Overall, Indias automotive lubricant market will grow at 3.5 percent to 4.5 percent per year in the next five years, R.N. Ghosal, managing director of Tide Water Oil Co. (India) Ltd., told the ICIS Indian Base Oils & Lubricants Conference in Mumbai in late April. He also is director of Veedol International Ltd., the venerable motor oil brand which Tide Water acquired from BP in late 2011. Growth in the commercial automotive lubricant segment will be even higher, reaching 11 to 14 percent per year.

Executives from the Indian subsidiaries of Germanys Fuchs and Frances Total offered their perspectives to the conference as well. They agreed that India is a huge and important market, while warning that it poses some special challenges.

Ghosal, based in Kolkata, pointed to key trends in Indias automotive sector. India has a growing economy with large domestic demand, he said, however, inflation is a matter of concern. The country enjoyed GDP growth of about 6.9 percent in 2011-2012, and expects GDP growth of 5.4 percent this year.

India saw a big surge in vehicle sales in recent years; nearly 18 million vehicles were sold in 2011-2012, of which about half were produced by Indian manufacturers. From 2012 to 2021, Ghosal foresees passenger car vehicle production in India climbing about 13 percent per year; commercial vehicle production going up by 11 percent per year; construction equipment production rising nearly 15 percent per year; and farm tractor output increasing 6 percent per year.

Lubricant demand in India today is about 2 million kiloliters, said Ghosal, citing data from Kline & Co. This breaks down to 38 percent commercial automotive lubes, 10 percent consumer automotive lubes, 28 percent industrial lubes, and 25 percent process oils.

Challenges for Lubes

In India, as elsewhere, engine oil quality is rising as performance demands become more severe. Automakers are insisting on longer life, fuel economy and extended drains. Governments are concerned about emissions and pollution. End users want cost-effective performance, and lubricant and additive companies have a need for product differentiation.

With about 5 million commercial vehicles on the road, said Ghosal, India was the worlds fourth largest commercial vehicle market in 2012, behind China, Europe and North America. But by 2015, India will overtake the latter to become the number two market. Tata is the dominant manufacturer in this segment, with 65 percent of the light-duty commercial vehicle market and 63 percent of the medium- and heavy-duty segments.

Turning to Indias 208,000 kl/yr consumer automotive market, Ghosal noted that 57 percent of this demand is for motorcycles, 31 percent for passenger cars, 8 percent is gear oils, 4 percent greases and a mere 1 percent automatic transmission fluids.

Huge growth is projected for the next five years in two- and three-wheeler production, Ghosal said. Production of these will more than double, from 14 million units produced in 2010-2011 to over 30 million units in 2020-2021. Genuine oils dominate in this vehicle segment, and the market is API SG and above; a significant shift has started to SAE 10W-30 oils, with OEMs Heromoto and Honda taking the lead.

Nearly 60 percent of Indias passenger car lubricant market is API SF/CC/CD, and Suzuki is the prime driver, Ghosal continued. The diesel car population is increasing rapidly, due to fuel economy concerns.

Indias tractor market is dominated by Indian manufacturers, who claim more than 70 percent of the market. The segment is in transition, said Ghosal, moving towards higher horsepower and an increase in wet-brake models sold. API CF and CF-4 levels are the most popular categories, and SAE 20W-40 grade dominates, although 15W-40 recommendations from OEMs are gaining ground.

Overall, concluded Ghosal, OEM influence is growing with extended warranties.

Can You Do Business?

Yves Jassaud, CEO and executive director of Total Oil Indias Lubricants Division, told the ICIS conference that in India, most important is the right attitude and mind set. Total is an international marketer, active in more than 130 countries. Although lubricants are just one part of its activities in India, the country is also home to Totals technical center for the entire Asia-Pacific region.

Those contemplating a foray into the region, said Jassaud, must first decide whether or not to do business in India at all. Ethical issues are a big question to address, he noted. In addition, can you access the market? Can you select the right partners? Your business must be profitable, so you need a robust business model, Jassaud continued. You must consider all these before deciding whether to do business in India.

Once a company has decided to enter the Indian market, you cannot impose your western point of view, especially your management style, Jassaud cautioned. There is a lot of talent and skill in India, a lot of innovation, but also weaknesses. Its better to combine talents than to have them against one another.

He noted attrition rates as an example of a difference between India and Europe. In Europe, you focus on staff loyalty to keep staff attrition low. But in India, Jassaud said, you need to accept staff turnover and plan for it.

Its better to be highly patient rather than impatient. Spend time in India and youll see the complexity. Be an ambassador of India in your multinational company.

Loyalty, Logistics

Eric Nerlinger, regional vice president for India and Southeast Asia with Fuchs Petrolub, noted that his company is the worlds ninth largest lubricant supplier, with 2012 sales of 12 billion. Nearly 26 percent of Fuchs sales are in the Asia-Pacific region. Asia-Pacific is the largest regional market with the highest growth, Nerlinger told the ICIS conference on April 23, and India is extremely important, as the worlds third ranking lubricant market, after the United States and China.

Fuchs has a 25,000 ton per year lubricant plant in Mumbai, and has made a big push to grow in India, but is still very small, Nerlinger said. The company sold 4,300 metric tons of lubricants in India in 2012, and its goal for 2013 is 5,500 tons, with a focus on performance products.

The challenges, said Nerlinger, include recruiting and retaining people. Logistics are also demanding; Fuchs is trying to source locally, but supply and quality are problems. Fuchs imports most of its raw materials and finished products, so costs and lead times are high. In addition, competitors are often state-owned companies.

In India, Nerlinger continued, there is often a low-cost culture, and low levels of environmental awareness and safety.

External challenges include volatile domestic demand, highly complex regulations and taxation, regulated markets, and changes to additive and base oil requirements.

At present, India is on a downward spiral because of internal challenges and conditions, Nerlinger concluded. But we believe in India. We will satisfy key customers. Its a key country, and a major export hub to Southeast Asia. We will continue to invest in plants and people in India.