Pingqian Industrial Park, Suzhou City, China
31st Floor, Wenjin Plaza, Luohu District, Shenzhen, China
Pingqian Industrial Park, Suzhou City, China
31st Floor, Wenjin Plaza, Luohu District, Shenzhen, China
The automotive market is the main downstream market for turbochargers. The size of the turbocharger market directly depends on the internal combustion engine production volume and the level of turbocharger configuration rate in the internal combustion engine.
According to the different application fields of internal combustion engines, the downstream market of internal combustion engines can be divided into automobiles, construction machinery, agricultural machinery, ships, generator sets, etc.
The automotive market is the primary application market for internal combustion engines and the main downstream market for turbochargers because of its most significant production and sales scale. Taking the Chinese market as an example, in 2016, China’s automotive internal combustion engine accounted for 81.56% of the entire internal combustion engine market.
The configuration rate of automotive turbochargers is increasing year by year: Although automotive internal combustion engines are the main application field of turbochargers, the current configuration rate is still low.
With the rapid development of the automotive industry, global car ownership continues to increase. The world is generally concerned about the increase in petrochemical energy consumption, the decline in air quality caused by automobile exhaust emissions, and the greenhouse effect.
In recent years, the world’s primary automobile production and consumption countries and regions have formulated increasingly stringent automobile “energy conservation and emission reduction” policies.
Japan has proposed new fuel economy standards for light vehicles until 2020. It is estimated that the average fuel economy level of passenger cars will increase to 20.3 km/L by 2020, which is a 20.3% reduction from 2009’s 16.3km/L.
In 2009, the EU replaced the voluntary CO2 reduction agreement with mandatory legal instruments to introduce EU-wide requirements and labelling for vehicle fuel consumption and CO2 limits. The emission reduction agreement calls for a target of 95g/km CO2 emissions from passenger cars by 2020.
In August 2012, the United States issued fuel economy and greenhouse gas emissions regulations for light vehicles from 2017 to 2025 (Phase II). The regulations call for an average fuel economy of 54.5 mpg for U.S. light vehicles by 2025.
Due to the advantages of high fuel efficiency and low emissions, mature automotive markets such as the United States and regions with faster sales growth, such as China and India, are increasingly using turbochargers.
With the arrival of the time node of the assessment of automobile energy conservation and emission reduction by various governments, the growth space of vehicle turbochargers is large.
By 2021, 48% of new vehicles sold worldwide will be turbocharged technology, up 9 percentage points from 2016. Vehicles equipped with turbochargers include not only conventional cars but also hybrid vehicles.
It is estimated that by 2021, about 70% of mild hybrid vehicles will be equipped with single or multiple supercharging systems. In the future, the automotive market will remain the primary downstream market for turbochargers.
The basic national policy of “energy conservation and emission reduction” is an essential factor in promoting the development of turbochargers. In recent years, China’s industrial policy for the automotive industry has always been centred on “energy conservation and emission reduction”.
In 2012, China set a goal to reduce the average fuel consumption of passenger cars to 5.0L/100km by 2020, reduce the fuel consumption of energy-saving cars to less than 4.5L/100km, and reach advanced international levels for new commercial vehicles.
The average fuel consumption of domestically produced passenger cars in 2015 was approximately 7.66 litres/100 km, far from the target of 5.0 litres/100 km in 2020.
Car companies are using energy-saving and emission-reducing tech such as lightweight vehicles, efficient engines, turbocharging, hybrids, electronic control, etc. Turbocharging is often seen as the most efficient and cost-effective option.
Turbocharging mainly plays a role in increasing engine air intake to increase engine power and torque, turbocharging technology can improve the fuel efficiency of gasoline engines by nearly 20% and diesel engines by nearly 40%.
Strongly promoted by the “energy conservation and emission reduction” policy, the deployment rate of turbochargers in new sales vehicles in China will continue to increase. This will promote the further development of China’s turbocharger market.
In the context of global economic integration, international turbocharger manufacturers adopt a global product strategy and set up production bases in Europe, Asia-Pacific, North America and other regions to reduce production costs.
Honeywell, BorgWarner, Mitsubishi Heavy Industries, Ishikawajima Harima and other manufacturers have established wholly-owned or joint venture companies in China.
International turbocharger manufacturers dominate the Chinese automotive market with R&D capabilities and product innovation advantages. They monopolize the turbocharger market for passenger cars and high-end commercial vehicles.
Compared with international giants, China’s national turbocharger manufacturers still have noticeable differences in production capacity, research and development strength, and management level.
Some leading national enterprises such as Ningbo Fengwo, Hunan Tianyan, Kangyue Technology, Weifang Fuyuan and Ningbo Weifu compete with international giants in the market of low-end automotive turbochargers and non-automotive turbochargers with cost-effective advantages.
But at this stage, they still cannot break the monopoly of international giants on the high-end turbocharger market. In the future, international turbocharger manufacturers will still dominate the domestic market.
(1) Demand for turbochargers is overgrowing, and the market is large.
Different models of turbochargers have similar components, such as compressor casing, turbine casing, and turbocharger, with a 1:1 support relationship.
Therefore, the market capacity of turbocharger parts and the market capacity of the whole supercharger have a proportional relationship. The demand for turbocharger parts will increase with the growth of turbocharger sales, and the market space is enormous.
(2) The trend of global procurement has been formed
Global procurement refers to the use of global resources to find suppliers around the world. With the intensification of market competition, international turbocharger leading companies have passed the reform of the supplier system. The purpose is to reduce the self-made rate of parts, implement global production and procurement strategies, optimize the industrial chain, and control production costs.
Major turbocharger manufacturers look worldwide for suppliers with the best quality and reasonable prices. They supply their globally distributed production sites by integrating specialized component manufacturers into a long-term supply chain management system.
International turbocharger manufacturers have a global presence. Suppliers in emerging countries such as China and India benefit from the advantages of production costs and the geographical advantages of downstream markets. They attract a lot of overseas demand.
(3) Partnerships between major component suppliers and turbocharger manufacturers are stable
A specialized division of labour and lean production techniques have been implemented to support this trend.
It is mainly reflected in the following aspects:
A. Turbocharger manufacturers follow strict procedures in selecting component suppliers.
First, potential suppliers need to have ISO/TS16949 quality system certification;
Second, the supercharger manufacturer reviews the quality, process control and technical capabilities of potential suppliers, and only after passing can they become qualified suppliers;
Third, qualified suppliers obtain product supply qualifications through bidding, bidding, etc., and complete the performance test, reliability test, small batch trial installation and other processes of related products before starting the mass production of the product;
Fourth, turbocharger manufacturers regularly conduct comprehensive assessments of their suppliers’ product quality, price, delivery timeliness, service, etc., and evaluate their overall capabilities to adjust their qualified supplier list.
Since the procedures for turbocharger manufacturers to identify qualified suppliers are strict, long-term and stable cooperative relations are formed after the supplier is determined;
B. In the vehicle production process, downstream automobile manufacturers have widely adopted a platform and modular production mode to replace traditional assembly line production to reduce manufacturing costs.
Simply put, many generalized parts are used to form a platform, and one platform supports the development and manufacture of different models. In this mode, the same model of the turbocharger can be widely used in a variety of vehicle models, with the characteristics of a long product life cycle and great demand.
To maintain stable product quality, reduce production costs, and improve production efficiency, turbocharger manufacturers and supercharger parts suppliers usually retain stable cooperative relations.
C. When turbocharger manufacturers develop new products, they will invite specialized parts suppliers to participate in the research and development process for synchronous development to shorten the research and development cycle.
Simultaneous development requires component suppliers to fully understand the fundamentals of the turbocharger manufacturer’s design philosophy.
Parts suppliers need to quickly apply new processes, technologies and materials to product development and complete process design, tooling mould design, and prototype manufacturing in a short time. In this way, component products can quickly match customer needs when customers launch new projects and new platforms.
Synchronous development puts forward higher requirements for suppliers’ product customization and development capabilities, making the cooperative relationship between turbocharger manufacturers and core suppliers more comprehensive and close.
(4) Product development and manufacturing capabilities are the embodiment of the industry’s competitive advantage:
Due to the continuous development and application of new turbocharging technologies, new materials and new processes, turbocharger manufacturers have increasingly higher requirements for the customized development and manufacturing capabilities of parts suppliers.
The stability of process control, the quality and service life of parts and components, and the world-renowned turbocharger manufacturers have established strict quality standards and assessment systems for the purchased parts.
Part manufacturers must rely on continuously improving product development and manufacturing capabilities to ensure the stability of product quality and continue to meet the standards of buyers to occupy an advantageous position in the competition.
(1) Engine downsizing is being used to improve production technology in order to comply with global emission and fuel consumption standards. This helps to provide better driving performance while also meeting the needs of energy conservation and environmental protection.
Compared with hybrid, fuel cell, hydrogen power and other technologies, downsized engines have the advantages of lower cost and easier commercialization. Therefore, reducing engine displacement and using turbocharging technology to achieve engine downsizing is a significant development direction of modern automobile engines.
Car companies are increasingly using turbocharging technology on small engines below 1.0L, which increases the demand for turbochargers and requires parts suppliers to improve the production process of parts.
(2) Competition among vehicle manufacturers is increasing, leading to higher demands for timely delivery and product quality from their suppliers.
Downstream turbocharger manufacturers have adopted a “zero inventory” model and passed on these requirements to their suppliers.
Parts suppliers must use numerical control, automation, and flexible equipment to upgrade their mass production capabilities for customized products.
In addition, the rise in labour costs has increased the cost of enterprises with a high proportion of manual processing, and they are in a disadvantageous position in the competition.
Therefore, improving the automation rate of the production process will help enterprises enhance production efficiency, reduce production costs, maintain the stability and reliability of product quality, and maintain core competitiveness.
(3) Lightweight technology is expected to become the focus of future market competition:
About 70% of a car’s fuel consumption is spent on body weight. Reducing vehicle weight significantly improves fuel economy and exhaust emission levels. This is great significance in achieving energy conservation and emission reduction.
Vehicle lightweight requires supercharger component suppliers to reduce product weight as much as possible while meeting performance indicators.
This can be achieved by replacing conventional materials with lightweight materials such as aluminium alloys and reducing the weight of parts by optimizing the pouring process. The first to master the mass production capacity of this type of technology will be able to stand out in future market competition.
(4) Accelerated industry integration:
Leading supercharger part companies are expanding their production, leading to more integration and reorganization in the industry. This will help optimize resources and grow the scale of the industry.
Suppliers with certification from significant customers, high automation, and scale effects will grow in a competitive and integrated market. Those with a weak position will be annexed or go bankrupt and disappear.