This end-user segment is particularly important for our Performance Coatings business. We supply a full range of advanced coatings and color technologies for virtually every type of transport, including cars, commercial vehicles, ships, yachts and airplanes. We also produce specialty chemicals used to make automotive systems and components, with particular emphasis on automotive plastics. In addition, we supply surfactants for automotive fuels and lubricants.
17% of revenue
The outlook for the Automotive OEM parts and assembly sub-segment remains strong globally with steady growth. We benefit from this, but not fully, as we do not participate in the mainstream automotive OEM coatings business. Automotive growth remains robust in China, while India is gaining momentum. South American automotive production is facing challenges, with little prospect of a rebound in Brazil in the short term. Growth expectations are modest in Europe, where we expect the UK referendum vote to only have a minor direct impact.
North America has a moderate medium-term outlook, despite some analysts forecasting demand may come off cycle during 2017. There has been a noticeable shift towards larger models due to lower fuel prices. However, manufacturers still aim to reduce car weights, supporting the continuous conversion to composites and plastics. So the outlook for automotive plastics is disproportionately strong, which is important for AkzoNobel, as we are a leader in automotive plastic coatings.
Growth expectations in the Automotive repair sub-segment are less robust, although the market is more stable and less cyclical than in other automotive sub-segments. Key drivers for growth are the size of the vehicle car park, the accident rate and the repair rate. Higher growth is therefore expected in the BRIC countries, as well as South-East Asia. In the US and Europe, we see a consolidation trend in body shops and distributors. In Asia, changes in legislation regarding VOCs are taking place, steering towards more sustainable technologies.
Within the marine and air transport sub-sector, marine new build is facing a challenging time, following the lowest order intake for many decades in 2016. All main marine segments are down, although investments increased in the cruise and ferry sectors. Market analysts suggest a recovery will begin in the second half of 2017, but we expect this to be very slow.
Demand for air travel is forecast to increase, with a growing population and steady income availability, mostly in developing regions such as Asia. Deliveries of new aircraft and, notably, orders for new airplanes have decreased as airlines try to control capacity. Lower fuel prices also mean they are able to keep operating older models for longer periods.
Airlines are increasingly using livery for promotion and advertising, moving to more sophisticated and colorful designs. This trend is balanced by more advanced coatings systems, which use less coatings and have longer durability, reducing the volume of coatings across all segments.
Future sustainability developments
Based on the World Business Council for Sustainable Development’s (WBCSD)Vision 2050, by 2050 there will be an 80 percent reduction in energy use by light duty vehicles. In addition, the WBCSD is expecting a 50 percent drop in energy use in freight transport. Further environmentally driven, tighter legislation will drive some growth in marine build towards the 2020 timeframe.
Implications for strategy and actions
Products with sustainability and/or cost benefits – either during manufacturing or end use – continue to grow disproportionately. We actively seek to innovate and provide products that reduce carbon use and lower lifecycle costs.
Aesthetics will also remain important and we will continue to innovate in terms of products and services that support differentiated color and finish, and support customization. In addition, we intend to be well positioned geographically as the vehicle car park continues to increase outside of mature markets.
Light vehicle production
Passenger cars and light vehicles (units)
Vehicle car park
Passenger cars and light vehicles (units)
Marine new build
Compensated gross tonnage, indexed to January 2008
Source: Clarkson Research Services Limited
Volatile organic compounds.
Mature markets are comprised of Western Europe, the US, Canada, Japan and Oceania.