Coatings World - March 2008

Automotive OEM Coatings Market
While the automotive OEM market is level to slightly declining in the mature
markets of North America and Western Europe, Eastern Europe and Asia-Pacific
are experiencing healthy growth.
BY TIM WRIGHT

EDITOR

While the mature markets of North America, Western Europe and Japan own nearly all the automotive OEM coatings market in terms of value, their annual growth rates (AGR) remain relatively flat compared to other parts of the world.

The combined value of the world’s auto OEM coatings markets, including North America, Western Europe, Japan, China, India, Eastern Europe, Australia and South America, Mexico included, totaled $8.971 billion in 2007, according to Chemark Consulting.

North America was valued at $2.65 billion with an AGR of 0.6% from 2006-07. Western Europe was valued at $2.5 billion and showed 2.5% growth. Japan represented the third largest market and fastest growth rate of the three at $2.15 billion and 3.7% respectively.

Together these three markets represent $7.3 billion leaving the remaining $1.671 billion in market share spread among the other regions mentioned above.

While China, India and Eastern Europe represent small dollar values compared to the leaders at $510 million, $261 million and $331 million respectively, their AGR’s tell a much different story.

China’s posted double-digit growth at 11.5% followed by India at 8.2% and lastly Eastern Europe, led by Russia, at 5.5%. (See chart on next page.)

MATURE OEM MARKETS UNDER PRESSURE

Long term vehicle production in established markets of North America, Western Europe and Japan is essentially flat while short term established markets are seeing a down turn as well, according to David Fischer, global marketing manager, DuPont OEM Automotive Coatings. “The emerging markets of Eastern Europe, Asia Pacific excluding Japan and Korea, and Latin America are the growth regions,” he said. “Market share is shifting from large U.S.- and European-based manufacturers to those based in Asian countries including Japan, Korea, domestics in China and India.

“However the large U.S.- and European-based manufactures will continue to be a large and important group into the future,” Fischer continued. “In these mature markets, volatile situations with respect to raw material prices and regulations such as REACH will continue to impact current

Photo: Ford Motor Co.

and future formulation trends.”

The challenges facing the auto OEM industry are typical of mature industries and lie in market back-pressure issues, according to industry consultant and Coatings World contributor Phil Phillips of Chemark. “The industrialized regions of the world are feeling the effects of their respective economic slowdowns influenced globally by the fact that the world is inextricably tied together,” he said. “When one major region slows, they all are affected negatively to some degree. Such is the case with highly industrialized regions, particularly North America and Western Europe.

“Complicating the auto OEM industry further in North America and Western Europe is the fact that these regions have relatively expensive work forces with strong rigid unions,” Phillips continued. “Their $80+/hour rate including benefits cost versus emerging giants like China, India and Eastern Europe at less than $15/hour is significant since the average impact per car unit is now approaching $1,800 right from the starting blocks.

“This cost difference between industrialized and emerig-ing regions is further leveraged when one considers the ultra-new plants with faster throughput rates in combination with orders of magnitude of on-line and design flexibility within the emerging giants versus the highly rigid and controlled unionized industrialized regions,” Phillips said.