TRANSITION TOWARD VEHICLE ELECTRIFICATION
The most notable long-term threat to the automotive catalytic converter market is the accelerating transition to electric vehicles (EVs) where battery electric vehicles do not have exhaust after-treatment systems. Regulatory agencies like the International energy agency and the European commission are in the process of actively electrifying their nations by offering subsidies, emission limits, and phase-out policies on internal combustion engines (ICEs). Most nations, including European Union members, have suggested the prohibition of the new ICE vehicles sale by 2035, which directly affects the future demand of catalytic converters.
Moreover, even large car manufacturers are devoting themselves to electrification plans, shifting investment in ICEs to electric powertrains. Although hybrid cars also need catalytic converters, the slow decrease in the number of pure ICE vehicles is likely to decrease the volume demand in the long term. This system shift causes confusion to the catalytic converter producers, as they have to either diversify into related technologies or face the prospect of losing relevance in the market in the long-term.
SUPPLY CHAIN DEPENDENCE ON PLATINUM GROUP METAL (PGMS)
The concentration of supplies and volatility of the prices of the heavy reliance on platinum group metals- platinum, palladium and rhodium- offer a critical challenge. U.S. Geological Survey confirms that a major part of the world PGM supply is clustered in South Africa and Russia, which exposes the supply chain to geopolitical conflicts and mining interruptions and trade ban.
The volatility in prices has been notably noticeable in the recent years with the rhodium price subjected to extreme variation because of the tightening of emission standards and scarcity. This volatility has a direct effect on the cost of production of catalytic converters in that a large portion of the overall component cost is comprised of the cost of PGMs. The competitive pressures and the long term contracts usually make it hard to get these cost increases passed on to OEMs by manufacturers and hence, margin compression.
Moreover, any supply disruption, e.g. power outages in South African mines or geopolitical risks with Russia, may lead to supply and demand imbalances. This reliance on few suppliers and localities presents high risks and operational and financial risks, and it is a long-term issue to the market.
DECLINING LONGEVITY OF ICE PLATFORMS AND UNCERTAIN DEMAND OUTLOOK
The decreasing long-term perspective of the internal combustion engine (ICE) platform is a major challenge confronting the automotive catalytic converter market due to the creation of uncertainty in the demand across the value chain. Government and regulatory authorities, including the European Commission, have proposed to end new ICE vehicle sales in major markets, such as the European Union, by 2035, and other countries, such as the UK and Canada, have done the same. These policy orientations are bringing about a structural change in the automotive industry with long-term investment being shifted to the electrification.
This shift is affecting the capital allocation decision making by automotive OEMs and components suppliers. The large car manufacturers are reducing their investments in the ICE-related technologies, such as exhaust after-treatment units, and are concentrating on the electric powertrain development. This is causing the catalytic converters producers to experience lower levels of visibility on the long-term demand, which is difficult to plan capacity expansions, research and development, and supply chain strategies. Although ICE cars will still prevail in the near to medium term, particularly in the growing markets, the future path in the long term is unknown.
Also, supplier relationships and contract architectures are not immune to this uncertainty because OEMs implement more flexible sourcing techniques to respond to the changing powertrain mixes. Manufacturers too can be exposed to the danger of having to deal with stranded assets especially in areas that are determined to achieve electrification goals. This changing environment compels catalyst converter manufacturers to expand into new related technology or geographic market, making it more complex to operate.
MARKET AND TECHNOLOGY TRENDS
THERMAL MANAGEMENT AND COLD START SOLUTIONS
The catalytic converter has become a major subject of concern and focus due to the growing stricter regulations on emission levels, which focus on actual driving situations. As a result, the development of catalytic converters has been dominated by the emergence of two key focus areas, namely, thermal management and cold-start emission control. Much of the vehicle emissions- especially the hydrocarbons (HC) and carbon monoxide (CO)- comes at the first cold-start stage when the catalytic converter is not at its optimum operating temperature. The introduction of regulatory frameworks, including Real Driving Emissions (RDE) and testing processes by the United Nations Economic Commission on Europe within the WLTP cycle has added additional pressure on the necessity to manage cold-start inefficiencies.
To address this, manufacturers are working on the development of new advanced thermal management systems including close-coupled catalytic converter, which is being placed closer to the engine, and thus the heat-up time should be faster. Also, electrically heated catalysts (EHCs) are becoming popular especially in hybrid cars, where the engine is only used periodically. Such systems enable catalysts to attain light-off temperatures faster, and therefore the emissions are minimized in the start-up conditions.
ADVANCED CATALYST ARCHITECTURE AND FORMULATIONS
The trend of creating more complex catalyst structures and compositions is one of the major trends influencing the catalytic converter market, with the producers trying to maximize the performance, durability, and cost-effectiveness of their structures under the strictest emission standards. The modern catalytic converters are dependent on the optimization of platinum group metals (PGMs) such as platinum, palladium, and rhodium, which are strategically mixed to optimize catalytic performance and reduce expenditures on the material.
Substrate design innovations are also occurring, including high cell density ceramic monoliths and metallic substrates, which are facilitating increased surface area of catalytic reaction, thus increasing conversion efficiency. The new washcoat technologies are also being developed in such a way that the catalyst materials are uniformly dispersed and that they interact well with the exhaust gases. Such enhancements are important to achieve stricter emission limits without adding substantial loads to PGM.
Moreover, studies with the help of organizations like the U.S. Department of Energy are aimed at the creation of low-PGM or PGM-free catalysts based on other materials and nanotechnology. The innovations are meant to produce a high-performing product that will not be dependent on the limited and costly metals. With the changing emission standards and the rise in costs, the complex catalyst designs will remain in the center-stage of efficiency and sustainability of catalytic converter systems.
THE DOMINANCE OF SCR
Selective Catalytic Reduction (SCR) technology has been gaining popularity in the automotive catalytic converter market, especially in diesel powered cars, as it is very effective in the reduction of nitrogen oxide (NOx) emissions. To ensure that NOx is reduced to nitrogen and water, SCR systems require a urea-based solution (also called AdBlue or DEF), and it is necessary to meet the requirements of strict emissions regulations, including Euro 6, China VI, and BS-VI.
