“The automobile industry's change will have an impact on chemical firms. Those who want to thrive in the new normal must confront the changes head-on and address three major themes.”

For chemical firms, the future of mobility looms enormous. Historically, the automotive industry has been a large end market for chemicals, accounting for more than 10% of total sales and even greater percentages for individual substances. The automotive market, on the other hand, has seen a significant increase in uncertainty during the last decade.

Even before the COVID-19 problem, many chemical businesses were feeling the strain of diminishing auto sales and profit margins in the automobile industry. Several reasons have contributed to these figures, including shifting import tariffs, increased and regulatory expenditures, and the slowing of the North American and Chinese car markets. Industry profit margins are likely to shrink dramatically in 2020 and beyond as a result of COVID-19. To make matters worse, OEMs are anticipated to encounter increasing disruptions in the future years, forcing chemical companies to adapt their business models to changing markets.

The automobile industry is in a state of flux

While the coronavirus-related slowdown is projected to alleviate in the medium term, increasing city-level controls on private car ownership and the expansion of shared modes of transportation are expected to have a long-term negative impact on automotive sales. In our business-as-usual scenario, light car sales will only expand somewhat. However, given the predicted policy changes in major cities throughout the world to limit private car ownership, global sales in 2030 could be comparable to today's levels in a more muted scenario.

While ACES interruptions have a significant impact on the automobile industry, their impact on chemicals is less than projected. Autonomous driving, linked automobiles, electric vehicles, and shared mobility are the four disruptions that will most likely have the most impact on chemical companies.

The attention is on automotive non-core assets.

In the automobile sector, a new value chain is evolving in which mobility is purchased as a flexible service, and vehicles are connected, autonomous, and electric. The traditional automotive business model, in which privately acquired, hardware-focused, human-driven automobiles powered by internal combustion engines (ICE) are the norm, is the polar opposite of this.

Between the value chain and across geographies, the rate and scale of change vary. It's also oversimplified to say there's a traditional model and a future one, with winners and losers clearly defined. Emerging disruptive forces have a range of effects on organizations, ranging from positive to bad, and from sudden market revolutions to decades-long evolution. Regional differences in the adoption of electric cars (EVs), for example, are expected to be significantly faster in Asia and Europe than in the United States.

Read More :- https://www.pukkapartners.com/insight/automotive-industry-turmoil-how-chemical-players-are-dealing-with-the-disruption

Getting the business ready to sell

During the M&A process, preparing a business or non-core asset for sale entails improving potential value and/or fighting against value leakage. This is generally accomplished through extensive sell-side materials. Carefully compiling and managing the information flow to assist buyer targeting, business positioning, buy-side due diligence, and transaction structuring is critical to a successful deal.

Investors are already wary of the sector's current uncertainty and risk, so any further uncertainty brought on by substandard materials will be tough to overcome. Risks and concerns can also be detected early and avoided or managed by a thorough process of developing business and sell-side materials. Off-balance-sheet/contingent obligations, ongoing liabilities, pension liabilities, and tax are all examples of places where value leaking can occur.

Major Market Highlights:

BorgWarner Inc. and Delphi Technologies have announced the signing of a formal transaction agreement under which BorgWarner would acquire Delphi Technologies in an all-stock deal valued at approximately USD 3.3 billion. BorgWarner's power electronics products, capabilities, and scale will be strengthened as a result of the acquisition.
Denso formed Denso Sales South Africa (Pty) Limited to sell aftermarket products and services in Southern Africa. Denso's product selection will be expanded in South Africa, mostly for automobiles produced by Japanese-affiliated automakers.
Continental's new 48V high-power system for HEVs consists of an electric motor with integrated power electronics and a battery that cuts fuel consumption and CO2 emissions by roughly 20% compared to equivalent vehicles with combustion engines. The new 48V technology is also significantly less expensive than previous high-voltage systems.
Conclusion: Companies need to take bolder decisions

Companies must make daring judgments concerning non-core aspects of the business while staying true to the traditional automotive business model. While these components may not have received much attention recently due to the industry's focus on the rapid pace of technological and market developments, now is the time to pay attention to them and maximize the value they provide.



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