Xpel Attracts New Generation Of Auto Enthusiasts

Some in the auto industry worry that Generation Z doesn’t care about driving or cars, only about gaming, social media and lattes. But Ryan Pape is betting the experts are wrong. And so far, the CEO of Xpel has been winning the wager.

San Antonio-based Xpel has reached annual revenues of more than $300 million and reached a gross margin of 42% in the first quarter by effectively marketing and selling mainly paint-protective film for cars, through a network of independent detailing services, glass-tinting specialists, conventional auto dealerships, outfits that produce “billboard” marketing wraps for vehicles, and other auto-related retailers.

Pape has expanded Xpel’s menu of products and services into automotive adjacencies such as window tinting, and into other verticals such as home and office windows where tinting films are popular. But in his 14 years as chief, after turning around Xpel from near extinction, Pape has kept the company focused on a particular niche of the automotive aftermarket that keeps paying great dividends.

“Some 75% of buyers of a new car have some pride of ownership associated with the vehicle,” according to research, Pape told me, despite industry handwringing about young people being indifferent about obtaining a driver’s license and the fact that the unique automotive enthusiasm of the baby-boomer generation is slipping into history.

“And [damage] to the exterior of the car from rock chips always has been a major customer-satisfaction issue for car manufacturers, along with electronics.

Pape believes “the enthusiast auto buyer is as strong as it’s ever been, and that continues to be replicated and developed in each generation. Facets of that may change, but the phenomenon of later driver’s licenses [for Gen Z and Alpha] doesn’t seem to be a factor for us.”

The evolution of the U.S. automotive market keeps favoring Xpel for a number of reasons. First, Pape said, paint-protective film applications have been “growing in awareness and attach rates.” And the early adopters who are buying the first electric vehicles tend to be higher-end consumers who more readily want to plop down $2,000 or more to protect the forward parts of the exterior, or more.

Also, some automotive OEMs are beginning to install Xpel films at their own factories, including Rivian, the electric-truck startup.

Pape said that Xpel’s film protects vehicles “from the average wear and tear that creates the vast majority of small pitting damage. Paint-protective film is going to prevent that entirely. Then, you move up to the next level, where you’ve got something onerous, like a larger rock or some other road debris, and then you’ll see the film being damaged but the paint being protected.

“It won’t stop a panel from being dented if it’s hit with enough force, but it’ll be a much simpler repair if the paint isn’t damaged underneath.”

Similar to a successful customization approach pioneered by WeatherTech, which grew by making floor mats digitally fitted to each vehicle model, XPel’s computers cut each piece of film specific to an individual body panel and to the extent of that panel a consumer wants to protect.

“It’s a big part of our value proposition,” Pape said. “You can apply it to as much or as little of the car as you want. Commonly, we see coverage of every painted panel from the windshield forward, and that will retail for about $2,000.” Xpel now also offers ceramic coatings that Pape says “make the car self-cleaning.”

Given that Xpel films may be considered a luxury even among enthusiast and aftermarket mavens, the brand at this point “overindexes and gets higher attachment rates with EV buyers,” Pape said. “They’re more apt to be our customers. They tend to be early adopters and are more likely to be enthusiasts, so that makes sense. At the same time, if you look at the front-end designs of many EVs, they are more prone to damage.”

Interestingly, one way that Pape has kept Xpel focused and increasingly successful is by maintaining its heavy emphasis on sales and retailers while farming out manufacturing of its products to contractors. Xpel has grown robustly in this market even competing against industrial giants including 3M and Eastman Chemical.

“We are a very high-touch service model,” Pape said. “We go deep with our [retailer] customers and provide a lot of value. We’re not a transactional business selling widgets. We provide great value to our dealers.

“Our ability to cater to those independents is key to our success. We meet them where they are and provide them the best service they can get with how they run their business, and we don’t try to change it.”