Cycle and Car Sales Steer India’s Growth


Cycle and Car Sales Steer India’s Growth

Lubricant demand in India is projected to rise 4.3 percent this year, according to Kline & Co., with strong growth for passenger car and two-wheeler lubes more than offsetting flat or near-flat demand in the commercial and industrial segments.

The consulting firm said during a webinar last week that the market now consumes 2.4 million metric tons per year and is valued at U.S. $4.5 billion. It predicted growth for consumer automotive, commercial automotive and industrial lubes through 2021.

The Nov. 17 webinar was presented by Anuj Kumar, a project manager in Klines energy practice. He did not mention an estimate for Indias lubricant demand for 2015, but during an April presentation he pegged that number at 2.3 million tons.

Indias consumer lubricant market demand this year is expected to reach 380,000 to 480,000 tons in India this year, Kumar said, adding that strong growth in two-wheeler and car sales resulted in strong demand growth for consumer lubricants in 2016 compared to 2015, and is expected to do the same for demand growth out to 2021. Two-wheelers account for around 87 percent, or 160 million, of 185 million consumer vehicles in India in 2016, Kline estimated.

Motorcycle oils will account for more than half of the consumer segment. Passenger car motor oils for gasoline- and diesel-powered engines make up more than a quarter, while gear oils, greases and automatic transmission fluids account for the remainder. Along with the demand growth, Kumar said, India is experiencing a remarkable shift toward better quality lubricants over entire product ranges.

Kumar said growing disposable incomes and changing lifestyle needs will drive the demand growth for two-wheelers and cars. India is a big market for two-wheelers and a growing market for passenger cars as there is a rapid shift towards a high-income, middle class population, he said. Vehicle sales – especially for two-wheelers – continue to enjoy high growth rates, which contributes to the high demand for finished lubricants in India.

He said the taxi segment has been boosted by the growing operations of taxi aggregators such as Uber and Ola Share. The taxi population has grown quite fast, especially in tier one and tier two cities, he said, adding that the concept of bike taxis has also been introduced.

Lenthening oil drain intervals and gradually increasing penetration of synthetics will dampen growth, he said, both on consumer and commercial vehicle lubricant demand. Electric vehicle sales could also have an adverse impact.

Kline estimates Indias demand for commercial vehicle lubricants at 720,000 tons to 760,000 tons for 2016. Agricultural products was a bright spot for the segment this year, thanks to an abundant monsoon. Tractor sales this year were quite good, Kumar said. Revival of Indias construction and mining segments could occur, benefiting from government policies. Growth in road infrastructure is also expected to have a positive benefit.

Kline pegged industrial lube demand at 1.2 million tons to 1.3 million tons this year. Process oils -such as transformer oils, white oil and rubber oils – will account for more than half of that volume, followed by industrial engine oil, metalworking fluids and hydraulic fluids.

The primary cause of the flat industrial lubes demand is lower-than-expected growth in several key end-use industries. Over the last few quarters, in the index of industrial production in India, it shows slow to flat growth in most of the segments, Kumar said. It is not as high as one would expect. That eventually takes a toll on demand growth for commercial as well as industrial lubricants.

On the industrial lubes side, one factor impacting demand growth is the adoption of better maintenance practices, such as on-site filtration and oil recycling. There is also a small but growing trend towards using better quality lubricants, which extends oil drain intervals, he said. A lot of companies are now performing oil condition monitoring. Theres also more new equipment, with relatively smaller sump sizes.

This flat growth could change upon implementation of government initiatives such as Make in India and growth in foreign domestic investment in India, he noted. The stated goals of Make in India include facilitating investment and building best-in-class manufacturing infrastructure in the country. Ambitious power connectivity targets for India could also have a direct impact on demand for turbine oils and transformer oils, he added.

He pointed out that Indias lubricant demand growth from 2014 to 2015 was slower than the historical demand growth observed in the country during most of the last 8 to 10 years, aside from declined contraction in 2013. Nonetheless, the growth in the Indian lubricants market is positive news for the global lubricant market in general, Kumar said. The growth observed in 2015 so far has continued in 2016 as well.

The recently completed study is titled, Opportunities in Lubricants: India Market Analysis.

Photo: Shutterstock / Kunal Mehta

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