OSAKA -- Nippon Paint Holdings will invest roughly 30 billion yen ($284 million) in three years to significantly increase its production of building paint in China, in response to solid demand growth for its inorganic paint.
The major Japanese paint maker currently operates five large-scale plants and 24 smaller production facilities in China. It plans to add one large building-paint plant each in the inland provinces of Hubei and Henan, spending a total of 20 billion yen.
By also setting up smaller plants for paint materials for homes, buildings and other structures in Hubei, Jiangsu and other provinces, the company aims to lift the total number of its Chinese production bases to 38 within three years. This is expected to raise its total Chinese production capacity for paint, including automotive coatings, to 3.6 million tons a year in 2020, up 70% from 2015.
Nippon Paint will also expand its sales network in China, making its products available at more stores, centering on the city of Chongqing and elsewhere. The company sees at least 65,000 stores handling its products by the end of 2018, a 50% jump from the end of 2015. The number of locations that only handle Nippon Paint products will grow 10% to 3,300.
Nippon Paint will also set up locations to provide after-sales services. The company hopes all these efforts will help boost its share in China's home-interior paint market from around 30% today to as high as 50%.
The Japanese company turned its Chinese joint venture with Singapore's Wuthelam Group, its top shareholder, into a consolidated unit in December 2014. This raised the contribution of Asian operations to Nippon Paint's overall sales to 60% in the fiscal year ended this past March. The figure is expected to go up further, since the company is looking to hike sales at its Chinese operations from 232.8 billion yen in fiscal 2015 to 300 billion yen or more as soon as possible.
Nippon Paint has also set its sights on expanding group sales by 30% from the current level to 700 billion yen in the year through December 2018, and then to 1 trillion yen over a longer term.
China is the world's biggest paint market. Its construction-related paint segment, estimated to be worth roughly 700 billion yen a year, is forecast to deliver double-digit growth in coming years. At the same time, demand for inorganic paint is expected to climb, as organic paint comes under increasing pressure from tightening government regulations. Chinese consumers are also becoming more aware of organic paint's detrimental effects on health.