Disruptive changes in the industry and volatile financial markets drove the decision, Chief Executive Nikolai Setzer told analysts and investors in a call after the announcement.
A spin-off could be submitted for approval at the annual shareholders' meeting next April, with the unit listed by the end of next year, it said.
The required steps for implementing a spin-off are already being prepared, said the auto parts and tyres maker.
Continental has been struggling for several years with low profitability in its automotive supplier business, whose portfolio ranges from brakes to sensors and assistance systems.
With the move, Continental would effectively be halved: In 2023, the automotive division had sales of 20.3 billion euros ($22.31 billion) and about 100,000 employees, while ContiTech, the remaining tyre and plastics business, reported 20.8 billion euros in sales as well as a similar number of employees.
The automotive part of ContiTech would be carved out in a spin-off, and previously announced plans to carve out the User Experience division within automotive would be put on ice.
ELECTRONICS FOCUS
Wolfgang Reitzle, chairman of the supervisory board, threw his support behind the plans: "As a strong, independent entity, Automotive would be able to harness its full potential for creating value," he said in a statement.
"In addition, investors would be able to invest in a company focused specifically on automotive electronics," he added.
Shareholders would receive shares in the new company in proportion to their Continental holding as part of the spin-off, as with the spin-off of Vitesco Technologies in 2021, it said.
Philipp von Hirschheydt, current head of the division, would lead the spun-off company, Setzer told analysts and investors on a call following the announcement.
The contract manufacturing division would also be part of the transaction, said Continental.
($1 = 0.9100 euros)
