INTERACTIVE: Falling automotive sales hit global chemical markets

Will Beacham

17-May-2019

BARCELONA (ICIS)–Automotive sales are falling in all major regions of the world, with knock-on effects for chemicals demand in many value chains.

Source: Shutterstock

Faltering economic growth in many countries and nervousness about the escalating US-China trade war are affecting sentiment everywhere, and especially in Asia and the US, which are most directly affected by the hikes in tariffs.

For the automotive sector this translates into lower vehicle sales as consumers delay making big ticket acquisitions and focus on day-to-day needs.

Sales have collapsed quite spectacularly in China and India which have suffered double-digit declines.

China’s vehicles sales in April declined 14.6% year on year to 1.98m units, marking their 10th consecutive month of contraction amid continued pressure on the broader economy.

India’s April vehicle production fell 10.7% year on year as its economy slowed and as consumers suffered lower availability of credit to finance vehicle purchases.

Passenger automotive registrations in Europe fell 3.3% year-on-year in the first three months of 2019, the European Automobile Manufacturers Association (ACEA) said, amid a German industrial slowdown, weakening export demand and tepid growth in the region.

Honda said this week it is to close its UK automotive factory in 2021. The factory produces 160,000 cars per year.

German auto production fell 15% year on year in April and 12% in the first four months of 2019, according to data made available by the country’s auto industry trade group VDA.

US sales of new light vehicles in April fell year on year (4.6%) and month on month (5.7%), according to seasonally adjusted annual rates (SAAR) from the US Bureau of Economic Analysis (BEA).

The impact on chemicals markets has been widespread. In the last week alone ICIS reported that the weak automotive sector has depressed demand for chemicals markets including  Europe butanediol (BDO), US polyols , Europe epoxy resins , Europe oxo-alcohols , Europe acrylic acid, China  acrylonitrile butadiene rubber (NBR) ,  Europe PMMA , and Europe plasticizers.

Besides slowing economic growth in many regions, other factors are at play here, some country-specific as well as more global trends. Regulators across all regions are pushing targets for adoption of electric vehicles and aiming to restrict or even ban diesel and petrol-powered cars from city streets.

In Europe some car-makers have struggled to meet stricter vehicle emissions regulations introduced in the wake of the Volkswagen “dieselgate” emissions scandal. The “worldwide light vehicles test procedure”, or WLTP, took effect in September 2018.

Many consumers are now worried about the effect of vehicle pollution on the environment and human health. Rather than buy new vehicles people are choosing to use public transport or ride-sharing apps such as Uber and Lyft which have revolutionised this sector.

Another long-term factor is the ageing population and falling birth rates. Older people – with lower disposable income and grown-up families – tend to replace vehicles less often.

BRIGHT SPOT FOR CHEMICALS
The bright spot for future chemicals demand will be provision of materials for electric vehicles such as lightweight polymers/composites and components for batteries.

The automotive sector is investing heavily in electric vehicles. Volvo this week signed a multi-billion dollar deal with two Asian companies to supply batteries until 2028. The company wants half of all sales to be electric by 2025.  Volkswagen aims to sell 3m battery vehicles a year by 2025 and is spending €50bn to secure access to batteries.

However the switch away from internal combustion engines may also dampen demand growth for high heat-resistant materials such as nylon 6,6.

Focus article by Will Beacham

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