Home Cover Story Automotive lubricants market on a smooth ride

Automotive lubricants market on a smooth ride

Automotive lubricants market on a smooth ride

Rising vehicle ownership levels, incorporation of advanced engine, continuous growth in investment in infrastructure projects, robust two-wheeler sales, increase in number of women driving scooters, etc are propelling demand for automotive lubricants in India. Lubricant manufacturers are gearing up to tap the market by expanding geographically, rolling out new products and developing brand-specific lubricants, says Rakesh Rao.

Driven by an acceleration in economic growth and rising incomes (that fuel more intensive vehicle use and increased automobile ownership), the demand for automotive lubricant in India is forecast to increase 5.5 per cent annually to reach 1.7 million metric tonnes by 2021, according to the Freedonia Group, a Cleveland-based industry research firm.

Omer Dormen, Managing Director, Castrol India Ltd, elaborates, “With Indian households generating higher disposable incomes, there has been a significant boost in vehicle sales for personal mobility, both for two and four wheelers. While two-wheeler sales were slightly lower in 2017 mainly due to lingering impact of demonetization and GST uncertainty, first time users of personal mobility vehicles, along with growth in usage of two-wheelers in small towns and emergence of gearless scooters driven by increasing number of women riders will continue to drive growth in two-wheeler sales. Growth in commercial vehicle segment is largely driven by mini light commercial vehicles (MLCVs), one of the key focus areas for Castrol. The uptrend in economic activities is also likely to have a positive impact on the lubricant consumption of bigger trucks and given Castrol’s technical superiority and leading market share, it is well placed to take advantage of the same.”

Growing Strong In Rural Areas
While the auto industry has grown by close to 7 per cent in the last five years, lubricants industry in India has been growing in high single-digit primarily due to enhanced oil drain intervals. Stronger gains in construction and agricultural activities are also boosting the demand for off-highway equipment lubricants.

“Market for auto lubricants in India has always seen a steady growth of sub-5 per cent growth. India’s automobile market exhibited a strong resurgence in growth last year. The normal monsoon, good harvests in the past two years and support price going up aided rural income, which bolstered the demand for tractors and 2 wheelers. Overall the healthy growth in the automobile sector has helped retail and independent workshop business for automotive lubricants to grow,” informs Ravi Chawla, Managing Director, Gulf Oil Lubricants India Limited.

Increased agricultural production and the ongoing shift to mechanised farm machinery is also boosting lubricant sales. For example, rural area has started contributing significantly to Gulf Oil’s growth. The company is focusing on improving its rural distribution network, Gulf Rural Stockists, to reach counters that cater to rural demand.

Ravi Chawla explains, “Gulf Oil Lubricants India Ltd has shown double-digit growth across all its segments of MCO (motor cycle oil), PCMO (passenger car motor oil), CVO (commercial vehicle oil), agri-related products, grease and gear oil. Gulf Oil continues to be the fastest growing lubricant brand in India. The market would continue to see higher growth for differentiated products, OEM approved products and synthetics. Secondly, the need for a lubricant that would meet the future emission norm and as well provide fuel economy would necessitate the use of synthetic engine oils.”

The vast majority of automotive lubricants demand comes from aftermarket applications, which are expected to account for 58 per cent of demand in 2021. Gulf Oil Lubricants, Castrol, Indian Oil Corporation, Hindustan Petroleum Corporation, Veedol, etc are some of the major players in the Indian automotive lubricants market.

Lubricants are used in automobile for smooth functioning and longevity of vehicles. In addition to engine, lubes find applications in manual and automatic transmissions, wheel hubs and many other under-chassis applications. While engine oil and transmission oil require periodic changes, many others, especially greases, are filled for life. Lubricants possess various characteristics, such as, high viscosity index, high level of thermal stability, low freezing point, and high boiling point, all of which help to reduce friction between surfaces of machine parts and the rate of wear, without compromising operational efficiency.

“The new engine technology which aims to have more power with smaller fuel efficient engines, and the changes in the legislation to reduce vehicle emissions are the main drivers behind the changes in the lubricant technology. As a result, we are seeing an increase in demand for thinner and more premium synthetics lubricants in the market,” opines Omer Dormen.

Synthetic Lubes, The Preferred Option

India’s lubricants segment is projected to see strong gains in construction sector as the Union Government continues to invest in numerous road improvement and other infrastructure projects. Ravi Chawla elaborates, “The increased spending by the government in various infrastructure projects like road projects under the Ministry of transport (NHAI) and the Pradhan Mantri Gram Sadak Yojana; the Sagarmala programme to set up new ports and drive modernisation of India’s existing ports, etc is surely helping the demand for automotive lubricants. In addition, the steps taken by the government regarding capping of the age of commercial vehicles on-road; revising overloading limits and strict implementation of these norms will lead to newer vehicles in the market as well as higher number of trips. This, in turn, should lead to a boost in the commercial vehicle oil segment.”

While mineral oils at present account for a major share of automotive lubricants market in India, the demand for synthetic and semi-synthetic lubricants is growing at a rapid pace. “We are seeing rapid growth in synthetic and semi-synthetic lubricants demand with increasing awareness and knowledge of consumers. This will lead to more premium synthetics lubricants in the market – which is Castrol’s forte,” says Omer Dormen.

Incorporation of advanced engine technologies and growing consumer awareness of the performance advantages of synthetic lubricants are also boosting the sales of non-mineral oils. Ravi Chawla explains, “Mineral oils continue to account for a high share of automotive lubricants. Certainly, we are seeing demand for synthetic and semi-synthetic lubricants picking up. The upcoming emission standard in 2020 (BS VI) , phase 2 of Corporate Average Fuel Economy (CAFE) norms for heavy duty vehicles, increased warranty and extended oil drain intervals would necessitate increased use of synthetic content in lubricants. As mechanics and retailers get more informed and educated about the latest OEM recommendations and the availability of synthetic products increases, this trend will continue to grow.”

Expansion With Growth In Mind

With demand for auto lubricants rising, companies are gearing up to tap the market by expanding geographically and their product portfolio. “We are confident that our automotive lubricants, with their focused customer value propositions, can help us deliver high growth. Our campaigns for our MCO brand, Pride 4T plus around the IPL with the Chennai Super Kings and the recent TV campaign with our brand ambassador, Mahendra Singh Dhoni have been well received. We are also seeing good results of our outdoor campaign, this year, for our PCMO brand, Ultrasynth X. This, coupled with the good growth in the automobile sector and increased government spending on infrastructure will help us beat expectations,” says Ravi Chawla.

To serve its expanding customer base, Gulf Oil Lubricants recently started operations at its new plant in Chennai. With an annual capacity of 50,000 KL, the Chennai plant deploys advanced, custom-built technology made by ABB, France. Our Annual capacity of 50,000KL at this plant, will help us service the needs of our esteemed customers adequately.

Ravi Chawla adds, “We are looking to invest aggressively behind strengthening our brand and hence demand for our products, as well as looking to expand our distribution, especially our presence in rural India. On the former front, we have streamlined our brands and created strong Consumer value propositions (CVPs) for each brand. Now, we are taking those CVPs to the market, communicating them to consumers through mass media as well as to mechanics and retailers through various on-ground activations.”

While passenger vehicles have been volume propeller for lubricant makers, the demand for commercial vehicle oils is accelerating with the thrust of the government on infrastructure development. “Our objective is to deliver consistent profitable volume growth. While we have grown consistently in the personal mobility space, we are currently witnessing growth in the commercial vehicles segment too. With the improving economic environment and focus on Make in India, we expect the industrial segment to offer growth opportunity which we intend to tap into,” explains Omer Dormen.

Castrol is continuously working towards developing a pipeline of technologically innovative and advanced products. The company has also refreshed its specialties portfolio by launching transmission oils and greases. He elaborates, “In fact 80 per cent of our growth in the first half of 2018 has come from new product introductions in the last nine months. We continuously keep investing on our brand. Also in terms of our distribution network, we reach over a 100,000 retail outlets across the country. In line with our long term strategy Castrol continues with investments in technology and brands, aggressive expansion of distribution network, innovative marketing programmes and delivery of premium customer experience across multiple
touch points.”

Adopting different approach to EVs

As per the latest BP Energy Outlook, the number of cars on the road is forecast to double from 990 million in 2016 to nearly 2 billion by 2040, driven by rising income levels and vehicle ownership. Over the past decade, the number of electric vehicles has been increasing. By 2040, 300 million EVs are expected to be on the road.

“This means that internal combustion engines will continue their growth for the next couple of decades. Our estimate is that the impact of electric vehicles in our category will not be substantial in the next 15 years. We should also take note that in the near future, there are many more developments in terms of efficiency beyond electric. Even the normal standard combustion engines are becoming more efficient and one of our agenda items is to support the low-carbon transition by designing products for these new engines,” says Omer Dormen.

Rising number of electric vehicles will have an impact on auto lubricants consumption in the future. Compared to a gasoline-powered vehicle an EV consumes a lower amount of lubricants during its life-cycle, as the electric vehicle does not have the internal combustion engine – the major component that requires lubrication. However, battery-powered vehicles will continue to have gearboxes, axles, wheel hubs and other lubricant and grease points. This means lube manufacturers will need to focus on transmission oil, brake fuels and other oils to tap opportunities in the EV space.

For example, Gulf Oil’s R&D facility in Chennai is leading developments in advanced lubricants for electric vehicles. “We are working to enhance our portfolio to meet the stricter emission norms as well as develop futuristic lubricants to meet the needs of the emerging electric vehicles segment,” discloses Ravi Chawla.

Readying for BS VI engines

In the motor cycle oil space, slowly but surely there are two trends
emerging. “First, the awareness and, hence, usage of scooter engine oils is on the rise, asopposed to early trends of using same oil for bike as well as scooter. With more women driving scooters,
this will surely boost the demand for the same. Second, with more two-wheelers being sold ofhigher engine CC, consumers and mechanics are more open to purchasing and using synthetic engine oil for these high-end bikes,” elaborates Ravi Chawla.

In the passenger vehicle engine oil segment, experts expect a steady decline of diesel vehicles – for a variety of reasons including legislations, changing emission norms and fuel pricing mechanisms. This would mean higher share of petrol engines and increased usage of CNG as a fuel option, states Chawla.

Another mega trend for Indian automotive industry, and hence also for lubricants sector, is the transition to BS VI emission norms in 2020. Omer Dormen observes, “All OEMs are focusing on getting ready for this transition by producing fuel efficient engines meeting the norms of BS VI. We are actively working with our OEM partners on new products to meet the approaching BS VI emission legislation changes in India, leveraging our global experience of similar journeys in other regions.”

New challenger on the horizon

Traditionally, lubricant makers collaborate with vehicle manufacturers for developing products and co-branding opportunities. In September last year, Maruti Suzuki India Ltd (MSIL) tried to alter this business dynamics by launching its own line of lubricants, Ecstar.

Maruti Suzuki, with about 48 per cent market share in passenger vehicles in India, has the largest share in the total number of cars serviced at authorised service stations. Reportedly, engine oil and coolants constitute a major portion of overall service cost. With MSIL producing its own lubricants, there will be ramifications on other lubricant manufacturers. Will it be a game-changer move? Only time will tell.

We are seeing
rapid growth in synthetic and semi-synthetic lubricants demand with increasing awareness and knowledge of consumers. This will lead to more premium synthetics lubricants in the market..
– Omer Dormen,
MD, Castrol India Ltd

Usage of scooter
engine oils is on the rise, as opposed to early trends of using same oil for bike as well as scooter. With more women driving scooters, this will surely boost the demand for the same.
– Ravi Chawla,
MD, Gulf Oil Lubricants
India Ltd

Trends to watch out for
• Increasing demand for gearless scooters with a growing number of women drivers in India
• Shift in demand towards high premium, thinner synthetic oils in the four-wheeler segment with incorporation of new engine technology

• Demand for synthetic and semi-synthetic lubricants growing at a rapid pace compared to mineral oils
• Drive towards fuel efficiency as well as extended oil drain intervals in the commercial vehicle segment
• Growing last-mile vehicle segment driven by rise in micro light commercial vehicle (MLCV)
• Increase in demand for petrol vehicles, as diesel segment comes under pressure due to changes in regulations on environment impact

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