wiring and connection systems. This is largely consistent with our product mix today.
We are at the beginning of the curve on EV adoption. We believe this drives a significant opportunity for Lear as the automakers need supplier partners that have expertise to help them participate in the growing EV market. Lear has a long history of close collaboration with its customers as a full-service supplier with significant resources. We have design, engineering, and manufacturing capabilities, as well as the ability to source and supply parts across the globe. As the EV market continues to mature, both established OEMs and new EV companies will need partners like Lear to be successful. I would like to invite Jason to review our third quarter financial results.
Thanks, Ray. Slide 12 shows vehicle production key exchange rates for the third quarter. During the quarter, global vehicle production was down approximately 900,000 units or 4% compared to 2019. The majority of the production declines occurred in Europe, where production was down 8%, and in Asia, outside of China. In North America, year-over-year production was up 1% as OEMs continued to rebuild inventories depleted during the COVID-related shutdowns. China production was up 9%, the second consecutive quarter of strong growth following COVID-related production shutdowns in the first quarter. From a currency standpoint, the U.S. dollar weakened against our major currencies. Slide 13 highlights our financial results for the third quarter. As Ray noted earlier, our business has performed very well in the quarter. Our sales increased 2% to $4.9 billion.
The increase in sales versus last year was driven by the strong backlog in both segments, which more than offset the impact of lower global production volumes. Core operating earnings were $327 million, down $11 million. The slight reduction in earnings was primarily due to the impact of lower industry volumes, which was largely offset by the margin-accretive backlog and positive operating performance. Adjusted operating margins were 6.7% for the quarter. Adjusted earnings per share were $3.73, up 5% from a year ago, primarily reflecting a lower effective tax rate. Third quarter free cash flow was $474 million, compared to $193 million in 2019. The improvement in free cash flow primarily reflects favorable working capital in the quarter. Slide 14 explains the third quarter year-over-year variance in sales and adjusted operating margins in the Seating segment.
Sales in the quarter were $3.7 billion, down 1% from the third quarter of 2019. Seating margins were 7.8% compared to 8.2% last year, reflecting lower volumes, partially offset by positive net performance. The positive performance was driven by a combination of lower SG&A and manufacturing costs, including improvements resulting from our investments in restructuring, as well as strong execution by our operating and commercial teams in a very challenging industry environment. This more than offset both selling price reductions and ongoing incremental costs associated with COVID-19. Slide 15 explains the third quarter year-over-year variance in sales and adjusted operating margins in our E-Systems segment. Sales in the third quarter were $1.2 billion, up 9% from the third quarter of 2019, reflecting our strong backlog, partially offset by lower volumes.
Growth over market was particularly strong in E-Systems at 12 percentage points, reflecting added content on the F-Series Super Duty and the ramp-up of the Land Rover Defender, as well as new electrification and connectivity business coming online with Volvo, Geely, and Audi. E-Systems margins for the quarter were 7.7%. The increase in margins reflects backlog that came in above segment margins and the impact of positive operating performance. This was offset partially by the negative impact of lower industry volumes. Despite the challenging operating environment, we continue to make progress on our overall E-Systems margin improvement plan. We have improved margins on underperforming programs, our backlog rolling on has been accretive to margins. While we are continuing to make significant incremental engineering investments to support our strong pipeline of new business, we have narrowed our product focus, which will lessen the impact on near-term margins.
While the improvements we have made thus far have been largely offset by the significant decline in industry volumes and ongoing costs associated with operating our plants during COVID-19 pandemic, as industry volumes recover, we're confident that the changes we are making to this business will result in improved margins. Please turn to slide 16, where I will provide an update on our financial position. During the third quarter, we repaid $1 billion that we had drawn on the revolving credit facility in March in an abundance of caution following the emergence of COVID-19. With the strong free cash flow generation in the third quarter, we ended the quarter with $3 billion in total liquidity, including our untapped $1.75 billion revolver and cash on hand of $1.25 billion.
As shown on the upper right quadrant of the slide, we have a low-cost, flexible debt structure and no significant near-term debt maturities. With improved free cash flow performance in the third quarter, we took the opportunity to unwind some of the austerity measures that we put in place earlier this year. During the quarter, we repaid salary that had been deferred by our non-management employees. If industry conditions remain stable, we plan to do the same for the rest of our employees later this year. With respect to capital allocation, our first priority remains investing in our core businesses through capital expenditures. We will also consider bolt-on acquisitions, but believe our businesses are well-positioned. We remain fully committed to maintaining investment-grade credit metrics. We also remain fully committed to returning excess cash to shareholders. Turning now to slide 17.
On March 26th, we withdrew our 2020 outlook due to the significant level of business uncertainty caused by the COVID-19 pandemic. Over the last few months, industry conditions have stabilized somewhat, we've decided to provide full-year 2020 guidance. However, uncertainties surrounding COVID-19 still exist, and our outlook could be significantly impacted by industry disruptions beyond our control. Slide 17 shows the key assumptions for global vehicle production volumes and key currencies that form the basis of our 2020 full-year outlook. We base our production outlook on several sources, including internal estimates, customer production schedules, and IHS forecasts. Our full-year production outlook, which is shown on the slide, implies fourth quarter global production that would be 8% lower than the fourth quarter of 2019.
From a currency perspective, our 2020 outlook assumes an average euro exchange rate of $1.13 per euro and an average Chinese RMB exchange rate of 7 RMB to the dollar. For the fourth quarter, our outlook assumes an average euro exchange rate of $1.15 per euro. Slide 18 provides our financial outlook for 2020. Due to continued uncertainties about how the COVID-19 pandemic could impact our business, we have protected for some modest disruptions to our operations within our guidance ranges. To the extent that there are no disruptions, our financial results should be closer to the high end of the range. At the same time, it's important to note that our guidance ranges do not assume any broad COVID-19 related production shutdowns in the fourth quarter.
Our sales guidance is $16.35 billion-$16.65 billion, where operating earnings are forecasted to be in the range of $520 million-$580 million. At the midpoint of the guidance, this implies margins in both business segments of approximately 7%, reflecting a 4% sequential decline in revenue from the third quarter of this year. Full-year free cash flow is forecasted to be in the range of $125 million-$175 million, implying free cash flow in the fourth quarter of approximately $150 million-$200 million. Now I'll turn it back to Ray for some closing thoughts.
Thanks, Jason. Now turning to slide 20. The steps that we took to prepare our plants to safely ramp up production following the COVID-19 related shutdowns and to position the company for success resulted in significantly improved third quarter financial results. Although we still face uncertainty related to COVID-19, I am confident that we have the right team in place to navigate through these very challenging times. We have a strong balance sheet, a long history of operational excellence, a strong strategic positions in both of our business segments, and both businesses are poised for continued profitable growth. As I discussed, our E-Systems business is particularly well-positioned to benefit from the trends in electrification. We will continue to make targeted strategic investments that position Lear for continued market leadership and drive long-term value for our shareholders. We'd be happy to take your questions.
We will now begin the question- and- answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Joseph Spak of RBC. Please go ahead.
Thanks. Good morning, everyone.
Hi, Joseph.
First question. On the implied fourth quarter guidance, it looks like you've taken a more conservative approach to some of the industry outlooks maybe in Europe and China. Wondering if you could comment on that and what you're seeing that leads you to forecast that way?
Yeah. Why don't you take a broader look, and then Jason can add a little bit of the details of what we're looking at is. One, I break it up into two different areas. One, you have demand, which is very strong. I think every customer is really doing a nice job of replenishing their inventories. The demand is very strong. From my perspective, I know that from our plants, we're running extremely well. We've done a nice job of getting back up and running. However, on the supply side, I do see that the supply side holistically is very fragile. There's a lot of things that are at risk right now. I think we've seen most recently some of the government restrictions, even some of the shutdowns by country.
Chihuahua now is in a red status and still in discussions in respect to what that might mean in the short term. Right now it means 60% capacity. That could even drop further. This whole supply chain is interconnected. Like I said, we're very confident in how our plants are running. We've done a really nice job. I've been in the facilities. I've seen how they're running. Absenteeism still seems to be an issue throughout the supply base. There's some things that we still are hesitant about that are still in front of us, even for the fourth quarter. Like I said, I break it up into two issues. Demand is very strong. The supply chain is very fragile. There's obviously some things that happened recently that are going to put more pressure on that supply chain.
Jason, if you want to add a little bit.
Yeah. I think, first of all, we withdrew guidance earlier in the year when the COVID-19 pandemic started. We thought it was important when we reinstated guidance to be a bit conservative or cautious, just given all the uncertainty that Ray outlined. We are confident in the demand side. It's really a question of whether the supply base and the OEMs can hold it together here through the end of the year. Perhaps there won't be meaningful disruptions, and we'll be fortunate, and we come out closer to the high end of the range. That would certainly benefit us. Regardless of where we end up in the range, I think both Seating and our E-Systems businesses are going to perform well. Even at the midpoint, which has the global industry down 8%, both businesses are around 7% operating margins.
At the high end, they're going to be in the mid-sevens and closer to what we saw in the third quarter. I think it's a bit cautious, but we're hopeful that we'll favor the high end of that range.
Thanks for that color. The second question is, thanks for the information on E-Systems and your electrification exposure, so $250 million going to $1 billion in five years. Maybe just talk a little bit more about how the investment looks like to be able to achieve that. How much has been done already? Is it about scaling some of that investment? Or does more of that investment, you think, need to come online as the sales grow? I guess from both an R&D and a CapEx perspective.
Really, we've been investing in this portfolio of products over the last several years, and we've ramped up that investment from last year to this year. Even within this year, we've gradually stepped up our engineering investment. Looking at the fourth quarter, we have another step up in investment in engineering. Looking out to next year, while we're still finalizing our plans, we see a sequential increase in engineering. I wouldn't say it's as meaningful as what we've seen historically. It's probably 40, 50 basis points of margin headwind in E-Systems sequentially from the third to the fourth quarter, and a similar sequential impact from the fourth quarter or from the full year of this year to next year. I think as that business scales up, that impact on engineering will diminish.
I think as we kind of grow into that billion dollars of revenue, it should stabilize a couple of years out, Joe.
Okay. It looks like, if I'm reading your walks right, that the backlog is coming on at higher margin in the base business. That should help offset some of that investment?
Yeah, I think longer term, we're optimistic about the margin profile of that business. Our backlog overall has been accretive to segment margins both in the third quarter, and we see that again in the fourth quarter and looking out to next year. We're optimistic on that front as well.
Thank you very much.
Our next question comes from Rod Lache of Wolfe Research. Please go ahead.
Good morning, everybody.
Hey, Rod.
Just wanted to start just with a question on Seating. It looks like it had growth over market of around two points in the quarter, and I would've expected that mix looks pretty good, and was wondering if you could just give us some color on how that looks. I presume that the mix will be even better as you look out to Q4 with the comp against the GM strike. Any thoughts on what's going on for growth there?
Yeah. A couple of things. First of all, the fourth quarter growth over market and Seating does look really strong on the back of the North America and GM in particular, now returning to the strike. We'd expect almost 5% growth over market in the fourth quarter in Seating. It was a little light, 1%-2% in the third quarter, and that was really a function of Europe more than anything. I think a couple of our larger customers in Europe were a little slower to restart and ramp up production. JLR was a little bit light in the quarter. It's a really important customer, big business for us in Seating in Europe. That and Nissan both kind of weighed on that growth of a market figure for Seating in the third quarter. The two biggest factors, Rod.
Okay. Great. Thank you for that. I had two questions on E-Systems. Number one, does getting to this mid seven, 7.7% margin in E-Systems now kind of get you back on track to your original target of 10% by 2022? Can you talk a little bit about the bridge there? You still have some cost savings, I believe, and obviously a lot of backlog coming in here at decent incrementals. If you do get to that $1 billion of high voltage by 2025, can you just put some context around what would the addressable market be, or what would your market share be roughly, in that timeframe, more broadly?
Rod, I'm going to take a step back on this one. It's a good question because I do believe we have tremendous momentum. If you recall, we talked about some steps we were taking to get back on track. It wasn't that long ago. We talked about, obviously, putting a team in place, and a great team. We've done that. The team's in place. Carl Esposito and the team are doing a remarkable job. We're seeing that with not just momentum in the margin, but we're seeing that with our growth and the opportunities that are being presented in front of us as far as future growth. We also talked about customer diversification. We talked about that was one part of the business that was important.
We are doing a nice job of diversifying our customer base, but it also required investment, and we're going to stay steadfast in investing in those customers because it's a key part of our growth part of our business, but also de-risking how we look at our business. In a short period of time, this is what's amazing, 2016, top three customers represented about 60% of our overall business. By 2024, it's already down to 45%, and the overall business is growing. They're doing an incredible job of diversifying our customer base. We also talked about getting very focused on our business, and we've spent the last 18 months really narrowing down our focus in an area that we believe we have the right to win, and that's really paying off.
We have really focused capital and engineering needs on products that we believe will be successful on, not just from a profitability standpoint, from a growth standpoint, and that's in place now today. In addition to it, we talked about the vertical integration. I'll tell you, that is happening quicker than I could imagine. I think on the last call, I mentioned $50 million of vertical integration of connectors, and that will launch within the next year. About how much? About 70% of that will launch over the next year. That's going along really well, along with new business wins in connectors. We have an incredible momentum, and I just want to, like I said, take a step back. We're seeing that right now in the performance. The team did a great job, 12% over market.
From a growth perspective, the margins are not only stabilizing, they're improving. The new business that's rolling on is accretive to our margins today. We're very confident and comfortable where we're at. I think in respect to some of the things going forward, Jason, you want to give a little bit of the insight there, I think it'd be helpful.
Yeah. When we originally talked about that 7.5% - 10% margin progression over three years, that was last year. As you mentioned, Rod, that would've been in 2022, we would've achieved that. I think the biggest question mark is industry volume. In terms of the building blocks that we're working on, improving margins on underperforming customers, the vertical integration that Ray just described, the change in mix of the business, improving the margin profile, all of those things are on track and perhaps in some cases, a little bit ahead of schedule. The real question as to when we get to 10%, I think, is more a question of when industry volumes more fully recover. Is that late 2022, early 2023? I'm not quite sure, but as far as the things that we can control within that progression, we're on track.
In terms of the overall size of the EV market and what we're going after and what that $1 billion represents, I think we're not necessarily trying to grow with every customer on every subset of that opportunity. We've talked about high voltage wire and connection systems being about 40% of that business, and power electronics representing 60% of that business. It's probably going to be a $30 billion-$40 billion global market, we're not going to try to sell to all OEMs and all product lines. I think that our share of high voltage wire and connection systems will approach the same share that we have in the low voltage side, which has been 6%. I think it'll take some time to grow into that, I think that's a reasonable target for that part of the business.
Thanks for that. Just to clarify, I think you had like $115 million of remaining cost savings. That was for the overall company, I believe. If we think about E-Systems specifically, the additional engineering spend versus cost reduction, is that kind of a wash and the big upside comes from some of those initiatives that you talked about, including the new business launches, the vertical integration, and overall market growth?
Yeah, I think over time, those COVID-related costs will diminish, and that will be less of an impact, and you'll see the full benefit of all those actions reflected in the margin. I think if you look at just next year, we're planning at this point that some of that COVID-related cost will continue to weigh on margins a bit next year, although it'll diminish significantly from what we've seen this year. I'd say, if you take Seating and E-Systems together, our anticipated restructuring savings would more than cover the impact of the ongoing COVID costs that coupled with our customer recovery of those costs.
All right. Thank you.
Thanks.
Our next question comes from John Murphy of Bank of America. Please go ahead.
Good morning, everybody.
Morning.
Just a first question, Ray. If you look at slide 10, you have software and connected services not on this slide. I'm just curious, is this really just funneling in and focusing on the electrification opportunity? Is something sort of changing in strategy where software and connected services is being meaningfully de-emphasized over time relative to what you've been talking about?
Well, I think both. We're focused on connectivity and electrification. I think the significant shift that we've seen, I kind of think of it very similar to what happened with the CUV SUV market. It is coming at us very fast. I think I talked about a slowdown during COVID of quoting activity as customers were repositioning and working remotely. Since the emergence and the customers re-engaging, the pickup in quoting activity that we've seen in electrification is significant. I think what we're trying to highlight here is not a de-emphasis necessarily in electronics or connectivity, but an emphasis on the importance and where we play with electrification. To Jason's point, we're not focused across the board as a mega tier trying to sell a black box. We're very concentrated in a boutique type way to help our customers solve problems.
That's what we've seen really since the emergence of COVID, is our customers are coming to us in very unique ways and asking for solutions to some of their issues relative to electrification. We think it's important to show what's going on with electrification, and I think that's only going to continue to increase. What we want to be specific in is the areas where we're participating. Those areas are very important because they're creating value for our customers, and they create value for Lear, obviously from a growth perspective, and it's right in our wheelhouse.
Okay, it's not meant to de-emphasize software and connected services, right? This slide. I just want to make sure going forward.
No, not at all.
Perfect. When I look at slide 14 and 15, Jason, I wonder if you could sort of unpack the bar there of volume mix and other, and really just trying to understand mix and price in there, what those meant in the quarter. I think follow up to Rod's question, mix, it seemed like it was very strong in the third quarter, but particularly for you, it should be even stronger in the fourth quarter. I think there's some significant questions about your fourth quarter implied guide being relatively very conservative, particularly when we consider this mix. If you could just unpack price and mix in that column for Seating and electronics on slide 14 and 15.
There really hasn't been a meaningful impact on pricing in either segment. As I mentioned, we more than offset that with our cost reduction program, and we covered the cost associated with operating this COVID environment. That price equation is working for us in the third quarter, and we see that continuing into the fourth. In regards to mix and how that may impact the business, I think you're right. The setup is great for the fourth quarter, particularly in Seating. We had a significant impact associated with the GM strike last year, our North American sales will be up in Seating year-over-year, and our more vertically integrated GM full-size truck Seating sales will be up. The underlying guidance for margin in Seating is more than 100 basis points better than last year, reflecting that favorable mix.
Nothing really remarkable in terms of the mix to talk about on the E-Systems side. Our guidance does assume that sales will actually be up in the fourth quarter, even at the midpoint in E-S ystems. We're expecting growth over market could be as much as 14 points in E-S ystems in the fourth quarter, really on the back of a strong backlog, mainly.
Okay. Maybe to follow up on that, Jason, if you think about some of the austerity costs that are seeping back or are being reversed, which is only fair to the people that bore the burden there, is that a significant headwind sequentially from the third quarter to the fourth quarter? How should we think of it that third quarter, fourth quarter and maybe going into 2021?
Yeah, I think if you look at the impact of COVID and the offset plan, the net effect of that in the fourth quarter will be slightly better than the third quarter. I think the cost of operating in that environment come down faster than the cost reduction programs reversing themselves. There's a modest benefit sequentially. Looking out to next year, it's a bit more complicated, lots of moving parts, there's a significant portion of the cost reduction program that we deployed earlier in the year that will reverse itself next year. There may be a slight overhang of net cost related to COVID-19 as we think about 2021. Again, we're right in the middle of our planning process, we'll have more to share on that certainly in January when we issue guidance.
Okay. Just lastly, if you could remind us, you said the high voltage content per vehicle could be 3x what the low voltage is. Could you kind of sort of remind us what the dollar numbers are there roughly or the potential is?
Yeah. We see it in a full electric vehicle that there's about $2,000 of added content opportunity for us. About a quarter of that, or $500, would be high voltage wire and connection systems. The other three quarters or $1,500 would be on the power electronic side. That's if we sold everything on a car line that we are capable. Oftentimes we're only going to be sourced portions of that. You could see an onboard charger, battery management system could be in the $300-$600 range of content on an individual car line. The total available content on power electronics would be up to $1,500 for us.
Okay, the basis for that on the low voltage side, on a relative basis would be about $700. Is that what you're saying?
Yeah. We've talked about $700 historically. That's really kind of our Europe and North America CPV for low voltage wiring and connection systems. I think globally it's probably more like $650 on our car lines, and that will probably be $50 or so lower in a full electric vehicle. There's a modest offset on the low voltage side.
Okay, great. Thank you very much, guys.
Yep. Yep, thanks.
Our next question comes from Brian Johnson of Barclays. Please go ahead.
Hi, team. This is Jason Stuhldreher on for Brian. We've kind of rounded out the discussion a little bit around the EV disclosures and the slide you put out, but maybe just to follow up, helpful commentary on the content per vehicle. As we look out to mid-decade, though, and maybe just zeroing in on the content that you have, when we look at the pie chart of electronics versus connection systems and wiring, when we look at that entire sales mix, I was wondering if you could help us with, within that $1 billion, how much do you expect to be specifically software related? I think on the electronic side, at least right now, most of your products have some element of embedded software. As we scale power electronics, battery management systems, et c., does the software content increase?
How much of that, the product in mid-decade, what percent of that is going to be software? Just to remind us, I don't think there's any software content on the wiring side. If you could just sort of clarify that would be helpful.
Yeah. Well, let me take a little step back on this, and obviously it's a very exciting time in the auto industry. It's something like we've never seen before, and having two segments like we have, both in Seating and E-Systems, we're well positioned when we think about reconfigurability and smart seats and those types of things. In E-Systems, same thing. It is changing quickly, and you're asking a good question. When we think about software, we have both our embedded and our non-embedded software, and both of those are changing quickly. I want to take a step back here because it is an exciting time in both segments. I got Frank Orsini here, and I got Carl Esposito here.
They're on the front lines working what's going on with our customers, and I'd like to give you a more fulsome discussion around what we're seeing, not only within our products, but the changes in the future applications of Seating and E-S ystems, to your particular point. Frank, if you could give a little bit of insight to what you're seeing in Seating, and then Carl, if you could talk a little bit about software and how embedded software is changing and how we are really defining software and then some of the changes you've seen from the customers in respect to how they're coming to us looking for different solutions, because it is changing dramatically.
Thank you, Ray. Good morning, everyone. This is Frank Orsini speaking. From a Seating perspective, in particular to technology, we're very focused on differentiating our product lines through innovation. Ray mentioned in his presentation, we have a couple of very good examples of that. INTU Seating, where we're embedding intelligent technology into our seat systems through four key pillars of wellness, safety, comfort, and sound is an excellent product for us. ConfigurE+, where we have the electrified rail system in Seating. Both these technologies are really good examples of how innovation is giving us early access to our customer development programs. As a matter of fact, Ray and I were recently in the design studios with one of our largest customers, literally in the clays, working through how these technologies can be implemented for production applications. Just dialing in a little bit on both.
INTU Seating, for example, provides tremendous content and value to the end consumer in the vehicle. Our wellness pillar, where we use biometric sensing technology to detect heart and respiratory rates, is directly correlated to driver stress and drowsiness detection, which is an advanced safety technology for our customers. It's very sophisticated technology. It's a combination of hardware, software, and algorithms, but the INTU Seating product is really going to be great in the future. There's ConfigurE+. ConfigurE+ is an electrified rail system, as we mentioned, but it's also a combination of a rail system with a patented cassette technology, which allows us to attach the seats to the rails. It's first to market, it's a PACE Award-winning technology, and it's been completely developed in-house with our E-Systems team. I think the highlight is truly the fact that it's a tetherless system.
What that really means is that the seats are not hardwired to the vehicle. The seats are connected to the rails through our cassette system, and that creates a platform for reconfigurability, repositioning of the seats within the interior cabin, and ultimately flexibility. I think the benefits to us are the fact that if you can power the rails, you can power the seats. If you can power the seats, you can add content. Some of the content could be heat and cool systems, airbags, things of that nature, which provides a CPV opportunity to Lear and certainly provides a margin performance opportunity as well. We booked about $100 million in sales through 2023 with two global customers on ConfigurE+. We're really excited about what it means to us in the future.
I guess just to wrap up on Seating, innovation's doing a lot for us in the Seating segment. It's helping drive our growth. It's certainly expanding and deepening our competitive moat, and it's also allowing us to continue to build on our customer relationships, and ultimately that's translating into growth opportunities both in our standard business and conquest awards. With that, I'll hand it over to Carl Esposito.
Software is a really important part of our overall E-Systems strategy, and this will play out over the next five to seven years. Our E-Systems hardware products are increasingly dependent on embedded software to perform their functions, and the quantity and level of that software in our hardware continues to increase as the computing power and capabilities increase in our products. Products such as our battery management system may have over 1 million lines of software, and that quantity of software increases for each new generation of products that we create for our customers. The automotive industry will go through a similar transformation that I oversaw in my time in the aerospace industry, a transition from hardware-based functionality to software-based functionality with increasing levels of software integration. Functions that used to be done as separate boxes will be transformed into software.
In fact, we're seeing a number of software-only RFPs from our customers, depending on the customer vehicle architecture, for either us supplying software to the customer independently or us integrating other people's software into our high computing hardware. We're seeing both opportunities from a software perspective. We're positioning ourselves to be ready for this transition by making our software more portable, modular, and extensible to offer our customers choices to have either an embedded software solution or an independent software functionality solution. We're seeing both changes, and that'll play out in the next few years. In terms of how we're winning in the marketplace and what differentiates E-Systems, I really see it's in three areas. The strong customer relationships, the strong product capabilities, and our flexible business model. I look at two recent examples of this, one technical and one business related.
We recently had a customer come to us exclusively to help them solve a very difficult technical and compressed schedule electrification program involving high voltage power management. The relationship really brought the customer to us. Our capabilities enabled us to design a solution for the challenge, and our flexibility in scheduling met their needs. We were able to design a high-performance solution to meet their demanding product requirements in a very accelerated timeframe, and really proud about the engineering team and the customer team working together with our customers to solve these problems and make a great product. The second example is where we were able to solve a business problem for our customer. They quickly needed a new source of supply for multiple programs, and again, our relationships and execution track record enabled them to ask us to solve problems for them.
Our ability to vertically integrate components helped to improve our ability to execute as well as grow and expand our business. Finally, we had a flexible business approach to have the ability to transfer that new business away from a competitor to Lear. I think both of these are great examples of how the relationships open the door, our capabilities and expertise enable execution and success, and our flexible business models work for our customers.
Yeah. Thanks, Carl. Thanks, Frank. Again, just you can see how excited we are with the dynamics and the changes that are going on in the automotive space and having two business segments that are interconnected but also perfectly aligned for the changes that we're seeing with technology and innovation are key to our success going forward.
Okay. Great color, team. Appreciate it. Thank you.
Thanks.
Our next question comes from David Kelley of Jefferies. Please go ahead.
Hey, good morning, everyone. Maybe just to start a question for Jason. Could you update us on your capital allocation thoughts? Maybe what you would be looking for to reinstate the dividend or kind of bring back the share repurchase program here?
Sure. Yeah, we talked about this a little bit in the prepared remarks. First of all, our overall priorities on capital allocation remain the same. We're going to invest in the business through CapEx to support growth in both segments to protect our competitive positions. We're going to look at tuck-in M&A to further strengthen both segments. We're going to maintain our investment-grade balance sheet metrics. Lastly, we're committed to returning cash to shareholders. We talked about this on the prior earnings call, and it was a big deal for us to suspend the dividend. Our shareholders participated in the austerity plan that we put in place, and we've been unwinding that austerity plan throughout the third quarter and into the fourth quarter as the industry conditions improved.
What we said we're looking for is some signs of stability, consistency, and an ability to generate free cash flow on a consistent basis quarter to quarter. We're just getting started on our 2021 planning process. We're nearly complete with it, but we're not done. We look at kind of a wide range of outcomes for next year. Even in kind of the worst case scenario or a lower end of that range, we see an ability to generate consistent free cash flow quarter to quarter next year. The backdrop for reinstating the dividend is certainly in place. Ultimately, it's a decision that our board's going to make, and we're going to be talking about that with them throughout the remainder of the year. It's really important for us to get back on track with that.
Okay. Got it. That's helpful. Appreciate it. Then maybe just to follow up, the last couple of quarters, you all have highlighted some of the connector content ramp and the wins that you've got in the space. Just curious, a couple things here. First, do you find you're selling connectors as part of a broader E-Systems like solution set or are connectors being sold more on a component basis? Then also was curious to hear if you're winning more in high voltage versus low voltage in the connector space.
Carl Esposito again. We're seeing actually both. We're seeing the vertical integration where we're able to integrate the components internally as part of our both low voltage and high voltage wiring harnesses as well as external distribution and sales to third parties externally. We're seeing both, and we're seeing a greater focus on both of those sales channels, both internally as well as externally.
Okay, got it. Thanks, everyone.
If I can just add to Carl's comments, it's true, I think what we are seeing is the customers have opened up significantly. I think it was somewhat of a closed door before. The catalogs, which were somewhat closed, are opening, that's probably the significant shift, and the flexibility. I think why I was surprised at how quickly we got and identified $50 million of vertically integrating our own components. That happened quicker than I expected because of the willingness from our customers. Our customers are looking for value propositions, that's exactly what we deliver. This is an area that we believe we can continue to create value for our customers. With the introduction of new applications with either flat wire or high power, we're perfectly aligned and have some incredible designs that create value for our customers, too.
Just very optimistic, and so far things have been going really well.
Great. Thanks again. Appreciate it.
Our next question comes from Emmanuel Rosner of Deutsche Bank. Please go ahead.
Yes, good morning, everybody.
Good morning.
Morning.
Thank you so much for the color around what you'll be focusing on within E-Systems and what's in the portfolio. I wanted to dig a little bit deeper on this. Just curious about your, I guess, the rationale or philosophy on the choices that you made around what to emphasize or de-emphasize. As part of that, I'm also interested in some of these electronic components trends for automakers of insourcing versus outsourcing. I'm certainly interested about the integrated power modules, Battery Management System, and to what extent that may or may not have influenced your decision of what you're focusing on.
Well, let me give you a broader overview, and I think you know this, we discussed it before, but we spend a significant amount of time studying the markets. When we studied the markets, we studied our capabilities and competencies within our components and looked at the investment required with the type of returns that we would expect. After 18 months of doing a significant amount of work in granular detail down to where we believe we have the right to win and will be most successful, that's really what the outcome delivered and how we narrowed our product offering. I think in addition to that, really looking at where the customers were headed and understanding how their needs and where we can create value for our customers were aligned. There's a significant amount of work.
We took this obviously very seriously, spent a lot of time understanding our competencies, capabilities, and aligning those with the customer's future needs and where we believe we could grow profitably. There was a tremendous amount of time and effort there. I think, Carl, if you want to elaborate a little around some of the granular competencies and capabilities that perfectly aligned us with the customer, I think it'd be helpful.
Yeah, we spent a lot of time looking at the portfolio and driving the strategy, and the technology trends have been moving in the direction as expected, right. More software, more electronics, more high power. That fits our investment thesis and our differentiation. We're focused on those areas we can be successful. If I think about the portfolio in a little bit granular perspective, electrical distribution systems, we grow that core wiring business, accelerating the expansion of terminals, connectors, engineered components, and increasing that vertical integration to drive the margin expansion. We're adapting the portfolio. Higher speed signals, higher speed connectors, higher voltages, and higher power densities. We really differentiate ourselves from a power density and power handling capability with our high voltage connectors and have customers coming to us for that technology. On electrification, certainly growth area and high growth area.
We're focused on areas where electrification, where we have advanced technologies and proven business model, and also where we can differentiate higher power densities, integrate our products in unique ways to combine products to reduce the weight, improve the charging time, and improve the range of the vehicle. Unique integrations and the power capabilities that we have there help differentiate us. On the electronic side, we see higher speed computing, faster in-vehicle networking, and a move to faster networks. There we have a great longstanding tradition of domain controllers that continue to increase their computing capability, and that lets us put more software on those computing platforms and use connectivity to help differentiate from a software and services perspective. We're really excited about the focused areas that we have investments in and the growth opportunities ahead of us.
Okay. I appreciate the color. Two additional clarification, if I may. Just in terms of what's embedded in the fourth quarter guidance, again, you're assuming industry production down 8% at the midpoint. You're also assuming no broad shutdowns from COVID. Are you assuming mild shutdowns? I guess I'm just still not completely clear around why you think down 8% versus IHS down 3%. I guess what sort of industry scenario would that contemplate?
It would include modest disruptions, and I think certainly what we're seeing unfold in Europe is of particular concern. In some of the locations where we operate in Europe, they're already imposing some lockdowns. I think in North America, as Ray mentioned, the state of Chihuahua within Mexico just reestablished the red status, which limits the ability to fully staff.
Operate plants there. It's not so much a specific call on one customer, one program, one region. It's more of a broad general concern. Again, as we've reestablished guidance after having pulled it six months ago, we thought it was important to be cautious and simply explain our assumptions. If you have a more bullish outlook on how things will turn out this quarter, you can certainly model that appropriately. We just try to give you the building blocks to do that.
I appreciate it. Just a final clarification. On E-Systems margins, you've given us a lot of the pieces and it's very encouraging to see that with a refocus on specific products that would sort of help with the engineering cost. I believe that during the quarter at the September conference, you said that a good way to think about it for 2021 for E-Systems margins was 7%-8%. Did I understand that right? Is that still the case? I understand it is volume dependent, but just want to make sure that I have the right understanding.
Yeah. I think the biggest question mark is volumes. Emmanuel, it's a little bit early to talk about our outlook for 2021 in that level of specificity, but I can say that outside of volume, the underlying trends in terms of performance in that segment are all positive. You will see some tailwind of benefit coming into next year on the performance side. You're going to see a bit of a headwind on the engineering side and the biggest variable will be volume. Certainly we would expect industry volume to be up year-over-year. It's just a matter of how much. If you said it's going to be up 10%, I think IHS has it up 14%. You get to that volume level, you start to have a level of industry production that supports something in the 7s, certainly.
Great. Thank you so much.
Thanks.
Our next question comes from Mark Delaney of Goldman Sachs. Please go ahead.
Yes. Good morning. Thanks for taking the questions. What I'm hoping to discuss in more breadth is the comments the company made about being able to serve both some of the newer BEV startups as well, of course, as your existing established OEMs. Can you talk a little bit more about what sort of engagements the company has with some of these newer startup companies and how does the business opportunity compare with some of these new startups, which I think there could be an opportunity to provide some additional services for newer types of companies?
Yeah. I think that first of all there's literally more than 100 potential new EV players out there, so we're not going to try to sell to all of them. What we're looking for is partially where are the traditional OEMs partnering with new EV players. That I think provides a little bit of a supportive backdrop and that's a little bit less risk associated with investing with them. There's certainly some very well capitalized new EV startups that we have won business with. What we're looking for there is well capitalized, lower risk where they're providing some of the investment support up front directly. We're not going to try to sell to every new EV player, but there's certainly a handful that look appealing to us.
I think in a broader sense what we're seeing is obviously there's limitations on resources and capital investment and our customers are balancing that today and there's a tremendous amount of emphasis on EV and other technologies, connectivity, autonomous and other things are going on, reconfigurability of the vehicle. What we're seeing across all customers including the new EV players is that need to partner and they need partners that have these solutions that we have. One thing that is what I believe is unique about Lear is our ability to be agile and flexible, that we build designs that fit particular platforms. All platforms are not the same and each customer is different in respect to their strategy.
Our ability to come in and offer a very flexible design with scaled components across what we consider to be the base properties is very appealing. We have this history of being very customer focused, obviously focused on profitable growth, but being very focused on creating a value proposition. That is something that I've been seeing across all of our customers where they're coming to us and we have examples where they're coming to us and asking us to solve very challenging problems and in doing so we're winning the contracts. Having that ability to be flexible and I think this is important, there's a lot of mega suppliers out there that offer a black box design and it's kind of a take it or leave it.
This is what we offer, yep we can scale it, yep this is what we've designed, but the architectures aren't built that way. The architectures are built for the need to be flexible. What we're seeing is partnering with and we're very selective too. Like Jason said, we could be chasing a lot of different quotes and I think it's important when we talk about what the quoting activity we see, those are very selective quoting activities. We don't go after every single platform, every single customer. We are very selective on where we position ourselves for the best returns and the best future growth. Those partnerships are important and so we are seeing them with the traditional OEMs today and now we're seeing a pull from what would be considered the new entrants and the new EV players and we've been successful.
We're actually winning business with both and we continue to see that type of relationship being established where we can create a value proposition being very agile and flexible.
Very helpful. Thanks for the commentary on that. The other topic I was hoping to discuss more was on BMS, and thanks for all the comments on your electrification outlook and electronics outlook. A number of companies are trying to go after the BMS market. Could you talk a little bit more about what you think differentiates your solution, including whether it's wired or wireless? Any color about how much BMS may make up of the $1 billion target that you articulated for 2025?
Yeah, sure. This is Carl again. Battery Management Systems have been an important product for us for over 10+ years, and we have multiple programs both in production and also new programs in development. I think a couple of things that differentiate us around the Battery Management Systems, one is around the flexibility and choices that we give customers. We have not only the wired solutions, we have wireless products on our roadmap and have had customer discussions about wireless technology. We have also innovation on our connection systems in terms of getting into the battery pack and the battery cell connections to reduce the amount of wiring in the battery cells and simplify that. That's one thing that wireless can solve, but we can also solve that challenge a different way with some of our flat, flexible circuits and cables technology.
We're really able to provide our customers with a lot of different technology options to solve the problems that they have. Also, we'll see a trend towards more software-only solutions in the battery management space. As we're positioning our software investments that we've made with millions of lines of software and battery management systems to be more portable, to be able to be flexible in where and how we host that software functionality. I think it's really nice that we can offer our customers a lot of different choices to solve different problems depending on their vehicle architecture and unique needs.
Thank you very much.
Our next question comes from Dan Levy of Credit Suisse. Please go ahead.
Hi, good morning, team. Thank you for squeezing me in here.
Good morning.
Hi. I just want to start by asking about the E-Systems outgrowth. Can you just help us understand 12 points outgrowth in the third quarter, and I think you cited 14 points in the fourth quarter. I think you've talked about structurally six points of outgrowth for that business, and I know quarterly outgrowth can be lumpy, but is there something in the 3 Q and 4 Q outgrowth that can be extrapolated going forward, or is this really just your mix in these periods is just particularly favorable and can't be extrapolated?
I think we need to be a little bit cautious. We're super excited by the performance both in the third and fourth quarter. It's really the backlog. The way it kind of played out this year was back end loaded. We had $113 million in third quarter. I think it's a similar number in the fourth quarter. That's the biggest driver. Part of it kind of plays to the lumpiness you described there is, it's tied to program volumes on products where we have a lot of content. We do have a handful of programs that have seen significant volume improvement year-over-year. It's more of a mix driven CPV opportunity.
I think if you think about the 6% plus growth over market target we've established longer term, I think you're seeing the underpinning of that really in electrification driving about half of that. I think that there's upside to that certainly as we look at the adoption rates and what's happening with EVs. That's going to be a major component looking forward over multiple years. Yeah, I would caution you about modeling sort of that what we've seen year-to-date, which is about 10 or 11 points of growth above market and 14 in the fourth quarter. That's not necessarily what we're signaling for each quarter next year.
Okay. Then just to be clear, as far as the launch business that you have as backlog coming on, how much of it right now, at least what we saw in 3Q and 4Q, how much of that is electrification?
Our electrification business this year is about $250 million in revenue, and I think it grew by roughly $100 million or so this year. Within our backlog, it's a substantial part of that. Looking out to next year, we've got another $150 million of backlog rolling on. It's going to be a $400 million + business for us, Dan, if we look at next year.
Yeah, got it. Then just a question on 2021 and just restructuring more broadly. We've obviously seen a pretty robust volume recovery, I know you've been proactive about the restructuring, the question is there risks that maybe you've been too proactive in restructuring that if the industry recovers more significantly, now we're talking about being potentially back at 2019 levels by 2022. Is there any risk that you're potentially understaffed or you don't have ample footprint in place? Do you think that you still have ample capacity in place that even if the volume shoots back or snaps back, that you can still accommodate all of that volume?
We certainly have ample capacity in place. We're not concerned about that. In a lot of cases, what we did is we accelerated closures of facilities and capacity we took out and moved to lower-cost locations to help the near-term cost structure. It's not so much a change in our capacity if you look out over two or three years from what we were planning previously. It's just accelerating and taking out some of that higher-cost capacity, particularly what we did with Seating this year and a couple of plant closures in North America and then in E-Systems in Asia, the three plants that we are closing there that we talked about, I think on the last earnings call.
Great. Thank you.
Sure.
Our next question comes from Chris McNally of Evercore. Please go ahead.
Thanks so much, team. Two quick ones. One clarification, one tech question. The supply chain issues you've mentioned a couple times on the call, just wanted to clarify that regards to just whether there's production issues in Q4? It's a production issue. There's no Tier 2 or Tier 3 issues that would affect your manufacturing.
There's nothing unique to Lear in terms of that risk on the supply chain side. It's more of a general concern, and it's both whether our customers will be impacted by restrictions imposed in certain countries, or whether the labor disruption in the supply chain in general from restrictions imposed would impact the availability of components. Certainly, Carl and Frank's teams are working around the clock monitoring the supply chain. As Ray said earlier, it is fragile in the industry in general. It's not a specific call around a particular issue that we have. It's more of an industry issue.
Perfect. Super clear. Again, appreciate all the detail on the EV components. If I just try to summarize and look at this page eight, your top five, is it fair to say that in that growth going forward, sort of from the $250 to the $700 million to $1 billion, that is wire harness still the great majority of that? Is it over 50% of the high voltage business?
Yeah. We've seen the high voltage wire and connection systems at 40%, roughly, of the portfolio five years out in 2025, and that's the same as what it is today. Literally within 1% or 2%. We see the mix between that and power electronics being roughly stable.
That's great. If I could just squeeze one in. In terms of market share, do you see in high voltage that within those businesses, if we just stay within harness and connection, that you have a higher market share in EV than you do in non-high voltage, so it's sort of a net beneficiary for you?
Yeah, I think over time, we would have a similar market share, but in our current projections that underpin the $1 billion, it's a little bit lower than our current low voltage market share.
Perfect. Thanks so much, guys.
Thanks.
Our next question comes from Mike Filatov of Berenberg Capital Markets. Please go ahead.
Morning, guys. Thanks for taking my question. I'll just make it really brief. Could you give us an update around conquest wins in the Seating business, please?
I think last time we gave an update, it was the $700 million of conquest wins. We still have between the end of the year and probably first quarter, some significant opportunities for conquest wins. I think I would categorize that as probably being awarded in the first quarter of next year. We've done a really nice job this year. Due to a number of reasons, I think some of these programs have been kind of pushed back a little bit, but still, we see some opportunities that are in front of us for continued conquest success between the end of the year and probably more likely the first quarter of next year.
Understood. Thanks. Appreciate it.
Yep. Thank you.
Our last question comes from Itay Michaeli of Citi. Please go ahead.
Great. Thanks. Good morning, everybody. Just a couple quick ones. Just first, hoping to get an update on Xevo customer engagements and also kind of how you're thinking about, I think the prior, I think it was $5 billion addressable market by 2025. Any update there would be helpful.
Yeah, just a couple things. One, obviously during COVID, there was some slowdown of engagement with some of our customers just because of the transition going remotely, those type of things, and just suspending some investment from our customers temporarily created a little slowdown. What I will tell you is that when we talked about it, we were originally at 25 million vehicles. We're now deployed on 46 million vehicles. What's been interesting during this COVID situation is usage is up significantly, 80% since January and 200% growth quarter-over-quarter in the third quarter. I think a lot of that's because of the contactless transactions and people really wanting to do things more remotely within their vehicles. What's been good is we've established a couple new partners, the new partner with REEF, the largest parking operator in North America, for contactless parking payment.
That just was established, which is a continuation of our broader range of how we're connecting with our customers. Again, we've seen some very positive signs. In respect to just-
The addressable market, I don't really think there's been a change from that $5 billion market we described historically. That's long term.
Yeah. Yeah.
That's very helpful. Maybe just a last quick one for Jason. You kind of alluded to it, just want to make sure I'm clear on it. When we think about the gains and the backlog and so forth, is a kind of go forward growth over market kind of over the next couple of years still fair to think of seats as around 4%-5%, E-Systems, 6%-8%, or should we think about that a little bit differently now?
I think if you look out over a five-year period, those growth rates are still what we're targeting north of 6% and north of 4% in E-Systems and Seating respectively. I think we're even more encouraged of late with the growth potential of electrification really supporting about half of that just by itself in E-Systems. Yes, that's still intact, you'd say.
Great. Very helpful. Thank you.
Thank you.
Okay. Well, I think that's it. I'm probably the only one left on the call now on the Lear team. I just want to again reiterate my appreciation for all the hard work. It's been one challenging year, but your performance really showed well in the third quarter. I know we'll finish strong with everything that we can control that's in front of us. I just want to say thank you to the team and appreciate everything you're doing. That's it. Bye.
The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.