Such Times are difficult even for a lightweight construction specialist. Airplanes no longer fly, cars were hardly produced for weeks – the corona crisis hit the Japanese carbon fiber manufacturer Toray hard. The carbon fiber division, the previous profit engine of the world market leader in raw materials for lightweight components in aircraft and automobiles, has since plunged from a profit margin of ten percent into the red.
But Akihiro Nikkaku counts on growth in an interview with Handelsblatt. “Maybe people think I’m too optimistic when I talk about the demand for airplanes,” says the head of the key supplier for lightweight components Boeing and Airbus. But he believe in the aircraft industry. From 2023 the market will take off again, he predicts. “After Covid-19, people will travel more than before.”
At the same time, Nikkaku expects its carbon fibers in Germany from BMW and Daimler in the middle of the electric car hype, a long-term boom in fuel cell vehicles. The group builds membranes for their small hydrogen power plants and supplies carbon fibers for the hydrogen tanks. Germany could become an important pillar of the group in this area, but competes with China for Toray’s investments.
Nikkaku is so convinced of his thesis that he presented his growth plan for the next three and ten years at the height of the corona crisis in May. Powered by carbon fibers and specialty textiles for automakers and the Japanese fashion brand Uniqlo, it promised to increase sales by 22 percent compared to 2019 and operating profit by 38 percent by 2022.
For 2020, the group expects sales to fall by eleven percent to 15 billion euros, thanks to a recovery in the auto industry, and net profit by 60 percent to 270 million euros.
Nikkaku’s optimism seems to rub off on investors. Since the beginning of November, Toray’s share price has soared around 20 percent to more than 600 yen. However, it is still a third below the value in November last year. Because in the middle of the new corona wave, it is not yet possible to foresee when the airlines will again be flying in profits and ordering new aircraft. Instead, the threat of further losses, bankruptcies and job cuts.
The bad news has already accumulated in Nikkaku’s neighborhood. In South Korea, Korean Air plans to buy up its local rival Asiana. At home has major customers Mitsubishi Heavy, a supplier to Boeing, has banned plans for the first larger passenger jet developed and built in Japan. Because the corona pandemic has reduced the demand for the new aircraft to zero.
However, the Toray boss sees great long-term opportunities for the aircraft and automotive industries. Nikkaku believes that the aircraft market will become more active again in 2021 as societies learn to live with the corona virus. In 2022, the pandemic will no longer have a significant impact. “And we will see new demand in 2023.”
Nikkaku expects business people in particular to think carefully about travel after their experience of teleworking. “But overall, more will be traveled,” he is convinced. For him it is “human nature” that after such a long restriction they will celebrate their freedom again. “Maybe they are not saying it at the moment because they think it is insensitive,” says the Toray boss.
In his view, however, the growing demand will be offset by a lower supply that will suddenly have to be filled. Because the airlines would now reduce their aircraft fleet by ten to 20 percent in an emergency and would also have to replace aging aircraft.
Nikkaku therefore rules out any downsizing in Japan. “The salaries in Japan are fixed costs for us,” he says. Instead of laying off employees, salespeople and engineers are transferred to other tasks so that Toray can promptly serve the demand later.
The crisis as a catalyst for electric cars
Nikkaku also expects a trend reversal in the automotive sector from which Toray can benefit. “Sales will normalize again,” he predicts. “But I expect an important change: electric and fuel cell cars will benefit more than cars with internal combustion engines.”
For Nikkaku, the reason for the accelerated change is the crisis experience of the customers. He had already experienced this during the global financial crisis in 2008. “When people are in a panic, they look carefully at what is really important.” And in the auto industry, for him, these are environmentally friendly drives.
Electric cars should benefit first, according to Nikkaku. “But I believe that fuel cell vehicles will become the main product in the long term.” Because feeding long journeys from batteries alone remains a weight burden for him. Refueling with hydrogen is not only faster, it also enables lighter vehicles.
Nikkaku sees commercial vehicles such as buses or trucks as the first area of application. For cars, he expects the triumph of hydrogen hybrids, which combine a relatively small battery with a fuel cell. They could maybe drive 100 kilometers purely on electricity, even if the hydrogen in the tank is running low.
For the Japanese, more electrified cars mean higher sales opportunities. Because weight reduction through lightweight construction is becoming more important so that the cars can continue to drive. However, the carbon fiber business has developed more slowly than Toray originally hoped.
Because until now it has not only taken significantly longer to manufacture components from carbon fiber composites than from steel. At the same time, they were more expensive. BMW’s first electric cars ready for mass production built a lot of the light but strong building material. Just didn’t help with sales.
Nikkaku therefore expects electric cars to continue to be built primarily from steel and aluminum for the time being, while its products will penetrate the market via the premium models. “I think this will take time.”
Toray relies on hydrogen – and Germany
But he also senses growth in other components, especially in Europe: Toray has built a research center in Munich. In Hungary, the group is expanding its production of separators for car batteries as well as carbon fibers and synthetic resins. “But we are also seeing growth in fuel cell vehicles,” said Nikkaku. And Germany is one of the mainstays of the Japanese.
In 2015, Toray bought Solvicore, a small developer of membranes for fuel cells, and renamed it Greenerity. Toray now wants to ramp up production. “If things go well, we will double or triple the capacity,” announced Nikkaku.
But it is not a sure-fire success that Germany will become Toray’s mainstay in the hydrogen economy. Nikkaku sees a rival: China. Until a few years ago, the government there relied on electric cars. “But now there is a big change,” said the Japanese.
Hydrogen is suddenly booming there too – and Toray is spoiled for choice. “We plan to expand our capacities, but the question is where,” says Nikkaku. “We have to think carefully about whether Germany is the right place to expand production capacities.”
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