U.S. President Joseph Biden recently announced his administration has developed and promulgated $1 trillion in new federal regulations impacting U.S. companies and U.S. consumers in 2024.
Without delving into the many complexities of why these regulations were created, let’s examine where one or more of these regulations intersect the color industry value chain and its key customers in the automotive coatings industry and the auto manufacturing industry.
Color is used extensively inside and outside today’s automobile. It’s found in vinyl, plastics, and textiles throughout the interior. Color is a visible exterior feature, which consumers typically refer to as the color of the car. Color plays a significant role in consumer choice and behavior when it comes to purchasing vehicles.
Historically, American consumers purchase between 16 million to 18 million automobiles each year. This annual sales number dipped significantly in 2020 and has been slowly recovering since that year.
Automotive coatings is a major customer market for the color industry value chain. The value chain consists of pigments manufacturers (North American as well as global companies), pigments processors and converters, and plastics masterbatch companies. All these companies provide integral components of the raw materials supply chain for North American paints and coatings manufacturers and automobile manufacturing facilities in North America (USA, Canada, and Mexico).
Long-term economic stability and sustainability for the North American color industry value chain and its tens of thousands of employees and suppliers is linked to economic stability for automotive coatings manufacturers, automotive interior parts suppliers, and automotive manufacturing companies.
We’ve experienced a significant shift in the direction of federal agency regulations, as well as acceleration in the number of federal regulations promulgated annually. Significant business-focused regulations are being implemented by USEPA, Department of Labor, Department of Energy, Department of Transportation, and Securities & Exchange Commission. These regulations continue to increase annual operating costs for pigments manufacturers and processors/converters, coatings manufacturers, and automobile manufacturers.
New layers of federal regulations, added to existing federal regulations, have begun to accelerate annual compliance and operating costs throughout automotive industry supply chains, including the color industry.
Examples of recent regulations (2021-2024) are affecting automobile mileage, labor costs, automobile emissions, and energy sources. As manufacturing cost factors accelerate because of new federal regulations, consumers experienced significant increases in the cost of new automobiles. The average new vehicle purchase is $47,000 in 2024, as opposed to $38,000 in 2019.
Rising costs may continue to drive consumers away from purchasing new vehicles in future years. In 2023, approximately 15.5 million vehicles were sold in the USA, down from 16.9 million in 2019. If this downward trend in vehicle sales accelerates in 2024 and beyond, adverse economic impacts will reverberate across the automotive coatings industry and color industry value chain.
The color industry value chain is continually innovating, however, to meet automotive coatings and automobile manufacturing industries customer requirements for vehicles to demonstrate value and sustainability.
Biden administration regulations, mandating manufacturing of electric vehicles, has encouraged industry research to identify new business development opportunities for pigments manufacturers, pigments processors and converters, and plastics masterbatch companies.
Color industry companies are partnering with customers throughout the supply chain to meet technical requirements for new products required for the manufacture of electric vehicles. All this innovation has generated significant excitement and optimism, as evidenced by industry conversations at the 2024 American Coatings Show and the 2024 NPE.
It is not yet clear if new opportunities for development and manufacture of electric vehicles will provide long-term economic sustainability for the color industry value chain, but the industry remains optimistic.
The cost of purchasing a new electric vehicle is significantly higher than traditional internal combustion vehicles. In addition, the cost of manufacturing each electric vehicle results in a significant loss for an auto manufacturer. A recent Wall Street Journal article stated that Ford Motor Company has a net loss of $132,000 for every electric vehicle it sells. Earlier articles identified the net loss to Ford Motor Company at $156,000 per electric vehicle sold.
A wave of USEPA regulations promulgated in 2023 and 2024 are expected to result in significant manufacturing cost increases throughout US industries. Regulatory compliance costs will impact automotive coatings manufacturers, automobile manufacturers, and color industry value chain manufacturers.
These regulations may also result in significant disruptions to traditional industry supply chains and loss of current raw materials uses. When finalized, all these chemistry-related regulations could also impede or restrict development of electric vehicle manufacturing in the US.
Unless EPA modifies final regulations, by including targeted exemptions from compliance, significant color industry value chain technical and scientific innovations will have to be developed to meet more stringent raw material
regulatory restrictions.
CPMA, the North American trade association representing color industry value chain leaders, has launched its proactive Sustainability and Innovation Initiative, partly in response to business challenges created by new federal agency regulations described above. The initiative is designed to identify and implement long-term solutions in response to pressures exerted on automotive coatings and automotive manufacturing industries by regulators, legislators, NGOs, and consumers.
CPMA announced this industry Initiative in May 2024 at the American Coatings Show. Companies in the color industry value chain can learn more about how to become part of the Color Industry Value Chain Sustainability & Innovation Initiative at www.pigments.org.
The Color Pigments Manufacturers Association, Inc. (CPMA) is the only U.S. trade association representing color pigments manufacturers, intermediate suppliers, distributor companies and service providers in North America. Since it was formed in 1925, CPMA has been dedicated to identifying solutions to public policy challenges facing the color pigments industry. Today, CPMA serves as the recognized industry voice and expert on environmental, health, safety and trade issues, engaging government agencies and collaborating with industry stakeholders in shaping the future of the color pigments industry and its diverse markets. CPMA members gain insight into the latest legislation and regulations impacting their companies and products, receive sound guidance tools necessary for business compliance and learn about technical innovations necessary to meet customer expectations.
