Turbocharging is a key technology employed by automakers to boost the power of an engine and to address the issues of fuel efficiency and emission reduction while maintaining vehicle performance. Turbochargers help downsized engines improve fuel economy by as much as 20 and 40 percent in gasoline and diesel engines, respectively.
It is a mechanism that reuses hot exhaust gases kicked out by a car’s engine. Instead of passing out into the atmosphere, the waste gases are sent back through a turbine in the turbo. The turbine is then connected to a compressor which squashes the air down, making it denser and giving the driver more boost and more power.
Turbochargers are used in all segments of the automotive industry which include passenger cars, light commercial vehicles, and medium & heavy duty commercial vehicles. It is used in both diesel and gasoline engines; however, the penetration level of turbocharger in the diesel engine powered vehicles is very high as compared to the gasoline engine powered vehicles. Most of the diesel engines have to rely on the turbocharger technology to boost the power as they (diesel engine) generate less power whereas gasoline engines generate enough power; hence, the low need for additional boosting technology.
The major players of turbochargers in the global automotive industry are BorgWarner Inc., Honeywell International Inc., Mitsubishi Heavy Industries Ltd, IHI Corporation, Continental AG, and Cummins Inc.
Drivers and Constraints:
With the increasing disposable income and growing number of population in the world, there is growth in vehicle sales which impacts on carbon emissions. Transportation accounts for 23 percent of the world's greenhouse gas emissions and will continue to remain as the biggest carbon emissions contributing sector worldwide in the next five years. Government in many countries, such as in the US and in Europe, have implemented stringent fuel efficiency and carbon emission regulations with the sole purpose to curb the increasing global warming.
For instance, Europe has very stern norms for emissions. CO2 emissions target for new passenger cars are 130 grams per kilometer (gms/km) by 2015 and 95 gms/km by 2021. For light commercial vehicles, an emissions target of 175 gms/km applies by 2017, and 147 gms/km by 2020. This can be accomplished by either weight reduction of vehicles or engine downsizing using a turbocharger or increasing aerodynamics of the vehicle.
Engine downsizing is basically the use of a smaller engine in a vehicle that provides same power as that of large sized engine through the use of turbocharger. All major automakers started adopting turbochargers for their gasoline powered vehicles which has resulted in increasing penetration of the turbochargers in the automotive industry. China is the world’s fastest growing automotive market and is projected to increase the turbocharger installation rates in its new vehicles from current level of 38% to approximately 50% by 2021.
Increasing production of light vehicles and commercial vehicles provide additional growth to the demand of turbochargers. Global light vehicle and commercial vehicle production is expected to grow at 2.4% CAGR and 2.7% CAGR (2016-2021), respectively, in the next five years.
One of the biggest challenges with a turbocharger is Turbo lag. The lag comes from the time it takes the engine to create enough exhaust pressure to spin the turbo and pump compressed intake air into the engine and is longest when the engine is in a low-rpm, low-load cruising situation. Some of the others challenges are increase in noise level in the vehicle interior which annoys the passenger, and increase in the cost of engine due to turbocharging.
Strategic Market Assessment:
The turbocharger market in the automotive industry is highly consolidated with about a dozen major players, global as well as regional, capturing most of the market.
The global turbocharger market in the automotive industry offers a robust growth opportunity and is likely to witness 10.8% CAGR during the next five years (2016 to 2021).
Variable Geometry Turbocharger (VGT) also known as Variable Nozzle Turbine (VNT), and wastegate turbochargers are the most widely used turbocharger technologies worldwide. VGT / VNT is more efficient than traditional wastegate and will continue to gain market traction by gaining share of wastegate during the forecast period. VGT / VNT is well suited for diesel powered vehicles as well as gasoline engines.
Asia-Pacific (APAC) region is expected to remain the largest market for automotive turbochargers in the next five years. Continuous increase in production of the light vehicles and heavy duty commercial vehicles, high demand of fuel efficient vehicles, and increasing shift towards high powered vehicles are the major drivers of the turbocharger in the APAC region. China is the largest automotive turbocharger market in the APAC region, followed by South Korea. China will continue to drive the global and APAC automotive turbocharger market during the forecast period.
Major leading manufacturers are concentrating on high growth potential countries, such as China and India. They are scaling up production of their existing turbocharger plant or setting up new plants in order to cater to the demand of local as well as international market. China attracts more investors for turbocharger because it is the world’s fastest growing automotive market owing to rise in disposable income.
In September 2014, Honeywell International Inc., one of the world's major turbocharger suppliers, opened its new plant in Wuhan, Hubei province, China, adding an additional turbocharger capacity of 1.5 million units per annum. During the same period, another major light-duty vehicle turbocharger manufacturer, BorgWarner, commenced its second turbocharger plant in China, named BorgWarner Auto Spare Parts (Jiangsu) Co., Ltd., with a capacity of 400,000 units per annum.
Turbocharger market is sustainable with double digit growth opportunity during the forecast period. The global turbocharger penetration in the new vehicles sold is likely to increase from the current level of 38% to about 50% by 2021. All regions are likely to witness healthy increase in the penetration of turbochargers during the forecast period but China and North America are expected to exhibit significant higher growth as compared to the other regions.
There is huge growth potential in the entire value chain of turbocharger across the world but all turbocharger stakeholders need to formulate the right strategy to gain competitive edge and to win in the market space. The following are a few high growth strategies that industry stakeholders can adopt to gain competitive edge over others:
Government regulations such as CAFÉ standards and higher demand of fuel efficient and high powered vehicles will continue to provide double digit growth opportunity for turbochargers during the forecast period of 2016 to 2021.
Some of the automakers are emphasizing on rightsizing of engine rather than downsizing engine technology. Rightsizing will make an engine perform better using less fuel making the vehicle more comfortable to drive, with the optimum combination of displacement power and torque delivery. There is a demand for turbocharger technology that not only improves the engine performance but it also improves the entire powertrain performance of vehicle.
APAC region will remain the growth engine of the turbocharger market for both light vehicles and commercial vehicle segments. Increasing production of light vehicles and demand of the fuel efficient vehicles in China and India are likely to drive the robust demand in the Asia-Pacific region.
Turbocharger manufacturers with focus on the development of innovative products, such as multi-stage boosting, collaboration with customers, and focus on the high growth regions are strategically aligned with the market requirements and will gain competitive edge over the period.
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