Coloring the Automotive MarketFri, 09/01/2017 - 10:36
Q: How important is the automotive aftermarket for Sherwin-Williams and what growth expectations do you have for Mexico?
VO: Sherwin-Williams acquired the Mexican brands Excelo and Flex in 1997 and 2007, respectively. The company decided to retain the original brand image of both, which allowed us to grow in the domestic market. Today, we have 1,200 points of sale specialized in automotive refinishing. Our distribution network has allowed us to target vehicle fleets and refinishing shops, both independent and OEMs, leading us to double-digit yearly growth rates since 2015.
EZ: Our production facilities in Mexico supply 95-98 percent of our domestic sales and thanks to technology transfers from our US sites, we now export some of our products to that country. Mexico is also home to one of our four global research laboratories. Working with with our centers in the US, India and Brazil, this site has developed 25 percent of the colors managed by Sherwin-Williams. The company is growing and we are optimistic about our opportunities in the automotive sector. Sherwin-Williams represents 30 percent of the refinishing business in Mexico. We expect to maintain our momentum and reach double-digit growth in 2017.
Q: What are your strategies to maintain that level of growth in 2017?
EZ: One of our main drivers for growth is the size of the vehicle park and the increase in new car sales. More than 60 percent of all new vehicles are financed and insured, which means that if they have an accident they must be fixed immediately. That presents a great business opportunity for Sherwin-Williams. When a car is no longer insured or its repairs are no longer done at the OEM’s workshop, we can also offer our products at independent shops. Our biggest participation is with volume cars but we are also growing in the premium and luxury segments.
Q: How have your prices been affected by economic fluctuations and how have you countered these negative effects?
EZ: Volatility in the dollar-peso exchange rate at the beginning of 2017 affected us considerably. Raw materials also increased in price due to general inflation and as a result we also had to raise our prices. Right now, we are trying to keep our prices stable by optimizing our processes. We have a logistics group called Global Supply Chain that is in charge of our plants’ administration and one of its priorities is to implement lean manufacturing practices.
Q: What do you see as the biggest challenges SherwinWilliams faces in the automotive aftermarket?
EZ: One of the main challenges is technological because Mexico is divided in two regions. From the Bajio upward, technology is much more similar to what we can find in the US, where companies are oriented toward efficient processes. However, from the Bajio downward, we still see demand for acrylic lacquer, which we originally thought would disappear from the market.
VO: We also face problems in terms of color. This topic has become increasingly complex; pigments are more sophisticated and it has become harder to match colors when repairing a vehicle. Color matching is an art and there is no machine that can match tones exactly, even when vehicles are painted on the same manufacturing line. To have functional refinishing operations, shops must have an experienced colorist. We offer training to our clients but what really makes a good colorist is constant practice.
Q: Where is the biggest market opportunity for SherwinWilliams in the automotive sector?
EZ: Around 25 to 30 percent of our entire market is with repair shops, both independent and those belonging to OEMs. There are around 3,000 shops within this segment and we are their second preferred option. Vehicle fleets are another important segment that represents around 10-12 percent of our refinishing market. There is especially high demand for our products in the bus segment because these units have an image to maintain when they are part of a transportation fleet.