automotive coatings market

Outlook and Future of Automotive Coatings

The last 2 years have been the most challenging for the global automotive coatings market. The challenge started with the Covid-19 pandemic and was further aggravated by the crisis in the semiconductors supply chain has taken an immense toll on the auto industry and with it, the entire automotive value chain is in disarray including the OEM coatings suppliers.

Challenging Times for the Automotive OEMs Coatings Producers

According to OICA, International Organization of Motor Vehicle Manufacturers, the global production of automotive vehicles (LCVs and passenger cars) peaked in 2017 with over 74 million units produced. However, it has been on a steady decline ever since, reaching below 55 million units in 2020, accounting for a 25% drop in production.

A variety of factors contributed to the reduction in demand such as declining momentum in the emerging markets, rising environmental concerns, and the anticipated regulatory responses. Additionally, the recent Covid-19 pandemic, semiconductor chip shortages, and the ongoing war in Ukraine have also considerably affected automotive production. Further, the rise in used cars sale and the growth of ride-hailing/ car-sharing schemes are all weighing down on the auto demand.

All these factors have directly and negatively affected the demand for automotive OEMs, plastic car parts, and refinish coating segments. Additionally, the market is further hampered due to tightened supply and the drastic increment in the prices of several raw materials including resins, additives, modifiers, etc.

The global volumetric demand for OEMs coating was ~1,850 KT in 2017 which declined to ~1,500 by the end of 2021. The demand for refinished coatings segments also remained flat at around 800 KT throughout these years. Although major players in the space such as PPG, Axalta, and BASF managed to remain profitable by implementing a strong increase in their selling prices. This adversely affected their growth prospects and strategies and the business of several SMEs, especially from the APAC.

The recent dramatic situation in Ukraine and Russia has further aggravated the market situation resulting in escalated energy prices, supply chain interference, and raw material shortages, negatively affecting the business environment and causing unprecedented volatility of events.

Automotive Coatings Future Market Rise

Despite the arduous times, automotive coatings, OEM, and refinish, still hold an important position in the global paints and coatings industry. In 2021, the segment held a share of ~6-7% (by Volume) and over 12% (by Value) of the global coatings market and it is expected to see an adequate compounded growth of ~5% from 2022 to 2027.

The visible boom in the production of electric vehicles and the resultant demand rise for intumescent, dielectric protection, and fire-resistant/ protective coatings for batteries, cells, and other EV components is driving the growth and innovation of the segment. The use of different substrates and composites for the light-weighting of vehicles and the need for paint products that can be detected by LIDAR systems is also directing technological innovations among coatings developers.

Renewability, biotechnology, and reducing CO2 emissions have become an integral part of the coatings manufacturing companies as well as their customers and other partners, along the value chain, who are aiming for more sustainable solutions. Sustainability is the key aspect that will drive changes in the automotive coatings industry within the next few years.

Many global coatings manufacturers active in the segment such as PPG, AkzoNobel, BASF, and Sherwin-Williams have concrete future development plans to increase production capacities of less hazardous and sustainable water-borne coatings. It involves acrylics & PU-based resin systems, which together hold ~50-60% of the automotive coatings market. These investments although currently limited to Europe, the US, and a few developed countries in Asia, could soon expand to other developing countries such as India and China, where there is an increasingly growing demand for such products.

Additionally, several of these global players are actively working on the advancements of their bio-based coating system involving 100% bio-resins/ solvents/ etc., where fossil-based sources are replaced by renewable/ plant-based sources. These innovations around sustainability are mainly due to their persistent demand from developed countries i.e., Europe, the US, and Japan, among others, and a supplementary growing demand from developing countries such as India and China.

Overall, the hardships in the automotive coatings market seem to be settling down and the industry is getting back on solid ground with the next 5 years characterized by accelerated innovation and demand in the segment.

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