It is estimated by the Institute of Coatings & Painting of the Chemical Industry and Engineering Society of China that the market of the OEM coatings for the passenger vehicles (including car, SUV and MPV, etc) is about 360 thousand tons in 2013, growing by around 15 percent over 2012 and which is about 50 percent of the whole passenger vehicle coatings market in China. And the OEM coatings market will grow by 7-8 percent annually in the future.
The “Walking out” Policy of the Chinese central government encourages domestic car producers to invest in other developing countries such as Brazil and Russia to build overseas manufacturing bases. The fierce competition in the local automobile market is another reason that Chinese automobile producers speed up their outbound investments. Those companies leading this trend include Geely, Chery and Great Wall Motor. And this trend has “ripple influence” on their coatings suppliers’ investment strategy as well. For example, BASF expanded their coatings capacity in Brazil in order to provide water-based coatings and electrophoresis coatings to Chery’s new local car factory there.
Car refinishes market will grow even faster
By the end of 2013 China has already 110 million passenger vehicles, 71.3 million out of which are cars. The big size of the existing car market will lead to fast growth of market demand for car refinishes in the following years. Some foreign companies such as AkzoNobel have already noticed the huge market potentials in China. Just two months ago, AkzoNobel started operations at its new invested vehicle refinishes plant in Changzhou, Jiangsu province, the company’s 30th manufacturing facility in the country. The new factory adds around 25 million liters of capacity for Sikkens, Lesonal and Prime vehicle refinishes products. It will strengthen the company’s position as one of the leading players in China’s vehicle refinishes and commercial vehicle OEM markets, building on its acquisition of Changzhou Prime Automotive Ltd. in 2010. Right now, the car refinishes market in China is controlled by foreign brands such as Dupont, PPG, AkzoNobel, Top Wave (joint venture), Sherwin Williams, Nippon and Noroo(Korea). The local brands are mainly located in Guangdong province and competing in price with relatively lower quality.
And the relatively high profitable refinishes market attracts new investments even when the economy is not growing as quickly as before. PPG, another major automotive coatings player in China, put also into production its resin plant in the middle of 2014 to provide high quality raw materials to its plants in Tianjin and Anhui. With a new production base under construction in Shanghai, Axalta Coating Systems announced recently that it will establish a joint venture with Shanghai KLT to produce automotive coatings in the future.
With the local municipal governments under huge public pressure to improvie air quality, the automotive coatings industry has been required to reduce VOC to a new level in recent two years. China’s first painting line for water-based coatings was put into operation in 2005. By the end of 2010, there were ten painting lines of water-based coatings. In 2015, it is estimated there will be over 50 painting lines to use water-based coatings in China. Although the water-based varieties have been increasingly applied in intermediate coatings and color coatings, the percentage is only around 30 percent, and it is estimated the percentage will double in four years.
The central government requires waterborne varieties to be used in the new paining lines build after 2012, a regulation which has speeded up the water-based coatings’ development in recent two years. And more pressure originated from public demand to improve the air quality in municipal cities such as Beijing, Shanghai and Guangzhou and Shenzhen has been felt by all the industries, and automotive industry is no exception. Guangdong has put into effect the limitation of VOC for the new build or existing painting lines no less than 20g per square meters. Tianjin has announced on July 31st that the since January 1, 2016 the VOC limitation for the painting line of the existing car producers should be less than 45g per square meters, and the VOC limitation for new build painting line should be less than 35g per square meters. Other car production centers such as Choangqing, Beijing and Shenzhen all have similar new regulations published or to be published recently.
But the VOC of the car body painting lines of most of the automotive producers in China is above 100g per square meters, and these painting lines were built at a time where there wasno strict regulation to limit VOC, so eliminating VOC can not happen overnight in China. And the Western automotive manufacturers are leading the way in the painting line transfer from solvent-based coatings to water-based coatings. Huachen BMW painting workshop, which was constructed by German Durr, has a VOC level at 2.3grams per square meters after putting into operation. These best practices and experience will be learned and shared by other companies and push the automotive coatings application to a new level in the future. With the efforts of the public, government and producers together, the automotive coatings market will soon become greener, and that’s for sure.