Indonesian Four-wheel Market Heats Up

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With some predicting lubricant consumption in Indonesia will continue to decline, suppliers are vying to grab sales volume by introducing niche 10W engine oils for four-wheel vehicles.

We are having a slowdown in economic activities, and this affects consumer purchasing power in the industrial and automotive lubricant segments, Ivan Rastianto, marketing manager of PT Wiraswasta Gemilang, told Lube Report Asia.

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However, demand for lubricants in the four-wheel segment remains intact.

People still need transportation for their daily activities, said Rastianto, explaining that although oil change intervals for the motorcycle segment have evolved from one month to two months, a similar change for passenger cars is unlikely.

[Car owners] use drain intervals from 5,000 to 10,000 kilometers as a reference, and they will still follow their car manufacturers recommendations, he added. Consumers will select the product that fit their needs in terms of specification, brand, etc.

To suit consumer needs and expand its market share in the four-wheel car segment, Wiraswasta Gemilang, which distributes Shell lubricants, began carrying two synthetic engine oils – Evalube Helios Ultra SAE 5W-30 and Evalube Helios SuperSAE 10W-40 – with drain intervals of up to 10,000 kilometers.

Wiraswasta Gemilang claims to have been the first private lubricant manufacturer in Indonesia. It has been producing lubricants for the automobile, industrial, marine and other sectors for 17 years, beginning its operations by producing the United States lubricants brand Pennzoil. It operates a blending plant with production capacity of 84,000 metric tons per year, along with a rerefining plant.

Federal Karyatama added a synthetic line of four-wheel lubricants in September. We have just launched the [Federal Mobil] Deltron line of diesel engine oil [from semi-synthetic to] full synthetic 15W-40, CEO Patrick Adhiatmadja said.

In April, the company introduced its first four-wheel lubricant, Federal Mobil Rextron, in two variants to suit Indonesian road conditions – heat and dust – with low research octane number-fuel by using anti heat and active-polymer technology developed locally, added Adhiatmadja.

Federal Karyatama is a partner toll blender for AHM Oil, an authorized Honda motorcycle lubricant maker and partner with state-owned Pertamina Lubricants.

Experts think the moves by local lubricant blenders make economic sense. Volume decline may not lead to value decline, as higher quality oils – especially semi- and full synthetics – can be sold at significantly higher prices and margins, said Richard Prince, BP marketing and planning manager and independent consultant for the energy sector, speaking to Lube Report Asia.

Availability of synthetic lubricants is limited in Indonesia. According to a Lubrizol Corp. audit in the fourth quarter of 2014, across six cities in Indonesia, 97 percent of lubricants sold at workshops were composed of mineral or semi-synthetic base stocks and only 3 percent were fully synthetic.

The most successful marketers do indeed look for niches and segments where there are better profit opportunities and they work hard to build strong brands and develop deep relationships with their customers, added Prince.

According to Federal Karyatamas parent company Mitra Pinasthika Mustika Tbks 2015 half-year financial report, lubricant sales fell by 13 percent to 28,074 kiloliters compared to the same period last year. Apart from developing its Surabaya and business-to-business channels, the company plans to boost its sales volume in the second half through its marketing campaign, said Adhiatmadja.

According to the Association of Indonesian Automotive Industries, sales of four-wheel vehicles this year fell from 99,402 units in March to 55,618 units in July and expected total sales for the year was revised to 1 million units from the initial forecast of 1.2 million units.

Production cost and pricing are other factors marketers are closely monitoring. Although Pertamina Lubricants declined to disclose details, it said that the economic condition has had some impact on its business. Pertamina is putting the efficiency of our operations as one of its top priorities, Arya Dewi Paramita, Corporate Secretary of the state-owned company told Lube Report Asia. We also evaluate and renegotiate with our suppliers – these two strategies are common practice in this [economic] situation.

Price setting is one of the most important things when we launch a product, said Rastianto. We give good quality product with good price. We can do this because we have our own lubricant manufacturer and its to our advantage if we compare it with imported brands.

There are major trends reducing lubricant demand per vehicle with mainly longer drain intervals, made possible as oil quality improves and smaller (but higher power) engines with smaller oil sump sizes [are introduced]. Unless the growth in vehicle numbers offsets these trends, then markets will decline in volume terms. This is what has happened over many years in many developed markets and will eventually happen in developing world lubricant markets, added Prince.

For the moment, economic conditions are challenging in 2015, but ExxonMobil views Indonesia as a key growth market for automotive lubricants and a temporary slowdown will not impact our long term strategy, said Osman Durrani, president director of PT ExxonMobil Lubricants Indonesia, talking to Lube Report Asia.

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