The auto refinish market: the auto refinish market is impacted by a variety of factors including VOC legislation, lack of market growth, increased complexity and collision center consolidation.
"Overall, the global automotive refinish market is stable to growing," said Danielle Ruess-Saltz, Axalta's Global Refinish spokesperson. "China's refinish market has shown continued growth in the high-end car segment, growing faster due to higher incomes and increased investment in the sector. The Indian refinish coating segment has also experienced double digit growth and we expect that our strong brands and diverse product range will attract and retain customers. We've also experienced strong growth in Latin America. In the U.S. and Canada, Western Europe, Australia and New Zealand we have seen an increased focus on paint efficiency as well as paint and materials profitability in body shops."
"As light vehicle OEMs continue to introduce new substrates and technology that require special equipment and formulations to repair, the complexity of the painting process increases," added Ruess-Saltz. "This trend has resulted in a greater focus on providing advanced technical training to our customers. Axalta is increasing the number and scope of training classes with more on-demand content so that when customers attend a class they get more booth time, which is practical experience."
While the challenges posed by decreasing accident rates, higher rate of 'totals' and lower miles driven continue to affect volume growth in the mature NAFTA and Western European markets, PPG said it experienced a robust uptick over the past year. "This is due in part to the rebounding economy, as well as the growing acceptance of our waterborne basecoat technology, especially in North American regions not yet governed by more stringent VOC regulations," said John Outcalt, PPG vice president, Global Refinish. "Asia, with its continued commercial growth and increased car pare, continues to be a bright spot for refinish. The China market is particularly strong as we are benefiting from double-digit growth there. Weaker ROW markets include Australia and Brazil where their economies continued to be challenged with growth."
David Brunori, president of Quest Automotive Products said the current state of the auto refinish is in flux, owing to a number of factors. "Change is touching all aspects of our industry at the global level," he said. "Technology, regulatory and the consolidation of manufacturers and distributors are accelerating at a pace we have never seen before. This change also creates opportunity for organizations who are nimble and willing to adapt when others cannot or won't."
Brunori said that this changes are ideal for Quest Automotive Products. "Our culture is entrepreneurial and we have global distribution and expertise that allows us to seize opportunities created by change. For example, in the European market, sentiment is shifting towards 'free to choose' brands, like Matrix and Prospray. Because of this, we've increased efforts in the EU and simultaneously improved the repairer's bottom line while significantly increasing our business in those areas. In North America, daily news outlets publish stories on consolidation and our industry is acclimating to change. This shift in mind set means that repairers are open to new solutions--QAP is that solution."
Brunori said there are five main trends in the North American refinish market: consolidation (at all levels), overcapacity, advanced materials, insurer compensation and the workforce.
"Consolidation: every day we hear about a new merger or acquisition," said Brunori. "The industry channels are evolving. Market constriction is happening throughout the entire supply chain, from manufacturers to distributors, and some organizations are integrating forward and backward. It is an interesting dynamic that we understand and embrace. Overcapacity: fewer collisions and increased 'totals' have spurred declines for nearly a decade. The result is overcapacity--there's not enough work to keep the estimated 40K shops alive. Our market is responding accordingly."
"Advanced Materials: from the 2015 Ford F-150's military-grade aluminum alloy to BMW's use of carbon fiber and extruded plastic, our vehicles are changing from chassis to electronics to finish," Brunori continued. "This means that shops need to train their technicians and invest in software and equipment to fix the newer vehicles. This also means that manufacturer's must provide solutions to these new challenges. Our teams of experienced formulators thrive in this environment and we are looking forward to the future. Insurer Compensation: the relationship between insurer and body shop is bittersweet at times. Shop profits are being squeezed by reduced compensation. QAP products reduce the impact of shrinking margins to the shop."
"Workforce: collision repair industry demographics show that our workforce is aging," Brunori concluded. "Attracting younger generations to our industry is difficult--it's not universally seen as desirable. Quest Automotive Products actively engages with the upcoming industry talent by reaching out to vocational schools and working with the Collision Repair Education Foundation. We do this two ways: 1) in-kind donations (this year we have already donated over $250,000) and 2) we created the Artists 4 Education awareness campaign (www.facebook.com/Artists4Education)."
Sustainability and the move to water-based technolgies continues to be a key driver for the auto refinish market.
"A common global trend is the need for increasingly sustainable coatings and productive refinish systems," said Ruess-Saltz. "Lower VOC coatings and, of course, waterborne are important for many customers. Industry consolidation in bodyshops and among distributors has continued in the U.S. and Canada. In Latin America we're using social media to reach more informed customers interested in improved productivity and color matching. There has also been a growing demand for increased professionalism among refinish technicians, both to improve profitability and to meet the technical specifications of more complex color formulations that, for example, are needed for composite materials. Axalta's 45 training centers are gearing up to meet this need."
PPG identified a number of key trends impacting the auto refinish market: the continuing impact of VOC legislation, lack of market growth, increased complexity, impact of accident avoidance technology and collision center consolidation.
"From a product chemistry perspective, VOC legislation, both now in effect and emerging, continues to make its impact on refinish and our customers across the globe," said Outcalt. "The critical challenge for us manufacturers is to provide the product systems that not only meet these sustainability requirements but also deliver on the high expectations for performance and color match, from collision shops, insurers and vehicle owners alike. We're seeing the proof that our effort is paying off with the fact that thousands of performance-minded collision centers in less strictly regulated regions have also adopted our waterborne basecoat as their go-to system. It's also interesting to note that we are now seeing an increased interest for green technology in China where air quality is a major concern. As the Chinese government considers measures to reduce solvent emissions, collision repair shops are readily transitioning to our waterborne technology."
Slow or no market growth is a compelling trend in developed countries. "Thus for an individual collision business to get a bigger share of the market requires competing effectively against the competition and offering an edge in performance. Since our success at PPG Refinish depends in large part upon the success of our customers, we continue to grow and develop our value added programs targeted at supporting collision centers in ways that can help them improve their business," said Jim Berkey director, MVP Business Solutions, PPG Automotive Refinish.
"In years to come the impact of technology and generational change will add some complexity to the repair process while slowly reducing the available work," Berkey added. "Thus shops will need to evolve with training, certifications and equipment to stay current and relevant. Competition will only get stronger for share and access to work. The Ford F150 represents the first high volume use of aluminum as OEMs continue the evolution of lightweight substrates driven by the need to meet CAFE standards. This evolving technology will continue to drive complexity."
"The debate goes on regarding the time frame and potential impact of accident avoidance technology in vehicles. Most agree that the combination of this technology coupled with the changes in driving habits within evolving generations will have a slow but steady negative impact on the volume of repair work available in the future and a lessening demand for refinishing products," Berkey added.
In North America, consolation of independent shops into national chains is happening at a record pace, and thus having significant impact in the marketplace. "This creates an interesting dynamic around performance within the shops," said Greg DeCamp, general manager, PPG Automotive Refinish. "Smaller independent businesses must create or maintain a performance advantage to stay competitive when going against a national footprint. The largest MSOs (multiple shop operations) face the challenge of ensuring shop-to-shop consistency in performance and service to retain the sources of work within the shops they acquire. Overall, this trend is sure to demand a lift in service and support from manufacturers and distributors as competition for work intensifies. Accordingly, PPG is strengthening its commitment to the independent distribution channel with programs and support that will ensure distributors are equipped with the necessary knowledge and resources to meet these changing demands."
Key Issues: profitability and quality
Customers continually strive to improve their businesses, through both profitability and quality, and need their coatings company to support that effort. "Axalta needs to offer a wide variety of the most productive coatings possible and employ technical experts that can quickly and efficiently train our refinish customers on the most up-to-date application techniques," said Ruess-Saltz. "It also means our sales force needs the know how to help improve shop profitability and operations. In the U.S., for example, we see the most sophisticated body shops pushing the envelope in cycle time. Our latest waterborne technologies--Cromax Pro, StandoBlue and StandoHyd Hi-Tec--are among the most productive waterborne technologies and are designed to meet that challenge with coverage in 1.5 coats. This greatly reduces time in the booth and energy usage."
Axalta also sees a huge interest in its Cromax Mosaic product, a low VOC solventborne paint with collision color capability. "In Latin America, our customers call increasingly for great color matching and improved productivity," said Ruess-Slatz. "To meet this demand we provide the latest color development technology and support tools, such as the Acquire Plus spectrophotometer, to reduce color matching cycle time."
"We spend a lot of time in the body shops and their number one concern is profitability--whether it means increasing the number of jobs, adding value added services, increasing productivity or improving the bottom line," said Brunori. "And what they tell us is that our products have helped them increase their productivity as well as their profitability. In some cases, shops are saving over 40 percent on their product spending ... these are real dollars that go straight to the bottom line. QAP is also investing heavily in field support staff. Our team of sales and technical professionals work hard every day at the shop level in educating and interacting where it matters most--the shop."
Auto refinish manufacturers must provide value-added support for increasing body shop performance.
"Intensifying competition combined with rising expectations from work providers focusing on turnaround time and customer satisfaction make performance the name of the game in collision repair today," said Berkey. "At PPG we're focusing on turning these challenges into opportunities through continued enhancement of our MVP Business Solutions programs that have helped hundreds of shops reduce their cycle time performance and raise their CSI performance."
PPG's Green Belt and White Belt training, along with Rapid Improvement Workshops, focus on cycle time throughput and educate the entire shop organization on process improvements that can be achieved through the practical application of Lean Six Sigma principles. These intense, hands-on courses are supported by a full offering of business development classes on critical fundamentals such as estimating, production, leadership, strategic planning and marketing.
"This year PPG rolled out Paint Shop Throughput, A Quick Changeover Approach--training to help shops gain critical capacity by increasing the throughput of the refinish area," said Berkey. "Data tells us that typical paint booth cycle time across the average collision center is almost two hours and should be closer to 70 minutes. By systematically eliminating non-value-added work and time that creeps into booth work, participating shops are gaining additional booth cycles in a given shift. Results have been phenomenal with huge increases in critical capacity by reducing waste."
Brunori sees future technologies focusing on three core areas: performance, sustainability and impact, and profitability.
"Within performance, our global technology team works alongside chemical engineers and top vendors to find new solutions to refinish problems," said Brunoir. "These solutions usually focus on performance and productivity enhancements as well as refinishing advanced substrates. Sustainability and impact guide us in finding more environmentally harmonious repair and refinish products that aim to reduce resources and minimize footprint and impact. Many of our new products are "Coast-2-Coast" technology--that means we proactively create coatings that meet the strictest air quality regulations, before they are mandated. Our goal is always to formulate coatings that provide solutions and with minimal change in application technique--intuitive application is key. And in today's global economy and fluctuating financial situations, we are keen to create products that make our customers more profitable. We are a Lean company and intentionally minimize overhead and added costs."
Nanotechnology and improved color capability are areas where refinish companies are focising their R&D efforts.
"The latest technologies being used for the auto refinish market include nanotechnology for improved color capability and enhanced digital color tools that allow improved color retrieval and accuracy for our customers," said Joanne Hardy, North America technology director at Axalta's Global Coatings Technology Center. "There are also advancements in high performance polymers that allow for improved rheology control to enhance appearance and support lower curing temperatures. These advances continue to allow production of ever more sustainable coating formulations, such as low-VOC and waterborne, that are more environmentally responsible and utilize less energy."
With OEMs using exterior colors as a key differentiator for their offerings, many highly chromatic, vibrant colors are being introduced that provide a candy-like appearance. "To match these translucent colors for refinish work, PPG is incorporating its ANDARO tint dispersion into our premium basecoat platforms," said Gareth Hughes, director of technology and global platform marketing, PPG Automotive Refinish. "This proprietary dispersion process uses nanotechnology in order to get the pigments down to the minuscule size required to achieve the transparent, dye-like appearance. A spectral gray undercoat system that designates a specific gray primer to partially show through the color coat and create the final color is used with these toners. This mirrors the similar process used by the OEMs, for an excellent color match."
Axalta has launched new products in a variety of regions globally. In Europe, Axalta recently launched a cutting-edge new generation clear coat technology, which combines excellent appearance with optimal drying attributes, either as forced drying in five minutes or as air-dry with zero energy consumption. This clear coat combines well with Axalta's recently launched waterborne basecoat system.
"In our Asia Pacific region, we launched our 'Ultra Productivity' system that features G3 Clear Coat and a new surfacer primer in China to help customers shorten the painting process and improve body shop productivity," said Ruess-Saltz. "In India, Cromax Pro was introduced to demonstrate our commitment to the market and our focus on producing more sustainable coatings. Cromax Pro features Axalta's latest waterborne technology, which helps to decrease customers' overall environmental footprint."
"In the U.S. our latest waterborne technologies--Cromax Pro, StandoBlue and StandoHyd Hi-Tec--are among the most productive waterborne technologies and meet that challenge with coverage in 1.5 coats to reduce booth time, painter time and booth energy usage," Ruess-Saltz added. "We're also excited about the strong interest in our Cromax Mosaic product, a low VOC solventborne paint with full collision color capability."
With the rapid adoption of our waterborne basecoat technology as a mainstream refinish system, PPG is focusing on upping overall performance of the primers and clears of our waterborne refinish systems. "For example we've just introduced clearcoats with new resin technology--products engineered to be exceptionally easy to apply, along with excellent gloss from the gun. EC530 En-V Performance Clearcoat and D8173 Premium UHS Clearcoat are the first of a series of new premium clears that we feel will be real game changers in reducing technician application errors and the need for rework," said Hughes.
Quest Automotive Products have launched a number of new products in 2014. Prospray, USC and Matrix brands have introduced over 50 new products in 2014. Every product is geared at improving profitability or productivity. Matrix's MPB-LV Low VOC Solvent basecoat provided shops with the first 'true' low VOC solvent system--Quest is a leader in solvent-based compliant technology. "Because of our innovative technology there is no need for new equipment or technique," Brunori added. "Compliance is a seamless transition. Instant success."
2014 and Beyond
Axalta has had significant expansion activity already this year. "Kicking the year off, in January we broke ground to construct additional waterborne capacity in Shanghai," said Ruess-Saltz. "In September we broke ground to expand our Wuppertal, Germany operations center, already our largest, to add production capacity for waterborne coatings. In Latin America, we just announced a $10.5 million investment to expand resin production in Mexico and we're continuing with the final leg of a three year expansion program in Brazil. Over the past 12 months we opened a new corporate headquarters in Philadelphia, new regional headquarters for North America and Asia Pacific and new training or office facilities in key markets like Spain (Barcelona) and the U.K. (Wellyn Garden City)."
In mid-2013, Quest Specialty Chemicals, Quest Automotive's parent company, acquired U.S. Chemical & Plastics and all of its brands, including Prospray Automotive Finishes. "This move made QAP the most diverse manufacturer in our industry--from body filler, to abrasives, to masking products to waterborne and solventborne color and refinish products--we have a brand and solution for every shop need," said Brunoir. "In 2014, we completed a major expansion by adding over 23,000 sq. ft. of warehousing and logistics capacity to better service our customers. More of the same is planned for 2015. We will continue to grow organically and through acquisitions, each time optimizing our business models, technology, logistics, information, marketing and manufacturing, to provide optimal efficiency which means the best products, the best people and the best service at the best price. We are excited about the future."
Kerry Pianoforte, Editor
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|Title Annotation:||FEATURE: Auto Refinish Market|
|Date:||Oct 1, 2014|
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