DETROIT (Reuters) - Johnson Controls expects the number of vehicles built to allow "start-stop" technology will more than triple in five years as automakers worldwide seek better fuel efficiency.
Already included in some vehicles, start-stop allows a car's engine to shut off when the vehicle is at rest, for instance, at a stop light. The engine restarts when the accelerator pedal is pressed.
Shutting down the engine by this method can save 5 percent to 12 percent of fuel and polluting emissions in conventional gasoline-powered vehicles, Johnson Controls said.
Globally, start-stop will be used in 52 percent to 55 percent of new vehicles built in 2016, up from 8 percent in 2010, Johnson Controls told analysts at a meeting in Milwaukee, Wisconsin, where JCI is headquartered.
The U.S. auto parts supplier expects nearly 25 million vehicles will be built with the advanced batteries allowing start-stop in 2016, up from 7 million vehicles in 2011, executives said during an analyst meeting on Monday.
JCI's power solutions president, Alex Molinaroli, said overall start-stop battery sales will be 35 million within five years, including batteries not put into new vehicles.
JCI executives told analysts the advanced batteries will yield three times the margin of more conventional lead-acid batteries.
The expansion of start-stop technology is driving demand for newer batteries, called absorbed glass mat.
"In this competition, start-stop has gained share because consumers perceive real value from the application and are moving it forward up the adoption curve," Kim Metcalf-Kupres, vice president of global sales, marketing and strategy, told analysts at the meeting, which was webcast.
The company told analysts that it expects the power solutions segment of its business to gain market share to 13.6 to 13.8 percent this year, up from 12.9 percent in 2010, and revenue of $5.8 billion to $6 billion, up from $4.9 billion last year.
Brian Johnson, analyst with Barclays Capital, said the 25 million batteries in new vehicles by 2016 estimate by JCI is up from the company's earlier statements of 17 million.
Barclays also said on Monday that it is maintaining a 12-month stock price target for JCI of $52 per share.
JCI shares closed on Monday at $39.52, up 0.9 percent. Its highest share price in the past year was $42.53 about three months ago.
OHIO BATTERY PLANT
Also on Monday, JCI announced it would spend $138.5 million to convert its battery plant near Toledo in northwest Ohio to an absorbent glass mat factory, its first such U.S. plant.
The company said production of the start-stop batteries will begin in spring 2012.
Demand for vehicles that already use start-stop, such as Toyota Motor Co's Prius and Ford Motor Co's hybrid models, has outpaced expectations in Europe in recent years.
Johnson Controls forecast Monday that 70 percent of new cars in Europe will adopt start-stop by 2015, and Eric Mitchell, the executive in charge of power solutions in Europe, Middle East and Africa, called that estimate "conservative."
The expansion of start-stop systems will likely delay the widescale adoption of pure electric vehicles, because consumers can use a fuel-saving alternative without having to contend with different infrastructure, executives said.
In the United States, automakers are expected to increase the average fuel economy of their fleets to 35.5 miles per gallon by 2016. In 2012, the expected average fuel economy is 30.1 miles per gallon.
Internal combustion engines, which were used in 90 percent of vehicles built last year, will make up as much as 46 percent of the market in 2016, the company said.