Speaking at a Feb. 17 seminar ahead of the ICIS World Base Oils and Lubricants Conference in London, Gulf Oil International Ltd. Vice President for Technology Y.P. Rao said Indias overall lubricant market has an exceptional combination of size and growth rate. With annual demand of 2.3 million metric tons in 2014, including process oils, Indias market is the worlds third largest, far behind China and the United States but easily ahead of Russia and Japan. Moreover, over the past five years it has grown faster than any of the other 13 largest markets.

India has an unusually large proportion of process oils, which account for 29 percent of total lubricant demand, Rao said, citing data from Kline & Co. consultants. Commercial lubricants – those supplied for on-road trucks and light-duty vehicles used for commercial purposes – are the largest segment, having accounted for 33 percent of demand or 760,000 tons in 2014. However the commercial segment is not very dynamic now; Kline projects demand volumes will grow at an average annual rate of less than 3 percent from 2013 to 2018, and the viscosity and performance level of products demanded is relatively stable.

By comparison, the motorcycle and passenger car segments are changing faster. Kline forecasts those segments, whichtogether comprise the consumer segment, to grow at a combined average rate of between 6 percent and 7 percent annually from 2013 through 2018, Rao said. He did not offer a breakdown for the subcategories, but said demand for motorcycle lubricants will grow faster than passenger car oils.

In the consumer segment, MCO is the dominant category, and it continues to be the fastest-growing compared to PCMO considering that every year around 16 million motorcycles are added to the 2-wheeler parc, Rao said. Two-wheelers currently account for 77 percent of the nations total vehicle population, and sales of them have risen an average of 6.8 percent annually over the past five years.

Passenger cars account for 15 percent of the vehicle parc, and sales – which numbered 2.7 million in 2014 – have grown just 1.8 percent per year over the five-year period. While passenger car motor oils dont match motorcycle oils for growth, their performance levels are rising faster than oils for motorcycles or commercial vehicles. The PCMO category will see a sharp decrease in 15W oils and a proportional decrease in 20W oils by 2019, Rao said, adding that shares of 10W, 5W and 0W oils will also increase.

The commercial category will undergo smaller shifts from monogrades and 20W-40 oils to 15W-40s, while the motorcycle category will be relatively stable except for some shift from two-cycle products to 10W oils.

Rao said the portion of synthetic and semi-synthetic oils in the passenger car category will also grow faster than in the motorcycle or truck categories, although penetration in motorcycle oils was highest in 2014, more than twice as high as for passenger car oils. Synthetics and semi-synthetics made up less than 10 percent of Indias total lubricant market in 2014, according to Kline.

The penetration of thinner grades and higher performance level oils would be much faster in PCMO category considering that fuel economy norms will be kicking in from April 2016, Rao told a reporter after his presentation.

Indias government has also announced plans to tighten caps on passenger car emissions of pollutants and carbon dioxide, and these will also contribute to performance levels of passenger car oils rising faster than motorcycle or heavy-duty engine oils.

Demand for rising performance levels may pose challenges for lubricant marketers, but they also spell opportunity, at least for those that can meet those demands, since higher quality products typically carry greater profit margins. Markets in developed economies have already developed lubricant formulation technologies to address most of the same fuel economy and emissions challenges looming for India. Rao said this will reduce the amount of formulation research and development needed for the Indian market but not eliminate it altogether.

By and large, the factors driving the quality of engine oils in India are similar to the ones that drove the development of oil standards in North America, Europe and Japan, with an adjustment for the local service conditions and fuel quality, he said.

Drain interval for commercial vehicle lubricants is very important in India, like Europe, considering the OEM push. We also need significant strides in bringing down total carbon output. There is always a scope to fine-tune the formulation technology to local conditions to ensure differentiated offerings and longer drain intervals.

A reporter for Lube Report Asia attended the conference and provided a copy of Raos presentation and an audio recording on which this article is based.