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Automotive Coatings Set for Tune-up

Tuesday, June 12, 2012

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Sputtering and choking for five long years, the U.S. automotive coating industry is set to restart its engines and regain some ground in the next five, according to a new market report.

Vested in relatively few companies, the billion-dollar industry dipped by 0.7 percent in the period from 2007 to 2012, reports “Automotive Coatings Manufacturing in the US,” a new market research report from California-based IBISWorld, the world’s largest independent publisher of U.S. industry research.

Sinking Demand

Demand for new cars, as well as paint jobs and other glamor tweaks for older cars, has been hammered in recent years, said IBISWorld industry analyst Nima Samadi.

DuPont

Just four companies control nearly 81 percent of the automotive coatings market. U.S.-based DuPont and PPG are the largest.

Automakers had already been bruised by lower consumer demand for new vehicles when the U.S. recession struck in full force in 2008. In 2009, U.S. vehicle sales fell to historic lows, and motor vehicle manufacturing revenue plummeted, draining the demand for automotive coatings with it.

The body-shop industry, a major market for automotive coatings, also was hurt during the economic downturn as consumers deferred discretionary spending for luxury services like custom coatings, finishes and detailing.

The two trends dealt a severe blow to the niche industry, which has just 62 businesses employing about 2,200 people, IBISWorld reports.

‘Aggressive’ Rebound

However, motor vehicle manufacturing revenue “has rebounded aggressively from 2009 to 2012,” reinvigorating demand for automotive coatings, according to IBISWorld. A turnaround is expected in 2012, with growth of 3.5 percent lifting the automotive coatings industry to $1.3 billion.

In 2012, the top four firms are expected to consume nearly 81% of industry revenue. The industry's two largest companies, PPG and DuPont, are both based in the United States and generate a majority of their revenue domestically.

In addition, many companies are general chemical suppliers that produce numerous products across various segments and for multiple industries. Over the past decade, these companies have leveraged their economies of scale to acquire smaller coatings companies to incorporate into and expand their operations.

New Technology

In addition to the general thaw on consumer spending comes several new styles of automobile coatings that are tempting car buffs to resume their spending. The new coatings include those with ultraviolet light-cured finishes, nanotechnology-based products and, above all, waterborne coatings.

“Water-based coatings are the future of automotive coating technology and are expected to boost demand for coating customization, given their ease of use and lower potential cost once the technology is widely adopted,” the report says.

All of these factors bode well for the automotive coatings manufacturing industry, the report says. “Industry firms will experience growing demand for their products over the next five years, prompted by an expanding economy,” IBISWorld reports. “Revenue is expected to grow in the five years to 2017.”

Comment from James McDonald, (6/13/2012, 11:40 AM)

Crush zones in cars have caused a higher percentage of "totals" or vehicles that will require more to fix than their worth, which means they aren't getting painted. Back-up camera's, self parking cars, flexible bumpers and dozens of other innovations have chipped away at the auto refinish market. It appears this is going to continue to be a tough market for coatings manufacturers to grow in.