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Automotive Transition Raises Strategic Questions for Chemicals Companies

10 July 2019 Anthony Palmer Kate Hardin

Global sales of battery electric and plug in hybrid vehicles in 2010 were less than one percent of global light vehicle sales. Nearly a decade later, sales have risen to over 2 percent of global light vehicle sales, and IHS Markit projects that by 2035 sales of battery electric and plug in hybrids will have reached nearly 20% globally. This shift to new power trains and other new technologies raises critical questions for the chemical industry:

  • What will changes in automotive powertrains mean to the supply of feedstock to the chemical industry?
  • How will design changes in the automotive sector affect the demand for chemicals and materials such as thermoplastic polymers and synthetic elastomers?
  • What are the strategic implications for the chemical industry's structure and participants?

The expected changes in transportation liquid fuel demand will have consequences in feedstock availability for the chemical sector. The other main area of impact for chemical companies is the changing materials demand resulting from design changes in the automotive sector.

Feedstock Implications
Changes in power trains and increased fuel economy, coupled with resulting societal trends impacting vehicle miles traveled, will change the volume, mix, and geographic distribution of the automotive energy supply. This will significantly affect the global refining and gas processing industries, resulting in changes in the price, volume and type of feedstock available to, and used by, the chemical industry:

  • North American base chemicals and derivatives investments will continue with advantaged NGL feedstock cost and availability in our base case scenario.
  • However, as adoption of new power train technologies increases, potential changes in energy and chemical feedstock prices could significantly affect regional competitiveness and investment decisions for base petrochemicals.
  • Lower oil prices would narrow the oil versus natural gas price spread, reducing the cost advantages for the natural gas-based feedstock forecast—particularly in the US.
  • Global petrochemical demand for naphtha is expected to increase—particularly to supply additional steam crackers in Northeast Asia that will be required to meet expected derivative demand growth.

Automotive materials implications
The other significant area of impact for chemical companies will be in automotive materials, as changing power trains will impact the type and quantities of materials required from the chemical industry. For example, elimination of the gasoline tank (HDPE) will impact demand for HDPE currently used in molded fuel tank systems. The move away from ICE powertrains will reduce demand for materials used in under-the-hood applications such as engineering thermoplastics. In addition, we anticipate a move by auto manufacturers to reduce the fluids and lubricants in these new vehicles to minimize maintenance and warranty issues.

The advent of new automotive technologies does presage increased demand for some chemicals, for example light-weighting trends will continue, with plastics and polymers continuing to play an incremental role going forward. We also expect adhesive applications to increase as automotive assembly techniques adapt to the need to join dissimilar materials in place of traditional welding techniques.

IHS Markit integrates our chemical expertise with our automotive and energy expertise. Using vehicle production data from our automotive team, we model sales, fleet and fuel demand for alternative power trains in the global on road vehicle sector. For more information on IHS Markit's indepth analysis of these trends in the Chemical and Automotive industries:
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Posted 10 July 2019 by Anthony Palmer, Vice President, Circular Plastics & Sustainability and

Kate Hardin, Vice President, Energy and Mobility, IHS Markit


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