The impending tightening up of emissions standards in Europe will create huge opportunities for suppliers, according to supplier industry analysts.
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Edmund Chew, editor of SupplierBusiness, said that whether the European Commission imposes mandatory limits or not, fuel economy has clearly moved up the agenda and vehicle manufacturers will have to change gear. “The risk of further tightening of CO2 emissions is very serious and could be business-threatening,” said Chew.
This is good news for suppliers. Currently vehicle manufacturers reward suppliers with financial incentives for saving weight. “The payback for weight and fuel saving on a vehicle must rise,” said Chew, “as vehicle manufacturer redouble efforts to accelerate CO2 reduction.”
Chew believes there will be a net benefit to suppliers, even if the volume of new car registrations goes down because cars become more expensive, and if customers switch to smaller vehicles that carry less profit for manufacturers. Any business lost by parts suppliers will be massively exceeded by the extra business that vehicle manufacturers are forced to push their way, according to Chew.
Manufacturers of light parts or advanced engine parts stand to benefit most.
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By GlobalData“The major negative is that it will further increase the distance between the technology required for European vehicles and those required for emerging markets,” said Chew. He referred to a conference presentation given by Bernd Bohr of Bosch recently, where Bohr noted that the divide is growing. “This will impose some short term the additional costs on European suppliers looking to secure a global market position,” said Chew.
In the long term, however, if other regions follow Europe’s lead, supplier companies deploying technologies to meet the new targets will find themselves in a stronger competitive position. Furthermore, if the efforts by the EU under its current German presidency to harmonise standards with the US make progress in the next few years, that could apply to the North American market as well as other world markets in Asian and elsewhere that have more traditionally followed the European lead on norms.
