Production localization and M&A help MNC strengthen leading market positions
The automotive refinish market in China is led by multinational companies, including PPG, AkzoNobel, Sherwin Williams, Nippon, etc. Domestic companies are holding the middle and low end market. The main reason is that the development history for the domestic automotive refinish industry is not long. To extend their leading positions, multinational companies acquired some local companies in recent years. Even so, there are still hundreds of brands in the market. The report predicted that market integration will continue in the future. Those companies who are lack of competition strength will be pushed out of the market.
Another trend in the automotive refinish market is localization of production of waterborne products. Sherwin Williams, Axalta, BASF, etc. have all established their automotive refinish production bases in China. PPG also started construction of phase 3 of its Tianjin plant, and the project is predicted to be completed in December 2019. Local production saves the cost for storage and transportation, speeding up the adoption of water borne refinish coatings in China.
4S shops drive adoption of water borne refinish coatings
The market share of waterborne automotive refinish coatings keeps their fast growing pace in China. In 2014 their share in China’s automotive refinish market was less than one percent, and in 2017 it was already more than three percent, though still low compared with developed countries. Western Europe led the development of waterborne automotive refinish coatings in the world, with the whole automotive refinish market controlled by waterborne varieties. In North America waterborne varieties has 40 percent market share.
Passing through the phases of market introduction and market development from 2008 to 2013, China’s waterborne automotive refinish coatings market has entered fast growing phase since 2014. Automotive OEM companies are driving the development of waterborne coatings in China. Right now the 4S shops of European brands such as BMW and Benz have all changed to waterborne coatings, and in 4S shops for Japanese brands, water borne varieties has 10-20 percent market share. On the contrary 4S shops for Korean and domestic brands were slow in adopting waterborne coatings. Tier 1 cities including Beijing, Shanghai and Shenzhen are leading the transition from solvent-based varieties to waterborne varieties because their local governments implemented strict environment protection regulations, followed by Tier 2 cities including Tianjin and Hangzhou.
Axalta recently launched in China their Pamake refinish coatings, a solvent based brand targeting small or independent vehicle painting shops and repairing centers. With lower cost and performance advantages in some areas, solvent based refinish coatings still holds most market shares in China, especially in tier 3 and tier 4 cities and remote areas.
Coatings companies begin to partner with renewable energy car brands.
At the 2018 Auto China show, 174 new energy cars were displayed, and 70 percent of them were domestic brands. Through March 2018, the number of new energy automobiles sold was 143 thousand – an increase of 154.3 percent over the same period of last year, and 102 thousand of those automobiles are pure electric modules. The fast change for automotive market landscape pushes automotive refinish companies to look for strategic partnership with new energy car brands, aiming for market advantage for the future. Recently PPG announced that its waterborne refinish coatings brand: Aquabase Plus has been certified by Nio, an EV brand which put its first module on sale recently.
Tthe lucrative refinish market also attracted new companies to join the competition. Kansai on March 28th launched its water refinish products: Retan WB Eco in Shanghai. Kansai has 34 percent share, and is ranked number one in Japan’s automotive refinish market. This event also marks Kansai’s formal introduction of their automotive refinish products into the China market. Before this, Kansai focused on OEM coatings business in the automotive market.
Development of waterborne formulas focuses on color coat
Color coat is the main source of VOC during painting jobs, and waterborne formulas can reduce up to 80 percent VOC comparing with solvent based formulas. High solid is currently the solution for reducing VOC for clear coat. On the contrary, long drying time and polishing properties, etc are still major obstacles for promoting water borne formulas for base and middle coat.
According to SAI, as China’s environment regulation is getting stricter, the market size for waterborne automotive refinish coatings grew by 15-20 percent from 2015-2016 to 2016-2017.
In the foreseeable future, waterborne coatings will continue their fast growth and grab more market shares from solvent-based coatings in the automotive refinish market. As market integration deepens under the pressure of environment regulations, fewer companies will be left in the market. Large leading multinational companies hold a better position with more mature technologies, closer cooperation with foreign automotive brands, multiple local production bases, etc.
Although aluminum and carbon fiber materials can be widely seen in 2018 Auto Show Beijing, car bodies made mainly of these new materials are rare, and repairing car bodies made of aluminum and carbon fiber currently need to replace parts instead of painting service. So right now new materials can only be considered a new phenomenon instead of a true threat. But for how long?