David Savastano, Contributing Editor10.11.21
Keeping vehicles in great shape is a pastime for many people around the world. Whether it is making sure the car or truck is running at its peak performance or looking like it did (or even better) than the day it was bought, car, truck and motorcycle enthusiasts are always spending to make their vehicles better.
The COVID-19 pandemic impacted the auto refinish market in a variety of ways. Because of the lockdowns and concerns over the pandemic, people did a lot less driving. A lot less driving means a lot fewer accidents, and a lot fewer repairs. Key coatings manufacturers report that the automotive refinish coatings market has improved during 2021 as people return to the roads. Still, the raw material situation remains a major concern.
Patricia Morschel, VP, marketing and commercial operations, Global Refinish for Axalta, noted that across the board, the shortages in raw materials and global shipping delays have impacted each business differently. However, there was good news for Axalta in the auto refinish segment.
“Specific to the automotive refinish market, our business experienced solid sequential recovery in the first half of the year as a result of the continued global traffic recovery,” Morschel said. “While net sales within our refinish business are increasing, volumes remain below pre-pandemic levels due to variability in miles driven. We continue to expect ongoing demand improvement in refinish for the remainder of 2021 aligned with the pace of eased restrictions, as well as vaccinations and post-lockdown travel recovery globally.”
Joel Johnson, vice president, Automotive Refinish Coatings for BASF, noted that BASF is still navigating through challenging times but continuing to innovate where opportunities present themselves. Johnson said that BASF has seen a partial recovery since the beginning of the COVID-19 pandemic.
“While rush hour traffic remains down, this is the first time the market has seen an increase in gas consumption and miles driven since the pandemic began,” Johnson said. “This increase in miles driven is also what continues to drive the number of claims. The pandemic required shops to digitalize business processes in order to keep customers and employees safe. Those efforts have helped carry them through this difficult time and shown even greater performance while supporting the market’s continued recovery.
“Throughout this difficult situation, BASF has seen stronger than expected growth as we continue to help our customers out-perform the market and increase market leadership,” Johnson added. “The market is currently performing very well yet still recovering to reach pre-COVID-19 conditions.”
Chancey Hagerty, PPG vice president, global automotive refinish, observed that in 2021, market demand has been very mixed by region, as certain countries have still been heavily impacted by COVID-19.
“While there has been some recovery in China and other markets, most markets are still down compared to pre-pandemic conditions,” Hagerty added.
Hagerty noted that fewer people on the road in 2020 translated into fewer miles driven, fewer traffic accidents and an overall reduction in the need for collision services.
“As people are returning to the road for work and personal travel, automotive repair needs have increased,” Hagerty said. “The industry, and specifically manufacturers, are looking to this increase in vehicle usage as a sign of recovery.”
Patrick Bourguignon, director of AkzoNobel’s Automotive and Specialty Coatings business, said that AkzoNobel saw the automotive refinish market show further signs of recovery, but COVID-19 continues to present challenges for the industry along with pressures on raw material costs and global supply chains.
“We are, however, seeing a return to more normal traffic volumes, which is resulting in a normalization effect for the automotive refinish business,” added Bourguignon.
“In relation to COVID-19, we closely monitor the pandemic situation and take appropriate necessary measures in line with local government regulations to continue serving our customers and rapidly reduce costs, while at the same time keeping the organization intact and continue to be able to respond quickly to changes in end market demand,” Bourguignon noted.
Key Issues Facing Auto Refinish Customers
COVID-19 changed the way auto refinishers have been doing business. Even as travel figures are on the upswing, significant challenges persist, beginning with raw materials.
“One of the major effects the pandemic has had on the automotive refinish industry centers around supply – raw material availability is our biggest challenge and remains a barrier to full recovery,” Hagerty reported. “Reduced raw material availability has led to many supply chain challenges in every region of the world, and the entire industry is feeling the effects of unprecedented raw material inflation, which unfortunately shows no signs of slowing. Additionally, the pandemic has impacted day-to-day operations for many companies due to labor shortages and an ongoing battle for talent.
“Additionally, a number of global suppliers have been impacted by the weather events in February and subsequent loss of energy supplies in Texas and other southern U.S. states,” Hagerty observed. “As a result of these global supply chain disruptions, we continue to actively secure raw material supply and minimize the impact to our customers. At the same time, there has been a significant increase in demand in some markets we supply due to increased consumer demand for our paint products for residential renovations. These commodity supply disruptions alongside increased demand for many PPG products have been a core driver of elevated raw material cost inflation within the coatings industry.”
Morschel said that the challenges Axalta is experiencing currently are not unique to Axalta or the auto refinish industry.
“Many global companies are continuing to mitigate the impacts of shortages in raw materials, increasing costs in packaging, freight and logistics, and even unexpected inclement weather,” Morschel observed. “We are working actively to offset inflationary cost pressures using a combination of incremental pricing actions, as well as focusing on additional cost and productivity actions. These incremental pricing actions are necessary and critical to offset inflation costs of goods and materials that are critical to producing our products and services.”
Johnson noted that there has been less driving, and therefore fewer accidents and cars needing repainting. This has led auto refinishers to develop new approaches.
“Our customers remain resilient and ready to adapt to changes in the industry brought on by the COVID-19 pandemic,” Johnson said. “With fewer claims coming in, customers are seeking new ways to attract business while maximizing profitability. We’ve developed and launched some exciting and innovative solutions over the past year that will help ensure the long-term success of our customers.”
Bourguignon pointed out that a key metric in the Vehicle Refinish business is kilometers driven.
“In the short term, this has been massively impacted by COVID-19, which became clear with the significant reduction of vehicles on our roads during lockdown and shelter-in-place orders. As previously highlighted, we are seeing a return to more normal traffic volumes, which can result in a normalization effect for the Refinish industry,” Bourguignon added.
Hagerty observed that the landscape of the industry has changed because of the pandemic, and all parties must adapt to the evolving industry.
“Everyone from body shops to manufacturers has had to relearn customer buying behaviors,” Hagerty continued. “Throughout the pandemic, PPG has maintained close contact with our customers to understand their needs and adapt our services accordingly.”
Digital Tools
One area has been the increased need for more digital solutions, whether that be for education and communication or for managing and organizing body shop inventory and service capabilities.
“As our customers have raised these issues, PPG has responded with innovative ways to reach them and provide the tools they need,” Hagerty said. “For example, India was especially hard hit by the pandemic and the resurgence of the COVID-19 Delta variant. Our teams servicing India went above and beyond to help our customers through waves of shutdowns made even more difficult by a great disparity in access to technology throughout the region. Our teams developed 86 online training programs, carefully choosing platforms that would be accessible to customers with differing levels of access to technology. These customized training programs reached more than 1,000 people and 300 body shops in one month.”
“We see continued uptake and increased usage of digital tools and digital training in the market that helps support our customers during times of social distancing, limited international travel and continued cost pressures,” Bourguignon said.
With a renewed focus on the climate crisis, sustainability remains a key issue.
“Waterborne coatings from PPG satisfy current needs and look ahead to potential future restrictions on solvent emissions and use, while maintaining the superior performance our customers rely on,” said Hagerty.
Challenges Ahead
There are plenty of challenges ahead for the automotive refinish field. One important resource is the people who do the refinishing, and the workforce is shrinking.
“The refinish market is dealing with an aging workforce, a shortage of qualified technicians, and the disruption of the industry and rapid speed of transformation caused by new technologies,” Morschel noted. “Bodyshops are feeling increased pressure to invest in new technology and training, while managing all other areas of business.”
Hagerty said that the OEM shift towards increased usage of ADAS (advanced driver-assistance systems) and the growing adoption of electric vehicles will have a substantial impact on the automotive refinish industry.
“These trends bring about a new set of challenges for body shops and manufacturers,” Hagerty added. “Body shops must adhere to a strict set of OEM guidelines when performing repairs to retain proper ADAS functioning. This often adds cost and time to the repair process. Additionally, paint and coatings manufacturers are faced with the challenge of continuing to offer precise color matches, while also allowing for optimal ADAS performance. This balancing act is an issue plaguing the industry and one that manufacturers are racing to solve.
“PPG is continuing our R&D efforts to expand our line of available RADAR-compliant color matches and fine-tune our precise color matches,” Hagerty noted. “ADAS and future advanced technologies will be even more prevalent as consumer preference and legislation increases the adoption of electric vehicles and potentially even fully autonomous vehicles.”
Bourguignon observed that as OEMs increasingly adopt the use of Advanced Drive Assistance System (ADAS), bodyshops are consequently seeing an increase in the complexity and cost of repairs - with significant effort required to maintain and calibrate these systems in line with OEM specifications.
“Additionally, the drive to reduce overall CO2 emission of vehicles through weight reduction is resulting in the need for new repair coatings that can cope with lightweight, multi-substrate vehicles while ensuring radar and lidar safety systems are not impacted,” he added. A direct impact of ADAS is an expected trend towards smaller repairs Thatcham (https://www.thatcham.org) is predicting a 14% increase in cosmetic repairs by the end of 2020, and this will accelerate further towards 2025 as autonomy levels in vehicles increase.”
Bourguignon also reported that tightening of vehicle emission legislation, especially diesel particulates, has increased the number of battery and hybrid power trains in the general car population.
“Collision repairs for these alternative fuel systems need to be handled in a different way; specifically, curing of refinish coatings on these types of vehicles needs to be done at a much lower temperature to avoid permanent damage to battery systems,” he said.
“We are also seeing a strong move into cosmetic repair coming from allied automotive industries, rather than from traditional collision repair streams, where these activities can be aligned along with glass replacement, mechanical service, or specifically focused on serving the growing trend in automotive mobility services.
Johnson said that aside from the uncertainties stemming from the COVID-19 pandemic, macro trends reflect the following ongoing challenges in the market:
• Talent shortage: With the average technician age being 44 years old, the talent pool continues to shrink, leading to an ultra-competitive market.
• New technologies: Autonomous and electric vehicle technologies require precision to meet more complex OEM standards for safety and quality.
• Shop productivity: Efficient and proper repair processes, paired with reduced cycle times, are main drivers to sustain repairs via work-providers.
• Eco-effectiveness: Reduced emissions and elimination of re-work/waste are key targets to many green-conscience repair centers.
“We recognize the importance of proper and safe vehicle repair and understand how our OEM partners influence those repairs,” added Johnson. “Our response to these macro trends is making sure we constantly evolve our portfolio to create opportunities for our customers to grow and sustain these challenging times.”
New Developments
The auto refinish field is an important business, and coatings companies are expanding their presence worldwide. Auto refinish manufacturers have made a number of acquisitons and expansion projects in key regions.
In a major move, Axalta recently closed on the agreement to acquire U-POL, a leading manufacturer of repair and refinish products used primarily for automotive refinish and aftermarket protective applications. U-POL’s portfolio of automotive refinishing products and accessories includes fillers, coatings, aerosols, adhesives and paint related products as well as other automotive aftermarket protective coatings. “The acquisition is a strong strategic fit and will accelerate our growth in the refinish market with the addition of U-POL’s complementary product offerings,” Morschel said. “The combination of Axalta’s industry-leading global distribution network and innovation capabilities and U-POL’s expertise in aftermarket accessories and protective coatings will certainly benefit our global customers. We’re excited to welcome U-POL’s talented team into the Axalta family and look forward to what’s to come working together.”
Johnson noted that BASF is expanding its reach in China.
“We’ve invested in our coatings site located in Jiangmen, Guangdong Province in South China, by building a new automotive refinish coatings facility that is slated to begin production during the first half of 2022,” said Johnson. “The BASF team is working hard at adding and advancing our distributors and partners to expand our reach in the market. In addition to ensuring we have the most innovative facilities, BASF continues to invest and develop new technologies which provide our customers with information, training, and consultation virtually, reducing resource interruptions and keeping shops productive.”
“Aside from the COVID-19 effect, in the mid-term, we would expect that consolidation will increase, as more complex vehicles drive repairers toward investing in equipment needed to manage repairs and ensure OEM specifications are maintained,” Bourguignon observed. “Also, the drive to improve air quality will continue to result in challenges for coatings to help reduce emissions, especially as sustainability becomes another driving factor. At AkzoNobel, we are constantly looking at how we can make our production, products, tools and services more sustainable and digitally-friendly. For long-term perspectives, depending on the timeframe we are looking at, we could think about robot spraying, 3-D printing of parts or even nanotechnologies that enable self-repair of coatings systems.”
The COVID-19 pandemic impacted the auto refinish market in a variety of ways. Because of the lockdowns and concerns over the pandemic, people did a lot less driving. A lot less driving means a lot fewer accidents, and a lot fewer repairs. Key coatings manufacturers report that the automotive refinish coatings market has improved during 2021 as people return to the roads. Still, the raw material situation remains a major concern.
Patricia Morschel, VP, marketing and commercial operations, Global Refinish for Axalta, noted that across the board, the shortages in raw materials and global shipping delays have impacted each business differently. However, there was good news for Axalta in the auto refinish segment.
“Specific to the automotive refinish market, our business experienced solid sequential recovery in the first half of the year as a result of the continued global traffic recovery,” Morschel said. “While net sales within our refinish business are increasing, volumes remain below pre-pandemic levels due to variability in miles driven. We continue to expect ongoing demand improvement in refinish for the remainder of 2021 aligned with the pace of eased restrictions, as well as vaccinations and post-lockdown travel recovery globally.”
Joel Johnson, vice president, Automotive Refinish Coatings for BASF, noted that BASF is still navigating through challenging times but continuing to innovate where opportunities present themselves. Johnson said that BASF has seen a partial recovery since the beginning of the COVID-19 pandemic.
“While rush hour traffic remains down, this is the first time the market has seen an increase in gas consumption and miles driven since the pandemic began,” Johnson said. “This increase in miles driven is also what continues to drive the number of claims. The pandemic required shops to digitalize business processes in order to keep customers and employees safe. Those efforts have helped carry them through this difficult time and shown even greater performance while supporting the market’s continued recovery.
“Throughout this difficult situation, BASF has seen stronger than expected growth as we continue to help our customers out-perform the market and increase market leadership,” Johnson added. “The market is currently performing very well yet still recovering to reach pre-COVID-19 conditions.”
Chancey Hagerty, PPG vice president, global automotive refinish, observed that in 2021, market demand has been very mixed by region, as certain countries have still been heavily impacted by COVID-19.
“While there has been some recovery in China and other markets, most markets are still down compared to pre-pandemic conditions,” Hagerty added.
Hagerty noted that fewer people on the road in 2020 translated into fewer miles driven, fewer traffic accidents and an overall reduction in the need for collision services.
“As people are returning to the road for work and personal travel, automotive repair needs have increased,” Hagerty said. “The industry, and specifically manufacturers, are looking to this increase in vehicle usage as a sign of recovery.”
Patrick Bourguignon, director of AkzoNobel’s Automotive and Specialty Coatings business, said that AkzoNobel saw the automotive refinish market show further signs of recovery, but COVID-19 continues to present challenges for the industry along with pressures on raw material costs and global supply chains.
“We are, however, seeing a return to more normal traffic volumes, which is resulting in a normalization effect for the automotive refinish business,” added Bourguignon.
“In relation to COVID-19, we closely monitor the pandemic situation and take appropriate necessary measures in line with local government regulations to continue serving our customers and rapidly reduce costs, while at the same time keeping the organization intact and continue to be able to respond quickly to changes in end market demand,” Bourguignon noted.
Key Issues Facing Auto Refinish Customers
COVID-19 changed the way auto refinishers have been doing business. Even as travel figures are on the upswing, significant challenges persist, beginning with raw materials.
“One of the major effects the pandemic has had on the automotive refinish industry centers around supply – raw material availability is our biggest challenge and remains a barrier to full recovery,” Hagerty reported. “Reduced raw material availability has led to many supply chain challenges in every region of the world, and the entire industry is feeling the effects of unprecedented raw material inflation, which unfortunately shows no signs of slowing. Additionally, the pandemic has impacted day-to-day operations for many companies due to labor shortages and an ongoing battle for talent.
“Additionally, a number of global suppliers have been impacted by the weather events in February and subsequent loss of energy supplies in Texas and other southern U.S. states,” Hagerty observed. “As a result of these global supply chain disruptions, we continue to actively secure raw material supply and minimize the impact to our customers. At the same time, there has been a significant increase in demand in some markets we supply due to increased consumer demand for our paint products for residential renovations. These commodity supply disruptions alongside increased demand for many PPG products have been a core driver of elevated raw material cost inflation within the coatings industry.”
Morschel said that the challenges Axalta is experiencing currently are not unique to Axalta or the auto refinish industry.
“Many global companies are continuing to mitigate the impacts of shortages in raw materials, increasing costs in packaging, freight and logistics, and even unexpected inclement weather,” Morschel observed. “We are working actively to offset inflationary cost pressures using a combination of incremental pricing actions, as well as focusing on additional cost and productivity actions. These incremental pricing actions are necessary and critical to offset inflation costs of goods and materials that are critical to producing our products and services.”
Johnson noted that there has been less driving, and therefore fewer accidents and cars needing repainting. This has led auto refinishers to develop new approaches.
“Our customers remain resilient and ready to adapt to changes in the industry brought on by the COVID-19 pandemic,” Johnson said. “With fewer claims coming in, customers are seeking new ways to attract business while maximizing profitability. We’ve developed and launched some exciting and innovative solutions over the past year that will help ensure the long-term success of our customers.”
Bourguignon pointed out that a key metric in the Vehicle Refinish business is kilometers driven.
“In the short term, this has been massively impacted by COVID-19, which became clear with the significant reduction of vehicles on our roads during lockdown and shelter-in-place orders. As previously highlighted, we are seeing a return to more normal traffic volumes, which can result in a normalization effect for the Refinish industry,” Bourguignon added.
Hagerty observed that the landscape of the industry has changed because of the pandemic, and all parties must adapt to the evolving industry.
“Everyone from body shops to manufacturers has had to relearn customer buying behaviors,” Hagerty continued. “Throughout the pandemic, PPG has maintained close contact with our customers to understand their needs and adapt our services accordingly.”
Digital Tools
One area has been the increased need for more digital solutions, whether that be for education and communication or for managing and organizing body shop inventory and service capabilities.
“As our customers have raised these issues, PPG has responded with innovative ways to reach them and provide the tools they need,” Hagerty said. “For example, India was especially hard hit by the pandemic and the resurgence of the COVID-19 Delta variant. Our teams servicing India went above and beyond to help our customers through waves of shutdowns made even more difficult by a great disparity in access to technology throughout the region. Our teams developed 86 online training programs, carefully choosing platforms that would be accessible to customers with differing levels of access to technology. These customized training programs reached more than 1,000 people and 300 body shops in one month.”
“We see continued uptake and increased usage of digital tools and digital training in the market that helps support our customers during times of social distancing, limited international travel and continued cost pressures,” Bourguignon said.
With a renewed focus on the climate crisis, sustainability remains a key issue.
“Waterborne coatings from PPG satisfy current needs and look ahead to potential future restrictions on solvent emissions and use, while maintaining the superior performance our customers rely on,” said Hagerty.
Challenges Ahead
There are plenty of challenges ahead for the automotive refinish field. One important resource is the people who do the refinishing, and the workforce is shrinking.
“The refinish market is dealing with an aging workforce, a shortage of qualified technicians, and the disruption of the industry and rapid speed of transformation caused by new technologies,” Morschel noted. “Bodyshops are feeling increased pressure to invest in new technology and training, while managing all other areas of business.”
Hagerty said that the OEM shift towards increased usage of ADAS (advanced driver-assistance systems) and the growing adoption of electric vehicles will have a substantial impact on the automotive refinish industry.
“These trends bring about a new set of challenges for body shops and manufacturers,” Hagerty added. “Body shops must adhere to a strict set of OEM guidelines when performing repairs to retain proper ADAS functioning. This often adds cost and time to the repair process. Additionally, paint and coatings manufacturers are faced with the challenge of continuing to offer precise color matches, while also allowing for optimal ADAS performance. This balancing act is an issue plaguing the industry and one that manufacturers are racing to solve.
“PPG is continuing our R&D efforts to expand our line of available RADAR-compliant color matches and fine-tune our precise color matches,” Hagerty noted. “ADAS and future advanced technologies will be even more prevalent as consumer preference and legislation increases the adoption of electric vehicles and potentially even fully autonomous vehicles.”
Bourguignon observed that as OEMs increasingly adopt the use of Advanced Drive Assistance System (ADAS), bodyshops are consequently seeing an increase in the complexity and cost of repairs - with significant effort required to maintain and calibrate these systems in line with OEM specifications.
“Additionally, the drive to reduce overall CO2 emission of vehicles through weight reduction is resulting in the need for new repair coatings that can cope with lightweight, multi-substrate vehicles while ensuring radar and lidar safety systems are not impacted,” he added. A direct impact of ADAS is an expected trend towards smaller repairs Thatcham (https://www.thatcham.org) is predicting a 14% increase in cosmetic repairs by the end of 2020, and this will accelerate further towards 2025 as autonomy levels in vehicles increase.”
Bourguignon also reported that tightening of vehicle emission legislation, especially diesel particulates, has increased the number of battery and hybrid power trains in the general car population.
“Collision repairs for these alternative fuel systems need to be handled in a different way; specifically, curing of refinish coatings on these types of vehicles needs to be done at a much lower temperature to avoid permanent damage to battery systems,” he said.
“We are also seeing a strong move into cosmetic repair coming from allied automotive industries, rather than from traditional collision repair streams, where these activities can be aligned along with glass replacement, mechanical service, or specifically focused on serving the growing trend in automotive mobility services.
Johnson said that aside from the uncertainties stemming from the COVID-19 pandemic, macro trends reflect the following ongoing challenges in the market:
• Talent shortage: With the average technician age being 44 years old, the talent pool continues to shrink, leading to an ultra-competitive market.
• New technologies: Autonomous and electric vehicle technologies require precision to meet more complex OEM standards for safety and quality.
• Shop productivity: Efficient and proper repair processes, paired with reduced cycle times, are main drivers to sustain repairs via work-providers.
• Eco-effectiveness: Reduced emissions and elimination of re-work/waste are key targets to many green-conscience repair centers.
“We recognize the importance of proper and safe vehicle repair and understand how our OEM partners influence those repairs,” added Johnson. “Our response to these macro trends is making sure we constantly evolve our portfolio to create opportunities for our customers to grow and sustain these challenging times.”
New Developments
The auto refinish field is an important business, and coatings companies are expanding their presence worldwide. Auto refinish manufacturers have made a number of acquisitons and expansion projects in key regions.
In a major move, Axalta recently closed on the agreement to acquire U-POL, a leading manufacturer of repair and refinish products used primarily for automotive refinish and aftermarket protective applications. U-POL’s portfolio of automotive refinishing products and accessories includes fillers, coatings, aerosols, adhesives and paint related products as well as other automotive aftermarket protective coatings. “The acquisition is a strong strategic fit and will accelerate our growth in the refinish market with the addition of U-POL’s complementary product offerings,” Morschel said. “The combination of Axalta’s industry-leading global distribution network and innovation capabilities and U-POL’s expertise in aftermarket accessories and protective coatings will certainly benefit our global customers. We’re excited to welcome U-POL’s talented team into the Axalta family and look forward to what’s to come working together.”
Johnson noted that BASF is expanding its reach in China.
“We’ve invested in our coatings site located in Jiangmen, Guangdong Province in South China, by building a new automotive refinish coatings facility that is slated to begin production during the first half of 2022,” said Johnson. “The BASF team is working hard at adding and advancing our distributors and partners to expand our reach in the market. In addition to ensuring we have the most innovative facilities, BASF continues to invest and develop new technologies which provide our customers with information, training, and consultation virtually, reducing resource interruptions and keeping shops productive.”
“Aside from the COVID-19 effect, in the mid-term, we would expect that consolidation will increase, as more complex vehicles drive repairers toward investing in equipment needed to manage repairs and ensure OEM specifications are maintained,” Bourguignon observed. “Also, the drive to improve air quality will continue to result in challenges for coatings to help reduce emissions, especially as sustainability becomes another driving factor. At AkzoNobel, we are constantly looking at how we can make our production, products, tools and services more sustainable and digitally-friendly. For long-term perspectives, depending on the timeframe we are looking at, we could think about robot spraying, 3-D printing of parts or even nanotechnologies that enable self-repair of coatings systems.”
