Growth: Beneficial or Costly? - Brief Article

Automotive Finishing, Winter, 2000 by Beverly A. Graves

According to a recent study from the Economist Intelligence Unit (EIU), consumers will demand an increase in the operational life of most major car components. These include cruise control using radar and sensors, keyless entry systems, air conditioning, cabin filters, fuel filters, entertainment systems, seat comfort features, electronic braking systems and automatic transmissions. What does this mean for finishers?

It may mean that the automotive engineers charged with designing these longer-lasting systems could determine that for the systems to last longer, certain parts would require longer-lasting coatings. If this happens, who would be responsible for developing these coatings? The finishers? The automotive manufacturers? The coating suppliers? All three working in concert?

Who will pay for the development of the new coating? Well, most likely the cost will be passed on to the consumer. However, if the finisher devotes more time and spends more resources developing the coating, will he/she be able to recoup the investment? Or will the automotive manufacturers expect the finisher to do this as part of "retaining the business?"

According to the study, future growth in air conditioning is definite. Although air conditioning is fairly standard in America and Japan, it is still often considered a luxury item in Europe. Suppliers see a great potential for growth here in the early years of the century. The EIU predicts the global volume for air conditioning units will rise by about 36% by 2005.

Another growth area is navigation units. Although these devices are popular in Japan and Europe, they have not seen as much application in the U.S. The EIU expects approximately one of every three new passenger cars sold in Japan (1.7 million) will have navigation units. This will climb to 2.4 million by 2004. In the U.S. in-car navigation systems have not seen as much growth, but the EIU states it has the potential to reach 1 million units by 2005, whereas only 100,000 systems were sold in 1999.

Another growth area will be automatic transmissions. The EIU forecasts that by 2005 automatic transmissions in passenger cars will rise to 2.3 million per year compared to 19.3 million manual transmissions. A significant amount of this growth will be in Western Europe where worsening traffic conditions have been cited as one reason for the increase.

This growth in manufacturing could be a plus for finishers; however, the costs of R&D could outweigh any benefits they might see in increased production. Much of what happens depends on how the automotive manufacturers cooperate with their Tier 1 and Tier 2 suppliers in satisfying the increased consumer demand for longer-lasting major automotive components.