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September 19, 2016

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Home » Business » Autotalk Special

Even car paint is touched by industry technology

AT the recent celebration of its 150th anniversary, Philadelphia-based Axalta Coating painted a greener, brighter future for itself in China, the world’s largest car market.

Original car paint today is expected to become prettier, with more gloss on it and less volatile organic compounds. That demands professional supplies from the likes of Axalta and its biggest competitor PPG.

Following that trend closely is refinishing paint, an area that Axalta dominates as the biggest player worldwide. In China, the company finds itself against an interesting, and fast-changing, business landscape.

A few years back, Chinese car owners started to move away from dealerships and turn to independent body shops for cheaper and faster repairs. This shift is expected to continue as reforms in China’s auto insurance industry usher in sharp premium increases that may discourage motorists from filing claims for small dents and scratches.

Charles Shaver, CEO of Axalta Coating, having seen the trend earlier in the US and European auto markets, said he is not worried that increasingly price-sensitive, cautious car owners may have second thoughts about touching up their cars.

“We have seen in other countries how insurance changes drivers’ behavior,” he said. “As motorists drive more safely, accident rates go down. That’s what everyone wants to see. China’s collision rate is still high. We hope people will still want to get their cars fixed, and expect our business to keep growing because of the big volume of new car sales each year.”

New cars are the key driver of the refinishing paint business in China, where the average age of its car population is 10 years. That has become a psychological threshold for car owners to keep a vehicle. As a result, as cars approach six years of use, many owners are less inclined to touch up the finish.

For cars 10 years and older, which may have been sold and resold, touch-up work is usually limited to used car dealers, Shaver said.

Axalta now does 60 percent of its refinishing paint business with dealerships and independent or chain body shops, which only deal with cars less than five years old and compete for customers after car warranties expire.

The focus is often on how to fix up a car faster and better after a minor accident. Axalta sees a business opportunity it can exploit with its water-born coating.

A popular replacement for traditional solvent coating overseas, water-born coating has just started to gain official attention in China because of its environmental friendliness. All new passenger car factories in China have been ordered to convert to water-born coating to reduce volatile organic compounds, and the city of Beijing has extended that initiative to include the after-sales and used-car markets.

In addition to its ecological benefits, the paint is easier to match and dries faster. Its use requires investment in spray equipment and airflow management.

“Just like consumers, most businesses are not going to change unless they have to,” said Shaver. “They need a good reason.”

The penetration of water-born coating in China is now about 30 percent, significantly lower than overseas. That is expected to grow to between 80 percent and 90 percent in the next five to 10 years.

The regulation is a good start in protecting the environment. Most people don’t have a clue about the paint on their cars. But the industry, looking out for its own interest, certainly sees the writing on the wall.


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