Plastics in Automotives - No Longer Too Early for China   

Dr. Kai Pflug, CEO, Management Consulting - Chemicals (Ltd.),
Dr. Bernhard Hartmann, Managing Director, A.T. Kearney China
In considering the prospects of plastics in automotives, both the car production and the utilization of plastics per car need to be considered. As for the first aspect, in 2009, China became the biggest car market by number of units sold (though by value, the US market is still much bigger as the average US car costs 4-5 times as much as in China). Year-on-year growth from 2008 to 2009 was around 45% and another 30% from 2009 to 2010, reaching a 2010 volume of 16-17 million units.  
   For 2011, industry experts predict some slowdown of this rapid growth to about 15%, partly due to government measures in specific regions, e.g., the newly introduced registration lottery in Beijing, which follows older measures in Shanghai. However, overall long-term prospects still are very promising, particularly compared to the very modest growth expected in the developed world. Key reasons are the rising income of China's middle class and the very low per-capita number of cars currently owned in China. While in Italy there were 559 cars per 1000 inhabitants (2009), the comparable figure for China was only 30 cars, providing a huge potential for China to catch up.
    A rising number of cars produced obviously correlates with increased consumption of the materials used in its production. In highly developed markets such as the US, plastics usage is already widespread - in fact, the average US car contains 105 kg of plastics:
  * Bumpers account for approximately 10 kg of plastics - typical polymers used are PP, ABS and PC
  * Seats (approximately 13 kg) are made of polymers such as PUR, PP, PVC, ABS, PA
  * Dashboard (15 kg), typically made of PP, ABS, PA, PC, PE
  * Interior Trim (20 kg), typically made of PP, ABS, PET, POM, PVC

    These figures also indicate that the rising number of cars is only one of the two components that make the automotive plastics segment so promising in China. The other component is the comparatively low current content in Chinese cars. For example, in an average American car, around 20 kg of polyamide are used while Chinese cars currently only contain 5-6 kg. Given that plastics have a number of advantages compared to metals, such as lower weight and resulting lower fuel consumption, higher design flexibility and potential for higher safety and recyclability, it is not unreasonable to expect an annual increase of 15% for China in the next few years, which would still leave the 2015 content in Chinese cars at only half the US level.
   The effect of these two factors, rising car production and increasing content of polyamide and other plastics in each car, are modeled in Fig. 1. It is therefore realistic to expect a four-fold increase in automotive plastics in 2015.
    However, while this sounds like a great opportunity for plastics producers in China, it will not be realized without substantial efforts from these suppliers. The key issue is that the infrastructure requirements for use of plastics in automotive are very different from the ones currently existing for metals usage. Replacement of metals by plastics requires extensive retraining of automotive engineers who as a group have worked with metal for more than a century but have very limited experience with polymers (not surprising as, e.g., still more than 80% of the weight of US cars is taken by steel, iron and aluminum). A shift from "thinking in metals" to "thinking in plastics" is necessary, and this shift will only occur if plastics suppliers take strong efforts. Instead of simply providing plastic materials, they and their partners need to provide a bundle comprising both a physical product and extensive services. These comprise the development and establishment of new technologies, e.g.,
  * Molding and subsequent procedures
  * Tests (possibly customized) of the new materials to guarantee adequate performance
  * Other add-ons such as painting, design calculations, recycling pathways etc.
    Apart from creating this infrastructure, plastics suppliers also need to be willing to invest in a variety of supporting measures in order to promote the usage of plastics in the Chinese automotive industry, e.g.
  * Participation in conferences (e.g., the annual Auto Plastic and Innovative Materials Development Forum in Shanghai, sponsored by automotive plastics producers such as Rhodia)
  * Education and training (e.g., opening of Bayer AutoCreative Center for automotive engineers in Shanghai)
  * Promotion of plastics to automotive customers (e.g., at ChinaPlas)
  * Cooperation with local compounders. Among those, a number

    In this endeavor, indirect support is likely to come from the Chinese government. While probably not directly promoting the usage of plastics in automotives, government regulation is still likely to indirectly favor a higher plastics content in cars. Increased safety, fuel and environmental standards will be easier to comply with via the utilization of plastics. For example, it is estimated that an increase of the polymer content of a car from 4% to 8% of total weight corresponds to fuel savings of 750 liters over the lifetime of a car (100,000 miles of distance driven).
    Another indirect support comes from the government target to consolidate the industry. Generally, plastic usage is more economical for mass production of cars, so a more highly consolidated industry is likely to consume more automotive plastics.
    Several expansion plans of companies involved in the Chinese market for automotive plastics, all announced in 2010,  indicate that the segment is indeed taking off:
  * AKRO-PLASTIC established an additional plant to serve the domestic automotive industry after their business in China increased by 65 % in 2009. 70% of their polyamide compounds are being delivered to the Chinese automotive industry
  * BASF announced they will more than double the compounding capacity of engineering plastics by an additional 65 000 tons per year at its Pudong site in Shanghai, driven by the increasing usage of engineering plastics especially in automobiles
  * Bayer's planned substantial expansion of polyurethane and polycarbonate production in Shanghai is also partly driven by demand from the automotive sector
  * Borouge inaugurated a new compounding manufacturing plant in Shanghai aimed at the regional automotive market, and already started construction on a second plant in Guangzhou
  * China XD Plastics Company, a Chinese manufacturer, and distributor of plastics primarily for use in automotive applications in China, for the third quarter of 2010 announced a year-on-year revenue increase of 80.5% from the third quarter of 2009, and profit increased by 93%
  * LANXESS announced to boost production capacity at its compounding plant in Wuxi, China, where it makes semi-crystalline thermoplastics primarily for automotives
  * Rhodia just announced that after a 25% sales increase in 2010 and a 15% growth forecast for 2011, compounding capacity at its Shanghai facility will be expanded by 40% by July 2011
    With this starting position and the twin drivers of production volume increases and increases in plastics utilization per car, a rapid further development of plastics in the automotive segment is almost certain.