Jeff Cote: Sure. So I think it does boil down to expectations regarding overall demand for vehicles as opposed to our belief that there’s going to be more bottlenecks in terms of ability to produce vehicles. I think the industry has proven they can deliver on the IHS estimates of around the 21 million, 21.5 million units. So I don’t think it’s bottlenecked from an ability to produce. I think it’s just a question of ultimately what the raw demand will be. And again, if you want to emphasize, we’re basing our estimate, which is more conservative based upon conversations with the customers the order rates, we could see orders pick up. We could see orders drop out. We have, for the most part, with our automotive customers, a 4-week order fence.
So there is still time for them to place more orders if they see strong demand as the quarter progresses. But as we’ve seen in the past, there’s also an opportunity for them to drop out some of those orders. So we try to read the tea leaves the best we can to give you a read as to how things are looking. But again, it’s in-quarter estimate, we continue to be quite optimistic regarding the longer term, not only on overall automotive but the transition to electric vehicles, which we believe is a long-term benefit to the company. And then on the other point on the China. So it’s directionally half, but it really does depend on the platform that we’re talking about. And the additional color I would provide on that is that China was among the earliest adopters for electric vehicles.
And there — many of the vehicles are shorter range, and so they have less content — Sensata content from an electrification standpoint. Certainly, many of our other applications, tire pressure and braking and air conditioning, environmental controlling just on those but we’re actively engaging with all global OEMs, including local Chinese producers on opportunities to serve their next-generation electric vehicles. So there — but direct — to your question it is about half the content on a local Chinese brand versus a multinational.
Operator: Our next question comes from Amit Daryanani from Evercore. Please go ahead.
Amit Daryanani: I guess, Jeff, I was hoping you talk about how do you think about inventory levels at the OEM side right now. And do you think that perhaps on more excess sensor inventory potentially, which is why your guide and your order trends are somewhat below what IHS talking about. I’m wondering if that’s a part of it, maybe you can just touch on inventory at the OEM level, that’s a bit of a headwind to the content number for the rest of the year.
Jeff Cote: Yes, it absolutely could be. And as I mentioned, we have a pretty good read in the North American market in terms of vehicle lot inventory, which has been inching up. I think it’s 38 days of inventory at the end of the first quarter. So that’s off the bottom level. It’s nowhere near what the normal range is, right? And so we could have a long discussion regarding whether or not OEMs are going to go back to sort of the deal or lot inventory in the 60 or 70 days that you’d historically see. If they do, then clearly, there is going to be an increase in production above sales level that will benefit from over time. The other part of the channel, that’s our question is around our parts that exist in our customers’ warehouses or parts that exist in vehicles that are partially produced.
That’s harder to get to, and we’ve used the model around some of our parts that we have a pretty high market share as a proxy for production versus shipment rates. In the first quarter, we did not see any meaningful inventory variation there, but we’re going to continue to watch it closely. And I would expect that we’re going to normalize on this because our on-time delivery for customers is increasing. They’re gaining confidence that there’s not going to be a bottleneck in the revision or the move back to more of a just-in-time inventory from a raw material standpoint with our customers will inevitably happen. And the ultimate proxy that we have for understanding what’s in the channel, Amit, is the call we wanted a delivery on Friday, it didn’t come, right?
And we have to expedite the shipment, and we’re starting to see more dialogue from our customers to make sure that they know when the shipment is going to arrive, which suggests they’re normalizing in terms of their inventory models.
Operator: This concludes our question-and-answer session. I’d like to turn the conference back over to Jacob Sayer for any closing remarks.
Jacob Sayer: Thank you, Jason. I’d like to thank everyone for joining us this morning. Sensata will be participating in several investor conferences this quarter, including Oppenheimer’s Industrial Conference in early May and all of the JPMorgan, RW Baird and the Bank of America Technology Conferences in late May and early June. We look forward to seeing you at one of those events or on our second quarter earnings call in late July. Thank you again for joining us this morning and for your interest in Sensata. Jason, you can now end the call.
Operator: Thank you. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
