Automotive Coolants Market

The global automotive coolant market is projected to witness healthy growth during the forecast period, 2019–2025. The prominent factor favoring the growth of the market is the growing demand for coolants in the global automotive aftermarket. This can be mainly attributed to the rise in the number of commercial and light passenger vehicles in transit in the Americas and Asia-Pacific market, particularly in the US, China, India, and Mexico. Likewise, the increase in the sale of commercial vehicles in the US as well as in the Asia-Pacific is expected to be the other key factor fueling market growth. However, the fluctuations in the prices of raw materials on the backdrop of volatility in crude oil prices is likely to hamper the prices of the products and may restrain the growth of the global market during the forecast period. Moreover, the adoption of electric vehicles in the global market is expected to be a key challenge for manufacturers/suppliers of coolants, as it is likely to result in a reduction in the consumption of coolants in the coming decade. However, the expanding automotive market in Latin America and the Middle East is expected to create lucrative opportunities for the manufacturers of coolants in the near future.

The automotive aftermarket is the secondary market of the automotive industry, which includes automobile service and components’ businesses. In recent years, the global automotive aftermarket has witnessed a healthy growth due to technological advancements, evolving customer expectations, and shifts in competitive power. Technological advancements in the global aftermarket have helped in increasing the average age of automobiles over the last decade. The key factors favoring this trend are the improving vehicle build quality & standards, growth of the organized used car market, and growing emphasis and awareness regarding car maintenance. These factors have increased the demand for automotive aftermarket services and, thus, for automotive coolants in the regional markets of America and Asia-Pacific as the replacement of coolant in an automobile is essential over a period of 2–5 years, depending on the type of vehicle.

For instance, in the US, the average age of cars has increased by nearly 16%, from 10 years in 2008 to over 11.7 years in 2018. According to a study published by the USA Today, the number of vehicles on the road that are at least 25 years old is about 14 million, and the number of vehicles that are 16 to 24 years old is over 44 million. Likewise, over 43% of the vehicles in Chile are more than ten years old, thus requiring more aftermarket services. Furthermore, the increasing number of light commercial vehicles in the Americas is expected to be a key factor fueling the demand for coolants in the automotive aftermarket. The number of light vehicles operating in the US in 2015 was just under 250 million, which has surged to over 275 million in 2018.

The aftermarket is the part of the automotive industry sector comprising the automotive services and parts businesses. The service business (maintenance and repair of vehicles) generates about 45% of total aftermarket revenues, while the retail and wholesale of vehicle parts account for the remaining around 55%. The aftermarket in Asia-Pacific is witnessing steady growth, with significant contributions from the Chinese, Japanese, and Indian markets.

China is not only the largest car manufacturer in the world but also a country with a large number of vehicles on the roads. The average age of passenger cars in 2017 was 4.5 years, while over 5 years in 2018, resulting in corresponding requirements for spare parts and aftermarket service. For automotive suppliers, China is, therefore, a promising market wherein many foreign players are active. For instance, German suppliers alone operated a total of 320 locations in China in 2018. With the rising number of aging vehicles in China, the automotive aftermarket will experience a boom once average vehicle age exceeds five years. Currently, around 1/3 of cars are over six years old in China already, and by 2020 the maximum will be about six years, thus fueling the aftermarket and the demand for automotive coolants.

Considering a large number of old vehicles in transit in the Americas and Asia-Pacific markets, the demand for coolants in the automotive aftermarket is rising. It is expected to further increase at a healthy rate in the years to follow.

Latin America is a high growth potential automotive market with the expanding consumer base and production. In recent years, the production and sale of automobiles have surged in major economies, such as Mexico and Brazil. The market is also witnessing, a healthy growth rate in Peru and Chile. The growing middle-class population in the region with increased purchasing power, continued investments in infrastructure development, increasing focus of the governments on in-house automobile production as well as initiatives to promote the automotive market are some of the prominent factors driving the growth of the automotive market in the region.

Mexico is one of the prominent country-level markets in the region, with over 4.1 million automobiles manufactured in 2018 (as per the data by the Organisation Internationale des Constructeurs d'Automobiles, OICA). According to the estimates offered by the government and automotive associations of Mexico, this number is expected to surpass 5 million by 2020. Moreover, over 21 automotive OEMs, including Volkswagen/Audi, BMW, Mercedes-Benz, Ford, Toyota, and Kia, have operations in 14 Mexican states, and around USD 60 billion were invested as a Foreign Direct Investment in the automotive industry.

The Brazil automotive market is expected to be a lucrative market during the forecast period. According to the data from the National Association of Manufacturers of Automotive Vehicles (ANFAVEA), the sale of cars, buses, and light and heavy trucks rose by 14.6% in 2018 while the production was up by 6.7%. Increased light-vehicle production was the main driver, rising by over 9% as compared to 2017. The increased credit availability in Brazil and the slowdown of the automotive market in Argentina were some of the key factors favoring the growth of the industry. This trend is likely to continue over the next few years and is further expected to boost the growth of the automotive market in the country. Significant investments by the automotive giants in the market are expected to aid the market growth in the following years. For instance, in August 2019, Volkswagen announced that it would invest USD 577 million in one of its factories in Sau Paulo. Likewise, in March 2019, General Motors Co. announced the investment of USD 2.7 billion in its two Brazilian factories at Sao Caetano do Sul and Sao Jose dos Campos, over the next five years.

The automotive industry in the Middle East is dynamic and one of the fastest growing, owing to factors, such as high per capita disposable income, growing population, and availability of lucrative financing options in the region. Besides, increasing government investments to boost domestic manufacturing is likely to drive demand for vehicles in the region in the years to follow, leading to the steady growth of the automotive industry. Currently, the number of automobile manufacturers in the region is limited. However, in the near future, this situation is likely to change, with investments increasing in Saudi Arabia, the UAE, and Oman, for setting up automotive manufacturing plants. The governments in these countries are providing incentives and devising plans to establish themselves as a regional automobile manufacturing hub.

Saudi Arabia is likely to be a lucrative market, offering immense opportunities for automobile companies across the globe owing to high domestic demand for cars due to limited availability of other modes of transportation, high purchasing power, growing middle-class population, and rapid infrastructural development. Saudi Arabia’s location at the centripetal point between three continents—Asia, Africa, and Europe—gives it a strategic advantage of being a significant trading hub, and hence, is considered to be a major automobile manufacturing hub in the region. Moreover, as a part of the Saudi Arabia 2030 Vision Plan, the automotive industry aims to attract Saudi and foreign investments, increase exports, and contribute to its economic diversification. Furthermore, the Bahrain-backed McLaren Automotive plans to triple car production and reach up to 5,000 cars by 2022.

Thus, the growing automotive industry in Latin America and the Middle East is expected to fuel the demand for coolants and create lucrative growth opportunities for the players operating in the global market.

Ethylene glycol and propylene glycol are the primary raw materials required to produce automotive coolants. The prices of these products are primarily correlated to the crude oil price, which is a major determining factor for raw materials prices. However, crude oil prices are constantly fluctuating since the last five years. According to Crude Oil Investing, there have been large swings in crude oil prices from USD 140 per barrel in 2008 to as low as USD 34.74 per barrel in 2016.

During 2014–2015, the crude oil prices witnessed an approximate 65% decline due to low global demand. In 2016, the Organization of the Petroleum Exporting Countries (OPEC) and its allies decided to reduce crude oil production, which resulted in a continuous rise in the prices. In the above figure, the crude oil prices since 2014 can be observed. Crude oil prices were always more than USD 100 per barrel before 2015. In 2015, the price declined by 51% and reached USD 52.09 per barrel. The price did not cross USD 100 per barrel since 2015.

With the oversupply of crude oil, there was a sudden drop in the price due to less demand. The fall in demand was observed mainly from the US, China, and some European countries. The other factor that led to a fall in crude oil prices was the pricing from the Organization of Petroleum Exporting Countries (OPEC). The oil price is decided based on different factors, such as the economic growth of countries, weather conditions, demand and supply analytics, and the presence of alternative energy resources.

Thus, fluctuating crude oil prices have affected the production of petrochemicals and, consequently, the production of ethylene glycol and propylene glycol. This is restraining the growth of the global automotive coolant market.

The global electric-vehicle (EV) market has witnessed robust growth in the past few years and is likely to expand rapidly. The demand for electric vehicles has increased in recent years, which is attributed to the growing sentiments of consumers as well as manufacturers toward environmental concerns. The development of Fuel Cell Electric Vehicles (FCEVs) is a major breakthrough in the automotive industry. This is expected to boost both the demand for and production of electric vehicles in the near future. The international conventions and conferences, such as the Kyoto Protocol, the Montreal Protocol, and the Paris Agreement are laying down binding regulations to limit the pollution across the globe. This regulatory trend is expected to continue in the future and is likely to fuel e-mobility, which is expected to account for 30% of global automotive production. Overall, the global EV-sales volumes are becoming large enough to create substantial profit pools for well-positioned suppliers and other upstream players, however, they are also having a negative impact on the consumption of coolants required in the vehicles. Electric vehicles are replacing the use of an internal combustion engine with batteries, which has reduced the demand for coolants.

The Americas electric vehicles market is expected to register healthy growth in the years to follow, with the US being the major contributor. In the US, around 200,000 electric vehicles (both plug-in hybrid electric vehicles (PHEV) and battery-electric vehicles (BEV)) were sold in 2017, which is 1.15% of all cars sold in 2017. However, it displayed a 26% increase from 2016, and the trend is expected to continue in the years to follow. Moreover, in 2018, approximately 208,000 new registrations for EVs were reported in the US, which is more than double the previous year. number of electric cars in circulation in the US, 2013–2018

Thus, the increasing use of electric vehicles in the US (which is the largest market for coolants in the Americas) and the developing EV market globally is expected to be a challenge for the players operating in the coolant market in the years to follow. However, the impact is expected to be relatively very small in the near future, but in the long run, it can significantly impact the consumption of coolants in the global market.