value chain in oem coatings - · pdf file · 2018-02-15• participants in oem...
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Value Chain in OEM Coatings
Dr. Karl-Friedrich Doessel
November 2013
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Agenda
• OEM Coatings as part of total Car Manufacturing Cost
• Participants in OEM Coatings Value Chain
• Roles and Expectations of
• Consumer
• OEM
• Paint Company
• Application Equipment Manufacturer
• Supplier of Raw Materials
• Globalisation
• Regulatory Framework
• Differences in „Time to Market“ along the Value Chain
• Summary
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OEM Coatings as Part of total Cost
Source: McKinsey PTW-HAWK-Survey
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Value Chain in Car Production
Total Process Cost Paint Shop Cost
(incl. CED)
Distribution
Manufacturing
Process
Material
R & D
25%
15%
55%
5%
70%
30%
Coating
Process
Material
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OEM Coatings Value Chain
Supplier of
Raw Materials
Paint
Manufacturer OEM Consumer
Application
Equipment
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OEM Coatings Value Chain
Roles and Expectations
Supplier of
Raw Materials
Paint
Manufacturer OEM Consumer
Application
Equipment
Consumer Role
• Purchasing decision to buy new car
Expectations
• Color, choice of color / differention
• Appearance
• Durability
• Cost
• Environmental compliance in car use and manufacturing
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Consumer as a Customer
• Lower Cost of car and color options
• Higher Quality
• Appearance, Durability, Color
• Scratch resistance
• easy to clean
• matt surface
• corrosion protection
• multi color car
• high chroma colors
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Paint Quality: Areas of Focus
Source: GM, SurCar 2013
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PQ: Exterior Appearance Contribution
Source: GM, SurCar 2013
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Source: GM, SurCar 2013
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Source: GM, SurCar 2013
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OEM’s Surcharge Policy on Colors
(in Germany, based on online configuration options)
VW Golf VW Passat GM Astra Ford Focus Toyota Auris
# colors 36 12 11 8 9
no surcharge 1 2 2 2 1
avg. cost/€ 1455 637 452 387 467
max cost/€ 2140 1720 680 555 525
VW Phaeton Audi A6 BMW 520i BMW 740i Benz E200 Benz S
# colors 16 14 (+) 13 (+6) 13 (+4) 12 10
no surcharge 2 2 2 2 2 1
avg. cost/€ 1642 943 829 (2517) 914 (2350) 976 1151
max cost/€ 3900 2750 3600 2350 1963 2059
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Color Economics
Today over 85% of car buyers select surcharge color
Customizing / differentiating a mass produced car
Based on 1 mio cars sold per OEM
added margin/profit for OEM color is
€340 mio (Ford, GM)
up to > €1,000 mio (other OEMs)
added revenue for PaintCo is ca. € 80 mio
Putting color on the car is a major part of value creation
for the OEM
Outsourcing this process is hardly considered by the OEM
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86 88 90
67 64 53
66 5956
5348
40
10
9
8
0
50
100
150
200
250
300
Standard 3 wet primerless
Total Cost of Paintshop€ / car
Indirect Matls
Energy
Labor
Capital
Paint
€ 282
€ 247 (- €35) € 268 (- €14)
Paint Material Cost is 1/3 of total Cost – Process Cost is 2/3
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OEM Coatings Cost Structure
Cost/Car
Cost of Paint € 90
Cost of Paintshop Operation € 150 - 400
range defined by age/design of paintshop
Cost increment for effect colors versus solid colors
Δ cost of Paint €20
Δ cost of Manufacturing €20
Cost increment for effect color is < 10% of added revenue
Color is a real money maker for the OEM
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OEM Coatings Value Chain
Roles and Expectations
Supplier of
Raw Materials
Paint
Manufacturer OEM Consumer
Application
Equipment
OEM Role
• Low cost manufacturing of durable, good looking cars
Expectations
• Low cost, reliable, global supply of paint and equipment
• Attractive color design proposals from raw material - and
paint suppliers
• Wide operating window from material and process – high FROK
• Environmental compliance, reduced energy demand
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CAGR of global Car Production
2013 - 2017
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Regional Shift – Follow your Customers
• China is the biggest market for car production
• China and South Asia have the highest growth rates
• Paint production and raw material production have to follow
• Regulatory compliance becomes increasingly important
• China emissions law requires w/b basecoat
• China GHS, chemical inventories
• REACh etc. make global sourcing more difficult
• Globalisation requires capital, people/Know-how, and
TIME !!
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Average Time to Market in Automotive Coatings OEM R & D
Troubleshooting
hours days weeks months 2 years +2 years Project
Management
minor paint adjustments
Product upgrades (some new raw materials)
Strategic R&D, new raw materials, chemistries
Toxicologic testing, registrations required
Application Technology
Raw material Co.s typically work on a different time scale than paint Co.s
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OEM Coatings Value Chain
Roles and Expectations
Supplier of
Raw Materials
Paint
Manufacturer OEM Consumer
Application
Equipment
Paint Manufacturer Role
• Low cost, reliable, global supply of paint meeting OEM spec.
• Create improvements in performance, color, cost
• Environmental compliance of paint and safe use
Expectations
• Low cost, reliable, global supply of raw materials
• Environmental compliance of raw materials
• Innovation offered with new raw materials and processes
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Paint Company as a Customer
• Lower Cost of raw materials
• Consistent Delivery & consistent Quality
• global availability (at competitive cost)
• pretested raw materials
• proven durability in formulations
• broad application field covering all OEM specifications
• Higher Quality
• Appearance, Durability, Color
• Environmentally Compliant Products
• Differentiation to competitors
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500 – 800
@ € 3000
per color
200 colors,
1000 products
incl.
pairs, triples
for s/b, w/b, 3-wet
low bake,
bell-bell,
bell-spraymate
100
Annual Basecoat Development Task PaintCo Europe
PaintCo Styling OEM selection PaintCo Development new Product
sales
Cost pa: € 2 Mio € 10 Mio € 1 Mio
150 DAS
colors
150
competitor
colors
150 PaintCo
colors
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OEM Color Development
Cost Implications
• In OEM component business the OEM (normally) fully
pays the upfront development cost and necessary
investments (tooling) while the supplier agrees to a
fixed pricing curve
• In OEM coatings the supplier (normally) bears all the
development cost
• Depending on the product lifetime volume
development cost is a major cost contributor
• 70% of the product developments never go
commercial
• 50% of the commercial products never travel the
“experience curve” (less than 3 batches per year)
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Value Creation - Subtotal
• Average consumers pay € 1000 to get special color
• OEMs have average € 90 cost/car for paint and
additional cost of € 40 to produce special color vehicle
• (still average OEM profitability is only 5 – 10%)
• Average OEM paint co. has profitability of 10% with
substantial business risk in R&D and capital investment
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OEM Coatings Value Chain
Roles and Expectations
Supplier of
Raw Materials
Paint
Manufacturer OEM Consumer
Application
Equipment
Application Equipment Manufacturer Role
• Low cost, reliable, global supply of OEM paint shops
• Paintshops with safe and compliant operation
• Create process improvements for lower cost, higher FROK
Expectations
• Paint materials meet new process requirements
• Wide operating window from paint materials
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OEM Application Equipment Manufacturer
• Business Model different to other participants of
value chain
• (one time) investment versus variable cost
• Investment cycle for OEM paint shops: 25 years
• New business mostly based on
• Regional growth / new plants in China
• Environmental regulations – change to waterborne
• Cost reduction by process changes with payback < 2a
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OEM Application Equipment Manufacturer
Source: Dürr SurCar 2013
Reduced
Market Size for
Coatings
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OEM Coatings Value Chain
Roles and Expectations
Supplier of
Raw Materials
Paint
Manufacturer OEM Consumer
Application
Equipment
Supplier of Raw Materials Role
• Low cost, reliable, global supply of raw materials
• Environmental compliance of raw materials
• Innovation offered with new raw materials and processes
Expectations
• Receive clear signals and longer term commitment from
customers / partners in the value chain
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- Painting / curing equipment
- OEM pilot series
- Investment and SOP
From Chemicals to Painted Car Body
….. 3 years + ….
- R&D new monomers
- New resources
- Polymer synthesis / testing
- Industrialization
- Paint formulation / testing
- OEM tests and approval
….. 4 years + ….
….. 5 years + ….
….. 4 years + ….
§ §
§
TSCA
KECI
IECSC
…….
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OEM Coatings Value Creation Summary
• OEM Coatings today offer long durability, attractive
appearance and color choices
• Average consumers pay € 1000 to get special colors
• OEMs earn more than 1 bio Euro by color choices
• Paint Companies can only capture 5-10% of this
• Raw Material suppliers capture 2-5% of the total
• Globalisation is a major factor for growth
• Regulations have to be observed when going global
• „Time to Market“ varies between days and 10 years
along the value chain