German industrial plastic maker Covestro AG is making radical changes to its supply chain in China in an attempt to counteract decreased demand from the country's slowing automotive industry. The company revealed that it will be shifting its production to cater more toward the country's growing consumer goods sector.
The bulk of the high-tech plastic company's business has been supplying plastic components to different automotive manufacturers around China. With the recent slump in China's auto industry, Covestro has been forced to consider partnerships in other sectors to offset its decreased sales.
According to the president of Covestro's China unit, Holly Lei, the company is now aiming to develop its products to cater to the country's consumer goods manufacturers. Manufacturers of products such as smartphones, household items, and even robots can apparently stand to benefit from using the company's high-tech but low-cost plastics.
Lei stated that the increased consumption in China and the growing income of low to middle-class citizens have made the consumer goods industry a very lucrative market for the company. Covestro is banking on making the growing sector as a new source of revenue growth, which could help it withstand the impact of the global economic slowdown and the slump in China's auto sector.
Due to several factors, which include its ongoing trade dispute with the United States, China's automotive sector has seen huge drops in sales over the past few years. In September, auto sales in China declined for the 15th straight month.
The company also reported a slower demand for its plastics in China's new energy vehicle industry. Covestro had considered China's electric vehicle market as one of its main sources of sales, especially for its polymer products. Unfortunately, due to the government's recent pull back on subsidies, the company had reported significant drops in orders.
Covestro mentioned that it has seen a rise in demand for its high-tech plastics from the consumer goods sector, mainly fueled by the evolving demand for higher-quality products.
The high-end materials that Convestro produces, which were originally meant for the auto industry, can be used in a variety of applications. The company's lightweight plastics for example, which are necessary for fuel-efficient vehicles, can be used to make items such as battery housings, covers for electronic devices, and even in lighting panels.
Covestro, which is a spin-off of the German drug giant Bayer, is also looking into other applications of its advanced plastics. The company had mentioned that it has found some success in commercializing its polyurethane rotor blades, which are now being used in wind turbines.
