INSIGHT: Brazilian automobile industry ripe for plastics growth

04 June 2013 17:28  [Source: ICIS news]

By Jeremy Pafford

HOUSTON (ICIS)--Brazil is known for its tasty variety of tropical fruits, from mangoes to papayas. But there is a scrumptious low-hanging fruit in the South American nation that has engineered plastics producers salivating – its automobile industry.

Excitement over the prospects of increased use of engineered polymers such as polycarbonate (PC), nylon 6 and nylon 6,6 in Brazil and South America has companies such as BASF, INVISTA and LANXESS fervently pushing their products in region.

That exuberance was apparent in late May at the biennial Feiplastic exhibition in Sao Paulo, where a virtual who’s-who of automotive plastics producers had set up lavish booths to display their wares.

One presenter who came armed with a truckload of engineered auto parts and a wealth of statistics was Andreas Scheurell, LANXESS’ general manager of high-performance materials in Latin America. He made the trip from Pennsylvania in the US because of the importance of South America – and Brazil in particular – to the global producer.

In 2005, the company’s sales in Brazil were just 1% of the group's overall revenue, he said. Eight years later, Brazil sales are 10% of the pie and growing.

About 3.4m cars/year are manufactured in Brazil and 800,000/year in Argentina, Scheurell said, and some 700 new cars hit the road every day in Sao Paulo state alone, an area with a population of more than 41m people.

“I always say my business is within 100 square kilometers – the state of Sao Paulo,” Scheurell said.

And there is much business to be had as the country looks to make its new vehicles more fuel efficient.

One of the ways of increasing fuel efficiency many manufacturers are looking at is by making vehicles lighter. Whereas that has been the trend across most of the world in recent years, it one that has not permeated into South America until now – and thus provides companies such as LANXESS with a prime opportunity.

“A typical front end as a structure of the car where you have the lamps and the radiator … This entire front structure here in Brazil is basically a full-steel structure. You use different stampings of steel and then you have to weld them together to get a very heavy product,” Scheurell said.

“In Europe, in America, in Asia, we have these plastic-metal hybrid front ends,” he added. “We use just the minimum amount of steel, basically U-shaped, and fill it inside with plastic webs. They look a little bit like honeycomb, and they’re strong.”

Steel, like most everything else, is not a cheap commodity in Brazil, but engineered plastics have not been a cost-saving proposition either.

But in 2012, Brazil mandated that automakers improve fuel efficiency by 12% among new cars over the next five years or face a steep hike in taxes.

The new rules changed automakers’ questions on use of engineered plastics in vehicles produced in the country from “Why?” to “How?”, Scheurell said.

“Every [automaking customer] is coming to us and asking, ‘How can we do this?’” he said.

But government regulations are not the only driver in the move toward more automotive plastics. Brazilian customers are demanding more amenities in their vehicles – features that drivers in other parts of the world take for granted.

“The [Brazilian] consumer wants not one airbag or next year the mandated two airbags. The consumer wants four, six airbags,” Scheurell said. “The consumer wants safety features. The consumer wants air conditioning, automatic transmission, Bluetooth …”

In those features are a great deal of engineered plastics – and a lot of low-hanging fruit.

Read Paul Hodges’ Chemicals and the Economy blog
Bookmark John Richardson and Malini Hariharan’s Asian Chemical Connections blog

By: Jeremy Pafford
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