Bazaar is Key Link for Oil Sales


Bazaar is Key Link for Oil Sales

Parked motorcycles and scooters, busy mechanics and customers selecting a brand of engine oil: This is the common scene at maintenance workshops and auto parts shops in India’s bazaar. The size of these shops varies, starting from 100 sq. ft., and is filled with various automobile products, lubricants and mechanic tools. However, the owners and vendors universally make good use of the space available in front of their outlets, with mechanics repairing the motorcycle on the road most of the time.

These modest establishments are a key point in the supply chain for two-wheeler engine oils, where products reach the end-use customer, and what goes on there makes a big impact on the sales of lube marketers.

Photo: D.S. Nag

A mechanic workshop in a western suburb of Mumbai

According to Sushmita Dutta, project lead for energy and petroleum at Kline & Co. consultants, 50 percent to 55 percent of motorcycle oil in the country is sold through retail establishments, including bazaar sales to local repair garages, while approximately 35 percent to 40 percent is installed at dealerships and other franchised and branded workshops. Factory-fill accounts for about 10 percent of the sales.

India is the world’s second-largest market for motorcycles, mopeds and scooters, and sales have jumped 40 percent to 16.45 million units in 2015-16, from 11.76 million units in 2010-11, according to industry body Society of Indian Automobile Manufacturers. The growth is driven by rising disposable income, demand in rural markets and access to financing. With rising two-wheeler sales, it becomes vital for lube marketers to establish a connection with bazaar outlets to ensure that it is their oil that goes into the vehicle.

However, reach alone isnt the deciding factor in boosting lubricant sales. Incentives and credit terms distributors and retailers get to promote the products also plays a key role, sources say. Therefore, marketers resort to schemes such as dealer loyalty programs, mechanic loyalty programs and credit terms to try to ensure that their products get put forward. It varies from market to market. Since its very specific to market, the distributors do it, said Vikram, who uses only one name and isbusiness strategy manager for lubes at Bharat Petroleum Corp. Ltd., which sells MAK-branded lubricants.

Lube Report Asia interviewed managers of independent workshops and bazaar outlets who said they get incentives for achieving certain sales volume targets, in addition to longer credit periods from distributors, who in turn receive higher dealer discounts from oil marketers.

The shop owners will sell only those products where they will get more profit. Grade will be the same but there could be some difference quality wise, said Hetal Shah, who has been in the business for the last 21 years, and runs Yash Automobiles, an outlet dealing in two-wheeler parts and lubes in Mumbais western suburban area Mira Road.

Sameer Shaikh, owner of A-1 Motors, agrees. Shaikh, who repairs two-wheelers and sells automobile products, said he switched from Shell to Motul-branded lubricants on the insistence of his distributor. I have a long association with him. He sends me the goods when I need it. He also gives me credit for up to Rs 2 lakh (Rs 200,000 or U.S. $3,000) for two to three months, he said.

According to industry insiders, most two-wheeler owners go to dealerships for oil changes during the warranty period, but after the warranty period, most shift to the bazaar route and independent shops for the upkeep of their vehicles. Klines Dutta said most seek assistance from mechanics in deciding the product type and brand of lubricants for their vehicles because most owners lack relevant knowledge.

Manish Gupta, a resident of Patna in Indias eastern state of Bihar, trusts his mechanic to do the job. I only ride the bike and then give it for servicing. I trust the mechanic and go by his advice. They also change the engine oil in front of me. Who has the time to open the vehicle and check the engine oil? he stated.

Shajil Kumar, who lives in Indias IT hub Bengaluru, said that he generally gives his motorcycle to the service center after every 5,000 kms for changing the engine oil. I go by service stations recommendations, he added.

Independent workshops usually charge Rs 10 to Rs 20 to change the engine oil, but they also do it for free if customers buy the oil from them, and it takes only about 10 minutes to change the oil. Prem Seti, who has been selling lubes and greases for the past 12 years and owns Bell Lubricants retail shop in Mira Road, said that motorcycle owners should change the engine oil after every 2,500 to 3,000 kilometers to get the maximum fuel efficiency and engine performance. Bhagraj Chaudhary, who runs Roshan Auto Parts outlet, said that only about 10 percent customers know what type of oil they should use in their two-wheelers, and most ask mechanics.

Shaikh of A-1 Motors agrees. Out of 10 customers, seven listen to us while three tell us which product they want, he said, adding that 20W-40 grade is more popular in the market. He stated that oils designed for motorcycles should not be used in scooters because scooter engines run hotter and require oils formulated for greater high-temperature performance.

Kedar Apte, vice-president of marketing at Castrol India,contended that young consumers are gradually learning technical aspects of their two-wheelers and are becoming more involved in the decision about which lubricant to use.

Kline expects two-wheeler engine oil demand in India to grow at a compound annual rate of 6 percent to 7 percent from 2015 to 2019. The size of two-wheeler lubricant market in India was around 200,000 tons to 250,000 tons in 2015. The consultancy said that demand will be driven by the rise in the population of two-wheelers in India, which is likely to grow at similar rates in the forecast period, and OEMs plans to expand and penetrate the rural market.

However, we believe that the two-wheelers growth in India will be driven by the scooters segment, which has witnessed double-digit growth since 2011, and we except a much slower growth rate of 3 to 4 percent for motorcycles, Dutta said.

It is safe to say that owners of many of those two-wheelers will take them to the bazaar for oil changes– once their warranties expire. And engine oil marketers will continue striving to improve the likelihood that their products are on display there and selected.

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