Morning, everyone. I'd like to welcome you to Axalta's 2018 Capital Markets Day. We'll call this the Donner Party edition. I had emails from San Francisco yesterday, early this morning. They couldn't get over the Sierra Nevadas. We are missing a few people, but I'm really happy to see a pretty full house here. Thank you for making the effort on a difficult weather day. We have a great agenda for you this morning. We have 6 speakers, as you can see. There's a break at 10:30, that'll be about a half an hour, and a lunch to follow at 12:45. That will be upstairs, by the way, in the lobby level. When we conclude, please take the elevators up for that. Between the speakers and during the break, I encourage you all to check out our product display.
We have a lot of exciting products out there, give you a sense of the breadth and diversity of our product set. I'd also like to point out some of the additional Axalta attendees that are here to help you describe those products and understand our R&D. From last year, you all may recall Barry Snyder, our CTO. You also may have met Robert Roop, who's back. Dave Heflin is here from Houston, who represents our industrial business, and Matt Boland from Michigan, who runs our transportation technology group. Before I introduce Charlie, I'd like to note a few points as takeaways. Axalta is a world-class global coatings company. Is this a platitude? No. We took over a business with some issues, especially in efficiency and organizational effectiveness. This is now behind us, and Axalta has accomplished a great deal over the last 5 years.
Our focus now is on keeping the momentum going and driving for growth. Our 5-year track record is strong, but we're just getting going. Today, you'll hear from each of our leaders about our growth opportunity. Many of you focus a lot on the near-term cycles and metrics. We'd like to remind you that the mean line trend in each of our markets, including light vehicle, points up. There's a huge white space for growth in each of our end markets, and we have the capital and experience to enable this growth. We're also far from done on cost and productivity. Axalta Way is not dead. The first $200 million was a key milestone for sure, but we now progress to next levels. Shareholder value creation underlies every decision we make. To an extent, this makes my job easy.
Today, we'd like to connect the dots a little bit for you, though, on our value creation model, and Robert Bryant in particular will address that. Axalta is an independent, nimble, and focused company. We're elevating capital deployment to its rightful place, front and center. All management decisions are viewed through a lens of efficient allocation, our ample free cash flow goes to building value, not growth for growth's sake or buybacks with no discipline. We appreciate that many of our key shareholders support our approach, and for any new investors, we welcome your interest and thank you all for coming to hear why we see Axalta's shares today around $32 as an attractive investment. With that, I'll introduce our Chairman and CEO, Charlie Shaver.
Good morning. Again, thanks for everyone sloughing it out this morning to make it. We were sitting here yesterday trying to think about how we could shrink the number of tables depending on who could make it in, so it's great to see the attendance today. Last year, we did this down at the Exchange. We did a technology day. Today, we really are shifting it. As Chris said, we're kind of shifting our focus a little bit to shareholder value creation. A lot of noise in the industry, a lot of things going on. We want to be able to give you some new things today that we're thinking about, kind of where we're leading the company.
Most of all, how we think about value creation, what we're going to do with our free cash flow, how we're going to build the business in times when we've got everything from a rising rate environment to raw materials going up to, it seems like every week we get something else new, whether it's tax reform or Trump tariffs or something else we have to deal with around the world, and how we think about all that. Anxious to do that today and spend time with you. Today's less about technology, and it's more about the growth of the businesses, where we're going to go, and how we're going to take advantage of the changing landscape that's out there. First off, for those of you who may be a little newer to the story, we are a customer-focused organization.
We really run two segments, Performance Coatings, Transportation Coatings. A couple of things I think that are noteworthy there as we shift the business. One, Transportation Coatings in 2017 was 38% of our sales. Most importantly, if you look over on the Performance side, what we're doing there is growing our Industrial business, primarily not only organic, but also inorganic. We'll talk about that today, myself, and highlight that throughout the presentation. In addition to what I think is a really good growth strategy for Transportation and for Refinish, you'll hear even more today about Industrial. Industrial two years ago was about a $550 million business. On a runway basis, 2018, it'll be $1.2 billion, and it's on its way to being a $2 billion business for us over the next five years or so.
In essence, we could end up with five years from now with Industrial being maybe not our largest business, but pretty close to our largest end market that we focus on, just because of the sheer magnitude of opportunity there. We're happy to talk to you about that today. Again, potential in all the businesses. I hope that you'll share our passion and enthusiasm for that. As Chris said, we're focused on shareholder value creation. As many of you know, who've been around the story for the last five years, it's been a significant transformation. We're not going to spend time on that today. I think everybody understands where we've come from, who we are. It's a 150-year-old child that separated from DuPont five years ago.
A major shift, culture, organizational structure, what we're doing from a productivity standpoint, last but not least, now starting to do bolt-ons. Really with us, I think what we want to make sure each of you walk away today with is that there's still a lot to come with Axalta. Not only driving profitable growth with innovation, customer focus, but solid markets. We're going to give you some additional market data today, talk about some of the trends that I think you'll find interesting. Again, many of you are involved in a lot of these pieces, but we want to point out to you why we like almost every trend that we see out there right now in the business, even though sometimes people around autonomous or things like that, people have questions about the health of some of these businesses.
We're going to talk to that today some. Last but not least, on the more to come, we really, on our capital allocation, our internal rate return projects typically target 20% or better. Frankly, we haven't even had any of that low, but we have pretty high hurdle rates, and we continue to find great opportunities within the company, and then also a robust pipeline of bolt-ons as well. As I mentioned, we've established a track record of success. Some days it feels like a long five years. Other days it seems like it was yesterday we were down in Wilmington spinning out of Barley Mill and moving forward. It's been fun to do. It's been fun to watch and go alongside of [inaudible] is one of our sister companies that Mark McDonough runs.
We always compare a lot of notes about where we were five years ago and where we are today. Although I wish I were the CO2 producer today as well. We have established a great track record of success. In 2016, 2017, I mentioned this in Technology Day last year. We're now on the cusp of being able to do a lot of different things as a company and what we've kind of been aiming for over the last five years. We're now, when you look at our private equity exit, when you look at our free cash flow, a lot of the one times behind us, the Axalta Way, now having an operating cadence we'll talk about today. All of those things we feel like we're really starting to hit on almost all the cylinders around. Started buying back some shares last year.
We've now done 15 deals that total of [inaudible] capital employed, where we are launching kind of Axalta Way 2 for us, which is another $200 million in productivity over the next three to four years. We'll talk about that today. Really, on the operations side of the business, continuing to invest heavily in the company. In the past two years, we put 400,000 sq ft of new R&D facilities on the ground in North America, EMEA, and in Asia Pacific. Leading in R&D, not only in % of sales, but what we plan to do with those coatings as we produce them. Last but not least, starting to be recognized for a lot of our sustainability and our corporate sustainability initiatives across the company.
Again, a great year of highlights for us, but a challenging environment going forward, and look forward to talking to you about why should you invest in Axalta today? It's great that we've done all these things, been a great run. We've gotten rewarded for it. I would argue that in the next couple of years, we're going to have a whole another transformation in coatings. Not only in maybe a couple of large acquisitions that go on at the top space, but the amount of companies, the amount of transformation and technology that's going on out there in all these markets is really going faster than certainly I've seen in the past few years. We'll talk about that. Most importantly, why invest in Axalta today? One, we're on focused end markets. We've got structural volume growth in all those.
It range anywhere from 3% in refinish to 6%-8% in some of our industrial businesses. There's technology change going on in all of those, in many cases, pushing out local players, regional players, weaker players. We've got the global footprint to be able to focus on that around the world. We'll talk today also about China. You hear a lot about China. We've talked a lot about China. It remains probably our single biggest growth opportunity in the company, just from the standpoint of the amount of coatings they consume, the value in those coatings, and we'll talk about that again as well today. It is an area of emphasis for us, one that we're now putting even more focus on. You saw six months ago, we announced our new Nanjing complex.
This will be a complex that'll probably have $300 million-$500 million of capital put in it over the next 5-10 years, really it'll join the other seven operations that we have in China. We've been there over 35 years, 3,000 employees, well-positioned, and we have a critical mass in China. Even though the Chinese economy is 6%, 5%, pick your favorite number, that understates what's really going on in some of the coatings markets in China and the positions they're taking. As China moves much more towards a waterborne, high solids environment, then we're well capitalized to take advantage of that. Axalta Way will always continue to be a productivity-driven organization. It's our DNA. A lot of us come out of the petrochemicals industry. We've got to deliver mid-single digits productivity every year. We've got to offset the cost of inflation.
I think Axalta Way 2 is an example of where we're going to continue to go at that. Not just people, but overall cost of operations, raw materials. Again, some of the things we talked about last year in our Technology Day. Clearly, consolidation opportunity. We've got a proven M&A strategy now. We have a very defined process. We understand how to look at companies. Of our 15 acquisitions, again, we haven't played double digit yet multiple for one. It doesn't mean we wouldn't, we continue to find great bolt-on opportunities at reasonable prices, I think that that will continue to serve us well. I would make one comment on M&A, is that I think the pipeline today is fuller than it ever has been.
I don't know if it's because of a lot of the smaller companies are beginning to realize that the potential people to buy their businesses is less and going to get fewer, the top 10 companies, or it's just the time in a cycle where they see rising interest rates, more competition, technology changes, is really starting to accelerate the rate that some of these smaller players want to get out of the business. We actually, being one of the few people in the coatings space able to do this, other than private equity or the other top three, we feel it's a great time for us to continue to look at companies and be strategic about what we want. We don't look at everything. We stay focused on our core markets. Strong free cash flow.
I think many of you know we target our free cash flow to be 45%-55% of our overall EBITDA, so we've got great free cash flow generation. Today, we're going to talk about what we're going to continue to do using that, how we're going to continue to protect that going forward. Last but not least is Just the return on invested capital growth focus that we've got. The shareholder alignment, I think we understand what many of you as the shareholders want out of a company like ours, and I think we're focused both internally and externally on how to do that. Of course, it all starts with structurally attractive markets. We're sitting today, if you look at coatings today, a $130 billion global coatings market. We participate in 45% of that. There's still 55% of the market we're not in.
The majority of that 42% is the decorative business. Our strategy on decorative has always been, we would only get in it if we can find a market-leading position somewhere. If in a region there was a market-leading business, we're not afraid to get in it. A lot of us have backgrounds in coatings and chemicals and aren't afraid of deco, but we're not going to go out and buy a number 4 or number 5 player just to get into deco and learn. We think there'll be some opportunities coming up. The reality is, when you look at the fact that we already participate in over 45% of the marketplace today, the white spaces for us, refinish, automotive, transportation, and also industrial, are just so great that frankly, we'd be opportunistic on the deco side versus more strategic. There's so many white spaces.
You'll hear about some of those today. I think what we most like about our businesses is this technology change going on in all of them that favors us. There's regulatory change. There's global pressures on a lot of these companies in the white spaces. Last but not least, these are markets that grow anywhere from, again, we've listed here some data for you, anywhere from 2.7% globally in refinish to over 5% in most of our industrial markets. Good growth, and again, our strategy is to grow faster than market, and I think we believe we'll be able to do that. Again, we are a global leader in many of our markets. As many of you know, we're the number 1 player in refinish in the world. We don't take that lightly. There's a lot of pricing leadership that has to come with that.
You've always heard me say before that if we don't raise price, no one else will. We have to, by definition, be the price leader in most markets. We're happy to do that, but in some cases, it takes risk when you have undisciplined competitors out there who attempt to take advantage of that. I think overall, we manage that well. We take it seriously. Again, if you actually look across our portfolio, even in industrial, being the number 2 powder coatings player globally, we actually like powder coatings. We're starting to grow to higher technology products, and that will continue to be a good business for us and one that we think we can aspire to even greater heights over time. You saw us do a small acquisition in the U.K. last year in thermoplastics, I think we're well suited to continue to take advantage.
The number 1 player is certainly someone we aim at a lot. We've had a lot of success against that. Again, in refinish, you'll hear from Joe today a lot of our global strategy. In some cases, we're doubling down in refinish. We feel like it's been a good business for us, but we've left too many things on the table the last few years. You're going to see a much more aggressive posture from us on product introductions, market introductions, acquisitions over the next couple of years in refinish because of what we feel like the fundamentals are that are going on out there globally, and against the backdrop of just higher quality cars, higher quality paint on cars, and the overall car market continuing to grow at 2%-3% globally, what that's doing to the global car park out there.
Transportation coatings, again, number 2, a really nice, solid business for us. We've looked hard to grow it inorganically the last couple of years. It's been hard to find opportunities. We really like the position we have, the technology we have, happy with the position we have in that business. Our real focus, you'll hear us talk today some, is around commercial vehicle. We believe it's a nascent business for us, a niche, but one that is really not just about heavy-duty trucks. It's about buses, trailers, all types of commercial transportation. We feel like there's some pretty big opportunities opening up for us over the next couple of years. Again, I think in both of these markets, having a global leadership position, it allows us to navigate logistics, raw materials, and other synergies in the business much more than some of the other players.
Again, when you think about these businesses, just great white space growth opportunities. In refinish, for example, we put a chart up here just to show you the growth in China. You're putting 30 million new cars a year into China. The global car park has grown by 11% there. Next year, China's car park will pass that of the North America, ultimately, will be the largest car park in the world. I'll show you some data in a minute also around those numbers and why that's important to be doing more in refinishing in China than we have. In industrial, for us, it's an evolving opportunity. We're core in powder. We now have developing opportunities in coil and in wood for us, and then in general industrial. When we look at industrial overall, that's a $40 billion market.
We're $1.2 billion of that, and we're one of the bigger players. When we look at that marketplace, in the end, the industrial market will be dominated by two, three, four big players globally. Maybe 20% of that will be regional, local players on the low end. We really believe, and I think we have a couple competitors that believe the same thing, that the industrial marketplace over time will not only increase in margin opportunity, but will continue to grow 4%, 5%, 6%. For us, it's a great space to play in, and we're very happy with the acquisitions we've done and also the organic growth we're seeing in our powder coatings business. On the light vehicle business, while people say, "Well, it's only going to grow 2%," that's still a pretty big number. This past year, 96 million new cars built globally.
That number will grow to 105 million over the next five years. The death of the automobile is greatly exaggerated. More importantly, those 105 million cars will all be of higher quality as people continue to demand more efficient cars. Some will have electric motors, some will have combustion engines. That doesn't really matter to us. That's the motor in the car. In fact, we participate in the electric side as well, not only in the battery with the resins and some of the things you've seen. That growth is going to continue to be big. Remember, all of that doubles down in the aftermarket into the global car park. That eventually feeds the refinish business. The high-quality cars that you build on the front end probably is more to our strengths than refinish over time.
Again, I think when you just look at cars per capita, when you look at what's going on in the rest of the world, while the cars per capita in North America may not grow much past about 75% or 80%, the rest of the world has a long way to run, and those are markets that will continue to grow 4%, 5%, 6%. I think too many times people just look at the North America car market, and they try to translate that to what goes on in the rest of the world, and you just can't do that. The dynamics are different, the quality's different, the players are different, and what they're doing with those vehicles is different as well. Last but not least, I mentioned earlier the commercial vehicle. That's a $3.6 billion marketplace. We have about $400 million.
Again, we're one of the bigger players, but we're still only about 12% of that market. We're very anxious to continue growing in that sector. Again, you'll see it this next year with a focus area. We recently created a complete commercial vehicle team with our top players running that business. A little bit more on refinish because it's the engine that drives our company at almost half of the profitability. Again, market share in three of the four major regions of the world. This is an industry that continues to be driven on consolidation, higher productivity. You're now seeing MSOs being created in Europe across borders, people like LKQ, people like private equity, Blackstone in there. All of that really favors people like us, because as these people buy these body shops, as they consolidate, they consolidate the distribution.
We end up being a preferred supplier in there because of what we can do with our wide range of coatings. Probably the biggest thing that we've done strategy-wise different from the DuPont days is we now want to own the value chain across not only the premium paints, the mainstream, and economy. A lot of our brands, a lot of our acquisitions are in the mainstream and economy segments. While those are actually a lower total dollar value, the margins are good in those businesses, and they're ones that we think help us to manage the entire chain out there of body shops in a particular country or a particular region. It also gives us higher than GDP growth because those are segments that tend to grow faster than the premium segment does.
Even though premium grows, it's always under pressure because people learn how to use less paint, be more productive with them. A good marketplace for us, but only grows at 1%-2% versus the rest of the market. Again, in this space, over 30% of the refinish market globally is still in the hands of local and regional players. Again, we continue to see them get out of the business as technology gets in the way, raw materials get in the way of them being successful. Insurance companies, obviously, whether it's China, whether it's the U.S., or whether it's in Europe, are really driving a lot of the technology change going on in the refinish industry because they're demanding productivity and what they'll pay for on a repair cost. I mentioned earlier a little bit about industrial, and you're going to hear from Mike Cash today. Hold on.
This is an area for us we're really proud of. We've over doubled the size of the business, and we'll double it again over the next five years. We've gotten into both opportunistically. We'd always wanted to get into wood coatings. A couple of us have a background running wood coatings companies. We were able to do that opportunistically last year with the business that came out of Valspar. Besides the acquisitions we've done, we've actually had significant infrastructure investment into both our powder coatings and our industrial liquids e-coat business over the last couple of years, growing 10% organic growth and new customer adds in the last two years in that business, really making strong gains in e-coats, not only base layers, but also base coats and top coat business. Again, we continue to target mid-single digits growth across the business.
You'll continue to see us do two, three, four bolt-ons a year in this business. Again, that can change depending on what's out there opportunistically. We're very happy with the portfolio. We may add other segments as we get a chance in here, but today our business is focused around these five segments. You'll get to hear Mike talk about those today. Synergies for us tend to be distribution, breadth of products. For example, we bought Spencer in the U.K. last year. We're now moving their products into Europe. We're moving them into the Far East. Ultimately, when we get capabilities, we'll move them into North America as well. Again, taking these products where many of those smaller companies couldn't do it. We've got over 55 manufacturing facilities around the world, but over 4,000 distributors.
In many cases, we have distributors looking to do more that are either refinish distributors or industrial distributors. These are great examples where we can move more products to them, and in some cases, just displace a competitor's product that one of our distributors was handling because we did not have something. Our commercial vehicle business I mentioned earlier, this is a great white space for us, not only under-penetrated geographies like China, but also adjacent areas like marine protective. People ask me about marine aero protective. We are in those markets today. We are not as big as a couple of our competitors, but we are in them today. We understand them. For us to grow significantly, we will need to do acquisitions, and you will see some of our acquisitions targeted over in those markets.
Some of these, like marine and protective, it is not a bad time to enter them because some of them have been depressed the last couple of years anyway. We are under no illusions about the cycles in those businesses, but they are great white spaces for us. We have also got in commercial vehicle, just in existing markets where we are today, like heavy-duty truck, mid-class trucks, things like that. Just looking at more content, more content per vehicle. If you look at the builds globally, heavy-duty truck only grows about 1%. Globally, however, we are growing share, so we pay less attention to what the overall market is doing, and we are just looking at content per vehicle and share. For example, in China, areas like that, we are growing mid to high single digits, our share basis there over time.
Our technology, we have always had good technology in bus, rail, areas like aviation. We just never deployed them, and in many cases, you need distribution points, you need approvals, and that is really what we are focused on in the commercial vehicle side of the business. Backing up a little bit more about China and the car park I mentioned earlier. Here is what is interesting, and I think that the car market in China is changing dramatically. Not only is it almost 30 million vehicles a year, but it is also now moving into the tier 2, 3, 4 cities. The quality of those cars going into the cities are going up. Those cities are not ones where you sell $100,000 Audis. They are mainly the more Chinese OEM players than they are some of the multinationals.
The car park today, if you look at 2018, for example, here in our chart, the car park in China is growing by 20 million vehicles a year. Now they are selling 30 million, there is a net of about 10 million vehicles a year that are coming out of that car park, either trashed, thrown away, salvaged parts, whatever. What that is doing, that 20 million that is going, is all higher end vehicles going into the car park. Interestingly enough, what we are seeing in China is a shift rapidly to waterborne, to high solid, solventborne, because of environmental issues where the government is just coming in and saying, "You have got to do this." Also the color match, the quality on those vehicles in those cities, and everything else is changing dramatically.
When we look at the car park over the next few years growing by 20 million a year, it's less and less about low-end vehicles that are dropping off the bottom, and it's more and more about the customer's more discerning, and they're going to take care of their car. Now, that doesn't mean they're going to use a Spies Hecker waterborne, highly productive paint. We're still driving mainstream products in China, and our mainstream is growing at double digit growth for us. We are seeing this rapid growth in the car park. Again, we think in the next couple of years, it'll approach that of North America, and pass North America as the largest car park. We're happy to grow with that. You'll see us, if we're successful this year, do one or two acquisitions in China.
We've held off doing any big acquisitions in China the first five years, frankly, just because we had so many other things to do. We also wanted to understand where China was going to go in overall chemical parks, where our facilities were located, and where did we want to play and how do we want to play. I think we have a great roadmap now, we know where we want to go, and you'll see us, I wouldn't say double down on China, but take a much more aggressive posture on the business. It funds itself with its free cash flow, we're happy to now turn our attention to doing more in that arena. Also in China, not only refinish but the industrial market. I mentioned earlier, China consumes over 40% of all the global industrial coatings, I don't see that changing anytime soon.
I think they'll continue to be a large industrial producer as they feed their economy as they export to other regions. They are shifting to more and more domestic consumption, which is good, they demand local supply. For us, you see we've shown here some of the global coatings, the different markets, $8 billion of the powder coatings market sits in China, $1.5 billion of the electrical insulation market. The reason the electrical insulation market is important is, as you look at electrifying not only cars but other forms of stationary transportation, more and more electric motors. We produce a pretty significant amount of impregnated resins that go in those motors, it's a business we'll be actually putting some domestic capacity on the ground in the next year to service that business.
I think China, while they do a lot in the high tech world, they'll continue to be a large industrial producer chew up more and more coatings. Those coatings will be more and more productive coatings. There'll be more and more waterborne coatings. I think us and a couple of the other multinationals are well-placed. Not to forget OEM, which is our largest business today in China. Again, our shift has been more and more to the domestic OEMs. We have a very large share of wallet with the multinationals. We're also doing more and more domestic OEMs, more and more automotive fleet penetration. The players that are there are Chinese locals, working with them.
Again, as we highlighted earlier, the per capita gap on cars to where the developed countries are is still relatively large, and China will continue to see this as a source of GDP growth. The automotive industry, whether it's OEM or refinish, will continue to be a critical sector in China's growth and their economy. It also fuels infrastructure spending. It's something they can't really afford to let slow down because it is the engine that provides per capita GDP across the country. Commercial vehicle for us, I talked earlier about. We're really focusing on that white space for us. Over 1 million trucks a year being built there. Again, what we're seeing with our JV partners there is they're all being demanded, as the OEMs were on the light vehicle side a couple of years ago, to go to waterborne.
We only have 6% market share of the commercial vehicle market in China, we have a long way to go to get where we want to be. Shifting gear a little bit from the business, just a couple other comments on why they invest in us. Operating excellence, Axalta Way continues. People have always asked me, "Gosh, have you now gotten out of everything out of the company, this post-DuPont era?" Absolutely not. We've actually just moved on to other things now. As we do bolt-ons, that actually continues to fuel the engine for Axalta Way. We are targeting another $200 million over the next four years to ensure that we remain a low-cost producer in the industry. If anything, we're going to have more of an obsession than we did the last couple of years.
Our investment, we continue to invest about $180 million in R&D as a company, about 4% of sales, and we're churning out about 200, 250 new products a year. That's the way we get pricing. That's the way we get in to see a new customer. New products, innovation, I think it will continue to be in our DNA as we go forward. Last but not least, you'll start to see us do a lot more in the area of e-commerce. A lot of talk about digital, getting closer to customers. We invest about 1.9%. We have all of our infrastructure in good shape. In fact, we don't even run a data center anymore. Everything's in the cloud. We'll move into S/4HANA on SAP later this year. Our infrastructure's in really good shape.
Now our IT investment really turns to e-commerce and to the customer and building out those platforms. We have multiple platforms in all of our regions, in all of our businesses around e-commerce and doing business faster with the customers. Looking at how we do blockchain, how we would change our whole order process for customers, how we would deal with them on currency is something you'll start to see us really work on over the next couple of years. Real quick on M&A, just leveraging the consolidating sector. Clearly, there's a lot of noise at the top of the world among the big players. I do believe there'll be one or two large consolidation moves in the next couple of years. You can all kind of guess the chessboard there. I think the world remains active there, and that we'll continue to see that happen.
More importantly for us, though, is we continue to do good bolt-ons, I mentioned earlier. Eight transactions in 2017, over $560 million capital deployed towards those acquisitions, and a run rate of over $365 million last year. We'll target top line to add about $100 million to $200 million a year in acquisitions. That's kind of our goal. We kind of overachieved last year. A lot of that was because of the wood coatings business with Valspar. Bolt-ons for us, it's a great business. There's still hundreds and hundreds of those kind of companies out there. There's four of them we're looking at right now. We won't do all four, but clearly there's no dearth for places to go in coatings and people who have good market and good technology or good market access. That's really what we look for in acquisitions.
Free cash flow, I mentioned earlier that we generate about 45%-55% of our free cash flow from our EBITDA. That's kind of our target. We have industry-leading margins. That's really a function of our market mix as much as anything at 20%, but it does generate a substantial amount of free cash flow for us. We're in a great place. I'll show you here in a minute how we kind of think about the chessboard, if you will, on all this. Our free cash flow this coming year, we expect it to be $420 million to $460 million. This year, capital will be about $160 million for us. On top of that, we'll layer our acquisitions. We did start our share repurchase program last year. It was modest, about $15 million.
I actually thought this past month we'd get an opportunity with the market swoon to step on it and get some more, we really never saw our share price move very much during all this swoon. We will be opportunistic of that, and we've got a big plan out there, and we'll take advantage of that over time, and as it makes sense with our free cash flow. We have put over $1 billion back in the business over the last four years, both in capital and acquisitions into the business, and I think that we're being rewarded for that with our performance. I'll share our value creation real quick. We're kind of where we wanted to be over the last five years. We've got a multitude of growth opportunities, technology, innovation drivers. From a productivity standpoint, we've got high-hour projects.
M&A, the coatings consolidations will continue, as I've talked about. I think bolt-on deals minimize risk for us. We have yet to have an acquisition that isn't performing where we want it to be. We're very happy with those overall. Doesn't mean eventually you won't have one that you stumble on, but the bolt-ons really are such that very minimal risk to us, and we can also add significant synergies to the returns for those. Last but not least, really focused on that whole capital allocation. What is going to be our targeted return on invested capital? How we can continue to increase that for all of you as shareholders and as investors. Over time, we want to continue to, at least in this current market, we target about 50% of our free cash flow back towards acquisitions.
$100 million-$200 million a year going back towards bolt-ons. Again, we won't do them just to do them. They have to make sense for us and have a good return, and then we'll continue to do share buybacks. Key goals for 2018, really this follows along the guidance a lot of you have seen. Mid-single-digit organic growth rate. Axalta Way execution, still focused. The majority of the company focused on better execution. Incremental cost actions. We've got over $100 million of raw material increase year-over-year hitting the company. We're busy out raising prices. We started that, as many of you know, last summer. We kind of got the jump on most of the coatings industry as they were kind of denying it was going to happen.
When you look at oil, when you look at what's going on in short, especially in specialty chems. Specialty chems continues to get hit with high operating rates, a lot of force majeure. We deal with that. We're security of supply. We're taking advantage of that as we deal with customers on our overall raising prices. You'll continue to see us this year banging on the fact that value propositions have to go up in coatings, and I think you've seen announcements by competitors to the same extent over the last couple of months. For us, it's about driving innovation, being able to price that into new products and stay ahead of what inevitably is always going to be an inflationary environment, some years more than others. Last but not least, disciplined capital allocation.
Takes up more and more of my time, more and more of Robert's time, as we truly make sure we put our free cash flow to the right opportunities. We've got a great balance sheet. We don't really have to pay down any debt right now. I'm not interested in doing that. We really want to put that capital to work in the highest area that we can. Long-term targets, again, I've mentioned these. I don't think our short-term targets and our long-term targets really vary. We really aim for where we want to be three years from now, five years from now, and where do we think the market's going. That really promotes most of our thinking in the business.
Again, we're very happy with the improvements we've made around working capital, I think we still think we've got another 100 basis points, 200 basis points to go there in the business. As we do bolt-ons, we continually have to look at balancing all that across the company. In summary, as I wrap up, I think we've developed a good, strong five-year execution record, this is a world where it's all about what have you done for me lately. Hopefully what you'll hear from my team over the next couple of hours is how we think about the future, where we're going, and I look forward to kind of the Q&A as we then shift and finish up the day.
I hope also in each one of the discussions today, you get something new to take back with you from how we're thinking about our business, what's going on in the marketplace that helps you as you analyze our company. I would leave you with. We're still a company that differentiates on technologies and service, and we don't ever want to lose that. We'll always be a low-cost producer. I'm not worried about that. We don't always have to be the lowest cost producer somewhere. We can differentiate with service. You always have to make sure that even as we pursue Axalta Way, as we pursue efficiencies in the business, that we balance that with what the customer's needs are out there. At the end of the day, that's really how we grow.
Most people already have coatings suppliers, as one of our customers have said. What they really look for is relationship and someone who can grow with them. It's understood you've got to be lowest cost, you got to have good service. That's really how we win business. If we just go in on price, all of us are kind of at the same level on that. You've got to do something different yourself. We're all focused 100%, as you'll hear from Robert and my team, on shareholder value creation. I think you'll hear that in all our business leaders as well, and look forward to spending the next couple of hours with you.
Again, hopefully, there's some tidbits we can deliver to you over the next couple of hours to give you a little greater insight into our confidence about the business, but more importantly, where we're going with the business for all of you shareholders. Thank you. All right.
Thank you, Charlie. Good morning, everybody. It's great to see everybody. We had a few people who didn't know if they were going to be able to make it in because of the weather conditions, but I'm glad to see such a full room here. We look forward to sharing with you, as Charlie mentioned, a lot of new information as well as new material and new views and looks at our businesses today. You're going to hear some interesting market insights from our business leaders.
I think Charlie hit the nail on the head when he talked about basically we've had a great first five years at Axalta, but it's about what are we going to do from this point forward. The presentation today and a lot of the discussion focused on where we are today and what the plans are moving forward. With that, move to the first slide here. Axalta has, as you know, multiple value creation levers. We have growth opportunities in all four of our end markets. You'll hear more about each of those today from our business leaders, and there are significant opportunities, as you know, in industrial. We talk a lot about that given our market position. You hear about the M&A.
There's also significant opportunities for us in Refinish, where we're already the global leader, but not necessarily in every market in the world and not necessarily in every segment in the world. We want to be the leaders in all segments, in all markets. You'll hear Joe McDougall will talk about that. I also think you'll enjoy hearing today from Steve Markevich. Our transportation business is much bigger and much broader than just light vehicle and just the certain segments of commercial vehicle where we play in today. There's a great amount of white space there, and Steve is going to talk about that. I also think you're going to find that very interesting. We also expect to see continued efficiency and productivity opportunities. Today, we talk about the launch of Axalta Way Phase 2, which we've formalized.
That'll be an incremental $200 million in net savings over the next four years. The other lever that's important for us, Charlie talked about this at the end of his remarks, is around capital allocation. We have and will continue to deploy a significant amount of capital towards M&A. Now that we've moved our leverage down, you'll also see more capital go to share buybacks. Always the high return IRR projects. On those high IRR return projects, our organizational or our operations metamorphosis inside the company is still in its infancy. Dan Key is going to talk to you more today about the nature of those opportunities with a fair amount of specificity. I think you'll also enjoy Dan's points. Moving on.
This slide really tees up and just goes through what our EBITDA and our free cash flow algorithm is expected to be. We really expect this to continue to result in ever-increasing higher return on invested capital. As Charlie mentioned, we expect low to mid-single-digit growth in organic volume. We expect to continue to capture price in the low to mid-single digits, depending upon where we are in the cycle. From a productivity perspective, Dan and the rest of the organization, we're all keenly focused on inflation plus as a minimum from productivity capture. Each year, offsetting the fixed cost inflation that we experience.
Because of the nature of our evolution, we have a lot of incremental opportunity beyond that, and that's Axalta Way, the Phase 1, the $200 million that we've already achieved, and the $200 million that we're targeting to achieve over the next four years. Our growth drivers are diverse. We expect growth to come from basically four areas. Not only four end markets, but also four areas. The first is really around clear strategies and greater resources. What we strive to do today is to provide a little bit more insight into some of the strategies in each one of the businesses and how we're thinking about and targeting growth in each one of those. We're also, as Charlie mentioned, continuing to invest heavily in the business, the amount of free cash flow that we generate allows us to do that.
We'll have CapEx of around $150 million a year, is a good rule of thumb. Our R&D spend is about $180 million a year, one of the highest in the industry, and I'll talk about that in a minute.
We also see market share gains in our core markets. Refinish, as an example, has increased its share by 500 basis points over the last five years, but we still have significant opportunities in Refinish in the mainstream segment, just below premium, as we've highlighted, selectively in the economy segment in certain markets. Most importantly, as we'll talk a lot about today, China, where our position in Refinish, although number two, it's still a relatively small overall share. We do see other strong headway in multiple coatings verticals. We talk a lot about industrial, but today, Steve Markevich is going to talk to you about transportation. It's also exciting to see some of the opportunities that we have in our transportation business.
Emerging markets, we've significantly expanded in Asia Pacific, the Middle East, and certain parts of Africa since our inception, and we continue to be heavily leveraged toward emerging markets. Given the growth that we expect to see in coatings markets and emerging markets, it's a good place to be. We're also working on globalizing our existing products, and it's important. We'll make acquisitions in certain geographies with certain products, certain technologies, certain brand portfolios, and then we'll leverage those globally. One great example of that is the really high level of industrial products that we had in Europe when we bought the business, that we've now expanded into Asia, and we've also taken some of those products to the Americas. The Syrox waterborne Refinish mainstream technology, Joe is going to talk to you about that.
We've also begun to move that technology into other regions of the world, and it's having very good success. Wood. Our acquisition in wood in North America is our first foray into the wood coatings segment, but will not be our last from a geographic perspective. You'll see us look at acquisition opportunities in wood coatings in other areas of the world to leverage that technology and to be close to our customers. Lastly, our e-coat technology that we've developed, high technology e-coat process that we've developed, that we're now leveraging in multiple areas of the world. Again, coming back to Axalta Way, as you all know, we achieved our first $100 million from our European Fit for Growth program at the very beginning. We've achieved another $200 million on a run rate basis in the first phase of Axalta Way.
We are going on to a phase 2 of Axalta Way, we're targeting another $200 million over the next four years. We might actually get there a little bit faster than that, depending on how quickly Dan's team is able to implement all the changes that he's going to talk to you about, which is pretty exciting. Over here on the right, you see a breakdown again of what some of the components of Axalta Way phase 1 is. Here at the bottom of the page, our philosophical view on how to think about ongoing productivity and what Axalta Way is. If we use that basis and come on to the next page, I did just want to talk a little bit about Axalta Way phase 2. Phase 1, where were we and what was it about?
Phase 1, as you see here, was very much focused on headcount reduction in certain areas, functional overhead cost reduction, putting in place a world-class procurement organization, getting some of the early wins in that. A lot of the commercial excellence initiatives in terms of customer intimacy and also having much more sophisticated pricing and analytics tools. Really the transformation of technology, which Barry, wherever you are here in the room, Barry in the back, has led very successfully across the company in terms of organizing the technology function globally instead of regionally as it was under DuPont. That was the first 2 years of the program. As we got into the 3rd year, we began to focus a little bit more on the non-manufacturing footprint part of headcount reduction, as well as additional improvements in procurement.
We began to formalize the Axalta Way a little bit more as our operating system of choice at the company. We began, led by Steve Markevich in the transportation business, began our complexity reduction initiative, which you'll hear more detail about with some really interesting examples from Dan Key today. As we now go into phase 2, what's in phase 2? Phase 2 really captures a lot of the ramping of productivity. I'm sorry, a lot of the ramping of complexity reduction, that's in transportation, but it's also in other areas of the businesses. This is something that has a long tail and will provide a lot of opportunity for us for a multitude of years. We've also taken a hard look at our manufacturing strategy and our manufacturing footprint.
Dan will walk you through how we're thinking about that and some of the changes that we plan to make moving forward. In the procurement area, we're also developing a number of additional suppliers and key raw materials where we're single-sourced or dual-sourced. Finally, from the regional consolidation perspective, we have put together our Latin America and our North America regions into 1, we're now running that as an Americas region, those benefits will also start to flow through as we move forward in 2018. This is a page on capital allocation, which all of you have seen before. We did just want to highlight that we're very disciplined on capital allocation. When we think about capital, it's not just when you think about classic capital or free cash flow, how am I going to spend that money?
Also every dollar of cost that we incur, we think about that as an investment. Just because something is budgeted doesn't mean it should be. Every dollar that's spent is very carefully scrutinized, and we're focused on that. Over on the right, you see here where our main focus for capital allocation is going to be in the next few years. That's organic investment. It's CapEx, it's R&D, mergers and acquisitions, opportunistic share repurchases and some share repurchase just to offset standard dilution. Given our low weighted average cost of debt and the direction of debt markets and interest rates, probably won't see too much debt reduction, but we will continue to build up cash over time. Currently, as you all know, there are no plans to institute a dividend. Moving on to capital expenditures.
We continue to invest roughly 3% of sales in CapEx with a focus on productivity and growth. I'll just highlight here some of the projects on the right side of the page. You can see that much of our growth CapEx is focused on emerging markets, where we're building more capacity, and we're also building greater capabilities. You should expect that trend to continue. Charlie talked a little bit about M&A, I would just complement what Charlie said, that it has been and will continue to be an important growth vector for Axalta. We make acquisitions in all regions, and we make acquisitions in all of our end markets. We do M&A here for a multitude of reasons.
You can see a few that we've highlighted, such as Century, Ellis, Spencer, Plascoat, and ChemSpec, where it's really product line extensions of existing types of products that we have, or it could be a geographic expansion like a HIPIC in Malaysia and Indonesia, or adjacencies. You will see us in our industrial portfolio look to fill out the industrial segments in which we don't participate today. With DuraCoat and coil coatings, United Paint and vehicle interiors, Valspar Wood and industrial wood coatings are good examples of that. There are market access type of opportunities such as Metalak and CH Coatings. I would just highlight as it relates to Valspar Wood, given the size of that transaction, the integration of that business is going extremely well, and is actually ahead of plan, both in time as well as budget.
Next, I'd like to move on and talk about our return on invested capital. This slide lays out for the major coatings players, based on publicly available information, what the return on invested capital is. Our number currently is about 10.5%. That's still heavily impacted by a lot of the accounting adjustments related to the carve-out. We really believe that we will see over the next several years Axalta move up into the mid-teens from that 10.5%. We're focused not only on the earnings side of the equation, but we're also heavily focused on more efficient use of our asset base. Next, I'd like to touch a little bit on our results and more specifically on some of our financials.
Over the last five years, we have grown net sales excluding the impact, or in other words, that we've grown net sales in constant dollars, 2013 dollars, at a CAGR of about 4.7%. What we wanted to show you on this slide is the dramatic impact that foreign currency has had on our top line. You can see in the gray bars what our sales have been as reported, and then if we pull out the impact of currency and adjust it back to 2013 in constant dollars, you can see that our trend line has been quite positive. Again, foreign currency has masked a lot of the top-line growth that we've achieved. We experienced significant currency headwinds in 2014, 2015, and 2016, but we've seen those headwinds attenuate in 2017 and 2018, and the outlook is currently for that to continue.
It'll be nice to have a tailwind from currency instead of such a strong headwind. Consistent with our strategic plan, if you look over on the right-hand side of the page where you can see net sales by region and by end market, consistent with that plan, we've grown in North America and we've grown in Asia and Asia Pacific. We've also increased the proportion that Industrial Coatings represents of our overall portfolio quite significantly. Again, some of the early strategies that we established as a senior management team and that the board established in terms of the portfolio geographically and by end market, that transformation is happening. Moving on to talk a little bit about technology and R&D. Our growth trajectory is heavily based on our investment in technology, and innovation, and service, but especially technology.
We invest more in R&D and technology than any major player in the coatings industry as a percentage of our sales at north of 4%. We have a strong pipeline of new products and customer innovation that business leaders will share with you today, and I think you'll enjoy hearing about those. We also wanted to show, in addition to adjusting some of the sales for constant currency, we also wanted to show a view of what the EBITDA progression has been for the company. In the gray bars, you can see here the as-reported number, and the red line is basically eliminating the impact of currency and the special items that are noted in the footnote. What you see is that adjusting for the impact of foreign currency and a few one-time items, our adjusted EBITDA displayed a steady and upward trajectory over the last five years.
Volume growth, price capture, further Axalta waste savings, and increased operating leverage are expected to drive our EBITDA higher in the ensuing years. We've also made good progress in working capital. In fact, we've made about 150 basis point improvement in working capital as a percentage of sales over the past two years. As Charlie mentioned, we believe that we have the opportunity to decrease to the high single digits. Now, much of this opportunity lies in inventory and accounts payable, and he will cover more on this in his talk later this morning. Looking at leverage, we've made steady progress in reducing our leverage over the past five years and our interest rate expense. Through multiple refinancings, we've lowered the cost of our debt to approximately 3.8%, and we've pushed out our debt maturities to 2023 and later for most of our capital structure.
We look at our free cash flow. It's increased by over 50% during the last two years, and we expect our free cash flow to continue to grow moving forward. As we've paid down debt, we've shifted more of our free cash flow to M&A and share purchases on an opportunistic basis, as well as some of the growth CapEx that I talked about earlier. We look at our guidance for 2018. I'd say at this point in the year, sitting here in the first week of March, we're encouraged by the business conditions that we see and Axalta performance through the first two months of the year, and we maintain the guidance that we provided on February 6. In terms of business conditions, we see stable and growing refinish demand globally.
In industrial, we continue to see strong volume growth, which is really underpinned by good industry growth, along with some of the great things that Mike Cash. In light vehicle, we continue to see some market share gain given our service and our innovation. Although you may see a slightly lower growth rate this year from a market perspective, I think Steve and the team feel very good about some of the things that they're doing. In commercial vehicle, really bottomed out last year. We saw North America towards the back half of the year snap back. In Latin America, you've also seen Latin America snap back. That's been a welcome event in the heavy-duty truck portion of commercial vehicle. We're going to talk to you today a lot about the non-heavy-duty truck portion of commercial vehicle.
In fact, the non-heavy-duty truck portion is 75% of the sales in commercial vehicle. It's important that we talk a little bit more and give you a little bit more insight about that. Since someone will ask this question inevitably later on today in the Q&A, I thought I would answer it now. Through the first two months of the year, we are ahead of budget in net sales and EBITDA. We've also been capturing price in the first two months of the year, predominantly in performance coatings. In transportation coatings, the Q1 is the toughest compare because we had not yet had the price downs on a year-over-year basis. March is always a big step up, however, from January and February levels. As always, our performance in March will be determinant on how we perform in the quarter.
In summary, Axalta continues to operate a strong business model with multiple value creation levers in growth, productivity, cash deployment, and M&A. We continue to diversify our end markets and also experience solid margin growth. Although we've made good progress in cost reduction, the opportunity remaining is still significant. Again, Dan will elaborate on this further in his section this morning. Our investment in technology, innovation, and customer intimacy forms the backbone of our business model. Of all the companies in the coatings sector, we really believe that Axalta has the largest amount of white space and the greatest amount of potential upside. We look forward to sharing that with you today. Now it's my pleasure to introduce Axalta's Head of Global Refinish in EMEA, and that's Joe McDougall.
Ladies and gentlemen, thank you for your patience while they play an in-room video to our live audience. This call will begin momentarily. Please continue to hold.
Great. Just like being home. I walk into a hyped video, somebody hands me two bottles of water. Well, thank you. I'm excited to be here to talk to you about our global refinish business today, we have some really exciting things, I think, for us to share. First
Let me start by talking about the refinish business and why we should care about it, why it continues to be a big part of Axalta's performance. First, the refinish market continues to be very stable, consolidated around four major players, it continues to grow in excess of 3% a year. Axalta has a 25% global market share in the $7 billion refinish industry, I'll share some details in a few minutes that takes it down to a regional level for you as well. We have the deepest portfolio of products in the market, including the world's most productive waterborne coating systems. That's a really big deal. Why? Because the body shops continue to be put under pressure for their productivity as insurance reimbursements continue to get lower. We also have products that cover all segments within refinish.
Our Spies Hecker, Standox, and Cromax brands are the premium brands in every part of the world and the envy of our competitors. Nason and Syrox cover the mainstream, while Duxone and Challenger are focused more on the lower end. Finally, we have a strategy that's focused on both organic and inorganic growth. The market that we play in has many key attributes that benefit Axalta, including distributor and body shop consolidation, growing needs of those body shops, growth of the car park, more competitive technology. At last year's meeting, one of my colleagues stood up here and he said something that really sums up Axalta's global refinish business. We are the global leader, that is undisputable. 2017 was a very good year for our business.
While today I'm going to focus on today and our go-forward plan, I'd be remiss if I didn't at least say a few words about 2017. We continued to expand our technology and our technology leadership by introducing an ultra-productive, low energy use clear coat. This new clear coat dries in 30 minutes at room temperature. That's unusual, because a traditional clear coat would take 2 to 4 hours to dry at room temperature. In fact, many of our competitors don't even offer a product that can dry in air temperature, and would need some sort of oven or baking to do that.
Our Syrox waterborne product in Europe has really started to grow. You're also going to see us this year introduce a product called Cromax EZ, which is a similar product. We're going to launch that in many parts of the world, including the U.S., Korea, and China. Training is an incredibly important factor for us. It shouldn't be overlooked. You're going to hear me talk about this a couple times throughout my presentation. We don't just sell paint. The technology and services that Axalta provides is a key part of our partnerships with the customers. Last year, we opened a flagship training center on the grounds of Hendrick Motorsports in Charlotte, North Carolina.
This facility has absolutely state-of-the-art capabilities for us to train our customers in both refinish and industrial. It's been fun to partner with Mike Cash's industrial business to launch an integrated center like this. In China, we're upgrading our training centers at a very rapid pace. Last year, as part of our Asia-Pacific technical center opening, we opened our flagship training center in China, which we're quite proud of. Then finally, on the customer engagement side, you got a little flavor of that from that video. We continue to use our motorsports relationships as a part of our customer intimacy strategy. Whether it's NASCAR, F1, MotoGP, or Snocross, we get to give our customers a sense of what our refinish paint looks like as we put it into action. 2017, a very good year.
What was really important about it was it really set us up for 2018 as well. In the next several slides, I want to talk to you a little bit about the refinish market. It's quite a dynamic market. It's important to understand both the complexities that come with that market, also the opportunities that come with it. That's the part that gets me excited. On the left here, you see the continued growth of the car park. The growth by region is listed. What's more interesting here is as you dig into that data to really understand what's behind just the broad regional rates. In Europe, for example, we see much faster growth in Central and Eastern Europe, while Western Europe remains relatively flat. However, the premium markets in Western Europe continue to thrive.
While in Central and Eastern Europe, you see more mainstream economy products accelerating the growth rate there. The overall sustainability and the environmental impact of paint remains a focus of regulators everywhere around the world. Our low VOC and waterborne coatings offer Axalta the opportunity to play a key role in helping our customers as they need to figure out solutions to comply with those laws. I mentioned performance earlier, and the MSOs, multi-shop operators. Our definition of a multi-shop operator, five body shops or more. As many of you know, these MSOs own hundreds of body shops in many instances. They measure performance down to the individual painter level. We help them do that measurement. We not only help them do that measurement, we actually help them increase the performance of those individual painters, and that's a really big part of our relationship with them.
Distribution not only continues to consolidate, but continues to become more and more complex. OEMs now run global tenders around the world for their approvals for refinish products. Part suppliers are growing across regions, and you're seeing that with companies like LKQ, GPC. You've got consolidation happening right here in the U.S. So that expertise that needs to happen in distribution is a core competency of ours and must be a core competency of any coatings company. Finally, our customers are becoming more and more demanding. Color match is absolutely critical. Insurance companies no longer reimburse for overspray. You think about a panel on a car that needs to be repaired. Historically, they would pay for blending, to allow that paint to really blend in and look quite nice. Today, if you're lucky, they pay to repair that panel. In many instances, they pay to repair that spot.
If the paint doesn't match perfectly the very first time, we have not done our job, and the body shop incurs more cost. Our field technical service becomes an incredibly important part of our value proposition to our customers by helping them solve their problems real time. Even with the pressure that I mentioned from insurance companies, claims continue to grow around the world. In a few slides, I want to talk to you about some broader market trends. First, I want to show you a little bit of data around claims. With all the press out there regarding accident avoidance technology, you wouldn't expect to see the chart here on your left. Both severity and frequency continue to rise in the U.S. The number 1 reason for this, all of us and our behaviors.
The U.S. claim market's a $160 billion market that's going to grow to about $175 billion over the next couple of years. That growth rate certainly speaks to severity, but over 2% of that growth comes from frequency. We continue to get in more accidents. It's not just a U.S. phenomenon. Give you a couple looks at some global data. In the U.K., claims are growing at a 4% rate, about $32 billion. What's driving that? The average cost of repair continues to rise, and that's happening in a very consolidated market where the insurance companies are in absolutely full control of the repair. In Germany, you see a growth rate of about 3%. Again, another very mature market, but you have a very large car park and a growing car park.
Claims are important, and it's an important factor for us to think about, but it's really just one factor that we think about when we think about the market. This slide's probably the most important slide that I'm going to show you today. You might ask why. It shows you on the left the very trends that impact the refinish market. Some of these trends, like growth of the car park, number of miles driven, vehicle leasing, and coating innovations, those are all positives. They grow the market and they help Axalta. Trends like insurance regulation, safety features, vehicle aging, mix changes, those will tend to lower your market growth. What's the key takeaway here?
The key takeaway is there's a bunch of positive forces and there's a bunch of negative forces that impact what's happening from a market perspective, but the positives outweigh the negatives, and it's why we continue to remain very bullish on the growth trends in refinish. Don't believe it when you read that singularly focused article, okay, that talks about there's never going to be a crash again. The data tells you something very different here, right? The articles will lead you to believe that the refinish market is in peril, but it is not. You've seen the data on claims. You see the data here on the car park growth, which is a big driver, okay? I'm going to share some additional data for you in a few minutes that's going to reassure you that the refinish market is indeed alive and well.
I know this is something that's probably on many of your minds. Let me take a minute and talk to you about advanced driver assistance systems, ADAS. Let's simplify that. When you're backing up and your car starts beeping at you because you're getting too close to an object behind you. Cars that have automatic braking in them, flashers on your side mirrors when a car's in your blind spot, all part of this technology. That technology has good uptake. What does the data tell you? The data tells you that in North America, in 2027, only 50% of the cars are going to have that kind of technology, and it grows to about 80% in 2034. Even with that technology, if you look at the red bars, it only affects the claims and the frequency of claims by 7%-12%. Again, why?
That's counterintuitive when you look at it. For the why, look around the room. It's all of us. Look at the charts on the right. Distracted drivers offset the technology. The survey data here is pretty staggering. 30% of people say they talk on the phone regularly. 70% say often. How about texting with driving? By the way, we're also assuming that people responded to these surveys honestly. My guess is most did not. If you look at the texting data, 32% say they send texts often, while 42% say they read them often. I don't know about many of you, but I have a rather long commute to the office. I would say that data's probably double that, watching people around me in cars. Perhaps me once in a while. Needless to say, we humans, we're our own worst enemy in offsetting this technology.
While we're the enemy of the technology, we continue to be the friend of the refinish market. Let me just say a couple of words then about autonomous, because actually I've already had a couple people ask me about that this morning. Since this isn't a crowd from Detroit, I'm going to assume you haven't all drank the Kool-Aid on autonomous. Autonomous technology exists today. There are autonomous Ubers driving around. There are lots of that technology, and it will continue to grow. However, the social and regulatory issues of this becoming a broad reality, it's still decades away. Think about it. Even if every government around the world tomorrow mandated autonomous cars, it would take 10-15 or more years to change over the car park. We know neither one of those things are going to happen. What's the takeaway from all this?
The takeaway is we're on top of the technology. We know what it is, and we watch it carefully. Our transportation team works very closely with the OEMs as they embrace the culture, expand the opportunities in ADAS and autonomous, and we're going to continue to grow with them. However, the impact on refinish is very limited. Even with that, it's very far into the future. If you're not excited about seeing some of the trends that are really helping our business in the market, I want to talk a little bit more about Axalta's business more specifically now. As I mentioned earlier, we're the market leader with 25% of the share globally. We bring to the table technology and service that makes us a true differentiator of a company. We offer products really anywhere, anytime, and in any part of the world.
I promised I'd talk about our regions, I want to do that. In North America, we have a 31% market share of a $2 billion market. The key story in North America for us are the MSOs and their continued growth. MSOs are about 28% of the repair market in the U.S. today. That's a big deal. We have a strong position with them because of their productivity mindset and our ability to provide them products and services that benefit them. In EMEA, our strength really lies in our distribution and our brands. Our Spies Hecker and Standox brands have deep European heritage and are truly regarded as world-class. We also have broad distribution, including company-owned distribution, along with access to key distributors across EMEA. Our waterborne products align with the regulatory pressures in Europe, while we continue to introduce new products like Syrox to compete in the mainstream.
In Asia Pacific, we're number two, but very focused on becoming number one. The car park in China is a great benefit for the refinish market. China has 170 million cars on the road. They're going to have 250 million cars in five years. The average age of these cars is about five and a half to six years old. You get newer cars fixed. The OEMs also have broad influence there and across Asia, we leverage our relationship with our OEM team and our approvals to ensure that we continue to grow in that space. Finally, in Latin America, we have a very strong position in Mexico is the largest refinish market in Latin America. We own that leadership both at the premium and the economy segment. In South America, really the two key markets there are Brazil and Argentina.
We have both manufacturing and a broad sales force in both countries to take advantage of that. Today, we only have time to really skim the surface of our strengths in each of these areas. I hope you see that we clearly have the market access, the products, and the technology, coupled with the right strategy to continue to expand our market leadership. You might say, "Okay, great. That's pretty great. Number one in almost every region. How can you continue to grow? What are you going to do?" We think we've got lots of opportunity and lots of white space to continue to grow our refinish market position. In the U.S., we are going to continue to ride the wave of the MSOs and continue to be the number one provider to MSOs.
They continue to consolidate, they continue to grow, our position with them is favorable, and we'll continue to enjoy that. In Europe, growth in Central and Eastern Europe gives us the opportunity to grow in an area that we definitely have room to expand. The market's fragmented, tends to be focused on the mainstream, a terrific opportunity for some of our products like Syrox, and you can learn more about that at the breakout side. Our strength in distribution in Europe really is a differentiator and allows us to move across the region with ease. What you see here in China is you see a shift happening in the market. Premium is going to remain a very large part of the market, economy and mainstream is really where the growth lies in China.
Further to that, you're going to see that growth shift to tier 3 and 4 cities. We've gone through a sales force deployment exercise in China to make sure that our people are in the right place to take advantage of this growth. In addition, you're going to see us be aggressive about inorganic opportunities to position ourselves in the economy segment in China. It's exciting for me to stand up here and see the growth opportunities and see how they align to where our strengths are to provide that continued expansion that we're very focused on. Maybe a word or two about our model. The key to our success really is our service. While we use distributors for logistics and delivery broadly, they do that to the end user for us, critical to remember the service model, and that's the lower part of this chart.
That's the key part of our value proposition. We provide customer service, training, technical support, and tools to the end user. We provide them tools like Scorecards. That helps them measure the performance of their business to run their business better. Tools like ColorNet gives them access to 100,000-plus formulas as they work on that color match to make sure that car is repaired perfectly. Our training gives them hands-on guidance to help them get the most out of our products. The model's all about adding value to world-class products. Our goal here is simple. It's to be more than a paint supplier. It's to be a business partner to our customers. How do you become the business partner? It's really understanding their KPIs. The biggest and probably best example I could give you would be the MSOs. Their key KPI, very simple: cycle time.
Their goal is to move cars through that shop as quickly as possible. They measure everything from time to quality to labor productivity. The productive leadership that we have in our products, it hits their KPIs head on. However, those products are best when coupled with the training and technical service. That's the real trick. That's the magic that we think we bring to the table. We want to allow our MSO customers to become world-class themselves in one of the most important parts of the repair. Why would I say the paint's the most important part of the repair? Think about it. For any of you who've ever picked a car up from a body shop, did you crawl under the car to see if the repair was done? Most of us don't even open the hood to look under there.
When you walk up to that car, if the paint matches perfectly, if that car shines, you walk away a happy consumer, and that's incredibly important. That means the shop is happy, the insurance company's happy. You as a consumer, you're satisfied with both of them. Paint is an incredibly important part of the repair. Before I wrap up, I just want to take a minute and talk about M&A. We've been busy in the Refinish front, both on the manufacturing side and on the distribution side. We've completed 10 deals across three regions, and we plan to be even busier in 2018. Given our strength and expertise in Refinish, we view our deals here as very low risk. They all have high IRRs and are easy and well integrated into Axalta. We've built a very robust pipeline, and we'll continue to add to this portfolio in 2018.
To wrap up, Axalta is and will remain the global leader in Refinish. That is without question. The trends in the market favor us, and the market continues to grow. We're going to continue to advance our technology, and you're going to hear us talk more and more about our technology and our market leadership, something I think we haven't done enough of in the past. You've heard me talk about M&A, what we've done, you're going to see us be even more aggressive in the future. I think about it this way. Leaders don't settle for the lead. When they're in the lead, they step on the gas, and they continue to put distance between those that are behind us.
I hope that what you heard from me today is that we're going to step on the gas in Axalta Refinish, we're going to continue to expand our leadership position in the future. Thank you very much for your time. Chris?
Thank you, Joe. We have a break scheduled now, about 25 minutes. Please, you're welcome to get some drinks, mingle a little bit, go see the product displays. Again, I encourage you to talk to our R&D leads from each of the businesses and our leaders from the segment. Thanks. I'll call you back when it's time.
Ladies and gentlemen, there is a break scheduled for the next 25 minutes to resume at approximately 10:50 A.M. Eastern Time. Please hold. Thank you to all those patiently waiting on today's call. We will resume in approximately five minutes. Please continue to hold.
It is very nice to be here with you today. I want to thank you for taking your time to be with us, and for giving me a few minutes to talk about what's my favorite subject, what's my passion in terms of coatings, and that's our industrial coatings business. Maybe just to get started and level set to where we are today. Our industrial coatings business has evolved from a niche regional business four years ago to a business twice our original size. Going back to the IPO in 2014, one of the things we talked about then was the ability to double this business by 2020. It's gratifying for everybody in this room. It's gratifying, certainly, for all of our colleagues at Axalta, for us to be able to say that we've been able to accomplish that two years early.
Where we stand today, we've done it through both organic growth and acquisitions. You'll hear a little bit about that over the next several minutes. A business today that's made up of a number of global franchises with some of the most recognized names in industrial coatings brands. Probably the message I want to leave all of you with is certainly the fact that we've doubled this business. It hasn't been by accident. It's been by design. It's been with a very thoughtful approach. More importantly, this business is primed for success in the future. I'll talk about that a little bit as we go forward. Today, our industrial business is made up of five growth-oriented, focused global businesses, serving very specific set of end markets.
If you think back four years, we had a powder coatings business, we had an electrical insulation business, we had bits and pieces of general industrial businesses, but we identified coil and wood as businesses that we thought would fit into an industrial portfolio well. Here we are today with the opportunity where we have five good, strong pillars with our industrial business. You start to think about what's the common thread. Really, there's three things. Each of our five businesses are very specific technologies and very specific manufacturing capabilities, fit for purpose, fast response.
But it's also in how the customers and the relationship that we have with those customers, and the ability of these customers to allow us to extract value and to understand their customers, and understand that if we're able to bring products to them, then allow them to get more value with their customers, this allows us to get more value for our products sold into those five specific market segments. Our five industrial segments sell into a $38 billion market space. While we're proud of the fact that our global market share has doubled in the past five years, we're also excited by the fact that 96% of the market lays in front of us. We continue to have, even with the success that we've had over the past four years, we continue to have a great opportunity in front of us.
A lot of white space and a big pond to fish in. When comparing our industrial coatings business to the rest of Axalta, one of the unique aspects that you'll pick up on is that our market drivers, our end markets, are non-transportation centric. We rely on things like industrial production, building construction markets, and also infrastructure. Those are key end markets to us as we think about our customers and what's important to them. The other aspect that's important to note, and I think Charlie mentioned it this morning, the importance of Asia. China represents greater than 40% of the industrial coatings are consumed in China. If you expand that to look at Asia, roughly 50% of industrial coatings are consumed in Asia today. That's a battlefield that we started off very underrepresented. Relying on a lot of toll manufacturers, relying on importing products.
Today, we're in a much different position. We have dedicated, focused teams in China. I can tell you our growth rates in China are very impressive, double digits. We're excited about the opportunity there, and I think we're also excited about the fact that we're just now starting to scratch the surface of this business. When we look back on 2017, it was a good year. We grew 43%, which is impressive. While we closed and integrated six acquisitions, we kept our focus on organic growth, and we grew organically last year by 7%. The third consecutive year where we outgrew our end markets, and we outgrew our competition by a factor of two. When you think about growth, it's very easy to be consumed by relying on acquisitions and the ability to lean so heavily on acquisitions. We see that in the coatings world, right?
That's happened in the past to certainly some of our respected competitors. We're committed to delivering above-market organic growth, as well as continuing to add on bolt-on acquisitions that will enhance our position going forward. Formula for success with organic growth is pretty straightforward. We had a couple of questions about that in the hallway this morning. Really, the recipe is simple. Invest in your sales teams, which we have done, make sure that we've got a steady, rapid flow of new products coming to market, and make sure that those sales teams are bringing and hunting new business each and every day. Let me kind of put it in quantitative terms for you. If we look back over the past three years, where we've outgrown our end markets by a factor of 2X.
The two things that we have done very consistently is we have brought at least 80 new products to market each of those three years, and we've captured at least 800 new customers each of those three years. You see 2017, you see the numbers on the screen. We actually had a very exceptional year, and this led us to having a 7% organic sales growth. As long as we continue to focus on those things, we typically will have a pipeline of anywhere from 100 to 120 new products that are being worked on by people that are dedicated to the industrial business. We'll have anywhere from 2,400 to 2,600 new accounts that we're chasing each and every day. As long as we keep those pipelines full, we should be able to continue to outgrow our end markets organically over the next several years.
In addition to organic growth, acquisitions played a big part of our success story to date. We've used M&A to enter new markets, wood and coil. They've brought us fit-for-purpose products, true industrial products. I think if you look back on our history, our industrial, particularly our general industrial business, primarily built with refinished products that we tried to fit into industrial applications. Today, it's much different. We have true industrial products that we compete each and every day with. As well as lower cost, faster response manufacturing, something that's absolutely critical to being successful in industrial markets. We acquired a number of businesses rapidly. Over a 12-month period of time, we closed on six industrial acquisitions. The obvious question, the question that we typically get asked a fair amount is, how well have we done in integration?
When you think about acquisitions, there's a lot of moving parts when you try to integrate them, right? You have new ERP systems, you have new financial systems, you have operational improvements and standards that you want to get up to speed on. Really what we found is the real test of integration success is how well we onboard new employees and our customers. Okay? Think about it this way. In most acquisition models, and it's a coatings business or it's any other industry. Typically, when you do an acquisition, you'll factor in some customer attrition. Typically, the range is somewhere between 6% and 10%. That applies obviously to coatings, but also to a number of different industries.
Probably the accomplishment that I am most proud of as we look at our acquisitions, probably the success factor that we have as we think about our acquisitions, is of the 2,850 customers, new customers that we brought into Axalta through these acquisitions. Today, at least six months or longer later, we have 2,845 of them. 99.8% retention rate. You think about that just from a business standpoint, but you think about it from a growth standpoint and not having to overcome losses as you're continuing to build a business, and think about it from an employee standpoint. I mean, the one single thing that a great employee hates to do is he hates to lose a customer.
If we're able to retain those customers and make them feel comfortable as being a customer now of Axalta, the things that we're able to bring to those customers I mean, it fuels our employees to feel comfortable and to feel motivated and to feel a part of Axalta going forward. As we continue to build our industrial business, we're building from good market positions, serving increasing number of premium and well-known customers, many of which you see their products on display in the lobby this morning. Growth for us is about designing and creating a specific value for each customer. You think about it, this may be how our coatings enable greater output in customers like James Hardie in building and construction, or Hunter Douglas.
In some cases, it's how our coatings enable functionality, like Tesla, where our coatings insulate their electrical motors up to last up to 20% longer. In some cases, it's how our coatings enable color, like Schutt Helmets, that have gone from five helmet colors being available 10 years ago to 1,800 colors and growing today. That's the specific value we're able to bring to customers, but it works both ways. Customers, if they're able to get that value from their customers, these are great examples of them being able to support the value we need from our products and services. That leads us to our competitive advantage. Why is industrial coatings, why are industrial coatings an important part of Axalta's value proposition today? Well, first of all, we have a much broader portfolio of products than we've ever had available. True industrial fit-for-purpose products.
We're moving these products around the world. We're taking some of the innovative products, you saw glass coatings in the hallway today. We're taking those products and supplying them into other regions of the world. We're serving customers like Weber Grill, who we've traditionally had a great business relationship here in North America, and we're expanding with them. We're following them as they're opening manufacturing positions in China and other parts of the world. We have today cost-efficient, fast response manufacturing capability, true industrial manufacturing capability. We have probably the most impactful sales and technology teams for our customers in the marketplace today. Today, we have five focused global business segments who do a really good job of protecting the castle. That's part of our DNA. That's something that we've traditionally done well. Anywhere from 12-14 times better at gaining customers versus losing customers.
12 to one, 14 to one, in that range. I'd also tell you that we are equally focused, not only on protecting the castle, not only on creating a moat that our competition has to get over, but also creating a way for us to get into our competitors' castles. Let's talk a little bit more about each of our individual businesses. Our North American Wood business is a North American leader in building products. This is a great franchise. They have customers like James Hardie, Louisiana-Pacific, Shaw. I mean, they're just an incredibly good, sound, solid business. We're gaining share relentlessly in kitchen cabinets. New customers like Decor, you see a picture here of some of their beautiful cabinets produced in Canada, as well as additional business that we're gaining with Merillat, which is an additional brand of MasterBrand. That growth will continue.
LP, James Hardie, they continue to sell out all of their manufacturing capability and continue to be focused on opening new plants. We'll continue to grow with them. Our growth also will come from building out our distribution network, primarily using distribution to reach custom cabinet and furniture manufacturers, smaller custom and furniture cabinet manufacturers that we traditionally have not had access to. When you think about Axalta, when you think about our DNA, and one of the things that we're really good at, one of the things that Joe's business has really taught all of us is how to handle and how to attract, how to motivate distribution. That's one of the great opportunities that we have in front of us. We started to take advantage of that.
We just recently opened an Axalta distributor in Orlando, Florida, that will now start to carry wood coatings products, and we have a number of other ones lined up. Our growth is going to come from the flooring market. We just launched some new UV curable products for both the wood flooring market, but also interestingly enough, when you think about a wood business, luxury vinyl tiling market. Okay? This business is something, and you can see the picture there. Even if you look at this picture closer up, it looks exactly like wood coatings, wood flooring. I mean, it is that pronounced. We've just launched new products, a new UV curable product that goes on luxury vinyl tiling.
We'll get $4 million worth of new business this year in the luxury vinyl tiling market, primarily because we not only have the products and have the technology, but we're able to supply that in North America, where our competitor struggles to bring that product in from Europe today. Finally, being able to expand this business globally, where we've already started down the path in Latin America. We've got a great opportunity to step easily into that market. We've got capability. We can support it from North America. What I can tell you, we're also working on plans to expand this business in Southeast Asia and certainly possibly in Europe. Just maybe to illustrate how we believe this market will play out in favor of the wood coatings business, as well as impacting our coil and our powder businesses to a certain extent.
Over the next several years, you can see new build construction as well as remodel construction is expected to grow at the mid 5% to 6% range into the foreseeable future. Moving on to our powder coatings business. We're the second largest player in this large market space. Think about an $8 billion global powder coatings market today. Something that's growing at GDP plus, because this is an environmentally friendly technology. Certainly, a technology that has advantages in durability, something that is continuing to take certain bits and pieces of liquid and converting it to powder. We've always said the key to success in powder is having full factories, having a certain percentage of your business with the premium segments of this market, and having an efficient cost structure with very low waste.
I can tell you today, as you look across our 19 powder coatings factories around the world, our factories are full. Our focus today is on what we can do to sell up, how we can sell and gain a bigger percentage of our business in premium segments. Premium segments like the Monumental Architectural market. This is a market that's grown 10% per year, at least 10% per year, last three years for us. Launching a new range of metallic products globally, expanding on our less-to-speed products, which allow us to coat products on customer lines that are moving up to 200 ft per minute, and expanding our new thermoplastic product line, a product line that we acquired with Plascoat last year, which is doing exceptionally well.
One of the examples I want to use maybe to tie in our Architectural Monumental business as well as metallics and illustrate maybe how we're focusing on this market space. You'll see in the upper left-hand corner, the San Francisco Transbay Transit Project. This is a 1.5 million sq ft project where 11 transit lines come together in San Francisco, basically from all over Northern California. The architect is actually a local architect here in New York, Pelli Clarke Pelli, also with offices in New Haven, Connecticut. The whole idea of the architect, what we worked with the architect on, was how to bring daylight continuously, day and night, but how to bring a daylight effect above ground as well as below ground. If I had a little larger picture, you'll be able to notice that there's actually 118 ft light posts scattered throughout the entire complex.
The requirement for coatings was to have high UV resistance, high mechanical properties, weatherability, that was something that was very advanced, and also being able to have the silvers. Cumulus Silver is the color that we supply for this particular project. Be able to have the colors that reflect the light and sparkle and actually enhance the light rather than detract it. We accomplished this. This has won a number of awards from architects and from the green building industry. Pelli Clarke Pelli were the architects, but it actually then went to a coater, DSI Spaceframes.
DSI Spaceframes has now been awarded the business for coating the L.A. Rams stadium, and they've chosen the exact same color, and they're coming up with a design that will utilize the same functionality, the same type of color, for this stadium that will open in 2020. Let's switch over and talk about coil coatings. With our DuraCoat acquisition, we acquired a business that over a 10-year period of time, consistently grew two to three times the market. This was a company that was well-recognized by customers as we did our due diligence, and now that we've owned the business for a little over a year and a half. They were recognized by customers as a go-to company when it came to some type of special or advanced technology for coil coatings.
When a customer needed a consistent product, something that would work and have a wide application window, DuraCoat was typically the product that they would call out, as well as responsiveness. Being able to gain additional business through how they service and support customers. We've continued this successful formula in a steady stream of new product launches, like Hydorpon, which is a water-based version of coil coatings, as well as Durapon High Solids, both environmentally friendly, environmentally advanced to traditional coil coatings products that offer in the marketplace. Both of these products are targeted towards the metal roofing industry, which is something that's growing at a very good clip within our coil coatings business. We've also made nice progress in expanding this business globally, starting with Latin America. We've begun shipping products down into Latin America to a couple of different brand-new customers for us.
We're very excited about that. This business is actively working with our powder coatings business to offer a liquid and powder alternative to architects based on their monumental building needs. Great example of this, we were able to entertain a whole group of industrial customers this past weekend in Las Vegas at the Las Vegas Motor Speedway. If you can picture a wall similar to the walls that are surrounding this room, but they're nothing but silver and a coated silver facade. Those products were coated partially with our powder coatings for the stanchions and the end caps, and then the rest was coated with our liquid extrusion products. It's been a great win. Let's talk about our energy solutions business. Energy solutions are made up of coatings that insulate and protect electrical motors.
Anything from a hand tool to an electrical motor in an electrical vehicle to the generator that powers the Three Gorges Dam in China. Anything that you can consider to be an electrical motor would use the types of coatings that we supply into this market today. This is a $1.5 billion market today. When you think about electrical motors, electrical vehicles alone, and the projection that electrical vehicles will grow by a factor of 20% each of the next 10 years, this segment obviously will become a lot bigger than what it is today. Today, our insulating coatings products protect the electrical motors for 60% of the electrical vehicles on the road. Customers like Tesla, BMW, Volkswagen, Ford, General Motors, and startups like Lucid Motors put their trust in our coatings to help their electrical motors last longer.
We use this market position, we use this strength and this technology and this focus and the things that we learn in the electrical motor market to help us in hand tools, in generators and compressors, any other electrical motor application we can find. We use it to invest in the next generation of coatings. We've been the first to launch a waterborne version of impregnating resins to the marketplace. This will become the coatings of choice, we believe, in China as the requirements for waterborne coatings are increasing. Additional products required by customers, like compounds and wire lubricants, things that we have not traditionally offered. We've developed these products, now we have a much broader base of products that are consumed by our customers.
China continues to present a key growth opportunity for us, with the focus being on products developed in China, manufactured in China, specifically for Chinese customers and consumers. Great example of this is corona-resistant wire enamel that we just launched at the end of last year. If you think about corona-resistant, probably the biggest killer to electrical motors are when there's different surges of electrical current. It may come in at a low surge, then there's a big increase. Wire enamels traditionally just convey the circuit. We've developed a coating, corona-resistant coating, that will protect and insulate those surges going into a motor, and in essence, help those wires and help that motor to last longer. Finally, our most diverse and also our fastest-growing segment is our industrial coating systems business. Hopefully, you've all had a chance to meet Dave Heflin.
Dave runs our global industrial coatings business. Many of the products that you see in the hallway, many of the industrial products, he's actually the godfather of these products. Certainly very proud of what we've accomplished there and the products and some of the customers that we take advantage of. Our coating systems go into the agricultural construction earthmoving equipment, as well as oil and gas, and general industrial coatings for specific segments and applications, things like glass coatings, ski coatings, drum coatings, storage tank coatings, metal components, and structural steel. Those are all product lines and customers that we service with a bundle of products with our general industrial business. We've acquired a lot of these general industrial products from Ellis, Century, and Spencer.
Great technologies that we continue to bundle in the products that we offer to customers, as well as spreading them throughout the world, creating a great opportunity. Pure industrial products that we sell direct to large OEM customers also that we're able to package and brand and sell through distribution to smaller OEM customers. You can tell this is obviously a great opportunity when you think about a $14.5 billion market space. I mean, twice the size of automotive coatings that are sold into the automotive OEM business today. We have two rules. As we look at the niches, we're not going to be an across-the-board player to everybody and to every one of these general industrial niches. The two rules are very simple. Can we win in this specific application field, and can we extract value?
If the answer to those two questions are yes, we go after those types of segments. That's how we've ended up in some of skis and glass coatings and structural steel. Finally, to sum it up, we've achieved our market growth targets two years ahead of our promise. This happened by design. This didn't happen magically. It happened by focusing on the right industrial segments, by investing in these businesses, using our global footprint and capability, keeping our energy on organic growth, delivering a wave of new products on a consistent annual basis, and a sales team that's intensely focused on delivering the unique value proposition for each and every one of our new customers. We have a lot more capability today than we did four years ago when we first started talking about the aspiration of doubling this business, and even more opportunity.
We're onto the next hurdle. You heard Charlie talk about it this morning. Our sights are set on what we have to do over the next several years to be able to double this business again. With that, I will turn it over to Steve Markevich. Thank you very much.
Thank you for your patience. They are now playing a video in the room. We will get you connected as soon as the video is completed.
Joe, for the record, I am from Detroit. Every car I own has a steering wheel, gas pedal, brake, and I expect I will have that for quite some time. Again, good morning, everyone. Thanks for the opportunity to talk to you about transportation coatings. Obviously, a topic that's very near and dear to my heart. For the next 25 minutes, I'd like to walk you through two important subjects. One, many of you know that we're a market leader in the light vehicle, commercial vehicle coatings market. I'd like to share with you what we call our strategic market opportunities, which includes some key organic and acquisitive growth actions to pursue no less than an additional $1 billion in the trans coatings market. After you've digested that, we'll talk a little bit about some of the future trends in transportation coatings.
Many of these trends are driven by consumer preferences, are driven by OEMs and tiers. As you'll hear, many legislative trends as well. We think in part, we'll play a role in many of those trends and we'll be advantaged by them as well. Just a definition on trans coatings. Two very exciting end markets for us, the light vehicle body business, which you've heard a bit about, also exterior and interior plastics and metal coatings to the tiers, and our commercial vehicle business, which includes medium-duty truck, heavy-duty truck, bus, planes, trains, and recreational vehicles. These two segments constitute about a $13 billion opportunity, or $1.6 billion of that. We see a lot of opportunity, a lot of upside, and a lot of excitement around the coatings in this space. As we take the $13 billion apart, we identified nine key market segments and sub-segments.
About $9.5 billion of that being in the OEM light vehicle business between the body business as well as interior, exterior plastic, and metal coatings.
The other seven segments in commercial vehicle, and I'll touch on those briefly later in the presentation, another $3.5 billion in coatings opportunity for us. Within those nine segments, we've identified three key customer areas. The core areas include the LV trucks and bus. We tend to have high teens to mid-20s in those markets. Developing markets in the center, which are generally in the low to mid-teens. The opportunity segments where we see significant size and white space opportunities for both organic growth and acquisitive growth. I'll jump into the growth discussion. I'll talk a little bit about 2017. It was a very productive year for us in trans coatings. We launched almost 500 new colors and products at 116 sites around the world.
The interesting thing for us in trans coatings is, as we launch new products, new colors, it really creates opportunity for us to reposition our products, reprice our products, reestablish that value proposition with current economics, no less. Excuse me. One example of a launch that we're very proud of is our new Lumeera clear coat products. We really see that as the ultimate in finish protection for gloss, for durability. When we repriced and introduced that product, we saw an average increase of no less than 25% average selling price across multiple launches and multiple customer locations. Within LV, we put coatings, body coatings, interior coatings, plastic coatings, on no less than 20 million vehicles, almost 30% of everything that you see on the road in 2017. We're very proud of that.
Commercial vehicle, we saw great rebound in part in the North America HDT market, but also significant new wins into the trans spray, which is the CV outside of HDT, with key wins with Yutong Bus in China, as well as Marcopolo in Brazil. I think very good progress and good growth there. It's important to note too that while we saw some of the downturns in North America and HDT, Axalta took very strong actions with regard to our structure, our strategy, our cost position. I think taking advantage of some of that downturn as the markets return. We see that in CV, both North America. We've seen that in Brazil as well. We've really come out of those, I think, downturns in a much, much stronger position. Finally, we've won over $90 million in new business at full volumes.
About $40 million in addition to that in replacement business. A couple of notable wins, again, that we're very proud of. We won a significant plant with Nissan in North America, because in part, the Japanese OEMs, we've talked about in the past, are key targets of ours. They tend to be in the underserved market, the developing market, big win there. Additional OEM business with a North America OEM, but in China, which we're very proud of. Additional significant growth in our APC markets as well. I think a good year in 2017, a productive year, and I think we certainly look forward to more of the same in 2018. Let's talk about growth. We call it the strategic market opportunities, kind of the art of the possible.
We created a framework around this, basically taking apart those nine segments, where we identified what we call what good looks like. We've got, I think, a number of different examples in that area. Certainly light vehicle, commercial vehicle in North America and South America, HDT globally. We looked at the fundamentals there, the customers, the product, the footprint, the approvals, the relationships that we need to have in place. This was not top-down, this was really bottom-up. Started thinking about what do we need to do in each of those segments to drive from that 20% plus market share. We certainly enjoy those market shares in several key markets, regions, and segments around the world. We certainly felt that was within the art of the possible. That was a bottoms-up approach.
We identified a number of key strategic initiatives, again, we'll talk about those, but just to highlight them, in LV, we will continue to grow with our core customers. We'll focus on many of our underserved customers, GEOMs, KOMs, domestic OEMs in China, new regions and emerging regions like India. You've heard a bit about new laboratories and factories in Savli in India. Commercial vehicle, also increasing content per vehicle. Very important discussion. In the space, I don't know how much you hear about how within 95 million, 97 million vehicles in LV, 3 million in commercial vehicle, how many of our peers talk about increasing content? That is clearly part of our strategic growth initiative. As we walk the vehicle, take that vehicle apart.
Clearly, we've had a very keen focus on Class A surfaces historically, but again, as we move into the plastic business and the interior, but many other opportunities in the components and the wheels, and again, we'll touch on that, but within CV, LV, significant content increases as well. Focused growth in the product areas. We're very strong with all layers. You've seen some examples out in the lobby with our core customers. We've historically been extremely strong in the base coat, clear coat areas. You've heard a lot about our consolidated systems, our homogenized systems, where we've got our estimate about 30-plus percent of the market. We've got opportunities, I think, certainly in e-coat areas and primer technology areas, the monocoat areas, to continue to take content with new products and technologies. Lastly, we'll spend a few minutes rethinking our value proposition.
We've got some interesting thoughts on that. We work very hard to partner with our customers, have relationships with those customers to drive improvement with those customers. We feel we create tremendous value, and we'll give you some examples. I think part of our opportunity and challenge is to continue to retain more of that value in these markets. Now let's start with light vehicle, the body business. Again, out of the $13 billion or so, this is $7 billion of it. We think there's a half a billion dollar upside here, and we think that in part because in this space, we know what good looks like in the OEM body business, and that is our core customer segments that you see in the center left there. We've got a number of customers that we serve in this $3 billion market.
We've got north of 25% of their annual buy. We have excellent product capability. We've got a good regional focus and capability in those areas. Again, when we have most of the layers between e-coats, primer, base coat, clear coat, we have significant content in those areas. We know what good looks like. We've got the products. We have the approvals. We have the footprint. We have the relationships. As I like to remind my team, we still have upside in this space as well. The upside in the core markets tends to be more regional, whether it's country or region, where we may be extremely strong in some of the home countries, maybe strong in select countries. From a geographic standpoint, there tends to be additional opportunity.
The core customer segment also creates a very strong foundation for the developing and opportunity segments, which represent another $4 billion in 600 paint shops around the world. I think it's important to note that within the developing customer markets, we're not starting with a standstill here. We've won over $60 million on an annualized basis over the last two years alone in the developing customer segment, and we continue to build that opportunity funnel. As Axalta, we now have detailed strategic growth plans for each of these developing customers, several of the opportunity customers, where we've identified key decision-makers in the space from a paint engineering, a purchasing, as well as paint shop management for targeted facilities that we have. We have discrete product plans for these customers. For many of them, we have products on test. We're building the relationships into these organizations.
As you've heard from Charlie, you'll hear more from Dan, we're putting the hard assets in place to serve these customers. Certainly, the manufacturing facilities, the laboratories, the supply chains that we need to serve the developing and opportunity customers in a much more intimate fashion. If that's not enough, on the right side, Charlie touched on this. There's a lot of discussion about where we are in the cycle. I think if you take that a step further, when you think about global light vehicle growth, in particular, the reference points as far as the number of vehicles per, in this case, per 10 residents. Certainly, the U.S. is the high mark. EMEA is close.
Even with GDP growth and increased GDP per capita, it's pretty easy to envision between India and China, two key emerging markets that we're focused on, from just moving that from a vehicle and a half to two vehicles creates another $700 million in this space. I think we've got significant opportunity. I think in summary, given the progress that we're making in the core markets, the opportunities in developing, we've got, I think, a line of sight here with regard to product, region, approvals, and content. We'll talk a little bit more about some other, I think, strategies we have in this, but it's a very exciting space for this. As Joe said, there's tremendous energy, tremendous focus, and passion on the body business. Yes, it's competitive. Yes, it's challenging, but I think it's an excellent business for us as well. Thinking more about content per vehicle.
This is a $2.5 billion market for us for interior and exterior component coatings. We think this is another $250 million opportunity. I think it's important to note, again, we're not just getting started in this space. Today, our APC business, our components business is one of the top, as a group, as a customer group, one of our top 5 customers in transportation coatings. We know this space. Strategically, and I think importantly here for you is there's very close adjacencies between the body business and APC, particularly with our customers in paint engineering. Those are the folks who are responsible for the approvals of our products, for the approvals of our colors, as well as for color harmony between the body and the plastic components, which is very important because from our body business, we know these folks extremely well.
Purchasing may be a little bit different because with some of the components business, you're dealing with the tier 1s and 2s, not just the OEMs. I think historically, again, APC, the components business, has been more focused on the exterior. With our recent acquisition of United Paint, it's gotten us into the interior of the vehicle. Although I think Mike's done an excellent job with acquisitions and interior. We have very specific M&A targets in this space that we've identified and that we're working on. Between interior and exterior, both organic and acquisitive growth, we see between $30 and $50 a vehicle in additional content in this space. I think we've got good line of sight on how we can pursue an additional $250 million in components. Commercial vehicle and HDT, you've heard a lot about it. Again, a $700 million market today.
Very proud to say, we've got north of 40% market share in the developed markets, certainly in North America, South America, and Europe. We've got a very strong position there. We have some of the greatest products in this space, some of the greatest brands, customers, relationships in the industry. Our growth strategy in this area is three-pronged. One is to continue to grow into the mature markets, particularly into EMEA. Like LV, we'll continue to expand our tier business, not only for exterior and interior, but also into frames, fuel tanks, and other key systems that require coatings on the vehicle. Lastly, certainly China, Asia Pacific, China, a lot of discussion, I think, in our presentation, and certainly a big focus for me, both with transportation and China responsibilities. The third prong is to grow with the international brands and the local brands in Greater China.
As many of the leading HDT, MDT brands and OEMs continue to build new paint shops in China, our brands, our global approvals, our relationships will be instrumental to gaining share in this market. In addition, we've focused on and grown with the domestic brands in China, including Foton and Sinotruk, which is also China Heavy, as you may know it. The net-net of this is, while starting from a relatively modest base, we have grown on a double-digit basis for each of the last three years, despite a market that's grown less than 3%. We feel our growth strategy is well underway. Commercial vehicle beyond MDT, HDT. Again, we call this our trans spray business, another $2.5 billion in market. It's a good market for us today.
We think as we take this one apart, there's a lot of segments and sub-segments, but we feel there's another $200 million in growth potential in this space. This area, again, is part of a bus, rail, private aircraft, personal watercraft, and RV market. It's got a very attractive, I think, market and margin potentials given, I think, some of the extremely demanding appearance and durability specifications that you see in this space. I think, again, M&A will be a critical component of this, particularly growing into aerospace, further into business jet, into personal watercraft, and expand into key regions and country. Sorry about that. Last slide on growth. Rethinking and re-engineering the value proposition. You've heard a lot about partnerships and relationships.
You heard a lot about productive systems and the work that we do to ensure Axalta products are some of the most productive, capable systems in the world. I think it's very important, again, in the trans coating space, that service is not only a key requirement but a key differentiator. We've taken conquest business as Axalta in part through service and process capability. I think based upon our analysis, our evaluation, a future service model in this area could be adapted, perhaps should be adapted in part to produce new revenue streams. At the highest level, I like to think about service on the one hand. As you see in the lobby, again, we could send in a liquid paint and kind of hand that off and good luck. On the other extreme, we could run a paint shop.
We've had customers make inquiries as to whether that would be something that we would be interested in. Obviously, from a service standpoint, we kind of land in the middle or to the right of middle. Certainly, our strategy in the service area is to be clearly integrated into that paint shop, to be literally an extension of that paint shop where our metrics, our measurements are clearly aligned with theirs. I think it's important to note in this space that the paint shop's upwards of a half a billion dollar asset. A lot of focus on taking cost out, energy, labor, capital, utilities, and we often play a vital role in making that happen. In addition to support on the process side, from a product standpoint, specifications sometimes change. Application systems change. Some of these changes require reformulation of our products.
Some not just small tweaks, but substantial mods, which require substantial resources. The question is, how much of this support is in the can of paint? Oftentimes, we feel that's an opportunity for us. Again, I think when you think about the automotive industry, 30,000 or so components and parts going into a vehicle, how the automotive industry works in general. When a change to a part or a system is required an engineering order is often generated, cost and time is provided, and the negotiation results. This sometimes is absent in the coating space. As we contemplate future service models, we believe there's an opportunity to unlock more of the value to create and monetize that value and create new revenue streams beyond the can of paint. On the one hand, I can assure you that the current model is not broken.
We enjoy industry-leading margins and relationships, but we work to create tremendous value. Part of our challenge, our mission, is to continue to retain more of that value, and return that to you as owners. I'm going to go through the next few slides here quickly. A number, again, of technology changes, again, many of them consumer-driven, and customer-driven, and legislative-oriented. Many new players in this space. I think for the existing OEMs that you think of, many new entrants here, some of them coming out of Silicon Valley, the Teslas, the Googles, the Ubers. A lot of new entrants and rising stars. Again, it's our opportunity to align with many of these customers early, ensure our product and our product technology, product capability is well-aligned with their strategy and direction. There's many design and consumer preferences in this space. As the world gets wealthier, larger families, larger cars.
More SUVs, more CUVs, more pickup trucks. That's great for us because that's more paint. Within that, looking at the winners in the OEMs and the segments is very important. We often ask ourselves, is a paint shop created equal? The answer, I think, clearly is no. Looking at the specific models and vehicles, ones that are going to excel in the marketplace are very important. It's something that we keep a very close eye on. I think through crash protection, pedestrian impact, we see some of the vehicle designs become a bit more similar. We see many customers starting to use coatings and paint to help distinguish their vehicles in very competitive markets.
Sustainability, I think you're going to hear a lot about and continue to hear about, whether it's CO2 in Europe or CAFE in North America, driving significant change with regard to the powertrain of the vehicle. In our space, what's affected is the lightweighting of the vehicle to attain those CO2 and CAFE requirements. You see a lot of discussion on lightweighting. Again, I think you've heard from Matt and some of the folks. You walk up to certain cars, it used to be high-strength steel. Today, it's high-strength steel, it's aluminum, it's nylon, it's carbon fiber, it's now magnesium. Many of these multi metal, multi material environment create significant challenges for the OEM, create significant opportunities for us, particularly in the area of corrosion and the area of substrate uniformity.
Trying to cure multiple substrates at the same temperature continues to drive, I think, technology into our paint and how we actually deliver the appearance and the corrosion performance that's expected by our customers. Advanced manufacturing, again, this fits into the value proposition. These are half-billion-dollar assets, very expensive. More technology going into this area. We'll continue to invest significantly into technology into the paint shop again. People know how to program robots, who know how to run and optimize some of the curing processes. Toyota recently did a big data case study at a conference. The example for that case study was the paint shop. Again, I think there's opportunities in part as we align with our customers, we invest into their process engineering to optimize in this space, to take cost out, to align with our customers, and continue to build our value proposition.
Last slide on technology. Autonomous and ridesharing. Again, Joe touched on autonomous. Very proud of our StarLite, which you saw the video on. I think the pearlescent paints and coatings continue to grow. They fit well within the whole discussion on autonomous. LiDAR radar cameras can see these colors. They're more reflective. They are cooler colors in the sense that they reflect infrared heat. You see upwards of 2% fuel economy improvement in those types of colors. Ridesharing, again, I think it's here and now, certainly in the urban areas. More utilization of the vehicles, maybe shorter life, more wear and tear. Also opportunities, I think, certainly on the interior, but particularly with the antimicrobial and keeping the interior of the vehicles clean. In summary, a lot happening, I think, in the space. It's a growing market. It's a big market for us.
I think we're very well positioned with, again, customers, products, approvals, our footprint, very important. We've got very specific plans for underserved customers in the developing and the opportunity areas. We continue to look very hard at acquisitions for M&A. A key point on the M&A is we look at opportunities in the interior, exterior. It also allows the opportunity for us to move into different regions that we may not have, but certainly also allows us to obtain products and product approvals for customers that are on our developing and opportunity list. Content and acquisition around that, very, very important. We'll continue to leverage our very strong positions in HDT and light vehicle around the world. Services, again, we will continue to invest in. It's a complicated process. There's value that's being created, value to be captured.
I think in the end, there's multiple technology trends that Axalta will both participate in, we are participating in, and we'll be advantaged by in the end. Thank you very much. I appreciate your time and attention. Next, I'll introduce Dan Key. Thank you.
Good morning, everyone. I'm very excited to be here this morning and appreciate the opportunity to speak a little bit about our journey on operations, procurement, and supply chain for the coming years here at Axalta. Just a quick background. I've been with Axalta for two years, and I was really excited when I got the opportunity to join Axalta because my background is in operational transformation and improvement. When talking with the leadership team, it was clear that it was time for Axalta to take that next step. This is actually the last function that has started on a change management process in Axalta. You'll see in several of the slides that we've got a really bright future and a lot of opportunity to continue our improvement. Let's start a little bit by just level setting where we are today.
Axalta has 50 plant sites around the world, including two new ones, one that we just acquired this week in Sacramento, California, that supports our North American wood business, and the second, which we're building and will be commissioning in a couple of months near Minneapolis, Minnesota, which will also support our North American wood business, as well as to help support our mainstream and economy refinish businesses. When you look at the 50 sites, they collectively spend about $2.8 billion in cost of goods sold. We have over 6,000 plus employees in the manufacturing sites, as well as in the procurement and supply chain teams. Our top 10 sites are approximately 70% of our total spend. We still maintain a very flexible workforce, where 15%-20% of our workforce is flexible for going up and down with volumes as they come into our plant sites.
Of our 50 manufacturing sites, 32 of them are liquid sites, and 18 of them are powder sites, and they're geographically dispersed to support both our largest global customers as well as our smallest regional customers. Let's talk a little bit about the journey we're on. As I said, I started two years ago, when I started, the first thing I like to do in a new role is actually to interview both internal customers and external customers and my team to find out what are the opportunities, what are the things that we can do differently to improve ourselves. What I found was a very strong heritage from DuPont days of safety, environmental, quality, and really focusing on the high-end refinish markets.
What I also found as I talked to the business leaders and as I talked to my team was that we were very inwardly focused, functionally driven, siloed thinking and decision-making, and really focused on incrementalism. When I talked to the business leaders like Steve and Mike and Joe, it became apparent that we needed a different future state because we weren't going to stay just in the high-end refinish market. We were going to grow and double in the industrial market, as Mike mentioned earlier. To do that, we had to become more customer-focused, more results-driven, really focusing on major step changes.
I like to tell my team I like quotations, and one of my favorite quotes for my team is, "The light bulb wasn't invented by continuously improving the candle." We had to step out and really look and think differently about how we were going to service our customers. As all three business leaders mentioned, how do we get closer? How do we service them faster? We set out 2 years ago on 7 major priorities, both for operations, supply chain, and procurement. I'm going to go through each one of these. The 7 opportunities are: We needed to restructure our leadership team. We needed to focus harder and better on quality and delivery. We had to develop a fit-for-purpose cost structure. We have to adjust our footprint, reduce our costs.
We also had to install an Axalta Operating Excellence System, something that gave us structure and decision-making, which I will explain and give you a couple examples. We had to continue, as Robert and Charlie both said this morning, on investing in high return capital projects and using our money wisely. Let's talk about each one of these opportunities. Restructuring our leadership, why did we have to make that change? We had some really great people that came from DuPont, really great people. They were very supply chain focused. They were really big batch focused, again, with the high-end refinish, and they were used to unconstrained capacity with buffered inventory. Unfortunately, as we grow our business in industrial and as we grow our businesses in transportation and in the mainstream economy market, that's not going to help us.
We've got to be faster, more flexible, and we have to be able to make quicker decisions. In the last 18 months, I've changed over 70% of our operational procurement supply chain leadership team. It's been a long journey, and quite frankly, in all the transformation I've done at Honeywell, at Sigma-Aldrich, at Hexion. This is the biggest leadership change I've ever had to make in a transformation process. What did we go out and look for? We went out and looked for people who were operationally excellent, who could get results, who could drive decisions, who were critical thinkers, who were leaders that could take us on this journey for improvement and transformation. Most importantly, we needed people who were servant leaders and were customer-focused. I'm really excited about all the new people on the team.
They have a great background, not all of them from the chemical background, not all of them from the paints and coating industry, but all of them great leaders who are going to take us on this journey. As we were making this change with our leadership, we couldn't forget the day-to-day operations. For the next few slides, we're going to talk about how we have been transforming for the last two years and where we're going in our transformation in the day-to-day operations. The first thing that we needed to focus on was how did we improve our quality and our delivery to our customers. One of the biggest things we needed to focus on was Right First Time batches, basically making the product the way the customer wanted Right First Time.
This is the very strictest of definitions, the right raw materials, the right quantities, the right process, as well as meeting the customer specifications without any adjustments. It's the hardest definition to make, but at the same time, if we can meet this, we'll meet our customers' expectations every single day. I'm proud to say that in the last two years, we've improved our Right First Time 67%, and we've done that by focusing on our physical properties like viscosity, solids, particulates. With that, we've reduced our serious customer complaints in the bottom left-hand corner by 25%. A serious customer complaint is a line shutdown, it is a major claim, or is a major product recall. Now we're not done. We're not anywhere where I want to be, and our goal is to be 95% or better on Right First Time with zero serious customer complaints.
In the next two years, the technology team and the operations team are working on our next big opportunity, which is color management. We're great at color, but we have a lot of variability when we make that color, and we have to take that out. We have a dedicated team of six engineers working on this right now to take the variability of how we make color, and that will help our customers, and it will help our operations make Right First Time production. While we were working on quality, we couldn't forget about cost. One of the great things about all the acquisitions that we've done is we've had a chance to learn from all of these sites that we've acquired about their cost structure and how does that apply to us.
In the chart here on the left, we're showing a representative sample of seven sites plus our Axalta average on our plant fixed costs, so the total cost in a plant divided by the number of liters that they make. The first six bars are very low cost, world-class competitive in their individual markets. Five of the six are acquisitions. One of them, the second line from the top, is actually an existing site. The bottom two lines are our Axalta average and one of our top 10 sites. You can see that one of these sites, the top 10 sites, is actually twice what our goal is. Our goal is, as you've heard from the business leaders, is to have a fit for purpose competitive cost structure. What do we got to learn from these acquisitions? We have to learn about emerging market cost strategy.
spend the dollar when you need to spend the dollar, don't spend any more than a dollar. Really look at the value of every dollar we spend at each one of our sites. We also have to be local for local. We have to be closer to our customer. One of the biggest things, which I'll talk about in a couple slides, is our ratio of employees who make paint to employees who don't make paint. We really got to get a much better ratio and more people involved in the paint-making process. The last thing I want to leave you with on our cost structure is we have to reconfigure how we look at our footprint. We're going to be going to a hub and spoke model that I'd like to describe to you here. What is a hub and spoke model?
A hub and spoke model is really taking advantage of a few large factories to make our large semi-continuous batches for our light vehicle customers, for making resins as a key raw material for making the final paint, or even our dispersions for our color dispersions for making our final products. The spoke sites are smaller, more flexible sites that are agile, have more paint-making employees, and are in lower cost regions. We're talking about sites that are 50 or fewer people at each site. As an example, the two sites I just mentioned earlier, Sacramento and Minneapolis, each one of those sites will actually have less than 20 operations people, but each site will make more than one million gallons per year on a single shift each and every day. How do we take what we've learned from our acquisitions and apply that to our existing network?
Well, we started in 2017 with this hub and spoke concept by actually closing one of our small resin manufacturing sites, moving the resin into a large hub site in North America. Saved us over $2 million a year in fixed costs. As we start this transition and we move into this hub and spoke model, it'll give us much more flexibility closer to the customer at the spoke sites, but maintain our integrity, our quality, and our process control for our large global sites. As we look at moving into this hub and spoke, we also have to think about our staffing. Again, one of the great things we learned from our acquisitions is what's the ratio of basically the non-paint making employees to the paint making employees.
This graph is exactly the same graph as before, except now it shows you basically our indirect population to our direct population. The smaller the number, the better. You'll see that the six sites on top, five acquisitions and one of our existing sites, have very low ratio of people who don't make paint to people who make paint. Or to say it differently, more people on the shop floor adding value to the customer, making, filling paint, and shipping it every day. You can see our results average, second from the bottom, and then our new site, or one of our existing top 10 sites, being almost three times some of the recent acquisitions. We've got a lot of work to do here, which is exciting to me because we have an opportunity to really focus on reducing our staffing.
One of the things I did not mention on the slide before is we have 50 sites today. In our hub-and-spoke model and with our new staffing model, I actually expect us to be 70 or more sites by 2020. Having more sites immediately invokes more costs. I actually feel we'll be below our current plant fixed costs today, because we'll be in lower cost parts of the regions, we'll have smaller, more flexible sites, and we'll have less overhead to deal with at the bigger sites. We'll have a bigger footprint, but a smaller total fixed cost. While we were doing all of this, we also embarked on installing our Axalta Operational Excellence system. Why do we need this system?
Many of you who have been around in the chemical world know about the Honeywell operating system, the Toyota Production System, the Caterpillar Production System, maybe the Danaher Business System. We need an equal system to be able to structure how we solve problems. That's really what these systems are about. How do you structure a process to find problems when they occur and fix them when they occur? Solve the problems today for today. This is a structured approach that we are installing at four of our sites today. We've deployed at our Wuppertal, Germany site, our Mount Clemens, Michigan site, our Guntramsdorf, Austria site, and our Jiading, China site site. We're leveraging the knowledge of our employees to learn from them each and every day and having them solve the problems for themselves.
I'm going to give you a couple of examples of quick wins that we've had just in the last few months. If we do this right, we will capture a lot of value in Right First Time, reducing cycle time, and shipping more on-time and full to our customers. Let me give you two examples. The first, this is from our Wuppertal example. In the bottom left, the pyramid really shows how decisions should be made in a plant manufacturing environment. They should be made at the floor level. The gray box on the bottom is our level 1 meeting, where the shifts are talking to each other and they're deciding what are the issues today and how do we solve them. If they can't solve them, it should go to the level 2 that day, that morning, to the supervisors.
If they can't solve it should go to the plant manager. The objective is fix the issue today. On the right-hand side of the slide, I want to give you one specific example at our Wuppertal, Germany site. Our employees found that they were working a lot of overtime. They were complaining in one of our filling areas. We said, "Okay, let's find the problem and let's solve it." They took it upon themselves and got the data, they found the problem, and they fixed the issue. In less than 30 days, they improved their average daily fill rate by over 11%. The back orders came down by 70%, now they're working basically no overtime, which in Germany, that's what they want to do.
This one small success in a 1,000-person site at Wuppertal, Germany, has spread like wildfire, and now everybody's trying to solve problems so they don't have to work any more overtime. Which is great for them, but more importantly, it is great for our customers and it is great for the shareholders. A second example, which I'm really proud of, is in Jiading, China. The reason I'm proud of it is because in Jiading, we haven't even deployed yet. We have a brand-new water-based facility that was built just three years ago. They were struggling with Right First Time. You can see a common theme. I love Right First Time. They were struggling with Right First Time. In fact, they were the worst plant two years ago at Right First Time.
I really challenged them at my first visit in Jiading to really focus on trying to fix this. The plant manager learned about AOE. He took back some of the basic principles. Needless to say, the team has improved their Right First Time by sixfold in the last two years, with the bulk of the improvements in the last six to eight months. While doing that, they've been able to reduce their cycle time in the bottom right-hand corner by over 50%. They're making it faster, they're making it better, and we're able to capture that additional capacity with new sales to both our light vehicle and our refinish customers. AOE has a lot of advantages, and we'll be deploying throughout our entire 50-site network over the next three years.
Robert and Charlie both talked about deploying capital, and I want to give you four examples of where we've deployed capital effectively in the last 12 months. The first is resin capacity. As we look at resin capacity, I mentioned earlier we were able to shut down a small site and move it to a much larger hub site. This is the example. We spent $1 million to basically get greater than $2 million of savings per year. It was an easy project. It took about three months to spend the $1 million to decouple and give ourselves more capacity at the hub site. We realized the savings almost immediately. In fact, three months ahead of when we thought we would.
The second is one of my favorite sets of projects that I tell my team to bring to me all the time, that's the installation of a bulk tank or the retrofit of a bulk storage tank and a pump. A few controls. For less than $300,000, we can gain over $350,000 in raw material spend just by changing from receiving materials in drums to bulk. Simple process. I tell them to bring these to me all the time because less than a year payback, we get the savings right away. The third example is insourcing. For modest investments, we can bring complex small volume resins that we need that are critical to our products and technology, we can bring them in and save as much money as we would spend on just a small debottlenecking. Usually piping, a few controls, and maybe a pump.
Again, great payback on this project, it really helps us secure our supply for our customers. The last is automation, we call it a manifold. It's in-house designed, in-house manufactured. We design the control systems, the valving, the piping, and everything. For, again, a modest investment of $600,000, we can improve how fast we measure our liquid raw materials, how we dispense them, and how they go into making our paint. All of that improves our Right First Time. When you think about Right First Time, it's not only making a perfect product for the customer, it's also not making bad quality that has to be reworked later.
All of these have great paybacks, all of them are where we're investing our money when we're not investing in the larger projects that Charlie had mentioned, like our Global Innovation Center, our new Nanjing site in China. Let me switch a little bit to procurement and give you a couple examples of complexity reduction. First, just kind of grounding ourselves on our procurement team. We have 130 procurement professionals that manage over $2 billion in spend, most of it going into cost of goods sold, some of it into SG&A, and of course, our IT functions. Over the past two years, one of the key figures on here is at the bottom. We've reduced our reliance on single-source suppliers from 35% two years ago to 25%. We still have a ways to go, we're going to continue to fight and go after this.
This is such an important topic from my perspective that we hired last year four individuals, their sole responsibility is to find new suppliers and to help develop them with technology and operations. We have one person in North America, one in Europe, and two in China. I'm happy to say that they have already brought over 10 suppliers to us that we're qualifying today, mostly in China, but that we're qualifying today to help us to diversify our single source and provide opportunities for more suppliers for our raw materials. One of the biggest questions I got this morning, I'm sure we'll continue to get, is raw materials in 2018. I just want to touch briefly on this, but in a can of paint, sorry, Joe, this is your can of paint.
When you look at solventborne, refinished paint, there are five primary components that go into the paint, as you can see on the left-hand side of the screen. All of them are experiencing inflationary pressure this year. The two primary reasons that we're seeing inflationary pressure are oil prices. The cost of Brent crude oil right now is in the mid-60s. It actually touched 70 late last year, very briefly, then dropped back down to about 64 this morning. The second really has to do with supply. We're seeing a shortage of supply and an increasing number of force majeure letters. In fact, we're averaging about one letter a week this year, where companies are claiming force majeure for a variety of reasons. The majority of them have to do with just plant turnarounds, plant maintenance, coming back up online, not being effective in that.
Some of them, as many of you have heard in the past, are shutdowns and governmental regulations, primarily in China. There's over 20 TiO2 suppliers, small suppliers in China that were shut down in the last six months, and none of them have yet to come back online. Although we expect some to come back online, they've not yet been able to cross the governmental regulation threshold. We're going to continue to see governmental pressures in China or governmental pressures around tariffs and trade wars to continue to put inflationary pressure on our key raw materials. What is our procurement team doing? Well, I'm not going to look through all these, but a couple I want to specifically point out. One is we continue to focus on modeling our raw materials, trying to get ahead of when there's going to be a force majeure.
While we have had all these force majeure letters, not one of them have stopped us from being able to get product and to make product for our customers. None of them have shut us down to where we've had to claim force majeure. That is all because our procurement team is modeling this, checking the markets, talking to our suppliers, and making sure we're ahead of the curve. A key component for us this year and next year is secure supply. It's equally as important as the raw material pricing, but for those who have raw material supply, you'll be able to make and sell product, and that's one of our major goals for the next two years. The other things are on the right-hand side, which is business collaboration and working with our technology team and what we call our match pairs.
Really finding new solutions. How do we use different raw materials? How do we qualify new suppliers? How do we reduce the complexity of what we buy and how we buy it? I really want to share with you three success stories that we've had in complexity reduction. Working with our business teams and working with technology, operations, and procurement, we've been able to save quite a bit of money in just reducing the general complexity of what we do every day. The first example on the left-hand side is we were buying dilute isocyanate trimers. I'm not going to explain isocyanate trimers, but safe to say we were buying specialty diluted products where we were asking our suppliers to basically take a pure raw form of a raw material and dilute it on our behalf to make it easier for us, what we thought was easier.
What we did, though, is we basically said, "Okay, go ahead and charge us more for doing our work for us." Working together with the teams, we said, "Look, we can modify our formulas, and we can do the dilution while we make the paint." That's what we did. Now when we went back and we're not asking for a specialty product, we're asking for something off the shelf, we invited more suppliers, and we were able to get a better price, resulting in a two and a half million dollar savings per year just on that one particular raw material. The second, one of my favorite, and one we're continually working on, Barry Snyder and I both work on this quite frequently, is our specification ranges for raw materials were different by region for the same raw material.
We had a solvent that we bought in every region of the world, but when you looked at the specifications, only about half of the specifications lined up by region. Again, we were asking for a specialty solvent when in fact, that particular specification, that particular solvent, we could open it up a lot more, get more overlap between the regions, and really make it more of a commodity buy. Now you invite more people. It is not as hard to meet our specifications, and we are not going to pay a premium for them to self-select a smaller range of specifications. That one saved over $1.5 million a year. The last one was, we were buying a UV light stabilizer from a company.
We thought we needed that particular product because of a specific patent they had and the specific quality they had. We found out the patent had expired. The generic, like in the drug world, the generics were as good or better. We focused on opening up the specification range, not sacrificing the quality. Again, at the end of the day, we were able to save over $4 million a year just by looking at it and saying, "Look, what's on the shelf? How can we buy on the shelf and make it work for us?" There's lots of these opportunities out there that we got to continually focus on between technology, business, our procurement team, and our operations team. All of them are in the room, and we're all working together to make those savings happen. Summary of key messages.
First and foremost, again, we're on a journey. This has been absolutely the biggest changeover in leadership I've ever had to do, so I'm a little behind where I'd like to be, but I see great opportunity as we move forward. I know that we can get to where we need to go. We're leveraging a legacy of high quality, high safety, and we're adding new focus to really around productivity, cost structure, competitiveness. We're going to continue refining our processes and our footprint. No one should be nervous or scared because I'm certainly not as far as going to 70 plants around the world because, again, we're going to fix our cost structure. As Mike Cash always tells me, we got to be close to the customer and fast and flexible to the customer in delivering a short amount of time.
That's what we're going to do. We're going to continue to focus on higher capital projects, the examples I gave you. Develop our suppliers, continue to bring in new suppliers, and most importantly, continue to reduce the complexity of our raw materials, our formulas, how we make products, make it a lot simpler for us to satisfy our customers. As the team in the picture, which is a brand new Windforce and light vehicle in China at FAW-VW in Qingdao, as they have thumbs up, the future's bright for us. I'm excited to be here and to help the team transform and get us to the next stage of Axalta's future. With that, I think turn back over to Chris. Thank you.
Thank you, everybody. Really appreciate your patience. We're going to now have a Q&A session for a little while with the team. If everybody could come up. Charlie and Robert are going to come up on the stage here, and our other four speakers will be on either side. All right, great. We have a couple mics out in the back. We have one question from the back. Let's get going. Thanks.
Thanks. This is Chris Evans, Goldman Sachs. I just wondered, Robert, if you could give us a little more specifics on the pricing trends that you cited in the first two months of the year, and how does this compare to how raw materials have been moving over that time period?
Thanks for the question, Chris. As I highlighted so far in the first two months of the year, we have seen price capture, in particular in the performance coatings side of the business. We put through a number of price increases, both in refinish as well as industrial in all four regions of the world in response to the increase in raw materials that Dan highlighted and that we've been highlighting since about the second quarter of last year. That is going well. As we explained before, on a full year basis, we'll need a combination not only of those price increases, but we'll also need additional cost savings. We've put our foot on the gas even more with our Axalta Way Phase 2 project as well as other initiatives inside the company.
From the number one Chris in the room. Thank you.
Okay.
All right. Can you just give a little more color around the $200 million in Axalta Way cost savings? How we should think about the various projects you've identified or Dan's team has identified. When we should start seeing the benefits or results. I think we probably are already. Is it evenly distributed per annum? Just any other color on your base assumptions around just core inflation. Thank you.
As we talked about, we tried to show in the one slide in the presentation today the nature or some of the components of it. Phase 2 is really a number of things. It's the ramp of the complexity reduction project that we've started. I think Dan tried to give you a little bit of feel for that. Essentially, we had the base chemistry from the Herberts acquisitions, plus we had the Herberts acquisition back in 1999 that DuPont made. We had DuPont's base chemistries multiplied by four, given that R&D was done on a regional basis. In some cases, we're managed by different base chemistries that underline our entire portfolio of products. The plan is to move, and Barry and Dan are leading this effort together with the commercial teams, moving to one, at most two base chemistries that underline our entire product portfolio.
That process takes a significant period of time. Once it starts to ramp up, it's really some important savings. I think Dan gave a few examples of that. That complexity reduction in dealing with that differences in underlying base chemistries, that would be the first bucket of opportunity. The second bucket has to do with the manufacturing footprint and the manufacturing strategy. Given some of the opportunities that we have there, both in terms of being more efficient at our larger plants and locating some of our smaller plants in lower cost geographies within each one of the regions and being closer to the customer. When you optimize across that also creates opportunities. It's not just the plants that we're talking about.
It's the physical asset footprint of the company, because it's plants, it's warehousing, it's distribution, it's our sales offices, and we now that we have an operations, as Dan said, significant changes made in the operations team, and we had to wait for many of those people to be in place before we could really move on making some of these adjustments that we've wanted to make. They've started to do that. That's another area. The third area I'd highlight is SG&A and overall administrative costs. We currently run at about 31% of sales in SG&A. If you look at our closest large competitor, they run at about 28%. If you look at one of our competitors who was recently acquired, we estimate that they were running at about 28% as well.
It's about a 300 basis point opportunity that we see in SG&A that comes from delayering the organization, but also comes back just from a value chain perspective, how we manage the business, in particular in operations, and how that affects all areas of the company. That would be the third major area within Axalta Way Phase 2. In terms of the timing, we expect it to ramp up during the four-year period. We're not going to provide a year-by-year number at this point. Regarding inflation, we continue to expect on a fixed cost basis, 3%-3.5% fixed cost inflation each year. This year, we're projecting about 10% raw material inflation.
That number, depending upon what happens with the market, it may end up being a little bit too conservative and a too high a number, and it may be a little bit less, but we went the conservative route this year. I think over time, we'll need the Axalta Way 2 to help offset some of that inflation, but also it'll generate some important net savings.
Mike over there.
Dan Jester from Citi. Maybe just a bigger picture question that came up a couple of times in the presentation today about the switch from solventborne technology to waterborne technology. I think that's come up for a couple of years now. Can you just talk about maybe what inning we're in China and maybe some of the other emerging markets? Are there end markets in which you're seeing the transition faster? Are there some end markets which are maybe lagging that could pick up over the next couple of years?
Yeah. I'll make a couple comments on that. As you correctly point out, the whole waterborne conversion across all these different segments has been going on for some time. Started 25 years ago, actually, in some segments. What we see right now, though, is that we've certainly seen an acceleration of waterborne in China and in Asia Pacific overall. I think China started several years ago when you look at some of the industrial segments, the newer OEMs, the light vehicle OEMs, and now it's moving into commercial. In the past couple of years now, because of direct pressure from the Chinese government in the bigger cities like Beijing, Shanghai, almost a rapid conversion now of people to waterborne. We've definitely seen an acceleration in China.
Now, I would say in the past 24 months, Japan, Korea, Thailand, Southeast Asia, and even India, we're starting to see a lot of renewed interest in moving to waterborne. I think we'll continue to see it go quicker. Again, some of that's driven environmental and some of it is just productivity. As people see what they can do with waterborne, they learn how to handle it. Once a painter moves over to waterborne, whether it's in refinish or whether it's into these industrial markets, they very rarely ever go back to solvent-borne because they learn how to do the color match. They go faster, again, then they can go a lot faster. I think the whole waterborne conversion will continue. It'll continue to accelerate in China because the pressure that they're all under.
In Europe and in North America, in the automotive markets, it's fairly well balanced. North America still has a big solvent-borne market in refinish, I think that'll stay that way. Where we see shops in the OEM market, excuse me, in the refinish market in North America convert is when an MSO buys them, they immediately want that shop to be as productive as it can. They'll move off of a solvent-borne product or maybe a lower-end waterborne, and they'll go to the most, because again, price is not the issue. As Joe pointed out, it's really more about productivity, get the car in, get it out, get it done right the first time.
As shops get bigger, they move in the U.S., as they get productivity demands, they'll move. Europe is pretty well done in the Western Europe world. Eastern Europe, Southern Europe, we think will stay solventborne for some time now, just because of relatively low productivity of the shops. In the industrial markets, as Mike Cash mentioned, I think you'll see people, where they can, they'll move to powder, because it's more environmentally friendly field applications. Clearly in industrial liquids markets, people are looking for waterborne solutions, whether that's coil, which we're in. Wood has already got waterborne products. I think everywhere people can, they'll continue to move that way. Now, whether that means the waterborne market continues to grow at double-digit like it has, or does it accelerate faster than that, I think that remains to be seen, and it'll just really be segment. Jeff?
Jeff Zekauskas at JPMorgan. A two-part question. The first part is, I think you said that your free cash flow target was something like 45%-55% of your EBITDA. Your EBITDA is about $1 billion. What you're saying is that there's $100 million variance in what your free cash flow might be in any one year. Why is that number so large? Second part of the question is, you're a $4 billion-$5 billion company. You're a third of the size of Sherwin-Williams or PPG. How do you reflect on that? In other words, so many of our companies say that scale really matters, that raw material purchasing synergies are tremendously important, that financial returns rise as you're much larger. Do you find yourself having very large, longer term targets in terms of profitability improvement?
Do you find yourself at competitive disadvantages because of your size? Can you just reflect on the size issue?
You want the first one?
I'll take both. On the first one, Jeff, I think the numbers that we put up of the 45%-55%, it's meant to be directional. It's not meant to be an exact number. That is cash flow from operations less CapEx. You can see variability in the amount of CapEx. You can see variability in the amount of working capital, and also other related working capital items. I wouldn't necessarily bring it down to that fine a point. It was more directional, trying to provide a directional sense of more or less, how much of EBITDA is actually converted to cash flow.
In the case of this past year, for example, we had the $39 charge. The magnitude of anything you may be doing in a way of special restructuring and that sort of thing can drive some differences. We weren't meant to be, or attempting to be overly precise.
On the second issue, I think that's always a fascinating point because, if you're in specialty chems or in commodity chems, absolutely size matters depending what you're in. I think coatings is a very different space. I do think you need to be a market leader to be competitive. Whether that's in a region or whether it's globally in a segment, being number three, four, five, or six, that can absolutely be at a disadvantage, because you got to have the critical mass, you got to have the scale. In many segments, you got to have a distribution network. If you look at refinish, for example, in North America, there's two of us that dominate that space, and why is that? A lot of that is because of products, absolutely.
The R&D behind it, our relationships, but it's also our distribution networks, and the ability to serve that marketplace. I think whether you're $15 billion in coatings or a billion, doesn't actually really matter because we actually see relatively small companies in coatings that do really well, but they stick to their knitting. They're in a particular niche, in a particular segment, or a particular region of the world. I think you got to pick your battles very carefully. In fact, we get asked a lot about Africa. When you look at a company like us, we have no business being in Africa except around certain key OEM customers and certain key industrial customers. Other than that, it could be a bust. I think you have to pick your battles real careful.
I also think that there's no parallel between being on the paint side or the coating side. In other words, [inaudible] affords you no competitive advantage over in the coating side and vice versa. I think it's all, Jeff, it's a good question. It's probably the number one question we always get, and I think it's all about being a leader in your market, technology size, picking your battles, and picking them carefully. Because, again, we go up against, in some regions, really small competitors who are really good, but they're very focused on what they're doing. I think on the raw material side, and especially as we move to waterborne coatings, where there's more differentiation, there's less solvent, there's less bulk buying of any compounds. I think raw material competitive, because none of us are back integrated, really.
We all make our own, to a large extent, our own resins. No one's back into TiO2, no one's back into epoxy resins, for example, in any large scale. I think all of us prefer to use our capital downstream. As long as that stays relatively balanced among the big players, I don't think anybody has a competitive advantage in raws. Again, even on the TiO2 side today, guys like Mark, they're not playing favorites with anybody. I think that over time, maybe in one particular raw you could get a competitive advantage somewhere, but I don't think that being bigger doesn't give you much leverage with most of these raw material providers at this point. Kevin.
Kevin McCarthy, Vertical Research Partners. As you know, electric vehicles continue to penetrate the market fairly rapidly, some people believe they could represent a double-digit % by, say, 2025. In that context, I'm curious, how does your content per vehicle compare in electric vehicles versus combustion engine vehicles? Is there any appreciable difference there? Related to that, is there any difference in the margin opportunity, as that market trend continues?
I don't know. Steve, you might want to comment on overall content.
I think from a content standpoint, I think it's important to note, you say electric, when you think about electric versus a hybrid, there's a big difference, right? There's many permutations of hybridization which are relatively more prevalent. EVs, I think in North America, they sold 174,000 of them last year, 1% of the market. Even if it's a big growth bagger, if you will, it's starting from a really small base. I think when you think about, though, hybridization, I think certainly on the exterior, probably not a lot of change. Again, you're going to see probably smaller vehicles on the Class A surfaces. Again, lightweighting will be very important, so they'll be pursuing some of the more exotic materials. Again, maybe the carbon fibers, maybe more plastic and SMC, things like that.
There'll be a continued push, I think, to develop advanced coatings that cure at the relatively low temperatures. Interior, probably some changes. I think you see more of the iPad-type dashboard. You certainly see that on the Tesla. A lot of the components that you would normally see on the instrument panel, there'll be less of that. I think certainly in Mike Cash's area, he spoke briefly to Tesla. Again, there's just the electrification, the motors, whether it's to power certain components, the seats and the windows, and all that stuff. There's been tremendous growth in electric motors in the car, and I think as you use electrification to power the car, there'll be significant upside in that area for us.
Yeah, I think it's more about, as Steve said, I think it's more about lightweighting right now than it is content change on these vehicles. The vehicles will get smaller because of electrification. If I was painting radiators, I'd probably be worried. We don't do under the hood and some of that. I also think, Steve, over the next couple of years, we'll do a couple of small acquisitions on interior to make sure we stay in front of all this. Right now, the big change is on just going to lightweighting, and where is all that going to lead, and how you do the prep and the color match. That pulls APC players in more.
It's less about dipping a car body anymore and all that goes on there, and it's more about all these parts, where are they coming from, who's painting them, and these shops being right there. When they put that car all together, all the color matches. Even more importantly, that all the finish looks the same. That was a big issue we had with the Corvettes the last couple of years. We just did a brand-new paint shop with them in Bowling Green because they had all the different angles. The car, even though we do all the paint on them, just didn't look good.
For the paint shop, we spent a lot of time on those surfaces and redesigned that paint shop with GM on how do you make this car look consistent, and also as the light refracts off all these different plastic pieces, making sure you get a lot better finish. I think that'll be the trick on lightweighting, is getting these cars to have that consumer feel as you go to more plastics. Not just plastics, but you saw the breakdown of all the different parts, high-strength steel.
Hey, Matt Krueger from Baird. Thanks for taking my question. Given the substantial raw material cost inflation that you've seen across your industry over the last two years, the pricing initiatives that both you and the industry have undergone to offset some of that, have you seen any conversion of your customers from premium products over to maybe mid-tier or lower-tier economy products? Do you foresee any risk of that happening as the absolute price of these products goes higher along with your price increases and the raw material costs underlying them?
I'll comment on a couple of the segments, and maybe Mike Cash can comment on industrial. When you look at the OEM side, we've certainly seen a couple competitors try to substitute with lower quality resins and lower quality pigments. In some cases, we've gained business because of that. People are experimenting, trying to figure out, okay, if people want lower price or if these particular additives are going to go up, how can I compensate for that and not necessarily have to push that through? I think that's been relatively limited. It hasn't been driven by the consumer so much as it has been from the paint manufacturer himself. In the refinish business, none. We don't see people switch back and forth.
They're either in one bucket or the other, I don't think they would switch. If the price of a paint goes up 4% or 8%, that's not going to cause a body shop or distributor to go switch. The switching costs are too extreme, the retraining, and everything else. You might want to comment on the industrial sector on liquid and powder, these guys get these pressures, what you're seeing.
Yeah. We do see some. I think maybe the approach we always take is that we're consciously doing that with our customers. If together we make a decision, we need to look at how we can take some cost out of the product, how we can come up with a more economical product for them, or move them to a more economical product. It's always done very cooperatively. Certainly, is we both look
Us and our customers both look at the inflation that we're facing together. There are other things that we're looking at beyond the content. Are there ways that we can buy in bigger batches? Is there supply chain savings? There's a whole myriad of things that we try to work with our customers on to help both of us.
When you get a rapid environment like this, my experience is, what you have to watch for is a competitor in a certain region who tries to take advantage of it. They'll try to come in with a lower price, knowing full well that 6 months from now, they're going to have to raise price. Today, they can try to gain share. History shows that really doesn't work very well in chemicals and in paint. You still from time to time will have a competitor try that game. Less and less so about the big multinationals, and more and more around a small regional player. Certainly in the past year, we've seen that in powder in China, where people were betting on the price of epoxies going back down, so they would reach in and try to grab share at a lower price than you were.
Again, our general view, there is a view out there, certain people believe raws are going to go back down next year or the year after, and I don't believe it. I have the fortune or misfortune of also being engaged in the oil and gas industry, and I just don't think anything could happen in the oil and gas industry. I think these raws are going to go back down to where they were anytime soon. I think that's a hope and a dream more than a fact right now. There are some people betting on that in their pricing, and I think that could come back to haunt them as we get into 2018, 2019.
Thank you. Give him the mic. Yep, great.
Matt Dio from Vertical as well. In Refinish, MSO consolidation has been a tailwind for the business, it would seem like there has to be a point where these MSOs get big enough to significantly increase their buyer power and maybe impact your pricing strategies in the business. Do you see this as a risk, or do you have any thoughts around when something like this could happen?
Yeah, Joe, you might want to.
Yeah, sure. I'll take it.
Stand up, Joe. We'll take the question. Thank you.
Yeah. Yes, we're going to continue to consolidate. Yes, they're going to continue to grow. As a couple of us were talking earlier, they are a very sophisticated buying group. They're very sophisticated folks in their organizations. As Charlie mentioned a few minutes ago, price is not a huge driver for them. It's about productivity. As they continue to buy these shops, their main goal as they buy them is to improve the productivity. That's where their payback comes from. Their payback doesn't come from necessarily coming in and lowering the paint cost. That's where you see that conversion also happening to waterborne. They come in and buy a solventborne shop. We're in there with them immediately converting it over. I'm not sure that we're going to necessarily see an issue in the way that you've laid it out.
We'll continue to work with them and bring tools to them to help them on that productivity side, as well as Robert Roop and his team continuing to make more and more innovative coatings to help them as well.
Yeah, I think the risk would be if you ever quit working with them on productivity, I think you start to look like a commodity to them. As long as it's a Caliber in the U.S. or if it's one of our groups in France, for example, every year, if you can continue to show them how they're using less paint per repair, their technicians are going faster, better Right First Time, I think that they're fine, and they don't focus a lot on the price. They already enjoy pretty big discounts. I think that they look at it, on an average repair, for example, in the U.S., I think paint and sundries is about 4.5% of the repair costs. They're able to charge that out at about 8%-9% to the insurance companies.
Paint materials is an important part of that repair on them being able to generate a profit. We are an important part on them on always helping get that repair through there faster and make a higher margin. I think the total cost to them, if you look at 4.5%, that's not just the paint, but that's the sundries. Maybe they could save a tenth here or a tenth there. That's not very high on their radar screen. Right now, the MSOs, frankly, their battles are being fought around parts, and paint's not necessarily on that high of a radar screen. Parts cost, the OEM's trying to drive more value there, push out the non-OEM.
If I sit down with a big MSO right now, 90% of the conversation is around all their parts issues, getting the right parts, getting the right parts the first time, getting them to fit. If you paint a part that didn't fit, then not only did they waste the paint materials, but they also wasted the part. I think we have to continue, as Joe said, to be productive and continue to innovate with them and help them grow their business and work faster, better.
One more maybe, I think we're going to head off to lunch. Yes.
Alex from Instinet. I just wanted to follow up on hub and spoke system. Is there any appreciable CapEx associated with this transition?
Sorry.
CapEx associated with hub and spoke manufacturing system transition to a larger number of sites.
Yeah. The transition will be a gradual transition. None of these transitions are quick. In terms of the guidance of roughly $150 million a year in CapEx for the next several years, that will cover the needs that we've laid out and discussed in the presentation. I think at this time, we'll cut it off since we're a few minutes over, and we have plenty of opportunity for more questions over lunch. We welcome you to join us for lunch upstairs on the lobby level. We'll take the elevators up. Sorry, Maggie. Straight through? Thank you. Okay. I thought it was upstairs. We're going to go straight through. Please join us, and thank you all for attending. Really appreciate it.