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  • Automotive plastics industry

    The automotive plastics industry is a sector whose growth is exclusively dependent on the automotive sector, and this sector growth is driven by BRIC nations (Brazil, Russia, India, and China). BRIC car market has slowed down after years of growth, pushing automotive and plastics investors’ returns further into the future. This may be a temporary stutter given that there is still demand for motorization in the future. 

    Introduction

    The automobile industry is among the most important end-users of high-end engineered plastics. As the industry has shifted production base to BRIC countries, the global plastics industry has followed suit. With increasing foreign investments, and rise in the number of new manufacturing establishments, BRIC countries have remained the prime driver of growth for the plastics industry because of rampant industrialization and expanding automotive industry. As car sales are falling in all three markets, Brazil, India and Russia,this year for the first time in more than a decade, this closes off the most important drivers of the industry. It leads to declines across all upstream raw material markets including engineering plastics.

    Drivers of the industry            

    The growth market and profit drivers for the global automotive industry have been the BRIC nations.Rio de Janeiro or Mumbai’s clogged roads are testament to a surge in car ownership over the past decade as the country’s middle classes are enjoying higher incomes and higher access to credits. The trend of urbanization has been a game changer for the industry. In order to achieve this goal, there is a need to reduce the weight of the average car, and polymers have become a lighter alternative to metals.

    Light, strong and hardwearing, plastic components are increasingly seen as a viable alternative to metal. Polymers such as polypropylene (PP), polyurethane (PU), polyamide, acrylonitrile-butadiene-styrene (ABS) and polycarbonate (PC) are now used in anything from the seating and paneling, to the glazing, chassis or in the engine. The migration from glass to PC for car headlamps highlights design freedom, transparency and reduced weight. Efforts are also being taken to use plastics for the side and rear windows, as well as sunroofs. According to the American Chemistry Council (ACC), plastics and composites use in cars has reached 378 lbs in 2000 compared to 194 lbs in 1990.

    A report published in 2012 by TechSci Research “India Automotive Plastics Market Forecast & Opportunities, 2017,” had forecasted that the Indian automotive plastics market revenues would double by the end of 2017. The market for automotive plastics in India has grown at an exponential CAGR of around 25% during 2009-12. With the Indian government taking initiatives to boost the market for electric and hybrid cars in India, this will also further drive the automotive plastics market. Some of the volume assumptions need to be revised.

    BRIC car market stalls putting the break on the auto plastic market 

    Many automakers have invested in the BRIC markets for the past 5 years to capitalize on the growth of this market and this has helped offset the pressure in mature markets. Brazil, India, Russia all bought more than 2.5m cars last year, making them the world’s fifth, sixth and seventh largest markets. All large car manufacturers entered these three markets, setting up factories, supply networks and dealerships. From 2010 to 2012, BRIC countries became hot ticket destinations for growth. Plastic manufactures followed the auto manufactures and also set up factories.

    Ford Motor is completing construction of a second plant at the tune of $1bn in India, while its first plant still runs below capacity. India has attracted Bayer Material Science (BMS), which has invested EUR20 million in a new aromatic and aliphatic polyisocyanate facility in Ankleshwar, which started operating in 2011. Earlier in 2012, Thailand PET manufacture Indorama Ventures entered into a joint venture with Indorama Synthetic India to build a US$700 million integrated purified terephthalic acid, PET resin and polyester staple fiber plant in India.

    After a decade of good growth, the BRIC booming car market has hit a break in Russia, India and Brazil. The slowdown has been attributed to a combination of slowing economic growth, reduced consumer confidence and weakening of currencies. In India, sales of passenger cars are down 10% to 1.7 million units in 2013 based on data collected from the Indian Automotive manufacturers. Similar stories in Brazil, where Anfavea, the national automakers group, indicates that 0.8 percent fewer cars were registered in 2013 compared to last year. Given the fact that the Brazilian economy is to grow at just over 2 percent this year, the car industry will either stabilize or contract further. In Russia, sales are down 6 per cent in 2013, according to the country’s AEB automobile manufacturers committee.

    While its BRIC cousins have stuttered, China had remained unabated. The passenger car components market, which is huge for plastics parts, is expected to hit the RMB85 billion mark by 2015, according to Research and Markets.  China-based manufacturers of automotive plastics parts like NBHX, JNMPT, Shuanglin and Shunrong have upped their market share as well as technology. 

    Conclusions

    The global plastics industry is witnessing the continuous shift of production bases to the BRIC countries. Besides growing demand from the automobile, the plastics market is propelled by globalization, demand for durable products and urbanization. As the automotive industry is declining in BRIC countries, this affects the engineered plastic industry. No data have yet been published on the magnitude of this impact, perhaps because this is a delayed effect. However, analysts agree that this may be a temporary stutter given that there is still a great deal of motorization in those regions in the future.  But, the concerns for those that have already sunk billions of dollars worth of investments into factories and supply chains in these markets is that a payback that they have assumed was just around the corner could take until the end of the decade to materialize.

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