UTECH NA Conference report: Automotive looks good for the future

Bhavesh Patel, senior consultant, chemical strategy consulting, IHS Chemical Consulting/IHS Automotive Consulting, gave delegates to the UTECH North America Automotive and Sustainability conference told delegates the signs are now positive for the auto industry. 

Bhavesh, Patel sees a number of key trends that will affect the shape of the global automotive industry up to about 2030.

Overall the automotive industry is looking positive, with overall growth of 2.28% across all markets to 2022. Some regions such as Europe will be flat, while China is expected to grow and the US will become more globally integrated into automotive production.

The oil price continues to have a big impact on economies over that period of time, importers will continue to benefit from the lower prices for a while, but over time, IHS predicts that the price will return to the $100/bbl level with time.

This will be one factor to affect demand in a number of countries, some of which are taking advantage of a lower oil price to increase the wealth of its people. India’s government, for example “is pushing to growing the middle class and providing jobs for them. India is a net importer of oil and this means good times for them,” Patel said.

When the price of oil is low, consumer disposable income rises.

“In the US, a 10 cent drop in the price of gas is equivalent to about a $10bn tax cut,” said Patel.

“As we go into the future the price of oil will come back, and the drive to sustainability is very, very important. Beyond 2020 or 2030 autonomous vehicles will be important too.

The megatrends which will affect the polyurethane industry up to 2020 are based around “social, technology, economy and legislation changes,” he said.

“We’ve seen the household budget shift towards expenditure on lifestyle and technology. At the same time global population is ageing and birth rates are falling. This is leading to changes in consumer shopping habits. For example, there is likely to be high demand for premium quality cars as the population ages,” he said.

 Size of the prize

In Europe, production numbers show that demand for premium cars is on the rise in that market. This will be important for polyurethane, because it is used in many areas such as sound deadening, where it contributes to the perception of quality in the car-buying public.

“Between 2014 and 2020 light vehicle production could rise by 17% and that’s 15 million jump in light vehicles, he added.

However, that production growth will not be evenly spread across the world: Europe production will essentially flat line over that period. “We predict a flat line growth looking US. The US has an advantage with ethylene, propylene polyethylene. Mexico, with its policy changes in hydrocarbons is going to be very lucrative. I think North America will become an export play,” he said.

“China is the giant. It’s a big deal and it’s real. Greater China, is a story about prosperity growth, rising urbanisation and domestic car companies,” said Patel.

“Polyurethane producers are going have to work with domestic players to understand the market better. Developing a good sourcing strategy, and regional reach will be important to supply the Chinese market in the future,” Patel added.

production“Around 90% of global vehicle production growth between 2015 and 2020 will come from emerging markets,” he said.

“Looking at North America, shale gas is a big deal, I can see a drop in regional sales as a proportion of the whole. It will become more globally integrated into the automotive industry. America won’t simply be the recipient of car imports. And will become a net exporter of completed cars in the future,” said Patel.

“Export expansion and localisation will become increasingly important. The players in the polyurethane industry will need to evaluate where they are, are they feeding the mouth of manufacturing or not? We don’t transport Polyurethane foam,” he said.

The green agenda

It is important for the industry to understand the basis of sustainable raw materials are going to be increasingly important in the future as governments and regulators increase the pressure for their use, Patel said.

“Polyurethanes don’t face cost-effective replacement materials. The industry’s capital structure and material efficiency also make it difficult to substitute polyurethanes,” said Patel. He added that polyurethane can further entrench itself in the automotive sector by looking at opportunities to increase the greenness of its products.

“Polyols can be made from castor oil, palm oil and soy depending on the region you are in. From that point, the techniques are to get into these bio-based materials but,” he warned, “It is important to understand the interplay between economics, performance, social awareness and the ethics of it all.

“I’m not saying you should be a hipster, but it is important to understand some of that,” added Patel, who went on to cite details of work done by CargilDow, research in in China to make polyol from broad beans to industrial polyols, and Bayer MaterialScience/Covestro’s

For example, he said, there is a 70% carbon-content isocyanate from bio-based sources. Pentamethylene diisocyanate (PDI) is a new isocyanate with a 70% carbon content from biomass that does not generate any direct competition for food production. See http://utech-polyurethane.com/news/bayer-materialscience-unveils-bio-based-innovation/)

“There are tremendous opportunities and challenges for industry participants and the winners will be those who participate in the whole value chain and collaborate and develop the agility to adapt to the global supply chain,” he concluded.