- Covestro, maker of hi-tech plastics for industrial applications, is tapping into consumer goods to offset a slump in demand from auto industry
Covestro AG, which produces hi-tech plastics for industrial applications, is looking to supply more of its materials to the growing consumer goods sector in China after its mainstay auto industry suffered a slump. The company is stepping up the development of products and services for devices such as smartphones and household robots, according to Holly Lei, president of Covestro unit in China. "The consumption upgrade habit is creating a new source of revenue growth" to shield the German group from the impact of a slowing economy, she said. "Our auto-related businesses have been affected by slumping car sales, but we now have a diversified market," Lei said in an interview. Evolving demand for better products and the penchant for frequent upgrades among Chinese consumers "have ushered in increasing demand for our products."
Covestro manufactures a wide range of lightweight plastic materials such as coating, lighting and steering wheel which are essential for energy-efficient vehicles. In the electronics sector, its materials are used in battery housings, and insulation, screens and light panels for examples.
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China's economy grew by 6 per cent in the third quarter, the slowest since records began in 1992, hurt by shrinking exports amid a trade war with the US. Auto sales in the world's second largest economy have fallen for 15th straight month through September, an industry association said. The industry, particularly in the early growth spurt of electric vehicle market, has been a prime source of sales for polymer producers like Covestro. However, China's decision to pull back subsidies for electric-car makers such like China Evergrande has since slammed the brakes on ambitious spending amid declining demand.
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For the future, Covestro has commercialised its polyurethane rotor blades for use in wind turbines, Lei said. That can be its new growth driver in the coming years, she added.
Covestro, a spin-off from German drug maker Bayer in 2015, had a 6 per cent year-on-year growth in sales volume in China in the first nine months this year, Lei said. With 3.1 billion euros of sales in 2018, China accounted for 21 per cent of its global sales.
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