Automotive Coatings Manufacturing
Business for Sale Industry Economics
2003 - 2020
2020 - 2026
The performance of the Automotive Coatings Manufacturing sector is predicted to decline during the next five years, until 2020. The primary products of the sector are protective coatings such as electro coats, primers, base coats, and clear coats, which are frequently applied throughout the vehicle production process. As a consequence, the industry’s performance has been hampered by slow growth in domestic vehicle manufacturing and new vehicle sales.
To that end, industry revenue is predicted to fall at an average pace of 2.3 percent to $2.3 billion over the next five years, with a 5.7 percent drop in 2020 alone. Profitability in the industry is expected to fall throughout the period as a result of weak growth in downstream markets, variable input costs, and the consequences of a larger economic slowdown triggered by the COVID-19 (coronavirus) pandemic in 2020.
Because of their protective characteristics, automotive coatings are a crucial component of vehicle manufacture. An electro-coat, for example, is applied to a vehicle’s frame to prevent corrosion, while a clear coat is put to a vehicle’s paint to protect it from scratches and UV radiation.
Automotive coatings are used by vehicle manufacturers to enhance the longevity of their products, thereby creating value for the end-user. As a result, automobile makers have the highest market share in this business. Given the high demand patterns for such vehicles in the United States, manufacturers of pickup trucks and vans constitute the single-largest source of industry income.
Revenue in the business is expected to recover, though at a slow pace, during the next five years, through 2025. Because of the popularity of inexpensive electric cars, research predicts the next five years to be good for the larger North American automotive manufacturing industry group. The analysis suggests that the Automotive Coatings Manufacturing business to benefit significantly from this category if the larger trend continues.
Nonetheless, there is a considerable level of uncertainty when it comes to the burgeoning inexpensive electric car industry. Taking these considerations into consideration, the research predicts that industry sales will expand at a moderate yearly pace of 0.8 percent to $2.4 billion during the next five years, to 2025.
The Automotive Coatings Manufacturing industry is expected to contract over the five years to 2020. Falling auto sales during the second half of the five-year period have offset gains from the first half of the period. Moreover, an economic downturn in 2020 has further solidified the industry’s annualized decline. The industry’s small spurts of growth in 2015 and 2018 coincided with a boost in industrial activity and new car sales.
Given the industry’s place in the automotive supply chain, the industry is highly sensitive to factors affecting domestic vehicle production. Taking these factors into account, Research forecasts industry revenue to decline at an annualized 2.3% to $2.3 billion over the five years to 2020. This includes an expected 5.7% decline in 2020 alone largely due to the economic effects of the coronavirus pandemic.
Domestic vehicle production expansion was the primary driver of industry revenue growth throughout the five years to 2020 at the start of the era. Automobile demand has risen mostly as a consequence of macroeconomic factors such as low-interest rates, reduced unemployment, and rising per capita disposable income. A more favorable economic climate has resulted in increased consumer and business sentiment.
The Consumer Confidence Index, a broad measure of consumers’ opinions of the general health of the economy, is expected to have grown throughout the bulk of the five-year period, according to research. As consumer mood increases, they are more inclined to make significant purchases, such as a new automobile.
Domestic vehicle production expansion was the primary driver of industry revenue growth throughout the five years to 2020 at the start of the era. Automobile demand has risen mostly as a consequence of macroeconomic factors such as low-interest rates, reduced unemployment, and rising per capita disposable income.
A more favorable economic climate has resulted in increased consumer and business sentiment. The Consumer Confidence Index, a broad measure of consumers’ opinions of the general health of the economy, is expected to have grown throughout the bulk of the five-year period, according to research. As consumer mood increases, they are more inclined to make significant purchases, such as a new automobile.
Consumer expenditure is predicted to expand at a 1.2 percent yearly pace during the next five years, until 2020. In response to the five-year period’s economic upswing, customers resumed spending on indulgences such as aftermarket coatings, protective coatings, and cosmetic modifications. Many aftermarket coatings are mostly cosmetic or preventive in nature, which means they are seldom required. As a result of improved financial circumstances, customers have reinvested in car customization that goes beyond operational or essential alterations.
Despite the fact that some customers continued to reduce the amount of money spent on projects or selected lower-cost services for their autos during the last five years, automotive coatings virtually always need expert application, which helps to insulate the sector somewhat. While these indicators have increased in some years, they have decreased in others, and it is the variation in economic conditions that have caused the industry’s overall yearly fall.
International trade is likewise projected to provide mixed outcomes during the next five years. Imports are forecast to increase at a 2.7 percent yearly pace to $106.4 million, helped by the strengthening of the US dollar. Foreign products become more accessible and hence more desired when the US dollar rises in value compared to other currencies.
Furthermore, demand for industrial exports is increasing in Canada and Mexico. On a worldwide scale, however, the rising value of the US dollar has increased the cost of domestic products, placing pressure on total exports. As a consequence, exports are expected to fall by 1.8 percent on an annual basis to $229.3 million over the next five years. Overall, trade has only a little impact on the success of the sector.
The growing impact of stakeholder capitalism and its consequences for the environment is an underlying subject influencing the sector. In the five years leading up to 2020, the sector has adhered to new manufacturing rules. Aerosol coatings, for example, are governed by a US Environmental Protection Agency (EPA) regulation that defines air quality standards based on reactivity principles. The behavior of a chemical reaction is referred to as reactivity.
Aerosol coating producers are only permitted to employ volatile organic compounds (VOCs) specified on the EPA’s Table of Reactivity Factors. Because the list only comprises 169 chemicals, the American Coatings Association (ACA) says that this rule makes it incredibly difficult for firms to innovate. The ACA further contends that the law prohibits manufacturers from utilizing substances that might result in lower emissions or ozone production.
Furthermore, rising industrial laws have resulted in higher operational expenses. Operators in the industry have changed their manufacturing procedures to comply with new requirements. Any change in operational methods has a detrimental impact on the industry’s cost structure, especially profit margins.
Over the last five years, the sorts of coatings offered to customers have also altered. Several new types of automotive coatings have been developed, including chrome coatings, coatings with ultraviolet light-cured finishes, and nanotechnology-infused coatings. This latter breakthrough allows nanoparticles to be grafted onto resins, such as plastic bumpers, for improved adherence. These technical advancements have contributed to an increase in demand for this business.
Most automobile coatings firms have started developing water-based coatings, and several have already introduced these products into the original equipment manufacturer and refinish markets. Urethanes and water-based technologies are fundamentally the same. Water-based coatings have the same lightfastness and color possibilities as solvent-based coatings since they are generally based on comparable pigments.
Water-based coatings only emit water vapor when curing, as opposed to urethane coatings, which emit VOCs that are harmful to people and the environment. Water-based coatings are also ready to use straight out of the container, and two quarts are adequate to coat a vehicle, while urethane coating requires one gallon for the same work.
Furthermore, water-based coatings do not need priming, which reduces project time and expense. Water-based coatings may also be sprayed directly onto aluminum, urethane plastic, fiberglass, or metal surfaces. Finally, water-based coatings, unlike urethane coatings, do not deteriorate or dry out.
In addition to changes in demand, raw material prices for coating makers have been volatile. Because many coatings are derived from petroleum-based compounds, crude oil prices have an impact on the industry’s input costs. Over the next five years, the global price of crude oil is predicted to fall by 4.1 percent on an annual basis.
However, the commodity has seen significant volatility over the last five years as a consequence of a number of macroeconomic reasons, including sluggish development in developing nations and overproduction. For example, the price of oil fell 47.2 percent in 2015 before rising 23.3 percent in 2017.
Input price volatility has harmed industry operators as a result of inefficiencies in regulating variable costs and obtaining stable buying contracts. As a consequence, research predicts that industry profit would fall from 7.5 percent of sales in 2015 to 3.8 percent in 2020.
Although many industry operators pass costs on to downstream producers, this is projected to become more difficult as the business becomes more competitive, especially in terms of pricing. The number of industrial establishments is expected to fall at an annualized rate of 0.4 percent to 99 in the five years to 2020. Research predicts that overall industry salaries will fall at an annualized rate of 0.1 percent to $230.9 million during the next five years.
Due to the sector’s established downstream markets and low level of product innovation, the Automotive Coatings Manufacturing industry is at a mature stage of its life cycle. Industry value-added, which represents an industry’s entire contribution to the economy, is predicted to decline at a 1.0 percent annualized pace during the next decade to 2025.
In comparison, the US GDP is predicted to rise at an annualized pace of 1.9 percent during the next decade. While IVA is expected to increase at a slower rate than GDP, the sector is not in decline owing to its critical position in the car manufacturing sector group.
Additionally, the sector’s well-defined product groupings and user sectors, as well as the relatively stable structure of industry goods, brands, and ownerships, all suggest that the industry has reached a mature stage. Future growth will be mostly driven by advancements in chemical technology, which will likely encourage customers to spend on bespoke coatings.
Numerous new types of automotive coatings, such as those cured with UV radiation and those using nanotechnology, have increased industry demand. Water-based coatings are the future of automobile coating technology, and their simplicity of use and possible cost savings could result in increased demand for coatings makers. While some product innovation occurs inside the business, it is insufficient to propel the business into the growth stage.