The Auto Refinish Market

By Kerry Pianoforte, Associate Editor | October 12, 2011

The auto refinish market faces a slow down in demand in North America and Western Europe, but emerging markets offer growth opportunities.

The automotive refinish market continues to face decreasing demand in North America and Western Europe. The economic downturn, increased safety features and a decrease in miles driven are contributing to weakening demand in these mature markets. However, in emerging markets such as Asia and Eastern Europe, newly affluent consumers are driving the auto refinish market forward.  

“Generally speaking the current market for auto refinish reflects the weakness of the global economy overall,” said John Outcalt, PPG vice president, global refinish. “As a result, developed countries—those encompassed by NAFTA and Europe—continue to experience flat to slightly declining volumes, specifically impacted by such factors as fewer miles being driven and the increased number of cash outs and vehicle totals.”

In emerging markets, such as Asia and Eastern Europe, the view is more positive despite the impact of the global economy. “This can be attributed to the growing affluence in ROW markets and the resultant increase in car parc,” Outcalt said.

Collisions have been trending down for years due to improved safety features on vehicles and better driver education, according to Vitor Margaronis, marketing director, BASF Automotive Refinish North America. “The recent economic slowdown has accelerated this trend by reducing the number of miles people are driving,” he said. “This has led to an overall slowdown in the collision repair industry causing the demand for repair paint to decline. In Asia and high growth parts of Eastern Europe, the opposite is true. Demand is increasing due to the increased number of vehicles being sold.”

In the mature markets there is an overcapacity of collision repair shops, which has led to a decreasing number of customers per shop. “There is also a consolidation trend where multiple shop operations (MSOs) continue to acquire smaller shops and increase their market share,” said Margaronis. “As their enterprises grow, they are better able to apply pressure on supplier pricing.”
Distributors are also consolidating, which also results in supplier pricing pressures, Margaronis said. Government regulations restricting products that emit potential air polluting substances continue to emerge in North America and Europe, resulting in revamped portfolios to meet these requirements.

This year has been challenging for the vehicle refinish market on a global level. “Supply chain disruptions and economic instability continue to put pressure on the customer base,” said David Brunori, executive vice president, general manager, Matrix System Automotive Finishes.

Raw material price pressure

Since late 2008, the auto refinish industry has experienced unprecedented increases in raw material costs. “These, coupled with consumer financial pressures, create a challenging environment from paint manufacturers down to the collision repair centers,” said Brunori. “These challenges will force paint manufacturers to become more efficient and expand into ROW markets. Increased demand for U.S.-based auto refinish coatings worldwide continues. Matrix System will continue to expand into these markets.”

Raw material price increases will continue to be a challenge for refinish manufacturers moving forward. “Raw material price increases, sales controls on key materials and an occasional force majeure will continue to create a challenging environment to maintain price points and ensure product is delivered to the end user on time,” said Brunori.

Distribution consolidation will continue which will put pressure on smaller family-owned organizations that have been selling auto refinish paints for generations, says Brunori. “This trend will not slow down anytime soon,” he said.

Matrix System has grown from a small start up paint company to a well respected competitor in the auto refinish industry. “Our company has grown tremendously over the last 18 years because of our relationships with the small distributors and body shops,” Brunori said. “We are committed to this industry and strive to find answers to the challenges that are presented to our team.”

Innovation is the key to growth

Companies must constantly innovate in order to remain competitive in such a challenging market. Environmental legislation has been one of the driving forces for innovation in the auto refinish market.

“On the environmental side, more stringent VOC legislation governing refinish products, supported by good corporate stewardship, is incentivizing the industry to develop and promote greener, more sustainable technologies, such as waterborne basecoats,” said Outcalt. “Given that a major shift in refinish technology is a fairly rare occurrence, the challenge is to educate customers and assist them in making a smooth transition to these new technologies without a disruption in productivity or a decrease in product performance.”

PPG is meeting the technology requirements of various legislative challenges while improving product performance in almost all cases, says Outcalt. “The fact that our waterborne basecoat technology represents a significant advance over solvent-based systems in terms of ease of use, color match and performance, has made it easier to overcome general skepticism end users have for VOC-compliant products,” he said. “For example, in Florida, a state where stricter legislation has yet to be enacted, one of our key distributors predicts 80 percent of his collision repair customers will voluntarily make the switch over to PPG waterborne systems in the next couple of years.”

In addition, PPG’s comprehensive “Convert with Confidence” program for shop owners, managers and technicians is proving successful in providing the necessary training and planning guidance required for a successful transition.

Price point, product quality, support systems and expanded distribution are the basics behind what an auto refinish customer has expected for many years, according to Brunori. “Matrix System was founded on the premise of offering customers high quality products at a fair price back in 1983. Our company was fortunate to be on the front end of the ‘alternative choice’ growth curve addressing a need the market was demanding.”

Economic conditions today have fueled the desire for price point relief at the shop level creating opportunities for small start up companies to enter the refinish market. “Matrix System will continue offering technologies and product platforms to help ease the profitability challenges our customers are struggling with,” Brunori said. “Two tiers of products—Matrix branded and Refinish Solutions—will continue to be the drivers for the organization. Our sales and technical staff continue to grow across the United States with basic orders: ‘stay in front of the customer’. Matrix distribution partners are the best in the industry and can get product in the hands of our customer typically within one-day. These are the issues today in the auto refinish industry and we are determined to address these needs.”

Reducing cycle time

Reducing cycle time from repair order to vehicle delivery is rapidly becoming the key focus of competitive collision centers and a major differentiating factor for retaining new business and gaining new business. “Improving cycle time is powerful,” said Jim Berkey, director, business solutions group, PPG Automotive Refinish. “It directly translates to a more satisfying repair experience for the policyholder but in turn it benefits the shop by reducing costs and making better utilization of fixed assets. The same performance that attracts new business allows the shop to flow additional business through the same fixed assets.”

Reducing cycle time requires a comprehensive approach including a critical look at existing processes from start to finish throughout the collision center. “This requires that the collision center organizations move beyond the traditional skill sets involved with repairing a vehicle and develop skill sets in rebuilding more competitive processes,” said Berkey continued. “With the most comprehensive set of Lean for Collision programs available, PPG is providing the required training, tool sets and onsite support required for an organization to move from thinking about Lean processes to implementing Lean processes.”

Just as important, PPG has developed faster, more accurate color-matching tools, and faster dry coatings to speed refinishing times. Along the same line, utilizing the latest in color matching software and tools is important.

“The ability to avoid ‘re-dos’ and quickly access the right color formula that accurately matches the customer’s vehicle the first time out is critical to cycle time performance,” said Mary Park, director, global color, PPG Automotive Refinish. “Over the past few years PPG has invested much of its global resources to deliver ‘right first time’ matches.”

These efforts have contributed to PPG’s new, revamped PaintManager color software program that incorporates an innovative RapidMatch workflow process that can also make use of a new, advanced spectrophotometer.

“These innovations set a new benchmark for taking accurate readings of a vehicle’s actual color,” said Park. “We’ve also invested extensive effort in providing color matching tools specifically for our waterborne basecoat systems. For example, we provide our waterborne users with a comprehensive deck of color chips, each sprayed with our actual waterborne refinish paint. So when a chip is paired to match the customer’s vehicle, customers can count on getting that exact color after it is mixed and applied.”

How fast a refinish system works has long been a factor of concern for collision centers. “Given the increased emphasis on cycle time performance this criterion becomes even more important today,” said Gareth Hughes, director of technology and global platform marketing, PPG Automotive Refinish. “Our coatings R&D team is continually looking at ways to speed dry times of our products.”

Advancing technology

When considering automotive refinish coatings, durability is the by far the most important factor. Fast-curing scratch resistant, self-healing clearcoats are becoming more widely used. “These clearcoats better resist car wash scratches and help cars keep that brand new look longer,” said Margaronis.

Existing products are constantly being tweaked to provide faster dry times and less energy consumption during the application process. There is also an ever-increasing usage of waterborne and lower VOC products in the auto refinish market. “Some of this is brought by new regulations or enforcement of old, but there are many progressive body shops that are ahead of the curve and marketing themselves as ‘green’ well before they are required to use lower VOC products,” said Margaronis.

BASF is bringing to market Fast Repair and No Bake Clearcoats that can be applied and cured without using high temperatures. This results in energy saving and increased throughput of small- to medium-sized repair jobs.

Matrix Systems has focused on delivering state-of-the-art waterborne and solventborne compliant basecoat systems. “Matrix System Aqualution waterborne basecoat was launched in California several years ago with great success,” said Brunori. “Our newest basecoat platform will be launched at NACE in October. MPB-LV is the only premium basecoat program that offers ‘prescription’ color match including all variant formulas.”

Matrix’s MPB-LV is supported by its proprietary Accushade formula retrieval software and the newly released Color Variant Deck. A Refinish Solutions version will be released in 2012.

PPG has launched a number of systems to meet the needs of the auto refinish market. “Regional preferences dictate the specific products and programs we introduce, yet one of our newest product initiatives we’re especially proud of is our all-waterborne, low-VOC paint system that has been introduced in the European marketplace,” said Hughes. “This complete waterborne system, comprised primarily of a primer, basecoat and clear, fulfills the two-fold demand to improve repair process performance and the quality of the work environment.”

PPG’s new ultra fast-drying clearcoat Deltron DC2000 in the United States is designed to improve repair performance in diverse repair environments. “This new clear now can be air dried as fast as it once took to bake a clearcoat finish just a few years ago,” said Hughes. “One obvious benefit is its ability to reduce the workload on the baking booth, and saving the energy to operate.”

PPG also recently launched PET (polyethylene terephthalate) primers in Germany. This new advance incorporates recycled plastic bottles into the resin systems and is part of PPG’s drive to develop environmentally sustainable products offering advantages over existing technology.
“In the near future we expect our ‘self-leveling’ primer technology to significantly reduce sanding times before and after applying an undercoat, thereby saving significant amount of labor and its associated costs,” said Hughes.

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