Axalta Coating bets big on India

It was in February 2013 when DuPont Performance Coatings took its new identity of Axalta Coating Systems following a change in ownership.

From Charles Shaver’s point of view, this transition has had important implications. “For Axalta, one of the key changes in strategy for me when we separated from DuPont was to really spend a lot of time in emerging markets,” said the Chairman and CEO of the US-based Axalta during a recent visit to India.

He was here to announce his company’s expansion plans as well as intent to set up an automotive coating development laboratory at its Savli facility in Gujarat. Axalta has a strong presence in Europe and the US and Shaver believes the real big opportunities now lie in China, India and Brazil. “In the last couple of years, I have spent majority of my time in these areas working on growth strategies,” he says.

In transportation and automotive globally, Axalta is either the No 1 or 2 player in most markets but, in its earlier avatar, DuPont never really had a big focus on India. “We decided to step it up especially when we have products and technology to offer. We have a long standing presence here and only need to focus a lot more,” says Shaver. The Axalta CEO justifies his belief in the country by pointing out to the good growth seen during the last couple of years. As he puts it, there are only a “couple of parts in the world” with growth potential of which India is one.

Axalta works with major vehicle manufacturers across the world who, in turn, have “always asked us to do more here”. DuPont did not do too much and barely put in $10 million annually. In contrast, during 2013-14, Axalta invested $500 million in business and going forward will invest $150-200 million in capital annually.

Over the next couple of years, the majority of this investment will go into China, Asia-Pacific and India. “Brazil has been disappointing and we will only put money in when there is some kind of stability,” says Shaver.

Asia-Pacific will account for 25 per cent of Axalta’s business over the next five years. The coating business typically grows at 1.5 per cent of GDP which explains why the company is upbeat about its prospects in India.

Shaver is not entirely sure about China though which “will continue to struggle” and grow at six per cent. “

I expect China to be more volatile than it has been in the last 20 years when the country expanded at a frenzied pace. We will stay there and grow given the size of the market,” he says.

At a time when the world is going through changes , Shaver believes there is a higher risk in making a mistake in “big companies like ours” which means being more circumspect as a result. “I think China will grow slower on the consumer side and India has a rising middle class which will bring investments here. I also think we need to be more careful and not get too far ahead of things especially with the rest of the world not growing with the present volatility,” he says.

For the first time in 20 years, Brazil, Europe and the US will see low growth with “crazy currency swings” in the last 12 months.

Shaver expects the world to be in slow growth mode for a while except for China and India. “As CEO, you need to wake up everyday and think in terms of investment,” he says.

India is poised to become the world’s third largest automobile market by 2020 and Axalta is betting big on this growth story.

There is a lot of technology involved in coatings for different conditions across the world. This explains why the company has earmarked substantial R&D investments as coatings are much more advanced and involve a lot of money.

“We do major innovation in Philadelphia, Shanghai and Germany and have satellite laboratories in another 12 locations including India,” says Shaver.

The coatings business is a $140 billion industry and growing which means there will be more applications in the future like water-borne coatings which are easier to use and not hazardous in the event of a fire.

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