Automotive Coatings Market

By Tim Wright, Editor | March 15, 2010

China's engine heats up, ends U.S.'s reign as largest auto market

The global recession that is severely impacting North America and Western Europe is not affecting China's economy so harshly. While slowing its pace of development, it started to warm up in the second half of 2009 when the housing market and infrastructure constructions revived, along with increased demand in the automotive market. As a result, automotive coatings manufacturers are benefiting from the revived demand as strong car sales are driving an increase in project volume and spurring investment in the region despite tough financial times.

China's 2009 vehicle sales rose 46 percent making it the world's largest auto market, a title held by the U.S. since the Model T Ford went into production a century ago. The nation's vehicle sales rose to 13.6 million units, according to the China Association of Automobile Manufacturers. In the U.S., sales slumped 21 percent to 10.4 million vehicles, the fewest since 1982, according to Autodata Corp.

This year the trend of China's emerging dominance continues. In January its monthly auto sales overtook the U.S. for the first time. China's ascent in the global auto market has been hastened by the plunge in U.S. auto sales, which tumbled 37% in January to a 26-year low of 656,976 units.

Chinese vehicle sales also have cooled, but nowhere near as dramatically. In January, 735,000 vehicles were sold, down 14.4% from a monthly record 860,000 last January, according to the China Association of Automobile Manufacturers.

With its growing middle class and vast potential as a consumer market, China is vital for automakers such as General Motors (GM), Volkswagen and Toyota, who have targeted growing Chinese demand to compensate for slumping sales in the U.S. and Europe. China's vehicle ownership climbed to 51 million by the end of 2008 from one million in 1977.

GM, the biggest overseas automaker in China, said in January that its Chinese sales rose 67 percent last year to a record 1.83 million vehicles. Shanghai General Motors Co. sold 727,620 cars last year, an increase of 63 percent. GM said in December it will sell a one percent stake in Shanghai GM to partner SAIC Motor Corp., China's largest domestic automaker. The $84.5 million deal will leave GM with a 49 percent stake in the venture.

Sales at SAIC-GM-Wuling Automobile Co., China's largest minivan maker, rose 64 percent to 1.1 million vehicles, accounting for about 60 percent of GM's China sales. The minivans are sold for as little as $4,000 each.

Ford Motor Co. is spending $490 million on a third plant in China, while Volkswagen plans to invest 4 billion ($5.7 billion) in the country by 2011. Seoul-based Hyundai intends to build a third Chinese factory as it aims to boost local capacity by 50 percent to 900,000 vehicles a year by 2011.

Coatings Manufacturers continue to invest in emerging markets

The global automotive OEM coatings market was valued at $7.75 billion in 2009, a 12 percent drop from $8.79 billion the previous year, according to Chemark Consulting Group. As expected, sales of automotive coatings reflected auto sale trends in general. Auto OEM coatings sales in North America dropped in 2009 a whopping 22 percent to $1.75 billion from $2.25 the year before. The sales decline in Western Europe was even more steep at 28 percent to $1.66 billion from $2.3 billion in 2008. Japan's auto OEM coatings market represented the largest market in terms of dollars and managed to grow 1.2 percent in 2009 to $2.23 billion.

In the emerging markets, China in particular, the growing number of car owners is driving sustained future growth in the automotive coatings industry there. According to Chemark, in 2009 China's auto OEM coatings market grew 5.1 percent to $863 million. India is another emerging market of note, whose market grew six percent in 2009 to $292 million.

Leading multinational companies are expected to continue to strengthen their footholds in China through merger and acquisition as well as infrastructure expansion to improve distribution channels and to increase production capability.

In-line with this growth trend, PPG has continued to expand its presence in the country. In 2008, PPG acquired Bonny Coating-Made Co., Ltd., a private automotive coatings business in Guangzhou. PPG now owns all brands, the customer list, trademarks, technology and working capital of Bonny. The acquisition extends PPG's distribution network and customer base in China.

PPG also opened a $10 million, 40,000-square meter automotive coatings plant in Wuhu, China. PPG Coatings (Wuhu) Co., Ltd. will primarily serve the local market and one of the major reasons to invest in the new plant in Wuhu is to better support one of its key customers, Chery Automotive. Building a plant close to Chery helps to shorten lead-time and increase efficiencies as well as better support the market in Southern China.

PPG produces automotive coatings in China for customers such as General Motors, Mercedes-Benz, BMW, Dongfeng Peugeot Citroen, Chery and Hainan Mazda.

Furthering its commitment in China, PPG also last year broke ground on its first resin production facility on main land China at the Zhangjiagang Yangtze International Chemical Industrial Park, Jiangsu province. Resins are key raw materials for paints and coatings, and the Zhangjiagang plant will supply other PPG plants throughout China, as well as automotive customers.

The Zhangjiagang plant will primarily produce water-based electrodeposition resins, which provide a more environmentally responsible alternative to traditional resin products for use in automotive and general industrial coatings. The plant will span 60,000 square meters and initial production capacity will be 27,000 metric tons. The plant is scheduled to begin operation in early 2011.

PPG said the facility will be "a model plant in Asia" in terms of its environmental features, and it will incorporate many of PPG's "green" building materials, such as low-volatile organic compound (low-VOC) coatings and low-emissivity glass.

Valspar recently expanded its global automotive color operations by opening a color technology center in Shunde, China. Establishing a color technology center in this location enables Valspar to offer more service options to its automotive customers in Asia Pacific and Australia. The center is designed to increase the quantity of available colors for automotive customers while at the same time ensuring that common technology, methods and procedures are being practiced. The center plans to develop 6,000 colors the first year with plans to grow to a capacity of 9,000 colors per year. The center includes employees skilled as colorists, sprayers and color information experts. The new color technology center will also support global color development projects for Valspar's automotive refinish brands including De Beer and Valspar Refinish.

A new DuPont laboratory and manufacturing facilities in China are accelerating the adoption of coatings with improved environmental performance by Chinese automakers. DuPont's technical center, located in Shanghai, and the manufacturing operations in Changchun allow nearby DuPont scientists to respond to local customers' needs quickly and efficiently. Shanghai General Motors uses advanced DuPont finishes, made in China, on its Cruze model.

As an example, the new Shanghai General Motors plant at Shenyang is located just west of the DuPont Changchun plant, and will use the DuPont water-based coatings produced at that facility. Shanghai General Motors is a joint venture between General Motors and the Shanghai Automotive Industry Corporation. The site has an annual capacity of 150,000 cars, and was not affected by the General Motors bankruptcy, which included only North American operations.

AkzoNobel inaugurated a new Powder Coatings Technology Centre in Ningbo, Zhejiang province. This R&D center has a state-of-the-art laboratory and will have an initial team of 20 scientists and technicians organized in centers of expertise for the strategic market sectors. The new facility is located at the existing AkzoNobel powder coatings manufacturing site in Ningbo. All the centers of expertise-automotive, architectural, furniture, domestic appliance, IT and general industrial-and their corresponding marketing teams will be located at the center.

In China, Kansai Paint constructed an automotive coatings plant in Guangzhou, and has created a system to respond to the expanding automobile market in China for the area ranging from Shenyang and Tianjin in the north to the Guangzhou region in the south.