A.T. Kearney Plastics-The Future For Automakers and Chemical Companies [PDF]

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Plastics. The Future for Automakers and Chemical Companies As legislative bodies hammer out laws to reduce man-made emissions, and $150-a-barrel oil seems feasible, it is fair to project that by 2020 plastics will comprise 18 percent of the average vehicle’s weight.

Plastics. The Future for Automakers and Chemical Companies

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Who could forget the scene in The Graduate when Dustin Hoffman’s character Ben Braddock, college degree in hand, is taken aside by older, wiser Mr. McGuire to hear the secret of success? “I just want to say one word to you, just one word. Are you listening?” “Yes, sir, I am,” Ben replies. “Plastics. There is a great future in plastics. Think of that. Will you think of that?” “Yes, I will,” mumbles Ben. “Enough said,” declares Mr. McGuire. “That’s a deal.”1 Today, more than 40 years after Mr. McGuire uttered these words, engineered plastics are fast becoming the future for two industries—chemical and automotive—as environmental concerns are increasingly affecting both. Even in emerging countries, legislative bodies are hammering out laws aimed at reducing man-made emissions that threaten the environment. Add to this the lingering effects of the global economic crisis and the result is a profound change in global manufacturing.

For optimal fuel efficiency, automakers are using more lightweight materials— plastics and polymer-based components. At the same time, increased competition for energy sources and a growing demand for automobiles are putting pressure on oil prices, and the notion of $150 a barrel no longer seems unrealistic. And regulators in both developed and emerging nations are legislating vehicle-emission standards and encouraging recyclability as a means by which to address both energy costs and environmental concerns. Figure 11 Plastics will account for  p from 14 percent for 18 18percent percentof ofaverage averagevehicle vehicleweight weightby by2020, 2020,u in 2000 up from 14 percent in 2000 Percentage of total vehicle weight 100%

6% 79%

2%

9% 76%

2%

75%

13%

14%

16%

18%

5% 65%

6% 63%

6% 61%

7% 55%

Plastics Rubber Metals Others

50%

25%

0%

14%

14%

1970

1980

1,100 kg

1,180 kg

17%

18%

18%

20%

1990

2000

2010

2020

1,260 kg 1,340 kg 1,400 kg 1,100 kg

Average vehicle weight

Notes: kg kg == kilogram. kilogram. Due Due to to rounding, rounding, some some percentages percentages may may not not add add up up to to 100. 100. Notes: Source: A.T. A.T. Kearney Kearney analysis analysis Source:

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The trend toward lightweight vehicles is a prime example. Since 2008—not coincidentally the year the global economy bottomed out—the average vehicle weight has dropped 20 percent, which translates into a similar reduction in per-vehicle emissions. In Europe, analysts project that by 2020, the average vehicle weight will shrink to a little more than a ton—its 1970 level— after peaking at nearly 1.5 tons in 2010. The main reason for the trend, of course, is that lightweight vehicles are more fuel efficient. Ironically, another fuel-efficiency trend—electric power trains—results in heavier cars. While standard engines account for about 12 percent of a car’s total weight, electric power trains account for 20 percent due to the extra-heavy battery. To preserve optimum fuel efficiency, automakers are using materials that are more lightweight— plastics and polymer-based components. We project that over the next decade, plastics will account for 18 percent of the average vehicle’s weight, up from 14 percent in 2000 (see figure 1). More than a hundred types and grades of plastic, categorized by performance requirements such as appearance, rigidity, resistance, weight, and cost, are used in the average vehicle. For instance, polypropylene (PP) is used in dashboards, wheel covers, and some engine parts; polyurethane (PUR) is employed in seats; polyethylene (PE) in carpets; and polyamide (PA) in parts that need to be heat- and chemical-resistant. Mass-volume plastics—acrylonitrile butadiene styrene (ABS), PP, PUR, and nylon—account for 70 percent of the plastics used in a car, while composites and higher-end plastics account for the rest. Importantly, plastic consumption patterns vary by region, sometimes even from one automotive original equipment manufacturer to another. European manufacturers use more plastics than those in North America and Japan. The latter have been slow to switch to petroleum-based plastics and are less familiar with high-grade plastics, and so continue to use more steel.

The Challenges for Plastics As automakers are challenged to build vehicles that are more environmentally friendly, they will use more plastics. This presents a significant opportunity for chemical companies. Taking full advantage of this opportunity, however, will require dealing with a new set of challenges. Among the most daunting of these are the following: • More competition from steel. Steel is still cheaper than plastics and benefits from innovations—in either product (for example, dual grades, tailored blanks) or process (for example, laser-welding)—that have improved its performance and reduced its weight. • Price volatility. As prices are based on oil costs, they change quickly. • Regular shortages. A relatively small number of global plants supplies all industries (especially for intermediates production). • Recyclability. Here, steel has the edge again, largely because the numerous different types and grades of plastics are difficult to recycle. To meet this last challenge—recyclability—chemical companies have had to develop ways to reduce plastic’s environmental footprint with bio-sourced and recyclable materials. Bioplastics are produced from renewables, with two main agricultural sources—starch-based, derived mostly from sugar cane; and corn, potatoes, beets, and oil polymers (see figure 2). As a result, bioplastics’ primary raw material base is diversified and its dependency on oil reduced. Plastics. The Future for Automakers and Chemical Companies

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Figure 22 Five primary ways to to produce producebioplastics bioplastics Sugar chemistry

Monomer production from sugar fermentation Seeds

Cultivation

Extraction

Fermentation

Polymerization

Examples: lactic acid, ethanol

Example: polylactic acid

Polymer production from sugar fermentation Seeds

Cultivation

Extraction

Polymer fermentation Example: Polyhydroxyalkanoates

Oil chemistry

Polymer production from molecules extracted from plants (oil) Seeds

Cultivation

Extraction

Polymer fermentation Example: Rilsan

Mechanical approach

Extraction from plant polymers (starch) Seeds

Thermochemistry

Cultivation

Polymer extraction

Thermochemical process Seeds

Cultivation

Gasification

Monomer re-composition

Polymerization

Source: A.T. Kearney analysis

Author to insert legend text Author to insert legend text Although bioplastics comprised less than 1 percent of all plastics in 2009 (with a global capacity of only 900 kilotons), its production has grown by more than 40 percent annually since 2007. Source: A.T. Kearney analysis The market is still highly fragmented, however, with few bioplastics manufacturers targeting automotive as a major outlet (some applications can be found within polylactic acid, polyhydroxyalkanoates, polyamide 11, and polyethylene terephthalate). Given current and planned production volumes and the price correlation of agricultural raw materials with oil prices, bioplastics will remain non-cost competitive with traditional plastics and will at best supply 20 percent of total plastics needs.

An additional concern for bioplastics makers is that in Europe, new regulations require a large proportion of vehicle materials to be recyclable by 2015. A European Union directive requires 95 percent of an end-of-life vehicle to be valorized and 85 percent of that to be recycled. This means 60 percent of a vehicle’s plastics have to be recycled. We expect to see similar legislation being introduced in other regions of the world in the foreseeable future (see figure 3). The problem is that while recycled plastics are environmentally friendlier and less costly than non-recyclable ones, they are less pure and do not perform as well. Thus, recycled products might enrich the portfolio, but cannot always be used as a substitute for virgin resins.

Plastics. The Future for Automakers and Chemical Companies

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Nonbiodegradable

Fully biodegradable

Figure 3 Figure 3 The evolution toward environmentally friendly plastics The evolution toward environmentally friendly plastics

?

Near-term plastics

Current plastics

Bioplastic 2010 (prototype)

Fully petroleum-based

Bioplastic 2015

Fully organic

Source: A.T. Kearney analysis Source: A.T. Kearney analysis

In attempting to resolve this dilemma, there is a third option: composites that combine the advantage of steel and plastics. These fiber-reinforced plastics represent a credible alternative to steel both in terms of material characteristics and cost competitiveness (see figure 4). Fiberreinforced plastics are now being used to make structural and non-structural components such as seat structures, bumpers, hoods, and fuel tanks.

Joining Forces To become more plastics-oriented, the automotive industry and the chemical industry are likely to join forces in a value chain that includes peripheral companies such as plastic-injection companies and automotive suppliers. This integrated value chain will have two goals: first, improving plastic’s performance standards to better meet consumer needs and comply with government regulations; and second, developing innovative ways to reach sometimes contradictory objectives of sustainability. Improving performance By improving performance we mean improving resistance, stiffness, weight, sustainability, and aesthetics, to name a few factors. The auto companies will want to move material considerations upstream in the overall design process, especially to align safety criteria and energyefficiency goals. And they will want to convince suppliers to develop polymer-based materials that leverage the properties and benefits of plastics—this in turn can generate innovation and new automotive applications. Collaborative research and development will be more focused on material properties and technology issues. If involved early enough, plastics can be used to substitute parts like-for-like, and also deliver an advantage by improving aesthetics, and Plastics. The Future for Automakers and Chemical Companies

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Figure 4 offer several severaladvantages advantagesin interms termsof oftechnical technical Fiber-reinforced plastic composites offer performance Weight

Typically 25 to 35 percent lighter than steel parts of equal strength

Manufacturing

Faster to assemble, as fewer parts are required, which cuts manufacturing costs and complexity, and often speeds up the design process and new model launch

Tooling

Less than half the cost—40 percent—of steel-stamping

Damage resistance

Ding and dent superior to that of aluminum and steel panels

Corrosion resistance Better corrosion resistance than most materials in any application, automotive or otherwise

Internal damping

Less noise, less vibration, less harshness

Design

More versatile—molding offers geometric details, shape complexity, and a depth-ofdraw range unavailable with metal stamping; in some cases, it is impossible to manufacture a vehicle part with other materials

Source: A.T. Kearney Real Companies, Real Growth study, 2011 Sources: Automotive Composites Alliance; A.T. Kearney analysis

reducing costs and vehicle weight. This latter point, reducing vehicle weight, is accomplished via suppression of sub-assemblies; for example, new thin seats are the result of merging foam, fabric, and structure. However, such breakthrough innovations will require a complete re-engineering of system architecture, and therefore will need to be initiated sufficiently in advance of a program’s design phase. Also, industries will have to join forces to develop predictive engineering tools, shared performance models, and material-properties data for composites (to help develop prototypes). Industries will also work together to investigate new production and assembly processes, such as a way to join plastics and metals. Increasing sustainability As for the often contradictory objectives of sustainability, plastics can be environmentally friendly and contribute to the overall “greening” of the automotive industry. Figure 5 illustrates the effect one vehicle can have on the environment in terms of greenhouse gases. Aside from the obvious and vital objective of reducing vehicle weight, other green areas include assessing the trade-offs between bio-based and petroleum-based plastics, the recyclability of a vehicle (and biodegradability of its components), and the extent to which production processes are energy efficient. Automotive applications are in general “investments” with respect to the use of carbon. Unlike dispersive applications of chemicals, such as shampoo, or short lifecycle applications, such as plastic bags, the trade-off between bio and petroleum-based is less compelling. Quite the reverse, recycling appears to be the one mid-term challenge to be confronted worldwide. This implies not only developing recyclable materials with sufficient performance but also introducing recyclable automotive parts. Plastics. The Future for Automakers and Chemical Companies

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Figure 5 How a vehicle produces greenhouse gas Equivalent of CO2 kilograms per ton1 50,000

47,000

500

40,000

-20%

Recycling and waste

-38%

Vehicle usage

37,000

Parts and vehicle assembly

500

29,000

30,000

39,000

500

31,000

20,000

Components production (plastic injection) Raw materials production (chemicals, compounding)

24,000 10,000

0

2,000 1,500 4,000

1,000 1,200 3,500

700 1,000 3,000

1,253 kg

1,000 kg

800 kg

Average vehicle weight

190 kg

225 kg

275 kg

Weight of plastics in average vehicle



1 CO2isiscarbon carbondioxide. dioxide. 1CO2 Source: A.T. Kearney Kearney analysis analysis Source: A.T.

Again, meeting both performance and sustainability challenges will require substantial collaboration throughout the complex automotive-plastics value chain—including the creation of a downstream recyclability industry.

Plastic Power The bottom line is that to remain competitive and prosperous, the automotive industry has to develop affordable vehicles that comply with increasingly stringent environmental regulations, and the chemical industry has to become more involved in the auto industry. The key for both industries lies in one word: Plastics. Authors Gaël Rouilloux, partner, Paris [email protected]

Bartek Znojek, principal, Middle East [email protected]

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A.T. Kearney is a global team of forward-thinking, collaborative partners that delivers immediate, meaningful results and long-term transformative advantage to clients. Since 1926, we have been trusted advisors on CEO-agenda issues to the world’s leading organizations across all major industries and sectors. A.T. Kearney’s offices are located in major business centers in 39 countries. Americas

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The signature of our namesake and founder, Andrew Thomas Kearney, on the cover of this document represents our pledge to live the values he instilled in our firm and uphold his commitment to ensuring “essential rightness” in all that we do. Plastics. The Future for Automakers and Chemical Companies

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