Car market boosted by commodity price collapse

Rebecca Ellinor Tyler is former editor of Supply Management
8 July 2016

Global automakers have experienced a stronger recovery than many other industries, with sales expected to be 30% higher in 2016 than the depths of the recession in 2009, according to a report by IHS.

The information and analytics company, which is to be renamed IHS Markit following the announcement of a merger, said while car sales and production are decelerating, the industry remains supported by the growing global middle class in developing economies and an ageing fleet in developed economies.

The report, which can be downloaded for free at Supply Management’s commercial partner site SM Insider,  says the automotive industry has benefited from the collapse in global commodity prices. “Materials from aluminium to steel are well off previous highs, cutting the bill for original equipment manufacturers (OEMs) and parts makers,” it says.

Further savings have come from the slimming of vehicles themselves, it adds. “Manufacturers are swapping heavy irons and steels for lighter aluminium and plastics. Steel components are shifting towards higher strength steels, which are highly engineered to deliver superior strength, enabling the use of slimmer parts.”

The article provides more detailed insight into the cost of rubber, aluminium, steel and plastics prices and also takes a look at materials needed for the burgeoning electric vehicles market.

“Vehicles are hurtling into the internet age, bringing additional connectivity and display technologies. These new features do bring additional costs, but the financial costs are not significant on the scale of a new vehicle,” says the report.

“What is perhaps more concerning for OEMs is the additional complexity that comes from managing yet another supply chain. Technology firms are used to much shorter product cycles than the auto industry reckons with and both sides will have to work to bridge their differences in the coming years.”

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