February 15, 2025 – Basf Mulls Strategic Shift for Its Coatings Division, Sparking Market Interest
In recent news, Basf’s newly appointed CEO, Dr. Carey, revealed during a global conference call that the conglomerate is reassessing the strategic direction of its coatings division, potentially exploring options such as seeking joint venture partners or altering ownership structures. This disclosure, confirmed by the conference call recording exclusively obtained by Reuters, has garnered significant market attention.
Basf’s coatings business boasts a vast portfolio, with automotive coatings constituting a substantial 65% of its revenue in 2023. Currently, the automotive coatings industry is undergoing a materials revolution, where water-based coatings are progressively replacing solvent-based ones. The rise of domestic coatings manufacturers in China is challenging imported brands, while high-performance materials are finding increasing applications. Furthermore, the emergence of new energy vehicles (NEVs) is imposing stricter requirements on coatings. This transformation is not only propelling technological advancements but also intensifying market competition.
According to insights from the Color Masterbatch Industry Network, the global coatings market is witnessing growing consolidation, particularly pronounced in China. Initially, China’s automotive coatings technology relied on overseas imports. However, in recent years, companies like South Korea’s KCC and the Sino-Japanese joint venture Xiangjiang Kansai have emerged, breaking the foreign monopoly. The booming NEV sector has enabled domestic coatings enterprises to leverage their geographical advantages and rapid response capabilities, securing a foothold in the supply chain. The stringent performance criteria for NEV coatings, including corrosion resistance, high gloss, and durability, have set new market standards.
Basf’s strategic realignment announced in September 2023 streamlined its operations into “core” and “independent” businesses, with the coatings division falling under the latter category considered for potential divestment. Despite Basf’s coatings business being a global leader and a historical profit driver for the company, the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of its Surface Technologies division has been on a decline, intensifying shareholder return pressures.
Amid escalating industry competition, diminishing profit potential, a challenging global economic landscape, and tightening environmental regulations, Basf may opt to divest its coatings business. This move aims to concentrate resources on supporting its green transition and other core strategic objectives. This strategic adjustment undoubtedly reflects a well-considered response to market dynamics and industry trends.