Axalta and PPG further increase P&M costs, report decreased Refinish sales in Q2

Axalta and PPG have both issued new paint and material (P&M) cost increases, effective July 1 and today, respectively.

Axalta’s prices are up on all of its Refinish brand products, which it attributed to a cost increase on imported products. Prices have been adjusted by a weighted average of 3.88%.

PPG will implement increased prices on Automotive Refinish collision brands by a weighted average of 2.84%. Current pricing will remain in place for PPG Velocity, Shop-Line, Omni, and Super Value product lines.

Before these increases, collision repair customers had already seen weighted average P&M costs increase by an average of 7.4%, according to company announcements from the five major refinish brands. Paint material increase announcements tracked from Q1 2020 through Q1 2025 resulted in an additional average cumulative increase of 59.6%.

During Q2 earnings calls held by Axalta and PPG on Thursday, both companies reported that Refinish sales were down.

Net Refinish sales declined 6% year-over-year in Q2 to $514 million, with organic sales down due to volume declines related to industry softness and distributor inventory corrections, which impacted year-over-year price mix year, according to Axalta Chief Financial Officer Carl Anderson.

Axalta President and CEO Chris Villavarian said temporary challenges continue within its Refinish segment in North America.

“Claims reported through Q1 remain meaningfully lower in the United States and slightly down in Europe,” he said. “Although collision statistics are pending for 2024, early insights from various states in the U.S. and independent agencies indicate that collision frequency declined by only low single digits. This collision statistic is in line with our expectations.

“We believe that factors such as elevated repair costs, rising insurance premiums, and broader inflationary pressures have discouraged consumers from seeking repairs, resulting in fewer claims despite steady or just slightly declining collision rates.”

Villavarian added business from 1,600 new body shops so far this year, in addition to the 2,800 that were added in 2024.

“Backlogs are also starting to come down… in terms of our MSO partners,”  Villavarian said. “With the backlog starting to come down from the pre-COVID levels, what we see is the opportunity for cost at the repair shops also to abate. I do believe that this marketplace will change. I do believe this is probably some time in 2026.”

He added that there was nearly 2% growth from adjacencies and retail, supported by strong momentum in DIY channels and accessories.

“As we examine external data, we see signs of industry stabilization,” Villavarian said. “Inflationary pressures are beginning to moderate, particularly in areas like repair expenses and insurance premiums… and total repair costs only increased 1% in Q1 year-over-year.”

Anderson added that, while income from operations declined by $12 million — largely due to restructuring-related costs — adjusted EBITDA reached $292 million, a company quarterly record and up slightly compared to 2024.

For the full year 2025, Villavarian said Axalta expects raw material costs to remain unchanged and variable costs to remain flat.

“Based on the latest industry indicators and consumer sentiment data, we now believe that the softer demand environment observed in the first half of the year will persist longer than anticipated,” Anderson said. “Our prior guidance had assumed a gradual easing of tariff-related uncertainty and a rebound in consumer confidence heading into the back half, particularly in North America.

“However, recent trends suggest that these improvements are not materializing at the pace we had anticipated. For the third quarter, we expect net sales to decline [by] low single digits compared to last year, in line with the second quarter. This outlook reflects positive price mix year over year in three of our four end markets, which will help offset expected volume softness, largely concentrated in Performance Coatings.”

Performance Coatings includes Axalta’s Refinish and Industrial businesses.

Looking ahead, Axalta expects to roll out its Nimbus digital platform to 40,000 body shops next year, Villavarian said.

He said Nimbus connects all Axalta products and services into a cloud-based solution, providing customers with data-driven insights designed to improve profitability and performance.

In response to a question from a Goldman Sachs analyst about how to make investors comfortable, Anderson said Q2 played out exactly as Axalta planned.

“There is destocking going on with one of our large customers,” he said. “That will continue to play out, probably through Q3 and maybe towards the end of the year. But overall, we continue to win in Refinish. We are winning in North America, in EMEA [Europe, the Middle East, and Asia], and across the world.

“We are extremely bullish about our Refinish business as we move forward. I think this is temporary. Chris kind of articulated some of the recent trends on costs and repair. One interesting perspective as well, as we think about some of the reconditioning companies out there, we’re seeing a pretty significant increase in activity. And I think that usually tends to be a precursor for where the market’s going to go in the future.”

According to Villavarian, in terms of what Axalta sees as average repair cost, is currently at $4,700 to $5,000, but he noted that it can vary widely depending on the type of collision, and coatings are about 4% of the cost, and 40% is labor.

“That is truly what Axalta’s value proposition is for our customers,” he said. “Everything that we do to save that 40% in a body shop is enormously important and drives, I think, why we’ve consistently been able to perform, even under these challenging conditions… we provide that efficiency and that ability to provide products that, essentially, whether it’s reducing time in the body shop by 50% or the amount of coatings by 50%, or the labor input by about 10% to 20%, makes a huge difference.”

CCC reported in its Q2 Crash Course report that the average total cost of repair (TCOR) by 2024 year-end was more than $4,730, an increase of 3.7% YoY, adding that it was the lowest increase since 2017.

PPG reported during its Q2 earnings call Thursday that overall net sales were $4.2 billion, including an increase in organic sales of 2%.

“The Performance Coatings segment delivered record net sales and earnings with a 6% increase in organic sales driven by both higher selling prices and sales volumes,” said Tim Kaniewicz, PPG CEO and chairman. “In Automotive Refinish, organic sales decreased by a low single-digit percentage versus the prior year. In the U.S., organic sales were flat despite lower industry collision claims, as we benefited from both share gains and customer order patterns.”

He added during Q&A with investors that he expects Refinish’s organic sales will be flat through the rest of the year and the first half of 2026.

“Collision claims have been down high single digits for the first half of the year, so we’re pretty proud of being flat at the midway point,” Kaniewicz said. “Now, as we move forward, I did say that we’re expecting Q3 to be soft because our strength in the first half of the year was driven by share gain and some distributor order patterns, and we expect the share gains to continue, but we do expect swinging of that distributor order pattern for Q3.”

PPG expects Q3 to be a bit soft and Q4 to be more normalized, he said.

“We’re not expecting industry recovery of claim rates and body shop work likely until 2026,” Kaniewicz said. “There’s a bunch of factors here on affordability of insurance, people not submitting claims, a number of other factors that we expect to play out through the remainder of 2025.”

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Featured image: RDN file photo of refinish paint and materials.