Wrapping your exhaust can improve the performance of an engine.
When exhaust gases leave the cylinder they start to loose temperature when they travel through the exhaust system. The loss of temperature slows the gases.
Keeping the heat in the exhaust means the gases travel faster.
The wrap is actually there to stop the exhaust from cooling. This keeps the temperature of the gases up, they are more "slippery". Less energy is require to force the gases out of the exhaust.
Here's a four branch manifold that's just been wrapped.
The wrap is held in place by stainless steel bands for security and longevity.
It sounds like a simple thing to do but it is quite time cosuming. The wrap must be tight from top to bottom and on every revolution around the pipes. As a side effect, hotter gases entering the air will be noisier!
Ideally, you should wrap your entire exhaust system to maintain the temperature until the gases reach the outside. But practically that's difficult as the underside of the car tends to get wet and so will the wrap.
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