The electronic content in light vehicles is increasing, just one reason why the automotive market maintains a steady pace.
Bishop tracks 12 companies in the automotive market sector. This market has had slow, steady growth over the last four quarters, as measured by these 12 companies’ revenues. In 2013, these companies grew 0.3% year over year. In 1Q14, the combined revenues of these companies grew 4.6% year over year and in 2Q14 grew 1.8% over the prior year. In comparison to these companies, the cable assembly market for the worldwide automotive market sector grew 8.2% in 2013 and is forecasted to grow 11.2% in 2014.
Bishop follows electronic interconnect sales trends in 13 markets. The combined annual revenue of all the market sectors was $4.24 trillion in 2013 and grew 0.8% over 2012. Of the 13 market sectors, automotive was the ninth-fastest-growing market sector in 2013 at 0.3%, with combined revenues of $1,342.1 billion. Profitability was $67.6 billion at 5.0% of sales.
Daimler had the most growth of the automotive companies at 19.3% year over year in the first half of 2014 with sales of $47,669 million. Mercedes-Benz car unit sales increased 3% in 2Q14 at 418,700, a new record in unit sales. The revenue growth from the prior year is partially the result of a relative improvement in the worldwide economies and pent-up demand in Europe.
Borg Warner had the second largest increase in sales in the first half at 14.3% year over year to $4,281 million. 2Q14 revenues were up 16.0% year over year. The company credits its revenue growth to its focus on automotive systems that improve fuel economy in cars (transmissions, turbocharging systems, EGR systems, and variable cam timing systems).
Lear Corporation grew 11.0% year over year in the first half of 2014 to $8,945 million. The company manufactures automotive seating and electrical systems. The company grew 11.5% year over year in 2Q14 and it set record revenue levels in both businesses in the first half of the year. Lear attributes its anticipated fifth consecutive year of expanding sales and EPS (earning per share) to its expansion into emerging markets.
Honda recorded the second-highest sales growth of the listed companies that manufacture cars. Honda grew 7.2% for the first half of the year to $59,809 million.
The following table shows the results for six of the companies Bishop tracks in the automotive market sector.
As shown in the following chart, year-over-year sales growth has been steady since 2Q13. Sequentially, second quarter 2014 sales grew 3.2% from the first quarter of 2014.
Trends in the Automotive Market
- The electronic content, and thus the interconnect content, has been increasing in light vehicles, and this trend will continue through this forecast period. The automotive market now uses more electronics in the infotainment systems, safety systems, and control modules installed in cars. Systems that used to be mechanical are being converted to electromechanical and electric systems.
- Europe’s stagnant market for cars caused by its economic recession created pent-up demand for new cars. Just as happened in North America, the average age of cars in Europe is increasing. As its economies begin to grow again, car sales started to increase, which further helped its nations’ economies (and car sales).
- Plug-in hybrid and battery electric vehicles (PEVs) are a small percentage of the automotive market sector, but they are growing at rates well above their gas/diesel-powered brethren. In 2013, 95,100 PEVs were sold in the United States, up more than 229% from 2012. PEVs are loaded with specialized high-voltage cable assemblies as well as the assemblies normally found in gas-powered vehicles, so they offer significant opportunities for cable assembly suppliers.
- Aluminum wire increasingly is used in passenger car wire harnesses. To reduce weight and improve gas mileage, the automotive companies are turning to aluminum wire, among other solutions. Aluminum wire always has the potential issue of galvanic corrosion between the wire and the beryllium-copper or phos-bronze contacts. Companies like TE Connectivity and Delphi have come up with solutions that alleviate this concern.
- Passenger car production is on the rise. Worldwide, according to the OICA, unit production rose 3.7% in 2013 to 65,433,287 cars. China grew 16.5% in 2013, Europe was flat, and North America rose 1.8% (5.9% in the US).
Bishop & Associates projects the worldwide market for automotive cable assemblies to grow 11.2% in 2014 to $39.4 billion. At 16% year-over-year growth, China will be the fastest-growing region in 2014 for this market sector.
Dave Pheteplace, VP, Bishop & Associates, Inc.