China Latest Frontier for Eco-Friendly Automotive Coatings

BEIJING – For manufacturers of environmentally friendly automotive coatings in China, the future is looking bright.

With sales of 10 million cars annually predicted to 2030, the central government’s current 5-year plan not only gives auto coatings special attention, it marks new materials and green cars as two of seven emerging industries that are garnering favoritism.

AkzoNobel Automotive & Aerospace Coatings spokesman Tineke Dikken says his company’s state-of-the-art technology in waterborne coatings puts the firm in a “pretty strong position” in China.

The company’s current products include its Autowave waterborne basecoat line launched in China four years ago.

Additionally, AkzoNobel recently launched the Eco-Logical System, a combination of waterborne basecoat and low-volatile organic-compound products that will “help clients lower their emissions, help make their operations more cost-efficient, increase the quality of repairs and stay ahead of the competition,” Dikken says.

Almost all the Eco-Logical solutions, especially the toners, are produced at AkzoNobel’s Sassenheim plant in the Netherlands, an example of how foreign suppliers often are dominant in China.

Training is a key source of leverage for foreign coatings makers, made clear by visits to repair shops and garages in the cities of Beijing, Yantai and Urumqi.

Dikken agrees, pointing to AkzoNobel’s 19,375-sq.-ft. (1,800-sq.-m) training center for automotive and aerospace coatings in Chengdu, which certifies technicians, while specialists develop training for painters to fit the OEM brands repaired at their body shops.

AkzoNobel also offers training at its Chengdu facility to key auto makers in China, including the local FAW-Toyota joint venture and Chongqing’s Chang’an Ford. Training topics include how to tint color and how to match color, along with other basic and advanced types of paint processes.

Tikken says Chinese coatings customers are keen to learn about sustainability. “(They) want improved health and safety; they want to create more pride, satisfaction and loyalty; they want to use less energy and carbon, less water and create less waste; and they want smart facility planning and design.

“By doing so, they will grow sales and improve their profit margins,” he says. “We find that a lot of work providers, insurance companies and fleet owners, for example, share our values. Almost all OEMs in China are thinking about launching waterborne products to their network. Honda, Toyota and Nissan already have turned to waterborne products.”

German rival BASF also is eyeing this lucrative market as well. Its BASF Shanghai Coatings subsidiary is investing in a new basecoat plant at the Shanghai Chemical Industry Park, which will increase the company's local production capacity for basecoats by 14,881 tons (13,500 t) per annum when it goes on line in 2014.

BASF already has linked up with Zhengzhou Nissan to supply waterborne coatings, which replace organic solvents with water, thus reducing emissions in the coating process. The deal, which gives the supplier a connection to Nissan’s local joint-venture partner Dongfeng, is one of several that fastens the multinationals’ hold on the Chinese automotive coatings market.

Frances Luk, a BASF spokesman in China, points to other examples of eco-friendly offerings for the country. Among them is a system for painting car bodies known as integrated process. “It reduces coating steps without any loss in the color quality or properties of the final paint job, saving time and costs,” he says.

However, Luk declines to specify what products are imported and which are produced locally. “Our objective is to supply to the Chinese market out of our operation in China.”

BASF will use eco-friendly options to aim for a greater share of the demand from automotive OEMs going forward, he says, and to become a primary automotive parts supplier for e-coats, primers, basecoats and clearcoats.  “The Chinese automotive OEM market is growing, and we have confidence in the long-term development of this market.”

PPG Industries, a U.S.-based global supplier of paints and coatings that claims to be the first to introduce waterborne coatings to China, this summer opened up its relocated automotive refinish operations in Songjiang, a Shanghai suburb.

The facility includes a 32,292-sq.-ft. (3,000-sq.-m) training center, where PPG experts will train technicians from the auto makers, service centers and dealerships. PPG Asia boss Mike Horton and Pauline Yuen, vice president-refinish coatings in Asia, also have overseen the openings of other centers in Beijing, Chengdu and Guangzhou.

Overall, securing contracts with ambitious domestic auto makers Geely and Chery has been a priority for both PPG and AkzoNobel in China. PPG has scored success with the cheap-and-cheerful Chery by building a facility in Wuhu, the car maker’s home base. The move ensures lower costs for Chery.

PPG’s other key China-based clients include Mercedes-Benz and General Motors. The firm also has reached south to supply Hainan Mazda.

Using an internationally respected coatings supplier is important, but doing business with one that services locations globally is vital, industry experts say.

Geely’s reach into developing markets, for instance, presents AkzoNobel with an opportunity to “grow along with them,” says Keith Power, the suppliers regional director in Asia. Geely has the capacity to manufacture 300,000 vehicles annually, while Chery can build 250,000.

Given that both Chinese auto makers have been on the scene only since 1997, they can use all the research and development help and advice that international brands such as PPG can offer. Chery, which hired Germany-based Dürr to install and commission its paint shop, has not restricted itself to PPG, also signing coatings-supply deals with Nippon, BASF and DuPont.

Chery claims its paint shop is the fifth most-advanced in the world and second most-modern in Asia.

Experts say it makes sense for coatings companies to serve multiple clients. Because China’s craze for cars is in the relatively early stages, there are questions about the commercial viability of many of the country’s auto makers.

Indeed, the China Association of Automobile Manufacturers predicted in July that more than half of Chinese domestic passenger-vehicle brands will cease to exist by 2017.

Light-vehicle manufacturers in China, on average, will operate at a 65% capacity utilization rate in 2012 to produce 18.5 million vehicles, says John C. Humphrey, J.D. Power and Associates senior vice president, adding that a vehicle plant typically needs to use 80% capacity to be profitable.