Axalta Coating Systems is renewing its focus on India by doubling the production capacity and increasing OEM activity.

Story by: Bhushan Mhapralkar

The Carlyle Group acquired Du Pont’s Performance Coatings business in February 2013 for USD 4.9 billion and rechristened it as Axalta Coating Systems. The Indian operations, as part of the global acquisition, also changed their name to Axalta. Positioning itself as a global supplier of coatings to the transportation and industrial sectors, Axalta, in India, is planning to double the production capacity at its Savli plant (Vadodara), and increase the OEM thrust. Bagging a supplier excellence award from Volvo Buses India last year, Axalta, apart from doubling capacity at Savli, is also looking at investing in an automotive OEM coatings development laboratory at the same location. The project is scheduled to go on stream by the third quarter of 2017, and result in the capacity expansion of both, high and low temperature bake coatings. Of the two, the low temperature bake coatings find use in the painting of lightweight plastic and composite materials increasingly finding use in trucks to lightweight and reduce fuel consumption. Such components are unable to withstand traditional high bake temperature curing ovens.

While the coatings that find use in automobiles are largely classified as high bake and low bake, they are also classified as primers, basecoats, and clearcoats, and are made from the use of high solids, high solids 3-wet, and high solids monocoat technologies. For commercial vehicles, the company offers specially engineered coatings like Imron (for trucks), Cetari (for buses), and Alesta (powder coating for chassis, brackets, etc.). Keen to leverage its relations as a global supplier of coatings to OEMs like Ford and Daimler according to Charles W. Shaver, Chairman and CEO, Axalta Coating Systems, a part of the company’s expansion initiative is the plan to scale up the production of water borne paints. OEMs are increasingly taking to water borne paints, and for environmental and cost reasons. These coatings, according to Shaver, are formulated to reduce volatile organic compound (VOC) emissions. They also help to reduce the environmental impact of coatings while providing superior finishes and improved OEM productivity.

Eyeing 25 per cent growth over the next five years, Axalta in the Asia-Pacific region has invested a good deal in China; it has come to have a significant presence there. “Before spinning out of Du Pont, India was a maintained market as far as the coatings business was concerned. We changed the strategy two years ago. We are becoming active; are reviewing our strategy and plans. We are meeting a lot of customers in India, especially on the transportation side. We did not do much with OEMs in India because we had a capacity constraint. The situation is rapidly changing as we invest; we will continue to invest in this country. We were looking at the economy to stabilise. We also see some ‘macros’ going our way,” asserted Shaver. He drew attention to the fact that they want to support the complete spectrum of automobiles in India in their pursuit for growth, especially at the OEM end of the business. In the Indian aftermarket (refinish market), Axalta has had a successful run. According to Shaver, it is the largest in the world for aftermarket refinishes, and second largest in OEM coatings. “Growth in India despite capacity constraints has been double-digit for Axalta. Apart from capacity, it was currency flunctuation too, which had an effect on the revenue,” stated Shaver. With the contraints seeming to ease, Axalta is keen to take advantage of the growing vehicle numbers and rising investments by OEMs. The company is well aware of some of the advantages the Indian market could offer in terms of lower interest rates, lower input costs, and favourabble weight structure. Axalta, it is clear, is also looking at leveraging the Indian operations to export to the markets in the Asia-Pacific region including the Middle East.

For the Indian market, the capacity expansion and setting up of the OEM lab are expected to help attract OEMs. Expected to be operational by the second quarter of 2016, the OEM lab will feature contemporary robotic spray applicators that can precisely replicate line application conditions. Even the equipment is designed to facilitate the development, approval, quality control and customer line support required by OEMs. Additional new capabilities would include colour measurement tools and accelerated paint testing equipment. Expressed Shaver, “The market is changing. It is moving from solvent borne coatings to high solids, to water borne coatings. We have the best technology in the world for that, and we are bringing some of it to India. We are reproducing a majority of our coatings here. We already have the global specs, and this puts us in a good position for exports.” The OEM lab will also mark an expansion of the application center, which has been supporting the aftermarket refinish segments.

Spending USD 200 million for R&D and tech support, Axalta’s stress on dedicated coatings for each vehicle type (for trucks, buses, etc.) has to do with specs that differ from region to region. Though coatings for a truck or a bus may mean usage under similar operating conditions, their formulation may differ in terms of their UV properties, clear coat properties, scratch resistance, impact resistance, etc. Coatings may look the same but differ in properties where one would be of the high bake type and the other, of the low bake type. Stressing upon the fact that coatings chemistry can differ from one product to another, Shaver explained, “The change in technology to water borne coatings is not just about taking the solvent out, but also about improving productivity. It is possible to speed up the process, go wet-on-wet, and use less quantity.” “Even a lot of refinish markets the world over are shifting to water borne technologies as they can paint more cars, have quicker colour match, and use less oven. So, its not just to do with the regulatory need,” he added. Shaver also pointed at the rising use of composite parts in autos with expectations for deeper and clearer coats. He expressed, “In the case of OEMs, the demand for longetivity, hardness, UV resistance is rising. In the aftermarket, the requirement is to be able to match the colour, to match the clarity, and withstand the competition. We are thus way ahead of the regulatory needs.”

After separation from Du Pont, Axalta, according to Shaver has moved up a good deal on the innovation front; the coatings major grew 6 per cent in volume terms globally. Profitability grew by 20 per cent almost. Good growth beginning 2013 has been purely organic in nature. The big changes the company effected over the last three years include product expansion with a strong focus to invade the main stream. With stress on the creation of new technology mediums like water borne coatings, Axalta, said Shaver, developed a whole new range of products at the right price. There were products that were truly redesigned in India as well. Hoping to grow faster than the market is expected to grow, the company, according to Shaver, has been quite successful in reformulations in the bus segment in the form of low bake coatings that it offers to Volvo, Tata Marcopolo, etc. Trucks is more high-bake, and includes a rising use of plastic components. Claiming to be the second largest powder coatings company in the world, Axalta surprisingly does not have a presence in this respective segment in India. Renewing focus on India after China, Brazil, Mexico and Germany, Axalta is keenly looking at India to be an export base. It is working on formulations that are not watered down, but smartly built ground up. These are being done keeping in mind the requirements of the domestic market, but also with an understanding that they would work well for export markets like the Middle East.

A 100 per cent supplier to Tata Group’s Jaguar Land Rover according to Shaver, Axalta’s refinish business is bigger than the OEM business. The refinish business is worth over USD 2.2 billion, whereas the OEM business is worth USD 1.4 billion. With the inclusion of commercial vehicles, it amounts to USD 1.7 million. Also eyeing two-wheelers, off-highway equipment, Axalta, said Shaver, is looking at a growth of five to seven per cent at the top; 10 per cent at the bottom. India, said Shaver, would grow at double digits. He pointed at India’s GDP growth, which is pegged at 7 per cent. Axalta’s core markets, indicated Shaver, could grow at nine to 10 per cent. While input costs, currency stability and inflation will matter in terms of exports, sources at Axalta are hoping that the country would make a significant export base going forward, both in terms of coatings as well as vehicles painted with their coatings. Given the Indian market requirements for premium quality products at a comeptitive price, Axalta is hoping to derive much out of its efforts to have developed formulations from ground up. Despite investing a good deal in China, Shaver opined, that the country will lose its export potential over time. He drew attention to the fact that raw material costs, labour costs and government costs in China are going up. “They are beginning to look a lot like US, and they are not low cost anymore. India therefore has a great opportunity, and should accelerate infrastructure activities. We are bullish about India, but are also looking carefully at the macro indicators,” Shaver expressed.