Automotive Exhaust Systems Market

How will Future Projections Outpace Historical Shortfalls?

Recessionary trends across the automotive industry throughout 2019 and a further COVID-19 pandemic induced shutdown led to a contraction in the global automotive exhaust systems market in the recent past. Significant gaps in the demand supply equation regarding automotive output were evident across two crucial markets- China and the US.

Despite prolonged lockdowns and social distancing curbs subduing growth, the market was largely sustained amid continuous research and development initiatives directed towards bolstering EV production. Tapping into government concerns regarding emission reduction targets, prominent automotive companies are fast tracking EV research, opening up potential future revenue pools for automotive exhaust system manufacturers.

How are Escalating Environmental Concerns Driving Growth?

With the global community scrambling to reaffirm their carbon emission commitments in the aftermath of the Paris climate accords, sustainability concerns are acquiring massive importance. A 2019 report published by the UNEP warns that unless global greenhouse gas emissions fall by 7.6% annually in the current decade, the 1.5^o C temperature reduction goal will be unmet.

Currently, G-20 nations account for nearly 4 out of 5 emissions, out of which only five have committed to a long-term zero emissions targets. Therefore, efforts are underway to bring about uniformity and emission reduction policies and initiatives. According to the report, all nations must substantially increase ambition in their Nationally Determined Contributions (NDCs) for a solution to present itself.

Consequently, overhauls in manufacturing approaches are manifesting themselves across key industrial domains, with the automotive industry making significant strides. With the UN Economic Commission for Europe advocating highly stringent vehicle emissions regulations, innovations in exhaust systems are becoming mainstream. For instance, the World Forum for Harmonization of Vehicle Regulation was set to be enforced beginning January 2021. Vehicle manufacturers will be able to obtain a single approval for all major markets, thus stimulating sales in the future.

Selective Catalytic Reduction (SCR) Technology to Acquire Center Stage

The global automotive exhaust systems market is heavily reliant on the surging preference for selective catalytic reduction (SCR), or Exhaust Gas Recirculation (EGR) emission control approaches. By injecting an ammonia agent and catalyst into the engines’ exhaust stream, SCR systems convert nitrogen oxide (NOx) into its less harmful elements water and nitrogen.

With important legislative frameworks such as the Euro 6 being enforced, a number of key automotive exhaust manufacturers have been incorporating this technology. Prominent players such as Tenneco Inc., Faurecia S.A., Bekaert S.A., Corning Inc. and Katkon Exhaust Systems are amongst the most prominent SCR-derived automotive exhaust components.

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Bekaert S.A., for instance, offers an extensive range of SCR Adblue^® tubes and tanks: the Bekinox^® VN stainless steel microfilaments, Bekiflex^® steel, nickel, zinc or copper cores and Bekiflex^® Hx helix cables respectively. These are fast, reliable, easy to process and highly durable.

Key Challenges Faced by Automotive Exhaust Systems

The automotive exhaust systems market is not devoid of its own share of challenges. Difficulties such as exertion of high pressure to force the exhaust through the filtering system, incompatibility across biodiesel fuel driven automotives, complicated injections setups and requirements for passive regeneration systems are all anticipated to restrain uptake of automotive exhaust systems.

Furthermore, as EVs surge in popularity, reliance on conventional diesel and gasoline driven cars is waning at a fast rate. This is expected to generate deficits in the demand-supply equation in the mainstream vehicles segments, restraining growth prospects in the long-run.

Country-wise Analysis

How emergent is the US Automotive Exhaust Systems Market?

The US automotive exhaust systems market is poised to experience significant incline, underpinned by stringent emission norms implementation. In November 2018, the Environmental Protection Agency announced its Cleaner Trucks Initiative, which sought to revise current NOx emissions limit of 0.2 grams per brake horsepower-hour (bhph) and particulate matter limit of 0.01 g/bhph.

From 2007 to 2017, NOx emissions declined by over 40%, with sea changes in emission standards proposed way back in 2001 playing a major role. Despite this reduction, heavy-duty vehicles remain the largest contributor to mobile source emissions of NOx, and are anticipated to also be the largest contributors to ozone by 2025. Thus, the Cleaner Trucks Initiative is geared to avert this staggering contribution.

To foster future development of this initiative, the EPA is conducting numerous technical projects and studies, such as the heavy-duty diesel advanced engine and after-treatment technology demonstration program and the heavy-duty gasoline program among others. Based on these aforementioned trends, it can be concluded that the scope for automotive exhaust sales is increasingly broadening.

Why is UK expected to yield Credible Growth Opportunities?

As per the Society of Motor Manufacturers and Traders, UK is the 13^th largest producer of automobiles by volume globally, and the 4^th largest across Europe. As of February 2021, the new light commercial vehicle market expanded by 22%, reaching 17,205 units, experiencing an annual expansion rate of over 9%. This upswing is directly expected to propel automotive exhaust sales in the short-run.

While sales of conventional automobiles are inclining, emissions to curb emission levels are also elevating. The Road to Zero project unveiled in 2018 is a significant driver behind such efforts, with the objective of attain a 100% success rate in manufacturing zero emission vehicles by 2040. The project also aims to help achieve at least 70% of new car sales and up to 40% of new van sales being ultra-low emission by 2030.

Such ambitious targets have paved the way for the emergence of key regional players, along with the entry of various global level manufacturers across the regional landscape. In April 2020, JP Exhausts, a prominent regional manufacturer, built a double valve exhaust for the Dodge Charger V8 with a 10 liter tank capacity, made up of twin 3.5 inches pipework. Similarly, BTB Exhausts manufactures the 150 mm (6 in) and 175 mm (7 in) outside diameter silencers.

Germany to Bask in the EV-induced Exhaust Sales Spike

Automotive constitutes the backbone of the German economy, contributing a significant chunk of its revenue. According to German Trade and Investment (GTAI) report for 2020-21, it contributed 60% growth with respect to R&D, yielding nearly a quarter of domestic industry revenue as of 2019. Nearly 5 million passenger vehicles were produced, with three out of four units being for export markets.

In spite of the pandemic crisis hitting hard, the German automotive market has fared comparatively well, with a lucrative € 4 billion stimulus packaged being proposed in late 2020, specifically to bolster EV production. This upswing has boded significantly well for automotive exhaust providers operating within the domestic landscape in the past year.

As with other European countries, Germany has agreed to spend up to € 3,000 per vehicle to upgrade engine management software to make exhaust filtering more effective, as part and parcel of its global commitment to reduce carbon emissions. This factor is also anticipated to propel the German automotive exhaust systems market growth to higher echelons.

Robust Presence of Regional Level Manufacturers Boding Well for China

According to Melchers China, nearly a quarter of all vehicles sold globally occur across the East Asian giant. Following an extraordinary growth period in sales until 2018, the market transitioned to a maturity stage since the past two years. The additional pandemic induced downswing also contributed to a stagnating growth trajectory.

Fortunately, with increasing emphasis on disruptive technologies such as automation, connected and alternative fuel driven vehicles are expected to steer the market away from this prolonged stagnation, generating significant revenue pools. Energy saving cars, yielding a fuel consumption of up to 4 liters per 100 kilometers, are expected to become mainstream by 2025.

Owing to these aforementioned trends, the Chinese automotive exhaust systems landscape is likely to take a turn for the better, with the landscape being characterized by the presence of a wide range of regional level manufacturers. Prominent faces include Qingdao Cartier Industry and Trading Co. Ltd., Nantong Fengyun Auto Parts Co. Ltd., Cixi Jinbei Machinery Fittings Factory and Zhejiang Yueding Corrugated Tube Co. Ltd. among others.     

Category-wise Insights

Why are Mufflers Likely to Cement Dominance in the Long-Run?

By product type, exhaust mufflers are anticipated to account for the majority of exhaust component sales through 2031, registering a CAGR of over 4% through the forecast period. As emission norms become stricter, automotive manufacturers are incorporating highly efficient silencer systems to prevent leakage of noxious emissions as well as curb noise pollution levels.

In January 2020, Hyundai announced it would be releasing its Creta mid-SUV equipped with a dual-exhaust muffler system in by the following month in India. The vehicle is BS6 compliant, representing a significant step in reducing carbon emission levels. By reducing back engine pressure, the system is expected to offer greater fuel economy, along with providing enhanced mileage.

How Lucrative are Growth Prospects for Passenger Vehicles?

By vehicle type, demand for passenger vehicle automotive exhaust systems is poised to register an upswing, followed by the light and heavy commercial vehicle segments respectively. With increasing car ownership amid surging incomes, governments are imposing tough regulations regarding implementation of advanced exhaust systems, hence heightening growth prospects.

Furthermore, as the global transportation industry takes a turn for the better in the future, high demand for extensive logistical arrangements is expected to increase the fleet of commercial trucks and vehicles. A significant promise lies across the electric trucks and buses segment, as automotive manufacturers look to incorporate environmentally friendly approaches.

Gasoline Vehicles to Remain Primary End-Users

Continued reliance on internal combustion engine based gasoline automobiles is likely to sustain high growth of the automotive exhaust systems market. As of 2019, over 9 out of 10 vehicles globally were those based on ICE technology. This is especially the case across emerging economies.

While EV popularity across countries in Europe and North America has dwindled conventional automotive sales, limited infrastructure for EV proliferation in the developing world is continuing to fuel sales of gasoline driven automobiles, thus keeping demand for automotive exhaust for the category afloat.

Competitive Landscape

Prominent automotive exhaust systems manufacturers as profiled in FMI’s extensive coverage include*:

• Faurecia S.A.
• Tenneco Inc.
• Eberspächer Group
• Friedrich Boysen GmbH & Co. KG
• Benteler International AG
• Futaba Industrial Co. Ltd.
• Yutaka Giken Co. Ltd.
• Bosal International N.V.
• Harbin Airui Automotive Exhaust Systems Co. Ltd.
• Sejong Industrial Co. Ltd.

*This list is only indicative- full details about key automotive exhaust systems manufacturers is available upon request.

The aforementioned market players are seeking to capitalize on anticipated future developments across the automotive industry. A key expansion strategy relied upon is the introduction of carbon neutral exhaust systems, in tandem with global emission reduction initiatives.

For instance, in February 2021, Faurecia S.A. announced a partnership with Groupe Renault for developing hydrogen storage systems for light commercial vehicles. Through this venture, the automotive systems manufacturer aims to target over 30% revenue share acquisitions across Europe.

In addition, manufacturers are deepening regional penetration by foraying into promising markets. The Eberspächer Group, for instance, inaugurated a new joint venture in January 2020, in collaboration with Sharda Motor Industries Ltd. in Pune, India. The venture, called Eberspächer Sharda Exhaust Technology Pvt. Ltd., has assisted the company in furthering its environmentally compatible mobility portfolio, enabling it to mass produce efficient exhaust systems for commercial vehicle in India.

In July 2020, Benteler Automotive reported that it is already in progress to design and manufacture electrically heated catalytic converters ensuring 100% pollutant removal during cold starts, in compliance with the expected EU-7 emission standards set to be implemented by 2025. The structure consists of a stacked metal component welded into the exhaust systems between the turbocharger and conventional catalytic converter.

Automotive Exhaust Systems Market- Report Scope

Key questions answered in the report

• How will the automotive exhaust systems market expand in 2021 and beyond?

  The global automotive exhaust systems market is anticipated to experience substantial gains through 2021, experiencing a resurgence in the post-pandemic scenario. Manufacturers are emphasizing on key technological advancements such as selective catalytic reaction based exhaust to enhance their portfolios

• Which key factors shall drive the automotive exhaust systems market growth?

  Growing popularity of EVs and rising carbon emission level concerns are primarily steering the automotive exhaust systems market in a positive direction. Additionally, stringent regulatory provisions to ensure 100% carbon neutrality attainment by 2050 is also spurring growth.

• Which is the most likely automotive exhaust systems manufacturing hub through 2021?

  China is anticipated to experience the maximum growth, owing to its apex position in the global automotive manufacturing landscape. Progressive government policies to bolster vehicle production is likely to remain the principal expansion driver.

• Which prominent players operate within the global automotive exhaust systems market?

  Faurecia S.A., Tenneco Inc., Ebersp are some leading automotive exhaust systems market players

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Key Segments Covered

By Product Type

• Exhaust Manifold
• Muffler
• Catalytic Converter
• Oxygen Sensor
• Exhaust Pipes

By Vehicle Type

• Passenger Car
• Light Commercial Vehicle
• Heavy Commercial Vehicle

By Engine Type

• Gasoline
• Diesel

By Sales Channel

• Original Equipment Manufacturer (OEM)
• Aftermarket

By Region

• North America
• Latin America
• Eastern Europe
• Western Europe
• Asia Pacific Excluding Japan (APEJ)
• Japan
• Middle East and Africa (MEA)