INSIGHT: BASF sees much more than a spark in its autos offerings

03 October 2012 20:39  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS)--The world’s big car and truck makers and fast growing emerging market demand are tantalising sales targets for chemical producers.

The average light vehicle, in the US at least, absorbs $3,297 (€2,539) worth of chemicals, including process chemicals, materials and fluids.

Strikingly, that figure, calculated by the American Chemistry Council (ACC), compares with $1,717 in 1990. Automobiles are getting lighter as vehicle makers introduce new weight-saving materials. Drive trains and their material requirements are changing.

The attraction is obvious, particularly as auto makers try to lift sales in emerging markets. The potential requirements for polymers, coatings and fluids of all sorts are significant, let alone the chemicals that may be required to underpin new battery technologies.

This is a challenging game with the prize of stronger profits and growth if you are able to make available the right products in the right place at the right time.

The chemicals-in-autos picture is complex enough too to allow major players room to grow and to offset severe current market weakness.

Hardly any auto maker in Europe now, for instance, is making money. Auto sales have been trending down for the past five years.

But globally, the issue of greater mobility sits high on personal and public agendas and light vehicles sales are growing.

Mobility is one of the megatrends that applies globally. The types of vehicles we use will change while the number of vehicles will rise.

BASF, for instance, suggests that by 2020 there will be 1.2bn cars on the road, 300m more than in 2011. Car production globally is expected to grow by 5%/year over the next 10 years compared with growth of 3% over the past 30.

And the Germany-headquartered chemicals giant has big plans for growth in autos. This is one end-product where the company can really test whether it is able to work effectively with the customer and realise its strategy to produce more “functionalised materials and solutions” rather than simply chemicals.

BASF’s auto-related turnover in 2011 was €9.5bn ($12.3bn) and the company wants to see that grow to €17bn by 2020, or by 6.7% on average a year.

Currently four main divisions, catalysts, performance polymers, coatings and polyurethanes, generate most auto-related sales, but other businesses also sell into auto markets. Chemicals sales-growth into autos is expected to outstrip that of precious metals (for emission catalysts production and trading).

BASF’s third party sales into the auto industry have grown by 6%/year on average over the past five years compared with automotive production growth of about 2.4% a year.

When BASF cuts the numbers, it reckons that emerging market original equipment manufacturers (OEMs) will grow faster than the pack. It is better to tie up with the big established, and increasingly global, players.

“It is about collaboration and cooperation with customers,” BASF CEO, Kurt Bock said last month on the sidelines of a series of investor presentation. This is a profitable business for BASF, he added. “It is a business we want to grow.”

Established OEMS will maintain their lead and account for more than three quarters of total vehicle production in 2020, BASF said. It is also convinced that the chemical content of cars will rise, with chemistry being the enabler of lighter, safer and more efficient vehicles. By its estimates, the chemicals content of today’s car is about €850, including precious metals.

The company is challenged to maintain its position as a leading supplier of emission catalysts, topcoats for vehicle exteriors and certain of the performance plastics used in vehicles. It says it is a “frontrunner in developing new solutions for the cars of tomorrow”, with R&D spending for automotive at €200m in 2011.

It is nurturing a preferred development partner status with leading producers such as Daimler and Hyundai.

And while BASF is convinced that the combustion engine will be around for years to come, it has been investing in next-generation battery materials and technologies, initially in the lithium-ion battery value chain.

Its lithium-ion battery cathode materials plant in Elyria, Ohio, is scheduled to start up late this year. And it wants to become a system supplier in the electrolyte business and help customers by providing tailor-made electrolytes.

The company has been investing smartly in battery technology companies since it created a battery materials business unit in November 2011, acquiring battery companies and buying into specific battery technologies.

“Over the next five years, BASF will be investing a three-digit million euro sum in researching, developing and setting up the production of battery materials,” it says.

($1 = €0.77)

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By: Nigel Davis
+44 20 8652 3214

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