Automotive Refinish Market

By Tim Wright | October 17, 2007

While the automotive refinish market is level to slightly declining in the mature markets of North America and Western Europe, Eastern Europe and Asia-Pacific are experiencing healthy growth.

The global market for automotive refinish coatings is currently valued at approximately $5.12 billion, according to Chemark Consulting. The Americas represents 31% of the market while Western Europe accounts for 33%, Asia Pacific 19%, rest of the world (ROW) markets 11%, Eastern Europe four percent and India two percent.

The current market demand in terms of volume for global automotive refinishes is approximately 138 million gallons. The Americas represents 28% of the demand, while Western Europe represents 29%, Asia Pacific 21%, ROW markets 14%, Eastern Europe five percent and India three percent.

Industry consultant and Coatings World contributor Phil Phillips of Chemark said the market remains heavily high-solids solvent-based two-component and base-clear for both cars and trucks. "Both in Western Europe and North America, EPA is starting to take notice of the larger job shop coaters' effluent tonnage and have started to place some pressure in certain urban areas.

"While the global market for refinished coatings will grow from $5 billion to $5.14 billion based on 2.7% mix growth globally, this market is one that will not see any appreciable exporting of the coating operation," Phillips continued. "Therefore not only is it a very good market to participate in from a profit aspect, bit it is 'protected' from exportation."

Refinish volume will continue to grow, on a global basis, as the total car parc expands over the next ten years, according to Bill Reynolds, director, strategic growth, global automotive refinish, PPG. "The U.S., Canada and Western Europe will continue to experience flat volumes as application efficiencies and accident rates continue their current trends," he said. "CEMTA (Central/Eastern Europe, Middle East, Turkey, Africa), Latin America and Asia Pacific will grow with the car parc and realize increased demand in the premium coatings segments."

While the auto refinish market is level to slightly declining in North America and Western Europe, Eastern Europe is showing a gradual increase as more vehicles are purchased and ultimately in need of repair, said Darlene Eilenberger, marketing director, BASF Automotive Refinish Solutions. "I believe Latin American markets, especially Mexico, are also showing moderate growth. Outside of Japan, where the market is flat, the Asian market is showing rapid growth, especially in China, where car sales are increasing exponentially, along with the subsequent need to repair. Australia and New Zealand are showing moderate growth, especially in the Australian fleet business. Africa is also showing growth, but outside of Egypt and South Africa volumes remain small."

Chris Wall, director of global marketing, Akzo Nobel Car Refinishes, said the world is splitting into three markets: mature markets, emerging markets and next generation markets. "In mature markets, the reduction in accident rates due to vehicle technology, speed/ traffic controls, and drinking and driving controls are leading to pressure on bodyshops for work/overcapacity," he said. "With this overcapacity, there is a steady reduction in the number of bodyshops. Additionally, the increase in efficient systems and application technology means that volumes are declining. However, the mature markets still have large vehicle parcs, and hence, remain very important for the refinish paint supplier.

"In emerging markets, a rapid increase in vehicle parc, inadequate roads and poor driver skills are contributing to a rapidly increasing number of accidents," Wall continued. "This means there is a need for bodyshops and paint. While growing strongly, emerging markets still do not represent the biggest piece of the pie for refinish companies. However, they are very important for the future.

There still remain many countries where the auto boom has not yet started but will come in due course."

Market Trends

VOC and other environmental legislation continue to be the driving force in the industry in the automotive refinish industry. A major challenge is to ensure shops are able to convert to compliant materials.

"The impact of environmental legislation in North America and the EU to reduce solvent emissions is driving the move to waterborne coatings and away from solvent-borne products," said Mary Kimbro, director of marketing, automotive refinish North America, PPG. "This changeover requires an education process involving collision repair centers' owners, managers and technicians on the proper application and equipment needed to make a smooth transition without sacrificing quality, productivity or loss of business.

In addition to environmental regulations, many other factors are contributing to the increasing complexity of automobile repair. "In the developed markets, an intensified 'customer service' focus on the part of insurance companies has placed increased attention on the turnaround time the collision repair center is able to deliver the vehicle back to the customer, without sacrificing repair quality or cost," Kimbro, continued. "As a result many shops must rethink and reengineer their entire door-to-door repair process in order reduce cycle time and increase throughput.

"Additionally, as the color spaces and OEMs compete for differentiation with the introduction of new pigments and metallics, refinish toners and color formulas must keep pace in order to ensure accurate color-matching," PPG said. "Color variances occurring at the factory is also creating the need for multiple variant formulas so the technician can select one that best matches the customer's vehicle. Also, the use of lighter-weight materials that contribute to increased fuel economy is, in several instances, requiring new products and processes to repair their paint finishes to its original condition and further ensure their durability."

Consolidation in the industry is also a challenge for paint manufacturers. "This includes all aspects of the business, from shop consolidation, to distribution and even consolidation of the insurance business, especially in Canada and Great Britain," said Eilenberger. "The influence of these larger players will affect the overall business significantly, in addition to tightening environmental legislation."

With improvements in vehicle technology, the average size of repairs is reducing. "The high repair costs for sophisticated vehicles means that the rate of write offs has increased greatly. Bodyshops and their suppliers need to respond to this changing profile of repairs," said Wall. "Additionally, the increase in insurance premiums and own pay limits mean that smaller repairs are also not being carried out-survey any supermarket car parc and you'll see many unrepaired scratches and damage. Existing bodyshops need to think of marketing strategies to attract these customers. One area of success is the provision of rapid repair facilities, especially in OEM dealerships but also at quick service providers. Independent crash repairers need to develop strategies for this type of repair market."

Addressing Customer Concerns

Color accuracy, application efficiency, reduced repair cycle time, compliancy and technical service continue to increase in importance as well as the concern for the shortage of technicians properly trained in the use of refinish coatings, according to PPG's Kimbro. "In the area of color accuracy, we have introduced new toners and A-Chromatic undercoats to our premium coatings systems to better align with OEM offerings. In addition, we've expanded our global color match network where our color experts are developing some 10,000 new formulas a year," he said

Enhancements to PPG's color chip variant decks and production color books are also aimed at delivering improved color alignment. "To assist our customers in their efforts to reduce repair cycle time we've upgraded and expanded a series of business development classes that teach best practices to collision center owners and managers at PPG training centers," he said. "In addition, our MVP Throughput Performance Solutions team has developed a comprehensive initiative designed to apply the proven manufacturing principles of Lean Six Sigma and the Theory of Constraints to the collision repair process and arm owners and managers with practical ways to improve their shop's throughput and quality at a lower cost."

To address the technician shortage issue, PPG is becoming increasingly involved with vocational schools to provide technician training and has recently opened up its Painter Certification training to students, which previously was only available to professionals.

The most critical area in automotive refinish is the quality and ease of retrieval of the color match, according to Paul Marshall, technical manager of BASF's color lab. "BASF's Color-Max system addresses this area by allowing the customer to quickly select and view a real sprayed-out panel of the color match before having to mix any paint," he said. "This greatly reduces the cycle time for color selection, adding to the body shop's productivity and profitability."

Many auto repairers are looking for assistance in marketing themselves to insurers, said Mike Bisig, manager, E-business development. "BASF is deploying tools, training and services that shops utilize in promoting their businesses and building relationships with insurance customers."

Akzo Nobel's Wall agreed that the key issue is insurance companies and how to work successfully for and with them, not against them. "They are the customer. They pay the bills and therefore deserve good service. The bodyshop as a supplier can only survive if it meets its customers' needs with a cost and capital structure that is attractive to the owner or shareholders of the bodyshop," he said. "This isn't mutually exclusive and there are many great examples of successful repair businesses growing strongly even in the mature markets. The winning formula is usually embracing the customers' real needs, providing excellent service and reliability, and hence, increasing trust. Trust lowers costs, distrust increasing costs. Repeatable repair processes increase trust (and quality) and feature strongly with the winners in the industry. Repeatability without waste is the cornerstone of the Toyota Production System and these concepts are finding increasing application in the car refinish industry."

Additionally, Wall said faster and more efficient products and color support all serve to help the bodyshop become more efficient, and hence, attractive to the insurance company or other work providers. "On the other side of the coin there have been some overly-severe challenges placed on bodyshops by the insurers and we believe that improving communication and understanding between the parties is important and as part of our Continuing Education with Acoat Selected we train insurance industry agents to better understand the issues facing the crash repairer," he said.

Technology Hurdles

Starting in California, lower VOC regulations are forcing body shops to transition to waterborne basecoats and this is expected to grow in the North American region, particularly in Canada, according to Tony Dyach, Glasurit product manager, BASF.

Along with continuing to reduce VOCs, helping shops maintain their profitability is a major challenge, said BASF's Eilenberger. "Not only is faster technology necessary, but step-skipping procedures such as direct-to-metal basecoat, and universal adhesion promoters are vital to ensure the success of our customers."

The next big leap will come with IT in the body shop-in the paint shop to be more precise, according to Wall. "Despite the availability of Internet connections in the front office, the paint shop is often still in the dark ages," he said. "There is so much great information available to the painter yet it is locked away."

On another note, Wall said reducing errors with color is a potential source of great savings. "We see spectrophotometers as another IT component on the increase," he said. "Affordable high performance three-angle devices are becoming more widely available. In addition, through its co-operation with BykGardner, Akzo Nobel has been able to help bring a six-angle spectrophotometer with inbuilt digital imaging onto the OEM market. This will come to the refinish market thereafter."

In addition, new technology communication possibilities are just around the corner, according to Wall. "They include car crash sensors in the car that send information by GPS on the place of the accident and details of the accident which can be used to calculate the damage and likely required parts and color code among other things," he said. "Other refinish technology include on the horizon include more UV cured products, more waterborne products such as high performance fillers and fast drying clearcoats."

On the Service Side

Paint companies have a vested interest in providing services and training that can support their customers' ability to compete successfully. "The consumer's insatiable demand for faster service and better quality at a lower cost will continue to place pressure on collision repair for continuous process improvement," said PPG's Reynolds.

Competition for repairs continues to increase, according to Bisig. "Repairers that are committed to maximizing a positive consumer experience will win repeat business and referrals well into the future," he said.

According to Eilenberger, service, especially in the training and education side, is becoming increasingly important. "Instruction on how to succeed with insurance companies, education on new legislation, how to be compliant with new legislation, and how to use these tools will continue to be a critical area of our business," she said.

The demand for services support continues strongly in the market, according to Wall. "We see customers hungry for relative performance data," he said. "Sikkens' e-benchmarking system is a big success in the market. Data is good but solutions to problems are even better.

"For individual body shops, co-operating in a network has many benefits," Wall continued. "We see a good growth in interest in our Sikkens Acoat Selected network. In North America, the Acoat offer has been strengthened significantly through the formation of the Verified Repairer Network, which offers a powerful data warehouse facility, insurer orientated metrics and a body shop finder facility for the car driver."

New Products & Technology

PPG recently advanced two new waterborne basecoats for use in North America and Europe-Envirobase High Performance and Aquabase Plus. These environmentally-compliant brands bring many features and benefits to the market including excellent color match, non-stir technology tinters as well ease of application and blending.

BASF has launched its VisionPLUS Dashboard, which allows collision repairers to monitor business performance in real time and identify opportunities for continuous improvement. The Dashboard automatically loads and processes data from the leading management systems, thus harnessing the power of business and repair data to take the repair shop to higher levels of performance.

In addition, BASF continues to launch VOC compliant waterborne technology in advance of the legislation. New undercoat and clearcoat developments to decrease cycle time and to meet new legislation are being developed and introduced in the market. Under the company's R-M brand it has launched Onyx HD waterborne basecoat. The Onyx product line has been on the market for more than ten years in Europe and is now available in the Californian market.

Akzo Nobel has upgraded its VOC compliant offer of clears in EMEA (Europe, the Middle East and Africa) and North America including Sikkens Autoclear Superior and Lesonal 420 clears. The company also upgraded its compliant primer offer with the fast drying Sikkens Autosurfacer Rapid and will upgrade its colored primer Colorbuild in the fourth quarter of this year.

Akzo also launched a clearcoat-Sikkens Autoclear UV-in selected markets and rolled out a waterborne basecoat-Sikkens Autowave-to North America and Asia.

Akzo Nobel also continues to invest in new facilities with a new production facility in Pontiac, MI and an extension to its R&D facility in Bangalore India.

Market Growth

Akzo Nobel Car Refinishes secures partnership with Great Wall

Akzo Nobel Car Refinishes (ANCR) has secured partnership with Great Wall Motor Co. Ltd, a major Chinese car manufacturer. ANCR has been chosen to be Great Wall's supplier for car refinishes products on a worldwide basis. As a committed partner, ANCR will provide a wide range of paint refinish products and related service to Great Wall's franchise dealers and bodyshops.

"Great Wall has developed quickly from a Chinese car maker to a worldwide automotive supplier. To attain the high quality and efficiency of refinishes in the after-sales market, we were looking for a reliable partner that could bring us both high quality products and dedicated services," said Liu Jun, responsible for international trade division at Great Wall.

Great Wall Motor is one of the biggest car exporters in China, exporting their products to 108 countries and regions.

BASF opens new refinish coatings training center in Shenyang

BASF Coatings has opened its BASF Refinish Competence Center Shenyang, a new training center in Shenyang, China, for the company's refinish coatings product users. The new training center will strengthen BASF Coatings' competencies in customer training services, and in providing enhanced refinish coatings solutions.

"I believe the opening of our new training center with international standards will have a great impact on China's refinish coatings industry," said Hans-Juergen Becker, the head of BASF Coatings International Trade (Shanghai) Co. Ltd. "As the after-sales network of global and local OEMs in the country is growing rapidly, establishing the new training center will allow us to further support the professional development of painters and bodyshop staff in China."

BASF Coatings currently has training centers in Kunshan, close to Shanghai, and Beijing, China.
In terms of future growth in the auto refinish market, opportunities can be realized through technologies that improve shop productivity as well as in the area of helping shops meet new, more stringent VOC regulations.

"Technology wise, in North America and Western Europe, having compliant yet productive products is very important," said BASF's Marshall. "Geographically, the Asian market, particularly China and India, are showing remarkable growth. BASF continues to grow in Asian markets by developing products suited to the regions and putting the necessary support structure in place with color laboratories now open in China, and next year in India."

Also discussing technology moving forward was Wall. "Large parts of the world are going low VOC, with waterborne basecoat as the central product," he said. "It is already in the EU and now North America starting in California and Canada. There is keen interest in other areas including LADCO (The Lake Michigan Air Directors Consortium) and OTC (Ozone Transport Commission) in Oregon and from other states. Japan has announced self imposed VOC reduction targets and Toyota has embraced this strongly. Korea has imposed regulations on the big cities from 2010. Waterborne basecoat technology is no longer a maybe, it's a global industry standard.

"Other approaches to lowering environmental impact of refinish products are in areas of low energy/fast curing, where UV looks to offer the most potential," Wall continued. "UV primers are becoming more widely available as are UV clearcoats, which offer flexible application and practical drying equipment."

In terms of geography, major growth in the emerging markets is being led by China, India, Russia and other EU countries. "In emerging markets, the majority of body shops are OEM dealerships. Very few are independent body shops. Also, these dealership shops are often part of big groups. These body shops contain state-of-the-art equipment and are repairing state-of-the-art cars," explained Wall. "There is a strong need for training, ranging from technical skills to body shop management skills. We continue to invest in training facilities and develop implementing training courses across the globe covering the full range of requirements. We co-operate closely with industry partners such as OEM and insurance companies, to develop the training programs they need. Additionally, we are investing in growing our local teams, through training and development and adding additional staff locally.

"On the health and safety side, the REACH regulations will challenge the industry with big pressure/disappearance of several materials, such as lead pigments, which remain today as the standard for building and repairing commercial vehicles in the red and yellow area," said Wall. "Also, getting away from Chrome (6) wash primers is becoming a major topic which will affect CV refinish and OEM CV segments."


PPG Custom Painted Harley Motorcycle Raffled to Raise Funds for SkillsUSA

A 2007 Dyna Super Glide Harley-Davidson motorcycle, custom painted with products donated by PPG Industries' automotive refinish business, was raffled during the SkillsUSA National Leadership and Skills Conference, June 18-24 in Kansas City, MO.

This 2007 Dyna Super Glide motorcycle by Harley-Davidson was raffled at the SkillsUSA National Leadership and Skills Conference to benefit SkillsUSA. The bike was donated by Harley-Davidson and custom painted by Justin Barnes of JB Grafix Custom Painting with products, donated by PPG Automotive Refinish, from the line of Vibrance Collection custom finishes by PPG.
The raffle was a fund-raiser for SkillsUSA, a national nonprofit organization serving teachers as well as high school and college students preparing for careers in trade, technical and skilled service occupations. The deluxe motorcycle was donated by Harley-Davidson and custom painted by Justin Barnes of JB Grafix, known for his appearances on the Discovery Channel's "American Chopper" television show.

Barnes designed the paint scheme and painted the chopper on-site in the collision repair contest area during the SkillsUSA Conference, in which nearly 14,000 people participated, including more than 5,000 career and technical education students. The design featured "O So Orange" paint by PPG formulated with the premium Global Refinish System. The job was clearcoated with the newest addition to the line of Vibrance Collection custom finishes, VC5200 Custom Clear. Introduced earlier this year, VC5200 is specially designed to complement PPG's custom offering and to achieve optimum performance when applying graphics.

Barnes has been using PPG products exclusively since 2004, when he painted the I-Robot bike Will Smith rode at the premiere of the film I Robot. "I like everything about PPG's products," Barnes said. "They are super durable, easy to apply, and when custom painting with Vibrance Collection custom finishes, you can create loads of different tones, colors and effects with a handful of products. PPG is always coming out with new products like the Hot Wheels Spectraflame paint line, which allow me to make my designs even more unique for my customers."

Barnes began painting racing helmets when he was 15 years old. He opened his business, JB Grafix Custom Painting, Inc., in Newburgh, NY, in 2001. His work has been featured on "American Chopper" and "Celebrity Build TV," as well as in Iron Horse, American Iron, Hot Rod Bikes and many other magazines. The shop specializes in custom airbrush painting, leafing, pinstriping, murals and lettering, and Barnes has created one-of-a-kind designs for stock motorcycles, choppers, custom cars, helmets, jet skis, guitars and, "just about anything paint will stick to," he said.

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