Report: Three Suppliers Dominate ‘Costly, Complex’ Paint Business
April 18, 2016—Auto-paint lines are too expensive and complex to accommodate new suppliers, according to a report from Automotive News, leaving the paint supply industry for OEMs dominated by three suppliers: PPG Industries, BASF and Axalta Coating Systems.
Although the actual cost of the paint is small relative to the vehicle's total value, the multi-step process of dipping, spraying and baking can create an expensive bottleneck at manufacturing facilities. Due to this, the three suppliers hold a majority stake in the $10 billion market.
"When you look at a car plant, one of the most significant investments is the paint shop," said Christopher Toomey, senior vice president for coatings solutions for North America at Ludwigshafen, Germany-based BASF, in the Automotive News report. "No plant manager wants their plant shut down because the paint shop isn't working. The pressure ratchets up in a hurry."
Steve Markevich, president of Transportation Coatings and Greater China for Axalta Coating Systems, went on to explain that there’s added complexity in working with “large, sophisticated customers” like OEMs.
"These guys are all global,” Markevich said in the report. “They're looking for a supply base that can serve them and do color development, work with them as they expand into China and the BRIC countries."
PPG, BASF and Axalta also have the advantage of tenure in the industry, Toomey said, which has allowed the suppliers to invest in technical development of the paint and “in the technical know-how to run the paint shop.”
“It's not to say other companies couldn't do it. But automotive paint isn't like house paint—it's a far more technical application," Toomey said.