Automotive Industry Opportunities

Published: February 01, 2003, By Bill Podojil, AWA Watson Assoc.

The market for coated and laminated materials in the automotive industry is large and complex, despite continuing consolidation. For reasons ranging from litigation to cost reduction, the North American automotive market is the world's largest for self-adhesive products. The average automobile in the US today contains more than five dollars' worth of labels, ranging from vehicle tracking and theft deterrence to warning and caution labels. This average has increased steadily, largely due to the threat of lawsuits stemming from an automaker's “failure to warn” — one of the hallmarks of American liability litigation.

During the 1990s label makers profited from the proliferation of governmental regulations pertaining to vehicle labels. One of the largest increases in the use of vehicle labeling came in 1996 when automakers were forced to place warning labels on vehicle interiors warning of the risk of injury from passenger-side airbags. These labels — still present on today's vehicles — can be found on the instrument panel, the sun visor, and even hanging inside the glove compartment. Other labels used in the automobile interior include seat belt warning labels, jack instruction labels, and vehicle identification labels.

Strict Labeling Laws
In 2002, the North American automobile market represented just over 16 million vehicles. Whether built in the US or not, each vehicle entering the US and Canadian markets must comply with strict labeling laws issued by the Dept. of Transportation. Automotive specifications have stringent performance requirements, forcing label converters and material coaters to comply with difficult specifications for temperature, adhesion, and abrasion performance, including such factors as accelerated aging, flammability, and toxic emissions.

The major OEMs in North America — Ford, General Motors, and DaimlerChrysler — joined forces to develop similar quality and performance standards for automotive components, including labels. Warning labels and other items such as airbag shrouds, fastening tapes, adhesive seals, and non-transferable tracking labels are considered functional products and must pass the same stringent tests as other automotive components.

The major European automobile manufacturers — Volkswagen, PSA, Renault, BMW, Fiat, DaimlerChrysler, and GM and Ford's luxury groups (Jaguar, Volvo, Aston Martin) — also have seen small growth in their vehicle builds during recent years. While the Western European automotive market has seen relatively slow growth rates, Central and Eastern Europe have seen much faster expansion.

The overall European automotive market is as large as the North American market, with automobile builds nearing 16.5 million units. However, the market for labels has been considerably less, with the average European vehicle containing just under three dollars' worth of label products. European automobile interiors have far fewer warning labels than do American automobile interiors — both for esthetic reasons and because liability lawsuits are not as popular in Europe as they are in the US. However, since the formation of the European Union and the beginning of standardized label laws, more labels are being placed inside European vehicles, and the value will rise to approximately $4 per vehicle by 2005.

The global automotive market is based on a tier system, with the Original Equipment Manufacturer (OEM) at the top. Tier 1 suppliers supply the OEMs; Tier 2 supplies Tier 1; and so on. The role of the OEM has changed significantly during the past 15 years, as manufacturing responsibility has been pushed down the value chain by component manufacture outsourcing. While the OEM continues to specify the materials and designs for vehicle components, its suppliers manufacture them, leaving only final assembly to the OEM. The automotive value chain relies upon a strict set of quality initiatives, such as QS9000 and ISO16949, to maintain product quality, traceability, and documentation right through the design and manufacturing process.

Adhesive Solutions
The adhesive products used have evolved over the past ten years; this is where real growth will be seen. These products traditionally have been labels or tapes, but today they have evolved into more functional converted components, such as fasteners, shields, and anti-vibration, protective, and fastening products. Much of this innovation came from converters and self-adhesive material suppliers, eager to capitalize on the OEMs' push to drive down cost and vehicle weight, while improving performance.

Some innovative adhesive-based solutions have been in the realm of electromechanical components and shielding products. As autos became more computerized, converters found opportunities for high-temperature shielding products and adhesive-based valve and electronic node covers.

Perhaps the fastest growth area for adhesive products is NVHA, or “noise, vibration, harshness abatement.” Vehicle interiors have become quieter, largely thanks to these products. Adhesive foams, felts, flocking, and nonwoven materials are used throughout an automobile to reduce the amount of sound generated by road conditions and wind. Other materials, called viscoelastic damping products, are being used in automobiles now, after years of use in high-technology mechanics such as aerospace and computer disk drives. These damping products consist of several laminations of sound-deadening materials, such as foams, foils, and films, and are die-cut to precision tolerances.

Even with a tight economy, the auto market is expected to remain stable for several years and will provide converters and laminators with many opportunities. Most of this growth won't be from traditional labels but from new adhesive-based products that help the OEM reduce costs and improve performance.

In the 1980s and '90s, converters, laminators, and die-cutters worked hard to gain market share, introducing products such as airbag shrouds and adhesive fasteners. Their success was often at the expense of other suppliers, who were forced out. In 2003 and beyond, suppliers to this industry will need to think of the automobile as a precision instrument and educate themselves in clean room manufacturing processes, electromechanical requirements, and damping and sound-deadening products. This is where tomorrow's growth will occur.