What Are The Prospects For Johnson Controls’ Power Solutions Business?

by Trefis Team
+2.80%
Upside
64.44
Market
66.24
Trefis
JCI
Johnson Controls
Rate   |   votes   |   Share

Johnson Controls‘ (NYSE:JCI) Power Solutions business is the largest manufacturer of automotive batteries in the world, supplying ~146 million every year to OEMs (Original Equipment Manufacturers) and aftermarket retailers. The segment provides a wide range of lead acid and Lithium-ion battery technology which can power every type of vehicle — conventional, start-stop, micro hybrid, hybrid, and electric. About one-third of all new cars sold are fitted with a JCI battery and 74% of all aftermarket automotive batteries are made by the company. The segment has managed to grow substantially in recent years, driven by a demand for their AGM (Absorbent Glass Mat) batteries, which are used in vehicles with the start-stop technology. Approximately 24% of all batteries sold are paired with this start-stop system.

Power Solution FY2011-FY 2015

With growing urbanization and increasing regulation driving a technology shift in the automotive industry, the prospects for this segment look bright. The company expects the batteries with the start-stop technology to increase from 24% today to over 60% in 2020. A number of factors work in the favor of this technology. As stated by Lisa Bahash, group vice president and general manager Original Equipment of Johnson Controls, strong growth is expected from this technology as it requires minimal changes to the vehicles, and costs considerably less than battery systems in hybrid or electric cars. It is also the best solution to aid automotive manufacturers to meet environmental regulations.

Car Environmental Targets

These AGM batteries are also able to handle the higher usage that comes along with the new technical features being added to cars. The electrical vehicle boom, and the opportunities provided by the Chinese market, make this business poised for substantial growth in the future. According to Ray Shemanski, a vice president of Johnson Controls, about 40% of new vehicles in China will be fitted with the ‘start-stop’ technology by 2020, the same year when the Chinese government requires automakers to further lower the average fuel consumption, from the current 6.9 liters per 100 kilometers to 5 liters per 100 km. In order to accomplish this, carmakers have taken to developing electric vehicles or by adding the start-stop system. Currently, such a system, which reduces fuel use by as much as 8%, is present in only about 5% of vehicles. Start-stop technology automatically shuts off the engine when the vehicle is idle and restarts it when the driver’s foot leaves the brake pedal. During this time, the car’s electrical systems use energy from an advanced lead-acid battery (AGM) rather than the gas-powered engine, which results in fuel savings.

Power Solutions FY 2015-FY 2020 Power Solutions Segment Income

Have more questions on Johnson Controls? See the links below:

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Johnson Controls.
Rate   |   votes   |   Share

Comments

Name (Required)
Email (Required, but never displayed)
Be the first to comment!