Mastio & Company’s most recent Injection Molding Markets Study predicts modest growth for injection molded automotive products in 2008. The study is divided into three major automotive market segments—interior, exterior, and under-the-hood components. Collectively, these automotive market segments reached nearly 1.8 billion lb of injection molding resin consumption in 2007 and are anticipated to reach just over 2 billion lb by 2010, representing an average annual growth rate (AAGR) of 4.0%.
PRESSURES ON TIER 1s
The majority of automotive molders surveyed said the sluggish economic conditions of 2007 had reduced their expected growth in this market and forced many companies into bankruptcy. Another factor is that OEMs have mandated that their Tier-1 suppliers of injection molded components should have, or plan to obtain, QS-9000 ratings. This has contributed to consolidation of the Tier 1 supplier base, as former Tier 1 suppliers have exited this market as soon as their existing contracts were fulfilled, because it would not have been cost-effective for them to pursue QS-9000 ratings. Among those who remain, most of their anticipated growth is from picking up orders from former Tier-1 suppliers who have gone out of business or left the automotive market.
Today’s OEMs are looking for Tier 1 suppliers who can not only offer complete interior systems, but also be more proactive in system and part design. Thus, most Tier 1s are forced to outsource many component parts to a variety of Tier 2 and Tier 3 suppliers. This increases the Tier 1s’ complexity of logistics, scheduling, delivery, and assembly.
More importantly, the main topic of interest in today’s automotive market is the increased cost of fuel. Many participants in the study stated that demand for more fuel-efficient sub-compact automobiles is expected to increase at a faster pace than for all other types of transportation. So far, it has resulted in fewer consumers purchasing a new motor vehicle. As the average price of gasoline nears the $4/gal mark, more consumers are relying on alternate forms of transportation, such as, buses, bicycles, and carpooling.
BACK TO 1993
As a result of a sluggish economy and high gasoline prices, industry analysts have predicted sluggish U.S. sales of new cars in 2008—i.e., 14.5 million to 15 million new vehicles. The last time sales were that low was in 1993, which was a very bad year for the auto industry. Yet some automakers’ predictions are more optimistic for 2008—from 15.5 million to 16 million units.
Although most automotive product sectors suffer during slow economic times, demand for injection molded under-hood components is also tied to demand for aftermarket replacement parts for existing automobiles. For example, makers of injection molded battery cases and components stated that the sluggish economy has increased demand for replacement batteries at a faster pace than batteries for new automobiles and other applications. This explains the higher AAGR of 5.3% for molded under-hood components.
Though it is not obvious why the projected growth rate for interior components is much higher than that for exteriors, one possible explanation is that there are more changes in interior than exterior design from year to year for a given model. Second, a few major interior component suppliers have recently filed for bankruptcy. The remaining—mostly smaller—interior participants in the study have picked up new business from the companies that had gone under. This may be the main factor behind the higher growth forecast for interiors.
A positive factor for the automotive injection molding market is the growing operations of foreign “transplant” automakers here. They have spurred some growth in demand for domestically produced auto parts, and a few molders even report demand for custom injection molded interior components for export to Europe.