China’s lubricants industry has faced significant headwinds since 2020, squeezed by a cooling economy, trade tensions with the U.S. and now the conflict in the Middle East. But according to industry consulting firm Kline & Co., industrial oil suppliers are likely to see business growth as China has shifted focus to new economy drivers.
Speaking at the annual China International Lubrication Industry Conference on March 24 in Shanghai, Shanghai-based Kline analyst Li Haoyang named AI, energy storage and green energy as the primary catalysts for the transition.
“Massive data centers for AI require high-quality immersion cooling liquids; transformer oils are essential for battery energy storage systems, and as China is doubling down on wind power, gear oils will gain momentum,” he said.
Announced in October 2025, the Beijing Declaration on Wind Energy 2.0 set ambitious expansion targets for China through 2060. For example, it aims to drastically increase wind power capacity to 1.3 terrawatts by 2030, a sharp rise from the 800 gigawatts set in the 2020 declaration.
Meanwhile, major Chinese tech companies are ramping up infrastructure. Alibaba Group, for example, has pledged to invest over CNY 380 billion (U.S.$55.2 billion) in the next three years to build AI and cloud computing infrastructure. By the end of June 2025, China was home to 108.5 million data center racks, up 20.5% from six months earlier, according to the China Academy of Information and Communications Technology.
Major Chinese lube suppliers are already pivoting. In January, Sinopec introduced an immersion cooling liquid line under the brand Xin Pai. The private blender Tongyi moved earlier, launching its own fluid in early 2025 after Chinese AI company DeepSeek made its global debut.
Despite the opportunities, Kline predicted a 1% decline in demand for industrial oils from 2025 to 2030, as traditional manufacturing sectors such as steel and cement will continue to struggle. The outlook for automotive lubricants is bleaker, with demand for commercial and passenger vehicle engine oils expected to drop by 4.7% and 2.8%, respectively.
“Fast EV adoption is the major reason for lower engine oil demand. Conversely, we see growing demand for transmission fluids used in EVs.”
Thanks to government subsidies, China sold 34.4 million passenger cars in 2025, up 9.4% y-o-y, according to CAAM. While sales of internal combustion engine-powered cars fell 4%, EV sales surged 28.2%, accounting for 47.9% of all new car sales.
Even among ICE car owners, “they prefer more expensive, high-quality full synthetic lubes to extend oil change intervals. This might help sales revenue but will surely affect sales volume,” Li noted.