The main function of turbocharging is to increase the air intake of the engine, thereby increasing engine power and torque. Turbocharging technology can improve the fuel efficiency of gasoline engines by nearly 20% and the fuel efficiency of diesel engines by nearly 40%. Driven by the policy of energy-saving and emission reduction, the allocation rate of turbochargers in new vehicles sold in China will continue to increase in the future, thereby promoting the further development of the domestic turbocharger market.
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In recent years, the industrial policy for the automobile has always focused on the energy-saving and emission reduction. In June 2012, the State Council issued the relevant development plan from 2012 to 2020. By 2020, the average fuel consumption of passenger cars produced in that year will be reduced to 5.0 liters per hundred kilometers. The fuel consumption of vehicles has dropped below 4.5 liters per hundred kilometers, and the fuel consumption of new commercial vehicles is close to the international advanced level. As of 2019, 119 domestic passenger car manufacturers have produced a total of 20,117,500 passenger cars, with an average vehicle curb weight of 1461 kg, and an actual average fuel consumption value of 5.53 liters per hundred kilometers, which is close to but not yet reached the target value of 2020. Among many energy-saving technologies, turbocharging technology is generally regarded as a more effective technology. Judging from the current stage, the new energy vehicle consumer market is still immature, and the advancement of energy-saving technology is still the choice of most auto companies, thus promoting the development of the turbocharger industry.
The Automotive Market Is the Main Downstream Market for Turbochargers
The market size of turbochargers directly depends on the output of internal combustion engines and the level of configuration rate of turbochargers in internal combustion engines. According to the different application fields of internal combustion engines, the downstream market of internal combustion engines can be divided into automobiles, construction machinery, agricultural machinery, ships, and generator sets. At present, the automobile market is the main application market for internal combustion engines and the main downstream market for turbochargers because of its largest production and sales scale.
Global and China Turbocharger Sales Continue to Rise
From the perspective of global automotive turbocharger sales, as of 2018, the global automotive turbocharger sales reached 44.1 million, a year-on-year increase of 7.9%. The global automotive turbocharger sales are expected to be about 52 million by 2021.
As of 2018, the automotive turbocharger sales in China were 11.12 million, an increase of 6.4% year-on-year, which is estimated that by 2021, it will be approximately 14.72 million.
In terms of penetration rate, according to statistics, the global turbocharger penetration rate was 45% in 2018, higher than that of China, both of which are estimated that by 2021, turbocharger penetration rate will be about 47%.
The Turbocharger Market Is Monopolized by A Few Giants, Whether International or Domestic
Global turbocharger industry pattern shows that the global turbocharger market is monopolized by five oligopolists, occupying 90% of the market. They are Honeywell, BorgWarner, Mitsubishi Heavy Industries, Ishikawajima Harima, and Bosch Mahler, among which Honeywell's turbocharger shipments account for about 28% of the global market share, as the world's largest turbocharger manufacturer.
The turbocharger market structure of passenger cars in China is quite different from the global structure. China's passenger car turbochargers are mainly monopolized by BorgWarner, Mitsubishi Heavy Industries, Ishikawajima Harima, and Honeywell, all of which account for 96% of China's market share.
The scale of the independent turbocharger companies in China is significantly smaller than that of international giants. Compared with international giants, domestic independent turbocharger manufacturers still have a big gap in terms of production capacity, R&D strength, and management level. At this stage, it is still difficult to break the monopoly of international giants on the high-end turbocharger market, in which international turbocharger manufacturers will still occupy a dominant position in the domestic market. However, China is a big consumer country, in which the local demand will become the significant driving point of local enterprises which are expected to develop further in production capacity and technological development.
Best is listed on the A-shares of turbocharger parts companies, along with Wuxi Lihu and Kehua Holdings. Wuxi Lihu mainly manufactures compressor casings and turbine casings. Kehua Holdings manufactures the intermediate shell. Best's gross profit margin and net profit margin are significantly higher than Wuxi Lihu and Kehua shares. Best's main products are turbocharger parts, engine parts, seat components, and other aircraft cabin parts, fixtures, and automation products used in the fields of automobiles. Best has no product overlap with Wuxi Lihu while it has a directly competitive relationship with Kehua holdings. Besides, Honeywell has been Best's largest customer in recent years, accounting for about 30% of the company's revenue. The five largest suppliers in the world have now become Best customers, in which Best still has several times the market growth space in the future.
Under the background of the trend of automobile electrification, the development of turbochargers also tends to be electronic, that is, turbochargers are more inclined to electronic supercharging technology that means the original scheduling device is replaced by a motor to drive the turbine to run, in which it can solve the problem of impediment that is common in the turbine as the motor has a higher control level. And the reason why the electronic supercharger has not been widely used is that the current 12V voltage of the car cannot meet the power generation demand of the electronic supercharger, but we believe this phenomenon is only temporary. In the future, with the advancement of technology, the voltage of the electronic supercharger in the car will be solved, and then the industry will usher in another change.
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