After Mergers, Japan Market Diversifies


After Mergers, Japan Market Diversifies

Japanese industry has a reputation for being dominated by large domestic companies, but in the past few years, shares of the nation’s lubricant market have been shifting to foreign and medium-sized suppliers.

“Based on the sum of all lubricants – that is, heavy-duty motor oil, passenger car motor oil and industrial lubricants – the [market] share structure has changed. Eneos Corp. – formerly JXTG – has lost share,” Adachi Yukihiko, managing director of Kline & Co.’s Tokyo office, told Lube Report recently. “Idemitsu Kosan Co. and Shell Lubricants Japan [which merged in 2019] slightly gained share, but Shell will not be part of Idemitsu from 2021.” 

In 2019, the market’s leading suppliers were as follows: Eneos had 31%, Idemitsu Kosan and Shell Lubricants Japan 32%, ExxonMobil 13%, and Cosmo Oil Lubricants Co. 8%.

In 2015, Eneos had the largest share at 37%, followed by Idemitsu Kosan and Shell Lubricants Japan with 22% each and TonenGeneral at 12%. That was prior to the merger of Idemitsu and Shell’s subsidiary in Japan.

“Idemitsu did well in the industrial lube area, in which it has been strong, Adachi said. “ExxonMobil’s share was counted in TonenGeneral but ExxonMobil left when JXTG and TonenGeneral merged in 2017.

Adachi said that ExxonMobil is the largest genuine oil supplier for Toyota and that Eneos supplies lubricants to OEMs such as Honda, Toyota, Mitsubishi, and Nissan under [original equipment manufacturer] supply agreements. Idemitsu is the major genuine oil supplier of Nissan, Daihatsu, and Honda..

In Kline’s view, automakers and other large lubricant end users have an interest in keeping the market from consolidating too much.

“I think automotive OEMs will not rely on just one supplier but maintain multiple sources for supply security reasons and select lubricant suppliers based on required specifications, supply capability or stability and price,” Adachi said. “Pressure on lower price by automotive OEMs is pretty hard, and lubricant suppliers sell lubricants with little profit. Lubricant suppliers can meet specification requirements, and the determining factor is the price – and supply capability in the overseas market).

“Japanese lubricant suppliers primarily supply lubricants to Japanese automotive OEMS in the overseas market, competing with local suppliers. One advantage they have is the relationship with automotive OEMs in the domestic market. However, Japanese automotive OEMs gradually are considering sourcing factory fill lubricants not limited to Japanese suppliers but local or other multinationals as long as their lubricant meets specification requirements, assures supply and offers low price. In this regard, the competitive environment in the overseas market has become stiffer.”

Japan’s traditional automotive keiretsu or supply chain is based on decades of trust, goodwill and obligational relationships. However, an economic crisis affected the Japanese automotive industry’s supplier relationship. “I think the changes took place around 1999, with the Nissan Revival Plan and in 2000 with Toyota’s CCC21,” Aoki Katuski, associate professor of the School of Business Administration at Meiji University told Lube Report. “In 1991, after the burst of the economic bubble, businesses were realizing the limits of a traditional Japanese-style of management including the keiretsu.” Katuski researched and wrote a report on “The New, Improved Keiretsu” in 2013.

Toyota’s CCC21 strategy, or Construction of Cost Competitiveness for the 21st Century, is based on collaborations between engineering, production engineering, manufacturing, procurement, and suppliers. Automotive parts suppliers were involved from the concept development stage to discuss ideas, up to and including the manufacturing stage. After the merger of Nissan and Renault in 1999, the Nissan Revival Plan was implemented to reduce costs by 20% over three years and to encourage partnerships with competitive global suppliers. 

In a 2002 Harvard Business Review article titled “Saving the Business Without Losing the Company,” former Nissan CEO Carlos Ghosn wrote, “Soon after I arrived, we started dismantling our keiretsu investments. Although breaking up the Nissan keiretsu seemed a radical move at the time, many other Japanese companies are now following our lead.” 

JXTG, which changed its name to Eneos in June this year, has been Japan’s largest oil refiner since the 2017 a merger between JX Holdings and TonenGeneral Sekiyu KK. Idemitsu Kosan and Showa Shell Sekiyu merged in April last year but in August of this year agreed for Shell to buy back its lubricants business in Japan. Cosmo Oil Lubricants has a blending plant in Wakayama prefecture, a grease plant in Osaka and a base oil supply plant in Mie prefecture, western Japan.