Demand for heavy-duty diesel oils in China will continue declining through 2029, largely due to a shrinking property market, according to industry consulting company Kline & Co. But there are still growth opportunities even with the overall downturn.
China’s economy has relied on construction and real estate as drivers of growth with a 30% combined contribution to GDP. These industries are supported by an array of large on- and off-road vehicles from construction equipment to heavy-duty trucks.
The country’s general demand for on-road truck HDDO is projected to decline by 7% from 2024 to 2029. Traditionally, these vehicles rely on fidelity warranty service providers for oil changes, but these days many are turning to cost-competitive independent service providers once their warranties expire.
The picture for industrial vehicles doesn’t look much better. Following the cancellation of many costly infrastructure projects by local governments last year and a property market that shows little sign of recovery after a five-year decline, Kline predicts demand for heavy-duty diesel oils in this sector will likely decrease by 5% annually from 2024 to 2029.
“HDDO suppliers need to rethink their partners, who probably lost clients due to recent market shifts,” Kline consultant Katherine Sun said at a lube conference held on Aug. 18 in Xi’an by the consulting firm Muchengyou.
Conversely, demand for HDDO from independent service providers is expected to grow 10% during the same period, according to Kline. This is being driven by the growth of hybrid electric trucks.
“[Independents] have replaced [fidelity warranty service providers] as the No. 1 truck service provider in China’s market,” Sun said. Kline data show that fewer than 15% of truck owners still choose fidelity warranty service providers after their insurance expires.
“More individual truck owners prefer joining a fleet to get discounted maintenance services,” Sun explained. “And as fleets grow, larger fleets often build their own service shops instead of relying on third-party service providers to save cost.”
Supplying directly to fleets is not as easy as it sounds. HDDO suppliers must offer a variety of products to meet demand from different truck models including electric trucks often used for short-distance deliveries.
“Fleet owners really like to work with someone who can provide a one-stop-shop experience,” she said.
According to Kline, Sinopec and CNPC held half of the truck HDDO market. Sinopec has built its advantages with ISPs and fleet owners while CNPC focused on winning over OEMs.