We are hearing about prospects for major changes in material specifications coming down from automotive OEMs and Tier 1 suppliers. The shift is primarily due to regulations requiring big gains in vehicle fuel economy. These changes may also impact non-automotive industries as demand for new, stronger and lighter materials increases.
In 2012, the U.S. Environmental Protection Agency (EPA) announced stringent Corporate Average Fuel Economy (CAFE) standards that require average fuel efficiency for new cars and trucks to reach 54.5 miles per gallon by 2025. That’s nearly double 2010’s required 27.5 miles per gallon! For complete information on regulations and testing for the EPA’s CAFE standards, check out http://www.epa.gov/otaq/climate/regs-light-duty.htm#new1.
The MMTC recently conducted a survey to discover what challenges may lie ahead for Michigan manufacturers due to potential transitions in material requirements. We reached out to casters, forgers, stampers, molders, fabricators, tool makers and finishers from all over the Mitten (and the Upper Peninsula!). We heard back from 260 manufacturers. Approximately half of the responding companies rely on the automotive industry for a significant portion (70% or more) of their revenue. Three in five agreed that their customers and markets will transition to products that are lighter weight in the next three years.
Manufacturers have plenty of hurdles to overcome when faced with processing new materials. The learning curve associated with it can be expensive and lengthy. The most common concerns include:
· Capital investment in new equipment to handle different materials
· Costs associated with testing and validating new materials
· Developing new supply chains that include new raw material suppliers
· Lost productivity due to unfamiliar materials
· Training production staff on properties of new materials
· Assumed price increases for raw materials
However, more companies see the opportunity to diversify into new materials as a potential opportunity (31%) than as a threat (18%). Proving your company can quickly adapt to change, while managing costs, can set it apart from competitors. It can also help win new business and drive growth as the automotive industry focuses on vehicle lightweighting.
Since 1991, MMTC has assisted Michigan’s small and medium-sized businesses compete and grow. Through personalized services fitted to meet the needs of clients, we develop more effective business leaders, drive product and process innovation, promote company-wide operational excellence and foster creative strategies for business growth and greater profitability. Find us at www.mmtc.org