Latin America Reports

DuPont rebuilds Argentine automotive aftermarket

By Charles W. Thurston | April 5, 2006

A new distribution network project is helping to revitalize Argentina's automotive refinish market.

The Argentine automotive refinish market has a fresh look that will become even more familiar, thanks to a new Color Exacto distribution network project underway by E.I. DuPont de Nemours' Performance Coatings unit. With two dozen distribution centers open since the launch in 2005, the company hopes to have 64 open by year's end and have 100 open by 2007, according to Tomas Domaine, a DuPont market analyst based in Buenos Aires.

The Color Exacto network, which markets the Chroma and Duxone lines, is an attempt by DuPont to reposition itself in a market that was dependent on imported paints until it was decimated by a precipitous currency devaluation several years ago. When the peso slid from dollar parity to 3-to-1, auto refinishers switched to low-quality paints and many shops and formulators closed. According to Domaine, about 70% of the 7,800 body shops in the market are small refinishers.

What Color Exacto offers these businesses is a more exact just-in-time mixing of a higher-quality product than most shops are using, albeit with greater cost control built into the computer and bar code-based painting system.

"If a client comes back to us needing 100 grams or 15 grams of a paint that we have previously mixed, we can provide that amount rather than another entire liter," Domaine said.

The company's nation-wide paint registry captures not only the refinisher's information but also the vehicle identification number so that future paint matching is facilitated.

The current Argentine automotive refinishing market is estimated to be worth approximately $28 million per year, based on about 2.2 million gallons, serving a national automotive fleet of some 6.9 million vehicles. About a third of the national fleet is made up of vehicles that are between ten and 20 years old, according to government statistics. Another third of the fleet is older than 20 years. Statistics also indicate that there also are about five million unregistered vehicles in the country.

Domestic sales of new autos seem to be rising, which ultimately is good news for refinish suppliers like DuPont. In the two months ending in February, new car sales to dealers were up 27%, according to ADEFA, the national Argentine automotive industry association, in Buenos Aires. Sales for February alone amounted to 35,800 vehicles, and ADEFA projects that full-year 2006 domestic sales will be up by 10%. While OEM exports and vehicle production is also up in Argentina, the industry is operating at little over 50% of capacity.

A major limit to the growth of the aftermarket segment is the minimal penetration of complete coverage insurance, which now stands at about three percent of all vehicles, according to Domaine. "Only 70% of all vehicles carry any insurance," he said. "This has created a dire need for future regulatory reform."

Insurers now pay only $36 per painted piece, with each repair averaging about four pieces, which has created a low margin ceiling in the industry. Still, there are enough older vehicles in the Southern Cone region to make the DuPont push worthwhile.

Apart from the new network in Argentina, the company expects to begin building systems in Chile, Paraguay and Uruguay in the near future. The first Brazilian Color Exacto franchise may be launched in a few months.

While DuPont invested directly to open the first dozen "clean-line, minimalist look" centers in its Argentine network, owner-financed franchises are being utilized to build out the rest of the network.

"In one year, we expect to control 35-40% of the Argentine aftermarket," said Domaine.

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