The key driver behind growing turbocharger use is the increasingly tough set of emissions rules which are deployed not just in developed markets but increasingly in developing markets too; turbochargers represent just one of the several technologies which the industry is using to reduce emissions. In this month’s management briefing we bring you selected extracts from just-auto Qube‘s research service, Global light vehicle turbochargers market 2008 to 2028. In this instalment we consider fitment trends across the world.
Overview
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Currently Europe has the highest fitment rates at over 70% and these are expected to climb to c80% by 2017 and above in the years thereafter; there is a realistic possibility that this fitment rate could actually turn out to be an understatement if manufacturing efficiency gains and the desire for model range simplicity makes it simpler for VMs to make turbos a standard fit on petrol engines, rather than an optional item.
North America currently has a fitment rate below 20% but by the late 2020s, if not before, its fitment rate will be much closer to that of Europe, at close to 75%. The principal reason for this growth in turbocharger volumes is that, even with engine downsizing, we expect North America to use a higher proportion of large engines than Europe and these will have a stronger need for turbochargers to meet emissions rules. Some suppliers’ estimates for future turbo take up suggest even higher penetration rates in North America and China in particular – one thing is clear: turbocharger volumes and fitment rates are going up.
Japan and Australia are the two other markets which will achieve fitment rates for turbochargers approaching those for Europe and North America. Australia could actually get close to 100% fitment if the VMs there decide that production and supply chain efficiencies make it easier and more cost-effective to make turbochargers a standard fit item. Japanese turbocharger fitment too carry some upside as Japanese vehicle production for overseas markets moves increasingly to the markets where the vehicles are sold – vehicles made in Japan will be increasingly for the local market. In this scenario, turbocharger use will be directly linked to Japanese emissions rules.
North America
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By GlobalDataTraditionally, this has been a petrol market with a very low take-up of diesels; indeed diesel engines have been limited to the large/heavy-duty end of the pick-up and commercial vehicle market. Until recent times, North American consumers have not yet taken diesel engines to their hearts, for a number of reasons, ranging from the image of diesels as dirty and industrial products to the lack of availability of diesel at fuel stations. However, the availability of diesel at fuel stations in North America is increasing and the German VMs in particular are increasing their offering of diesel engines in North America in the years ahead. We expect fitment of (European-made) diesel engines at the BMW/Mercedes/VW group plants in North America to rise in the next decade. Certainly they are making a major effort in marketing diesels to North American consumers, more so than they have done in the past.
By the middle of the decade fitment of turbochargers to diesel engines in North America will be close to 100%, if not 100%, but given the low proportion of the market accounted for by diesels, especially by comparison to Europe, the real determinant of turbo volume growth in North America will be the rate of take-up in the petrol segment. The CAFE rules and the parallel decisions by the VMs to downsize their petrol engines (eg the increasing use of EcoBoost engines at Ford, most notably in the V6s fitted to the Ford F-series) will be the principal driver of increased demand for turbos in North America.
Fuel prices have also risen in North America in the recent past and the era of cheap fuel (at least by comparison to European market prices) there is over; with the other general economic pressures which North American consumers are facing, these consumers are, not surprisingly, looking at a range of motoring cost savings and in this regard increased turbocharger use can be expected to continue.
The change in the market – led by Ford – is quite remarkable; in 2008, there were actually no turbocharged petrol engines made in North America, all previous turbo-fitted engines having been imported. The first North American built turbocharged petrol engine was fitted to the Lincoln MKS which used the first North American EcoBoost engine. This engine has since been fitted to the Ford Flex, Explorer and most significantly the F-series pick-up trucks. GM has been somewhat behind Ford in terms of the fitment of turbochargers, but it is slowly going down the same route; indeed it has already started on this journey, eg the 2012 Cadillac XTS had a turbo option on the 3.6 litre V6 engine. GM is however also working on improving the fuel efficiency of its naturally aspirated engines and has claimed that it can achieve similar fuel efficiencies gains to those available with turbochargers through other means. Chrysler has fitted turbos in the past on a number of engines, but in the near term the main growth in turbo fitment at Chrysler will come from Fiat’s MultiAir programme – that said, the initial MultiAir engines for Mexican-built Fiat 500s were naturally-aspirated units, with turbocharged units arriving during 2013. The constantly changing geography of vehicle production also comes into play here and will impact on the growth of turbocharger fitment on NAFTA built vehicles – the next generation Fiat 500 will be made entirely in Poland, rather than being divided between Poland and Mexico. Switching production back to Poland will actually have the effect of slightly reducing turbocharger fitment in North America (or actually slowly the rate of increase) and increasing it even more in Europe.
The CAFE rules announced in 2012 will force GM and Chrysler to accelerate their use of fuel saving technologies such as turbochargers and a large part of the increased volumes which will be seen in the next few years and into the 2020s come from the widening take up across these VMs, Ford having led the way.
Europe, including Russia
Europe is currently the largest market for turbochargers; this is because of the high proportion of diesels, c50% or more in several markets, and the associated fact that virtually all diesel powered cars are now turbocharged; as a result the growth in turbocharger volumes in Europe is driven by the continued increase in turbocharger fitment to petrol engines; at present our view is that several small petrol engines are likely to be able to meet fuel emissions standards without being turbocharged, but it is possible that by the 2020s the economics of turbocharger production could make it effective simply to fit turbos as standard, a switch which would greatly simplify the VMs’ supply chains and assembly lines. Turbo fitment rate in Europe is already over 70% and will trend to over 80% during the forecast period, although it is quite probable that for production efficiency reasons as well as declining cost as fitment rates rise that this could turn out to be an underestimate.
In Russia, there should be significant increases in turbocharger take up in the long run; in the short term there should be 3.5x increase in volumes, from just under 63,000 in 2012 to just over 250,000 in 2018; the rise in turbocharger volumes here is due to a combination of increased specification of vehicles built in Russia and a modest switch to diesels, which will likely require turbos to meet even current Russian legislation. The other factor in Russia is the increased production there by the developed world brands and in parallel decrease in the share of the market accounted for by Lada.
The expansion in Russia by GM, VW, Fiat, Ford, Renault (through its ownership of AvtoVAZ) and Hyundai (all of whom will operate plants of over 150,000 units pa) and smaller plants owned by PSA, Nissan and Toyota, will mean that the manufacturing line-up in Russia will change out of all recognition in the years ahead. A key aspect of this will be the production of models in Russia of models with specifications increasingly similar to those made in developed markets. In the coming years, Russian production will steadily move towards platform commonality with vehicles made in Western Europe, Japan and Korea especially. The corollary of this is that Russian-made vehicles are ultimately likely to be fitted with similar equipment to developed world models. Russian consumers’ spending power is rising as the economy grows and the developed world vehicle companies are moving in to meet rising demand for much more sophisticated vehicles than have been sold in Russia until recently.
Japan
Until now, Japanese demand for turbochargers has been limited by the small size of the domestic diesel market. Most diesel cars made in Japan have been for export and with the gradual move by the Japanese VMs to produce for global markets in the regions where the vehicles are sold, the proportion of Japanese-made vehicles fitted with diesel engines has actually been in decline for a number of years. This is likely to continue to decline; for example one of the biggest applications of diesels on Japanese brands is in pick-up trucks, but there are almost no pick-ups made in Japan anymore. Japanese emissions rules have, moreover, not yet made turbocharger fitment on diesels a mandatory requirement, although we would expect turbochargers to become standard fit items for both emission and performance reasons on all diesel engine vehicles made in Japan during the course of the next decade or so.
In the petrol segment, we also expect to see a progressive rise in turbo fitment, for a combination of reasons – engine downsizing, emissions requirements and other performance measures, but in the absence of clarity on when the next round of emissions legislation will actually come into play, we have assumed a reasonably steady rise moving forward, rather than any sudden step-change. It may be that Japanese turbocharger fitment will actually see such a step change in the next decade, although when this will occur is a matter for conjecture at this point in the absence of firmer news or insights on when Japanese legislation on emissions will change. As the Japanese VMs increase their production for non-Japanese markets in their factories outside Japan, Japanese vehicle production will increasingly be for the local market. In the absence of increasingly tough legislation forcing the increased use of turbos, the rate of growth of turbocharger take-up will be slower than otherwise might have been expected.
Although the application of European style emissions rules in Japan is difficult to predict in terms of timing, we expect the requirements of export markets to force an increase in Japanese turbocharger fitment to more than 60% by the middle of the current decade. If Japan decides finally to adopt European style emissions rules, then the c69% fitment rate projected for 2028 would be reached much sooner than shown here – and the associated volumes shown earlier – would be much higher and reach such levels sooner.
China
China has actually moved further than might have been expected in terms of adopting or planning to adopt emissions rules similar to the European rules which have effectively forced the increased adoption of turbochargers. The increasing problems of air pollution in Beijing, Shanghai and other major Chinese cities are regularly reported on in the west: the issue has been recognised as a serious problem by the government and we can expect increased attention to this problem in the near future. Vehicles on the road in China are likely to be subject to increasingly tough emissions rules in the years ahead and turbochargers will have an increasingly important role to play here. Indeed, we understand that Euro5 rules, or similar, should be in place by the….
See the forecast numbers and read more exclusive insight for turbochargers in China and the world inside just-auto QUBE’s dedicated research service
