Foreign companies supply the largest portion of consumer lubricants in China, and domestic oil majors hold sway over the industrial segment. Yet independent domestic companies collectively hold the largest slice of the commercial segment.
When asked why that is, sources told Lube Report Asia that it has to do with stronger relationships and price competitiveness.
A group of more than 900 local minors collectively held around 32 percent of Chinas 7 million metric tons per year lubricants market in 2015, due mainly to their stronghold on the commercial vehicles segment, according to a report this year from U.S.-based consultancy Kline & Co.
Kline cited regional players such as Tongyi Lubricants, Shandong Yuangen Chemical Co., Qingdao Copton Technology Co., Jiangsu Lopal Tech.Co., Fujian LaikePetrochemical Co. and YuchaiPetronasLubricantsCo. as holding 42 percent of the segment, which includes engine oils used in mid- to large-sized buses, trucks, taxies and off-highway mining, construction and agriculture vehicles and equipment.
Multinationals such as ExxonMobil, BP, Total and Shell supplied 48 percent of all consumer lubes. Chinese majors - such as state-owned enterprises PetroChina Co. and Sinopec Corp. - fulfilled 47 percent of lubes demanded in industrial applications.
Totals Francois Dezoteux offered several reasons why smaller, regional Chinese marketers hold such sway in the commercial segment, particularly when it comes to winning over fleet operators. Unlike Chinas passenger car segment where international automakers are more present, production of trucks and buses in China is dominated by Chinese [original equipment manufacturers], the head of external communications told lube Report Asia.
Large professional transportation companies are still rare in China, and trucking fleets tend to be smaller and fragmented for the time being, he continued, although thats changing. Another big difference from the passenger car segments demands, he added, is that customers in the commercial vehicle segment have, historically, cared more about costs than about quality.
But the latter tendency is changing, he contended. Fleet owners no longer simply seek the lowest-cost products. Instead, they focus on products that can meet new environmental requirements while reducing their total cost of ownership.
Klines Steven Zhang, project lead, China, concurred, but noted that regional players should be able to stay one step ahead in that regard. The low crude oil prices in recent years and the oversupply situation in Asia of high-end base oils, such as API Group III, also help local minors to get high-quality base oils, which helps reduce the gap in product quality. So local minors can still hold very strong position in Chinas commercial lubes segment.
Chinese independents market strategies are better than those of state-owned enterprises, said a representative of Beijing Unifly Scientific and Technology Co., in an interview with Lube Report Asia at the 18thChina International Lubricants and Technology Exhibition in Beijing last month. Newer, smaller companies devote a lot to the market. They pay more attention to distributors interests.
Meng Xiaobo, of Sano Chemical Technology Holdings, told Lube Report Asia that local minors strength in the commercial vehicles segment is derived from their firsthand relationships with customers.
Smaller players pay more attention to details when it comes to technical support after sales, Meng said. Sano has distributors all around the country that not only sell the commercial vehicle lubricants, but provide technical support after the sales. Thats Sanos edge against multinationals like ExxonMobil and the large Chinese majors. Sano holds a handful of events each year to provide training for all its distributors, he explained.
Price still goes a long way as well, explained Ni Baofu of Roadview Energy Investment and Service LLC. People know the wholesale price of the big multinationals, Ni said, noting that smaller players have more flexibility in their pricing. Roadviews prices are 20 to 30 percent lower. And with regional relationships with fleet operators, its easier to make seasonal discounts and to offer commission and refunds to distributors.