Johnson Controls Eyes Start-Stop Vehicle SurgeBy Danny King June 28, 2011
Global automakers' annual orders of vehicle battery systems that save fuel by shutting down the engine when the car's not moving will surge over the next few years and dwarf alternative-fueled vehicle sales, battery-making giant Johnson Controls said at its annual analyst meeting for its power solutions division. Automakers will use so-called start-stop systems as a way to meet progressively more stringent emissions requirements in both the U.S. and overseas while better serving customers looking for relatively inexpensive ways to save on fuel in the midst of rising gas prices, the company said.
Automakers will make almost 25 million start-stop vehicles in 2016, up from about 7 million vehicles this year, forcing companies such as Johnson Controls to boost production of start-stop battery systems. Since last year, automakers have committed to making more than 40 million start-stop vehicles over the next five years, the company said.
Carmakers are turning to start-stop systems because they boost fuel economy by about five percent while adding an average of just $800 to vehicle costs. Such a cost premium will fall over the next few years while fuel-efficiency gains from some systems may hit 10 percent by 2016. By comparison, hybrid-electric vehicles, while boosting fuel economy by about 30 percent, on average cost about $5,000 more than similar conventional vehicles, Johnson Controls said.
The company's forecasts will likely be closely watched because Johnson Controls, which was founded in 1885 and employs 142,000 people worldwide, is the world's largest vehicle-battery maker. Milwaukee-based Johnson Controls forecast 2011 sales of $39.5 billion, including $19 billion from an automotive experience division that makes components for seats, doors and cockpits; $14.5 billion from products related to energy-efficiency products specifically for buildings; and a power-solutions division whose battery-making market share is more than three times the next biggest producer, Japan-based GS Yuasa.
Johnson Controls also said it expected to be a market leader in start-stop battery systems because it has been making the product for about a decade, and stricter emissions limits and rising gas prices will work to the company's advantage.
"What's happening in the world as far as being more sustainable plays to our sweet spot," said Alex Molinaroli, president of Johnson Controls' power solutions division, at the analyst meeting. "Our ability to be the first mover in start-stop is a huge advantage."
Johnson Controls expects to boost sales from its power-solutions division, which includes vehicle-battery production, by as much as 12 percent per year over the next few years as automakers strive to meet more stringent fuel-economy and greenhouse-gas emissions requirements. U.S. vehicles must reach a fleetwide fuel-economy average of 35.5 miles per gallon by the 2016 model year, or about 50 percent greater fuel efficiency than the 2010 average, while European regulars are requiring automakers to cut fleetwide emissions by about 30 percent between 2008 and 2020.
In all, about 80 percent of new vehicles may have start-stop systems by the end of the decade, compared to about 25 percent that will use hybrid-electric, plug-in hybrid electric or battery-electric powertrains, as the global gas-price average doubles to about $8 a gallon. More than half of the vehicles made in 2016 will have start-stop systems, according to Johnson Controls.
In fact, the company went as far as to say the proliferation of start-stop systems may delay adoption of electric-drive vehicles because automakers pitching fuel-efficiency gains from hybrids and plug-in hybrids would have to factor out the gains already achieved by start-stop systems in order to provide a true cost-benefit analysis.
Such start-stop vehicle production expansion is already underway in Europe, which will account for more than 90 percent of the start-stop vehicles made this year. Including third-party vendors, the start-stop battery market will reach almost 100 million units by 2020, with Europe accounting for about half, and North America and China each accounting for about a quarter.
In Europe, stop-start will have "at least a 70 percent market share by 2015, and I actually think that's a conservative estimate," said Eric Mitchell, vice president and general manager of Johnson Controls' power-solutions operations in Europe. "What has been a suprise is how quickly consumers have latched onto this phenomenon."
With that in mind, Johnson Controls will invest about $420 million in start-stop battery development in North America and Europe within the next five years. That amount includes a $138.5-million investment in the conversion of a Toledo, Ohio, facility that will solely make so-called AGM batteries that will be used for start-stop vehicles. AGM, or absorption glass mat, allows for a more efficient energy discharge than lead-acid batteries.