Wide-ranging energy reform in Mexico began in 2013. The Mexican economy is very strongly influenced by and depends on the energy industry, Castillo Flores explained. General economic growth is coming, he continued, predicting an uptick of 1 percent in Mexicos gross domestic product as a result of energy reform. Theres going to be more money in the consumers pocket, resulting in greater demand for high quality lubricants and low viscosity grades.

Reform included a shift from state-run Petroleos Mexicanos monopoly over the oil industry to an open market. In the past, Pemex-franchised gas stations would sell cheap, inferior motor oil and sell it at a high price, Castillo Flores reported. Privately owned stations, he believes, are likely to replace unknown lubricant brands on their shelves with transnational brands, increasing both quality and competition in engine oils.

No official quality standards currently exist in Mexico, Castillo Flores reminded the group. Marketers can sell poor quality motor oil, and as long as the label warns consumers not to perform a full oil change with the product, its within the law, he related.

To combat this problem, industry players are urging the government to set some norms. Its more important to have an official norm that regulates the quality of the oil. That would have a bigger impact in the quality of the base oil, [more than] the energy reform.

The Mexican lubricants market is fairly well differentiated between lubricant companies that market products based on quality and those that emphasize price. If norms are enforced, Castillo Flores projects there will be fewer players in the market. People buy the best quality motor oil they have access to, he explained. If they have the money, theyll buy a very good quality; if they dont have the money, theyll go to the best quality they can buy.

Reform has also produced a significant shift in distribution channels. Fifteen years ago, Castillo Flores said, about 90 percent of lubricants were sold through informal channels–for example, an auto parts shop set up in someones home. Today, retail outlets, big box stores, OEM centers and gas stations are the preferred channels.

Just over 38 million vehicles were registered in Mexico in 2014, including 25 million passenger cars that made up 70 percent of the market, according to data cited from market research firm GiPA. Vehicle age has been slowly increasing since 2009, and todays fleet is an average of 12 years old. Thirty percent of vehicles are still riding the roads after 15 years or longer. A decade ago, 21 percent of Mexicos vehicles were less than three years old, but increased interest rates have pulled that number down to 15 percent. Most vehicles are bought on credit, so Im pretty sure were going to stay at 15 percent for quite some time, he predicted.

Despite its aging vehicle fleet, the Mexicos lubricants market has been growing 2 percent per year, with rising demand for higher quality lubes and lower viscosity grades. Citing research from ANELA, Castillo Flores said passenger car motor oil was split in 2016 about equally between API SL or older service classifications, and API SM or SN. In 2009, API SL and older classifications commanded about 60 percent of the market. SAE 15W-40 and lighter viscosity grades accounted for about 30 percent of demand in 2009, which rose to nearly 40 percent in 2016.

In the heavy duty market, multigrades have gained ground from just over 50 percent in 2009 to about 70 percent in 2016. During the same time period, oils classified as API CH-4 and lower were pushed from about half of the market to below 40 percent.

Eventually, Castillo Flores believes the vehicle fleet will rejuvenate itself. He pointed to a Kline and Co. study that shows demand for low viscosity engine oils overtaking demand for high viscosity oils in Mexico within 20 years.