Automotive Refinish Market

By Kerry Pianoforte | October 3, 2008

Consolidation of body shops, conversion to waterborne technologies and rising raw material costs are all factors impacting the automotive refinish market.

There are many factors influencing the automotive refinish market. Raw material prices and environmental legislation certainly play a major role. But other factors outside of the market's control also influence the automotive refinish market. These outside factors include auto insurance companies who are reducing the number of shops within their network, consolidation of body shops and lower accident rates.

"Globally, the vehicle refinish market is growing, where we see huge growth differences from country to country," said Ralf Schueler, global marketing manager, AkzoNobel Car Refinishes. "In the mature markets-Western Europe and North America in particular-the market is actually shrinking because of improvements in traffic and car safety and customers delaying repairs more than they did in the past. On the other hand, in emerging economies like the so-called BRIC countries-Brazil, Russia, India and China-there has been a tremendous boom in car ownership and corresponding growth in the car refinishes market."

"In North America we see a lot of shops slowing down, having less work or no work at all," said Darlene Eilenberger, director of marketing for BASF Coatings North America. "However, thriving shops continue to have sufficient work to maintain their current business models. Globally, we see that markets are also slow, but in most cases, oil prices have not affected the number of miles driven by consumers as is the case in the U.S. In this industry, the number of miles driven by consumers has a direct correlation with the amount of work available to collision repair shops."


The influence of insurance companies


Insurance companies are increasingly exhibiting more influence on the the automotive refinish market by implementing Direct Repair Programs (DRP). Body shops understandably have a desire to become involved in these programs since they result in more business. Insurance companies encourage these programs because it lowers their costs by reducing the number of body shops that they need to work with and by leveraging their purchasing power. In a recent report on the automotive refinish market, Chemark Consulting Group reported that more 80% of all shops in the U.S. participate in at least one DRP.

"One trend we see, especially in the higher segments, is a shift away from local customers-small independent operators-to global customers," said Schueler. "Compared to the past, vehicle manufacturers (OEMs) play a much more active role in vehicle refinishes activities through their dealer networks and approval systems. The majority of body shops used to be small independent operators, but these days the number of body shops linked to dealerships is increasing constantly."

The increased power of insurance companies has fueled the consolidation of the body shop industry. According to Chemark, the number of body shops in the U.S. has decreased by 31% from 1992-2006.

"The decision-makers in the industry-insurance companies and OEMs in particular-have played an important role in this trend," said Schueler. "For our premium brand Sikkens, it means that we need to provide a different sort of support than we have traditionally provided to smaller operators. Where they needed support on business management and finance, it's much more about providing process solutions to improve efficiency and throughput with these larger operators."

Conversion to waterborne

Dream Car Garage, a popular Speed Channel television show, recently restored BASF's 1957 Mercedes 300 SL Gullwing. BASF's 1957 300 SL is one of only 76 built in the Gullwing's last year of production. This particular Gullwing was originally shipped to Texas in 1957, and in the ensuing years went through a number of owners and color changes. For the past decade, the Gullwing has been kept in the lobby of BASF Coatings' Southfield, MI headquarters. To maintain the integrity of the restoration, the Gullwing was refinished in an original 1957 Mercedes color, using the waterborne Glasurit 90 line from BASF.���
Environmental concerns such as stricter environmental legislation and the move to more water-based technologies are also driving the market. In the U.S. most refinish coatings are high-solids solventborne. However, in Europe, in compliance with VOC regulations, the basecoats in use are mainly waterborne coatings. As environmental regulations continue to become more stringent manufacturers of automotive refinish coatings continue to explore waterborne and UV technologies.

"The market trend continues to be conversion to waterborne systems, spurred on by legislation or interest in new technology," said Eilenberger. "Another key market trend is fewer miles driven, because of gas prices, which has led to fewer accidents. Consumer trends toward smaller, more economical cars will mean smaller collision repairs."

"Moving forward I see oil prices stabilizing," said Eilenberger. "However, I believe U.S. consumers will stick with smaller vehicle choices, but will increase their number of miles driven back to 2005-2006 levels."

"For the next three to five years I believe we will continue to see some entrepreneurs leave the industry, but I expect the trend to stabilize very shortly," said Eilenberger. "For the next three-to-five years the industry will see change with regards to technology, insurance relationships, improved standards and growth of multi-shop operations (MSOs)."

According to Schueler, AkzoNobel is committed to sustainability and to reducing its environmental footprint. "We've always aimed to be a leader in producing environmentally friendly, safe, sustainable products, and so we view the trend as an opportunity rather than a threat, because we have products available that meet the tighter regulations," he added. "Besides lowering VOCs, we're constantly looking to ways to reduce or eliminate the use of other hazardous substances like lead and chromates, and to improve waste and energy management."

Rising raw material costs continue to put pressure on coatings manufacturers. "Of course the trend towards higher costs for raw materials puts pressure on us and drives up costs to our customers as well," Schueler continued. "That presents a serious challenge. We aim to respond to those pressures by finding alternative sources, by improving our efficiency in our production processes, and by improving the quality of the products."

Providing the tools to succeed

Manufacturers of automotive refinish coatings must deliver a quality product at a reasonable price. Providing value-added services such as training, technical support and tools is one-way coatings companies can make sure their customers and in turn, their customers' customers are satisfied.

"One of the key issues facing our customers is improving or maintaining profitability in the changing marketplace," said Eilenberger. "Understanding key indicators allows the shops to identify problems or issues within their work streams and immediately take corrective actions. BASF is helping collision repair shop owners in this area by holding more frequent Vision Plus University classes and offering additional Vision Plus activities online. Additionally, BASF has recently introduced the Vision Plus Dashboard, a real-time Key Performance Indicator scorecard that helps shop owners and managers monitor their shop's progress in real time."

"The first interest of our customers is the satisfaction of their own customers, driven by the right quality, delivered at the right time, for the right cost," said Schueler. "We help our customers achieve this goal by offering solutions in terms of products and processes. But it's not just about that. It's also about services, and helping our customers to get the greatest efficiency out of their shops. We have recently introduced Sikkens Process Centered Environment, a modular program which brings lean manufacturing concepts in a body shop environment."

Another key area is color. "Here again, it's not just about products like quality basecoats and topcoats, but also about supporting tools like color documentation and color measurement tools," said Schueler. "In color documentation, we now provide color chips that have the actual car paint on them. And earlier this year we introduced a major upgrade of our Automatchic color measuring tool. And we will introduce more interesting things in the coming months."

AkzoNobel is working on a number of new technologies. One of its latest developments is a UVA curable clearcoat. The UVA clearcoat helps save energy and speeds up the process. "We are also developing technologies that allow us to re-use raw materials," said Schueler. "In some cases, they may be retrieved from other paints, and in other cases, from other products. The idea is to extend the life cycle of raw materials, or even create a 'cradle to cradle' loop where the materials are not discarded as waste, but continuously re-used. These technologies have great promise for the future. Right now, we are using a certain percentage of renewable raw materials in our Sikkens Autoclear LV Superior, a high gloss, VOC-compliant clearcoat."

AkzoNobel is also working on a number of new technologies for the future. "One of those solutions, foil technology, has made amazing advances in recent years in terms of color accuracy and the range of colors available," said Schueler. "We have just made an exciting acquisition by buying Soliant LLC, a U.S.-based company that is technology leader in film coatings."

BASF is working on a number of technologies for the collision repair industry. "Technologies of the future will provide lower VOCs, scratch resistance, improved or quicker curing methods, fewer steps required to achieve results and sustainability," said Eilenberger. "Whether this is nanotechnology, UV technology, 'cool' coatings or another technology depends on the desired outcome."

Sherwin-Williams Automotive Finishes AWX System receives global approval from Volvo Car Corp.

The Volvo Car Corporation has announced Global Technical and Commercial approval of Sherwin-Williams Automotive Finishes' (SWAFC) AWX waterborne refinish system for use in all certified Volvo collision repair facilities around the world.

AWX is now listed in Volvo Car's new VIDA (Vehicle Information and Diagnostics for Aftermarket) system, as is previously approved SWAFC's Ultra 7000 basecoat/clearcoat system. SWAF recently introduced AWX, an innovative waterborne basecoat/clearcoat system that utilizes a proprietary resin system that allows it to perform as well as today's solventborne systems, the company reports.

"Volvo Cars is justifiably proud of its innovation, safety and environmentally responsible automotive developments like advanced air bags and SIPS side impact protection," said Craig Williams, SWAF director, OEM global marketing and service. "Sherwin-Williams is a market leader in environmentally and user-friendly products such as the AWX waterborne system. We also share that same commitment to quality as Volvo Cars and feel this approval demonstrates its confidence in our refinish materials, global reach and support."

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