Market Snapshot: Automotive Exterior (Web-exlusive expanded content)

Contraction in the domestic market contrasts with global growth.

What will the next quarter bring for automotive exterior suppliers? While long-term outlooks forecast the demise of excess capacity, a rebound is expected in the near future. In this application area, the good news is that there are still many metal-to-plastic conversions left to make, and plastics continue to offer a more cost-effective solution.

Global contraction

PricewaterhouseCoopers’ Autofacts Div. reports that today’s global automotive sector is in the grips of a devastating price war. A recent survey noted that North American consumer give-backs (in the form of consumer incentives) totaled an estimated $45 billion last year, with the European price war equally vicious. Even high-growth China has been hit by new car price pressure as competition intensifies. Autofacts also agrees that automotive component suppliers around the world are subject to continual “price downs” from their automaker customers, while rising commodity prices are squeezing some suppliers to the point of strangulation.

According to PWC, the reason we’re at this point is that the automotive industry has too much of everything: capacity, competitors, redundancy, and overlap. It estimates that light vehicle excess capacity globally stands at 20 million units, equal to more than 80 assembly plants and corresponding to a 76% utilization rate. Even with growth expectations of 10 million units over the next eight years, PWC believes it unlikely that industry-wide capacity utilization will improve to 85%, the figure most often cited as a profitability threshold.

Good news

While long-term outlooks tend toward the negative, this year’s figures bring a bit of relief. According to Action Economics’ Mike Englund, annualized September vehicle sales are expected to rebound 5.5% to 16.9 million units. He attributes much of the swing over the August/September period to the seasonal adjustment process. Instead, he advises, focus more on the average level over the period, which should be close to 16.5 million units. This would suggest that underlying demand remains solid, despite manufacturers’ attempts to wean consumers off of incentives.

Data from www.WardsAuto.com confirm that the domestic OEM contraction in 2006 has not been as drastic as the media would have us believe. While jobs have been lost, and this is not a trivial matter, the number of vehicles produced in the U.S. has declined by only 5.2% from January through September. Production of light vehicles in Mexico actually increased by 30% over the same period.

Switching to olefins

Where are the majority of exterior applications for plastics on a vehicle? Body panels still have not had the penetration predicted when Saturn first introduced its thermoplastic doors, but TPO fascias are standard fare today, as are exterior trim components such as mirror housings, side claddings, and fenders, all typically molded in PPO or PC/ABS. But sources at major polyolefin producer Basell say that its PP materials will be globally specified for a greater number of automotive exterior body panel applications going forward, replacing PPO blends and PC/ABS.

Material development has enabled the growth of polyolefins into new auto exterior markets historically controlled by engineering resins. Olefins give producers the ability to tailor-make compounds with stiffness, impact, and dimensional stability characteristics equal to or greater than conventional engineering thermoplastics, and this will fuel growth and penetration in the future.

Basell, for example, has developed compounds that feature coefficients of thermal expansion equivalent to amorphous compounds along with inherent lower density, excellent processibility, and environmental resistance. Future growth in exterior trim applications, such as fenders and quarter panels where PPO has been used and exterior roof rails where ASA has been used, is expected.

There is also, Basell says, an accelerating trend toward developing and specifying automotive exterior materials for use on a global basis. The resin producer recently expanded its agreement with Hyundai Engineering Plastics to a global scale by developing and qualifying materials for a variety of automotive applications in multiple regions of the world.

Finally, end-of-life recyclability issues are fueling the trend toward olefins. If exterior parts such as fascias can be recycled right along with other olefinic trim and fender pieces, it makes recycling a lot easier by avoiding the need to separate different polymers.

Web-exclusvie download: Growth rates in light vehicle sales for the Big Six.