Study: Automotive tooling demand to hit record in 2018

Demand for molds and dies in North America's automotive industry will continue to be strong in the near term, according to a recent study by Harbour Results Inc.

In 2018, automakers will spend a record high of $11 billion on tooling, up from $9 billion this year. By 2020, however, tooling spending in the auto sector is expected to slide to $6.7 billion.

Within this growth framework, plastic injection mold builders should see better-than-average demand for their products, according to Laurie Harbour, president and CEO of Harbour Results. Shifts in vehicle types bode especially well for plastics injection mold builders. The product mix of North American-assembled vehicles will favor sports utility vehicles and crossover vehicles, and these cars are heavy plastics users, said Harbour.

"SUVs and CUVs typically require 20 to 30 percent more tooling than sedan-type vehicles," Harbour said in a phone interview with Plastics News after she summarized the tooling study in a Nov. 7 webinar.

SUVs and CUVs contain more trim and other interior components than sedans, she explained. These vehicles include more interior features that consumers can touch and feel, so vehicle OEMs pay a lot of attention to vehicle interior aesthetics and functionality.

About two-thirds of the 177 vehicle launches between 2018 and 2020 will be SUVs, CUVs and truck platforms. Trucks are also heavy tooling users.

Heavy tooling purchases are foreseen for the next few years for all types of tool and die manufacturers, albeit at lower levels than recent years, HRI's study predicts. Launches for both new and refreshed vehicles numbered 60 and 61 for 2016 and 2017, respectively. They will dip to 58 in 2018 and slide further to 54 in 2019. In addition to SUV and CUV launches, the market will see more trucks, foreign-designed vehicles and cars with higher fuel efficiency introduced in the next few years.

Detroit's Big Three auto OEMs will lead launch activity. They are expected to launch 32 new programs in 2018, more than double the launches for Asia-designed vehicles and five times as many as for European cars. But in 2019, Asian car launches will lead with 26 introductions compared with 15 for Detroit's OEMs and nine for European vehicles.

Vehicle sales in North America will be flat in the near term, but there will be a high number of launches with each settling for smaller market share. So although overall vehicle production won't be strong, the high number of new models equates to high demand for tooling.

"It will be great for mold makers," Harbour told webinar attendees.

Annual sales volumes for light vehicles in North America will be steady, between 20.5 million and 21.1 million in the 2016-2020 time frame. The number of launches for light vehicles, however, is predicted to climb from 38 in 2016 to 67 by 2020, according to Harbour Results data.

High demand for tooling among shops supplying the major carmakers is creating a new tooling model whereby more tooling dollars are being outsourced. Large toolmakers will spend a total of $1 billion to $1.5 billion to source tooling services from smaller shops or overseas.

Primary tool shops tend to outsource services that exceed their capacity. Outsourcing amounts to 10 to 30 percent of their revenue as they look to outside shops to handle multiple tools, machining, design and assembly.

For secondary tool shops, usually smaller companies, only 5 to 10 percent of their revenue relates to outsourcing. They tend to outsource special capabilities such as machining and gun drilling.

Outsourcing indicates high capacity utilization. In 2017, mold building shops are running at about 81 percent of capacity, compared with 88 percent capacity utilization for die builders.

Another trend in North American vehicle production is the appearance of new foreign vehicle-oriented assembly and parts factories. Much of the new production is locating to Mexico because of that country's low manufacturing costs. Southern U.S. states like South Carolina are also attracting investment because of modest wage costs and business-friendly governments.

The Harbour Results study identified big differences in where vehicle OEMs in North America source their tooling. Not surprisingly, Detroit's Big Three source about 80 percent of their tooling within North America and only 20 percent in China and elsewhere in Asia.

The dominant Asian OEMs in North America get 40 to 50 percent of their tooling needs in North America and the rest in China, Japan and elsewhere in Asia. European major OEMs get 20 to 30 percent of their tooling within North America, with the rest from Europe and Asia.

"European OEMs lack some trust in North American shops," Harbour noted in the webinar. Somewhat offsetting that wariness is that European firms are setting up new technical centers in North America.

Increasingly, the tooling market is moving toward face-lifts of current models.

"If mold makers don't do fascia and grilles, there isn't a lot of activity," Harbour said.

The future beyond 2022 will see more electric and autonomous vehicle development and launches, and that will place new demands on tool builders, Harbour predicted. Tesla and other new entrants will be looking for innovative tooling, including projects in which there is no precedent.

And as always, manufacturing costs will be a force in tooling strategies.

"Mold makers will need to think more about building low-cost tooling," Harbour said in the webinar.

"It is important that tool shops continue to focus on improving operations and investing in technology during the good times to remain competitive during the dip," Harbour said.

Harbour Results in Southfield, Mich., studies and advises the manufacturing industry. Special focus is given to small and midsized businesses.