Coatings World - October 2012

drivers actually refinish their entire vehicle to maintain the value. That is another significant driver of repair coatings and something that is somewhat unique about the Chinese market. Therefore, we expect to see a bump in refinish coatings around 2014 or 2015, or about four to five years after the 2009-10 boom in car sales.

compete on price. Therefore, they need to find a buyer who is willing to pay a premium.

Are there coating applications outside of the automobile market that were significant for sales in China? Johnson: OEM paint manufacturers are essentially trying to make their products more attractive to end-users. So what do end-users want? End-users are car manufacturers and they want to cut costs. This creates several efficiency and demand trends in the industry that will also affect the sales of OEM coatings. For example, competition is too high for OEMs to pass-on excess costs to customers, and consequently, they put pressure on their upstream suppliers to offer a cheaper product. Therefore, some coatings suppliers may have introduced products that reduce costs by combining functions between coating layers, or offering a paint that can be applied in thinner coats.

Let me ask you the opposite question. Do you see any Chinese coatings producers moving into the market for high-end coatings? Johnson: Yes, there are a few Chinese producers that offer high-end coatings. Daoqum and Guangzhou Strong Chemical are examples of local firms that offer high-end products, although their market share isn’t especially high; each holds around five percent or so.

Who are the key OEMs in this market? Johnson: The largest car manufacturers, or OEMs include Hyundai, Dongfang, FAW, Changgang, Great Wall, Honda, VW, GM, Toyota, Nissan, BMW, and the other multinational car manufacturers. There are a lot of different automobile brands produced in China.

Because repair coatings are the fastest growing segment of the market, do you see foreign suppliers moving into repair coatings? Johnson: Well, there are many foreign players that are already selling repair coatings. PPG, AkzoNobel, DuPont, Nippon, KCC, Sherwin Williams, BASF and some others are already in the market. This makes entry for a new foreign player difficult because they would need to compete against these huge multinationals at the high-end of the market. It wouldn’t make sense for a foreign player to try to compete at the low-end of the market, as a foreign supplier simply cannot, or more likely does not want to

Why study the Chinese automobile coatings
market?

Johnson: Generally, we are very selective in the subject that we choose to study in a Limited Production Study, or LPS report. There is a long list of requirements that a product or market must meet before we can go ahead with the study. Some of those requirements include market size, composition, and concentration. We do not do market studies on markets that are heavily concentrated around domestic players, for instance. Also, the market must segment well. A study on instrumentation would be difficult because of the wide range of product segments.

Another important issue is market concentration. Put simply, we won’t do a market study in a market that has 1,000

players and none of which has a market share of over one percent; getting a representative sample would require far too many interviews.

Specifically, in this report, we interviewed about 40 different players, which represent about 80 to 90 percent of the entire market, which is a very good concentration. For this study, we spoke to a total of 84 players, including suppliers, channel players, end-users and repair shops as well as industry experts with individuals in academia, industry associations and regulatory organizations. CW

Repair coatings are difficult to define in China. A company—really only domestic—might sell the same paint to repair shops as they do to low speed electric vehicle, or even bus and truck, OEMs. This makes a total market size difficult to define, especially when you compare numbers offered by domestic companies with those of foreign companies.