Industrial Market Insight

Across the globe, light vehicles (gross vehicle weight rating under 8,500 pounds) consume roughly 5 billion pounds of composites on an annual basis. Thermoplastic matrix composites account for a majority of the volume. Composites and other lightweight materials have enjoyed strong growth recently, but the year ahead brings some headwinds for composites in automotive applications. The primary growth inhibitors will be a relatively flat market for light vehicles globally and a relaxation of fuel economy standards in the United States. However, opportunities for growth will exist as OEMs continue to reduce vehicle weight on global vehicle platforms.

Suppliers of automotive materials will need to gain market share to grow in 2020 because very little year-over-year production growth is expected. Europe is forecast to be flat, and a slight decline is anticipated in NAFTA as well. China is expecting low single-digit growth, which is very modest when compared to the phenomenal annual growth observed recently. Since the global production outlook is 2 to 3% per year through 2025, suppliers of composites will need to earn market share from incumbent materials in order to find meaningful growth.

In addition to general market sluggishness, relaxation of corporate average fuel economy standards in the United States will impact growth of composites in automotive. Weight reduction has been part of the OEM strategy to meet steadily increasing fuel economy and carbon dioxide emission regulations. These regulations have been the primary driver of the increased adoption of lightweight materials in automobiles over the past decade.

With the United States proposing to hold fuel economy regulations flat through 2026, OEMs will have less incentive to invest in weight-saving materials such as composites. This is particularly true for pickup trucks and large SUVs that are sold primarily in the United States. Suppliers of composites and other lightweight materials should expect less interest on U.S.-specific platforms given the current regulatory environment.

Rollbacks of fuel economy standards in the U.S. are only a minor setback to the adoption of lightweight materials on automobiles globally. More stringent regulation of carbon dioxide emissions outside of the U.S. will continue to drive the need for vehicle weight reduction on global vehicle platforms. Furthermore, weight reduction is critical to extend the range of battery-electric vehicles, and the pursuit of lightweight materials will continue for this small, but growing segment. Interest in composites for vehicle weight reduction will persist despite the “pause” on U.S. fuel economy regulations.

In order to capitalize on this interest, composite part suppliers will have to sharpen their value proposition versus alternative offerings. High-strength steel and aluminum have been the biggest beneficiaries of OEM weight reduction efforts in North America over the past decade, gaining 6% and 3% of vehicle mass, respectively. This share has been taken primarily from mild steel, which is the baseline automotive grade steel from the standpoint of cost, manufacturability and strength-to-weight ratio.

Normalizing the data and accounting for differences in specific gravity shows that the volume of high-strength steel and aluminum outgrew plastics and composite resins by factors of roughly 2 and 3, respectively, over this time period. Clearly, there is more work to be done if composites are to become the preferred option in mainstream automotive weight reduction efforts.