DRIVING GROWTH GLOBALLY
An overview of the global automotive coatings. By Olga Menukhin, PRA World.
Development of light-weighting vehicles and the move to low-temperature curing are driving the coating technology advances. Vehicle manufacturers are exploring the use of a wide range of lightweight materials representing alternatives to traditional steel. However, no single lightweight material can replace steel as the largest component while a multi-material approach creates a different set of coating challenges.
PRA, a chemicals & coatings consultancy, estimates the global demand for automotive coatings to be over three million tonne (2.4 billion litre) in 2016 and the global market is expected to grow at 3.2% CAGR over the period from 2016 to 2021. According to the new Irfab Global Industrial Coatings Markets study, the Asia Pacific region represents the largest segment for consumption of automotive coatings in the world, accounting for more than 46% of global demand, 1.4 million tonne (1.1 billion litre) in 2016. In the five year period between 2016 and 2021, coatings demand is expected to increase at 2.3% CAGR in Europe. In the Americas region growth is expected to be 1.6% CAGR over the same period. In Asia Pacific, the rate of growth will be 4.6% CAGR. Regional distribution of coatings consumption varies within segments.
Coatings used on passenger cars and light commercial vehicles (LCV) represent the largest market for automotive coatings, accounting for 44% of the demand in the world. The eight leading national markets for automotive OEM coatings by size are China, Japan, United States, Germany, Mexico, India and South Korea. The global demand for these coatings is expected to grow at 3% CAGR over the period from 2016 to 2021.
There are a number of trends that have supported the demand for the automotive OEM coatings in the last two to three years. Replacement demand from households swapping their old vehicles, a decision that was postponed since the global recession supported new vehicle purchases in the period 2014 to 2016. Improvements in real household disposable income and employment growth continue to underpin vehicle purchases in developed countries, but after the recent surge, the demand is slowing down. Costs of financing a vehicle have been low in the developed countries. Low rates and cheaper fuel prices have helped first-hand and replacement purchases of vehicles. However, increases in interest rates, tighter car loan rules, or phasing out tax breaks are likely to curb affordability. In emerging markets, auto-related financing is still significantly lagging behind developed markets. It is expected that a low degree of vehicle ownership in emerging markets and the anticipated rise in household incomes will continue to support further growth of the global automotive industry in the medium term.
OEM COATINGS: ASIA PACIFIC ACCOUNTS FOR 45% OF WORLD’S DEMAND
Asia Pacific is the largest regional market for automotive OEM coatings in the world accounting for over 45% of world’s demand. China is a major market for car sales. Personal disposable income increased in China with a double digit growth rate in the period from 2010 to 2014, but annual income growth has slowed down and is estimated to be around 6-8% in 2015 and 2016. However the country is lagging behind the developed economies such as the United States, Germany and the UK in terms of mechanisms available for financing car purchases. Domestic car makers are trying to catch up with foreign manufacturers including BMW, Volkswagen and Toyota. Commercial banks are keen on entering the market space to compete against the automotive finance companies. Increased competition in automotive financing might continue supporting car production and sales, but raising the tax on purchases of new vehicles is expected to curb the automotive industry in 2017 and 2018. Trying to avoid the tax increase many households brought forward purchases of new vehicles which boosted the industry in 2016. In addition, sales of second-hand cars are expected to rise significantly in the next few years. China is the world’s biggest truck manufacturing location, producing more than 32% of heavy commercial vehicles built worldwide in 2016 and Chinese truck manufacturers are increasingly trying to establish their presence in other markets in Eastern Europe, South America and South East Asia. Being the world’s second most important region for automotive manufacturing after Asia Pacific, Europe produced close to 21.5 million passenger cars and LCVs in 2016 based on OICA data, an 8% annual increase over 2015. This positive trend is not expected to continue and growth in 2017 is projected to be lower. There are a number of long-term trends taking place in Europe that could contribute to lower car sales and production over time. The overall market is influenced by demographic factors where older people drive less while younger people care about the environmental impact of auto pollution. Also, auto makers including Mercedes and BMW have launched their own car-hailing, car-sharing and corporate fleet management services to fit in to the growing sharing economy. The United States continues to be the largest consuming market of the automotive OEM coatings for LCVs. The demand for coatings was supported by the record-high sales of over 10 million of LCVs in 2015 and 2016, but tighter financing terms, reduced incentives for car purchases, stabilising gasoline costs and competitively-priced used vehicles are likely to result in lower sales and production in 2017. However, US automakers have made a number of announcements of funds allocations and investments in production facilities in the country.
The use of coatings for new cars is driven by automotive design and coating process innovation. Automotive manufacturers are exploring materials used in car production to create multi-substrate designs and build lightweight cars. Painting is the most cost- and energy-intensive process as well as the largest environmental footprint in car manufacturing. Consequently, OEM manufacturers focus on simplifying the painting process, but without compromising quality. The sector’s large coatings and application equipment players are investing in R&D to reduce time and cost. PPG Industries, BASF and Axalta Coating Systems have developed compact paint processes that are becoming the process of choice for achieving future sustainability targets. The development of the compact painting process has accelerated in recent years and will increase further to 2021 supported by legislative pressure in certain countries in Europe, and increasingly in China, in addition to significant savings that can be made as a result. The main compact paint process technologies being developed and implemented are the 2-wet, 3-wet and B1:B2 processes, as well as other primer-less technologies such as the Eco-Concept for car and LCV painting.
According to the Irfab Global Industrial Coatings Markets study, it is expected that a number of automotive plants operating a waterborne compact paint process by 2021 will exceed one hundred. In most cases compact process involves the elimination of the primer surfacer layer, thus lowering overall coating consumption on a car. PRA’s Irfab study projects that the compact process is expected to grow by almost 12% CAGR between 2016 and 2021. Many paint shops in the world are more than 20 years old and therefore there will be an incentive to drive the change to more water-borne compact processes being established in the next ten years. The Irfab study estimates, that global consumption of waterborne coatings as the primer surfacer layer is forecast to decrease in the next five years as a result of the growing impact of compact process technology. This is going to be partially offset by the increase in demand of the special basecoat layer to achieve superior performance and aesthetics. It is expected that the use of paint application systems, using compact processing techniques, which reduce capital expenditures and operating costs will be explored in truck and bus production.
NEW CHALLENGES IN COATING PROCESSES
Vehicle manufacturers are exploring the use of a wide range of lightweight material alternatives to traditional steel and are looking to employ a multi-material approach to weight reduction. Some of the materials include aluminium, ultra-high strength steel (UHSS), magnesium, carbon fibre reinforced polymers, and various high-strength plastics. Coating vehicles made from multi-metal substrates presents significant challenges to both coating formulators and applicators. It is now driving innovation across the entire supply chain and vehicle coating process. The Irfab study reports that it is unlikely that there will be any substantial shift from the use of metal over the next five years for the majority of the automotive components. However, despite certain material constraints, the coatings industry expects a continued change from metals towards plastic and ‘smart’ materials over the next ten years.
Increasing the content of plastics on vehicles requires low-temperature cure coating systems. The industry is moving rapidly towards an 80°C cure process, and the paint process needs to be modified as a complete coating system to ensure that all coating layers are fully cured at this temperature. Several trials are taking place at major car producers this year with new technology. The technology of faster drying, low temperature curing, with very high gloss is emerging in truck and bus manufacturing as well.
In addition to colour design and a glossy surface, automotive coatings are required to present performance characteristics such as self-healing and self-cleaning or resistance/easy removal of dirt and solar-reflectve functionalities. The challenge for smart coatings is that all substrates must have the ability to be painted in mass quantities and retain quality over the lifetime of the vehicle.
Refinish formulations are becoming increasingly global. It is expected that the repainted areas of a private vehicle will have the same high quality finish as the original coating. This is also becoming a standard requirement insisted by insurance companies in many geographic regions. The refinish coatings market is one of the most regulated segments within the coatings industry as the principal products traditionally contained high levels of solvent. Initially introduced in Europe, now existing and emerging VOC legislation to reduce solvent emissions is making an impact on product technology requirements worldwide. OEM approval is a major feature in product customer acceptance particularly in Europe and North America and is now also an emerging trend in China. All the major refinish coatings suppliers have products approved by all the OEM manufacturers. PRA estimates the global automotive refinish market to grow at 2.5% CAGR to reach 890,000 tonne (702 million litre) by 2021.
There is an ongoing consolidation trend in mature markets at both the paint shop and distributor level. In addition, the long-term decline of independent and dealership repair facilities and growth of multiple shop operation (MSOs) is a major change in the industry.
Productivity improvements continue to influence coating suppliers to develop novel paint products that can help collision centres carry out their job faster without sacrificing performance. The emerging technologies include faster drying, low temperature curing clearcoats with very high gloss. The need to paint new materials used in the construction of the vehicle and investments in paint technology by the OEMs will continue to drive the development of new colour effects. Faster access to the latest OEM colour formulas and variants is another key trend and refinish suppliers employ a variety of colour matching tools to provide paint shops with access to the most up-to-date colour information. In summary, the refinish service landscape is changing driven by the relationship with insurance companies and OEMs, innovation in paint shop management and colour matching enabled by digital solutions.
Irfab Market Studies
Originally published in the European Coatings Journal 09 – 2017