Honeywell predicts turbo surge as carmakers race to make greener cars

Honeywell Transportation Systems predicts a strong rise in turbocharger penetration in Europe because customers such as Volkswagen AG, Ford Motor Co. and Renault SA need smaller, greener engines to help meet tougher emissions regulations.

"We think turbo penetration for light vehicles and trucks will be up four (percentage) points from 65 percent to 69 percent" in 2011 compared with 2010, Alex Ismail, CEO of the wholly owned unit of Honeywell International Inc., told Automotive News Europe.

Factoring in a forecast 3 percent rise in Europe car and truck production for this year, an estimated 14.9 million vehicles in Europe will get turbochargers in 2011, up from 13.9 million in 2010, according to Honeywell data.

Honeywell, which controls half of the global turbocharger market based on analysts' estimates, says the total global turbocharger industry was 22 million units last year.

"That will grow 10 percent in 2011 and 10 percent every year until 2015," Ismail said. "So the 22 million turbos globally today could grow to 35 million by 2015."

Honeywell, which includes turbochargers for heavy trucks and construction equipment in its calculation, says that light vehicles account for 70 percent of its turbo business.

Market researchers Roland Berger expects that global demand for turbos in light vehicles will increase to about 33 million in 2015 from about 20 million in 2011 and rise to 15.8 million units in Europe in 2015 from an estimated 11.3 million this year.

New factory

To help keep up with the demand, Honeywell announced last week it will open a new plant in Europe. The U.S.-based supplier will start production of turbochargers for cars and light commercial vehicles in 2012 in Presov, eastern Slovakia.

Honeywell will invest 38 million euros (about $54 million) in the plant, which the company said would primarily serve growing demand for turbochargers in central and eastern Europe.

Demand is growing for turbochargers, especially in gasoline-engine cars, because they help automakers produce smaller, greener engines without compromising on performance. Automakers in Europe need to reduce CO2 ahead of tougher emissions regulations that start to take effect next year.

New business

Honeywell says it won $3 billion in new business last year, when factored over the lifetime of the programs. That's enough for Honeywell to stay No. 1 globally in turbos for the next five years, Ismail recently told ANE sister publication Automotive News.

"For Honeywell the future is really good and we see that for the next five to 10 years," Ismail added.

Honeywell expects to introduce more than 100 new turbo applications this year and has more than 500 engine applications in its development pipeline.

New rivals

Honeywell, whose closest competitor is BorgWarner, which controls half of the global turbocharger market based on analysts estimates, faces increasing competition, especially in Europe. Continental AG's first turbocharger will be produced by the Schaeffler Group starting later this year. A joint venture between Robert Bosch GmbH and Mahle GmbH also will start turbocharger output in 2011.

Ismail told ANE he is not worried about the added competition given that Honeywell has been making turbos for 50 years.

"We're 100 million turbochargers ahead of Bosch-Mahle and whoever else wants to enter this business," Ismail said.

Honeywell Transportation Systems expects to generate $4.5 billion to $4.7 billion in revenue, up from $4.2 billion in 2010, Ismail said. Turbochargers account for about 60 percent of those revenues.

In 2009, Honeywell Transportation Systems ranked No. 69 on the Automotive News Europe list of the top 100 global suppliers. Bosch was No. 2 and Continental was No. 4.