Value Chain in OEM Coatings. Dr. Karl-Friedrich Doessel November 2013

Transcription

1 Value Chain in OEM Coatings Dr. Karl-Friedrich Doessel November 2013

2 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

3 OEM Coatings as Part of total Cost Source: McKinsey PTW-HAWK-Survey

4 Value Chain in Car Production Total Process Cost Paint Shop Cost (incl. CED) Distribution 25% Manufacturing Process 15% 70% Coating Process Material 55% 30% Material R & D 5%

5 OEM Coatings Value Chain Supplier of Raw Materials Paint Manufacturer OEM Consumer Application Equipment

6 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

7 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

8 Paint Quality: Areas of Focus Source: GM, SurCar 2013

9 PQ: Exterior Appearance Contribution Source: GM, SurCar 2013

10 Source: GM, SurCar 2013

11 Source: GM, SurCar 2013

12 OEM s Surcharge Policy on Colors (in Germany, based on online configuration options) VW Golf VW Passat GM Astra Ford Focus Toyota Auris # colors no surcharge avg. cost/ max cost/ VW Phaeton Audi A6 BMW 520i BMW 740i Benz E200 Benz S # colors (+) 13 (+6) 13 (+4) no surcharge avg. cost/ (2517) 914 (2350) max cost/

13 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

14 Total Cost of Paintshop / car 268 (- 14) (- 35) Indirect Matls Energy Labor Capital Paint 0 Standard 3 wet primerless Paint Material Cost is 1/3 of total Cost Process Cost is 2/3

15 OEM Coatings Cost Structure Cost/Car Cost of Paint 90 Cost of Paintshop Operation 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

16 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

17 CAGR of global Car Production

18 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!!

19 Average Time to Market in Automotive Coatings OEM R & D hours days weeks months 2 years +2 years Project Management Troubleshooting minor paint adjustments Product upgrades (some new raw materials) Application Technology Strategic R&D, new raw materials, chemistries Toxicologic testing, registrations required Raw material Co.s typically work on a different time scale than paint Co.s

20 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

21 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

22 Annual Basecoat Development Task PaintCo Europe PaintCo Styling OEM selection PaintCo Development new Product sales per color 150 competitor colors 200 colors, 1000 products incl. pairs, triples for s/b, w/b, 3-wet low bake, bell-bell, bell-spraymate PaintCo DAS colors 100 Cost pa: 2 Mio 10 Mio 1 Mio

23 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)

24 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

25 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

26 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

27 OEM Application Equipment Manufacturer Reduced Market Size for Coatings Source: Dürr SurCar 2013

28 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

29 From Chemicals to Painted Car Body - R&D new monomers - New resources.. 3 years +. - Polymer synthesis / testing - Industrialization.. 4 years +. - Paint formulation / testing - OEM tests and approval.. 5 years +. TSCA KECI. IECSC - Painting / curing equipment - OEM pilot series - Investment and SOP.. 4 years +.

30 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