This end-user segment covers parts, assembly and maintenance of all forms of transport. At 16 percent of our revenue, this is one of the two smaller segments for AkzoNobel. Our coatings are vital for both protection and aesthetics in vehicles and our chemicals are used in processes that make components.
New build markets in this segment are quite cyclical, with substantial drops in demand during an economic downturn. The timing of the downturn can differ, however. Car production was already recovering from the recent economic crisis in 2010 and has been on a reasonable growth path since then. We expect this pattern to continue going forward, with growth roughly tracking GDP in all geographies. In terms of shipbuilding it is not clear whether the bottom of the cycle has been reached. Based on the order book, a robust recovery is expected to begin in 2014, but the timing of this is still uncertain as previous forecasts had shown recovery beginning in 2013. The maintenance market in all parts of the Transportation segment is much more stable, but slower growing, as evidenced by the vehicle car park, an important contributor to vehicle repair market dynamics.
Future sustainability developments
Reduced energy use in the manufacture and running of vehicles is clearly a major issue. Therefore, expected changes in the segment due to reduced energy use are considerable. According to the WBCSD’s Vision 2050 report, by 2050, an 80 percent reduction in energy use by light duty vehicles is expected, along with a 50 percent drop in energy use in freight transportation.
Implications for strategy and actions
As production continues to shift, we need to continue to ensure that we are well-positioned geographically both in terms of supply and the decision-making process, which often takes place in other physical locations. We also need to have products with the right functionality, aesthetics and price level to consistently meet the requirements in this very demanding segment. This includes providing products that contribute to reduced energy use throughout the value chain.
Light vehicle production 1
Vehicle car park 1
(passenger cars and light vehicles) million units
New build ship deliveries 2
million deadweight tons
1 Source: IHS, January 2014.
2 Source: Clarkson Research Services Limited, December 2013.
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