Estimates from a number of commentators have concluded that the overall costs for exhaust and aftertreatment systems will make up more than 5 percent of the total costs for light vehicles, compared to an estimated 0.5 percent for light vehicles in 2003.
The report says that a tightening regulatory environment has led to considerably increased revenues per vehicle, a result that is set to improve globally as emerging high growth markets catch up with Europe and Northern America in terms of the level of equipment needed to meet environmental regulations.
OEMs and suppliers have found that emerging markets have largely been able to pick their regulations 'off the shelf' from those developed to meet emissions requirements in the EU, Japan and the U.S.
Suppliers have undertaken structural changes resulting from the 2008 downturn in the vehicle market and the increased use of more robust materials, such as stainless steel. Raw materials prices, such as those for steel and platinum group metals, have affected the underlying cost base of the sector at the same time as the market has become more fragmented, with model proliferation, shorter product lifecycles and more demanding technology.
However, this market is moving from one facing significant headwinds towards a situation of structural advantage led by a global harmonization of emission regulations, a step that will bring huge long term benefits to those players in the exhaust and after-treatment sector, the report says.
Despite that, more stringent emissions regulations have required considerable innovation by suppliers facing pressure from OEMs who find it difficult to pass costs on to the consumer.
As with many automotive supply sectors, the report says the supply relationship with OEMs has also changed. Suppliers are expected to shoulder more of the research and development cost and risk, and develop the in-house competencies needed to provide a comprehensive end-to-end service.
Developments across the exhaust and after-treatment market have lead to the emergence of a