Vehicle Sales, Lube Quality Rise in ASEAN

As automobile sales and production continue to grow among Association of Southeast Asian Nations countries, synthetic lubricants formulated with polyalphaolefin and other higher quality base stocks are expected to increase their market share, an analyst at Frost & Sullivan told Lube Report.

In major markets like Thailand and Indonesia, synthetics - dominated by PAO - are replacing conventional base stocks in both of these markets. We expect the share of PAO to increase from a current share of about 10 percent in the semi-synthetic/synthetic [automotive lubricants] market to about 15 percent to 20 percent of demand in the next three to five years, said Shikhar Aggarwal, senior consulting director for chemicals, materials and food at the consultancy. Besides PAO, the list of synthetic base stocks used in automotive lubricants includes API Group III oils, polyalkylene glycols, poly isobutylenes and synthetic esters. Group IIIs are used in the highest volume.

Photo: Nuttapong Wannavijid/Alamy

A Honda dealership and showroom in Chiangmai, Thailand. Sales of passenger and commercial vehicles jumped 20 percent in Thailand in 2018, according to figures released by the ASEAN Automotive Federation.

Within just the synthetic base stocks we can expect the share of PAO to grow from about 33 percent currently to about 50 percent to 60 percent in the next three to five years, he added.

According to Aggarwal, growth in synthetic lubricants is mainly due to original equipment manufacturers technical demand, introduction of new motor vehicle engines and replacement of older vehicles with new engine vehicles.

New motor vehicles sales in Indonesia and Thailand are dominated by Japanese models that require low-viscosity oils, and lubricants using mainly API Group II and III base stocks are expected to have the largest market share. Group II base stocks are more highly refined than Group I oils, and therefore are not conventional, but neither are they considered synthetic.

Conventional base stocks form more than two-thirds of the Thailand and Indonesia market in the automotive sector. The passenger car motor oil sector has a higher penetration of semi-synthetics and synthetics in the range of 20 percent to 25 percent, whereas [semi-synthetics and synthetics] have only about 5 percent penetration in the heavy-duty motor oil sector. As a result, conventional base stocks will remain dominant in these markets, said Aggarwal.

For other growing economies in the region, the lubricant market landscape is quite different. Group I is the dominant product in the markets of Vietnam and Philippines currently due to the sheer volume of vehicles with older technology engines and lack of consumer knowledge in the aftermarket segment, he said.

However, Group II is fast replacing Group I lubricants in these markets as well, following the overall global trend in the last 10 years, and would become one of the dominant base stocks for lubricants in Vietnam and the Philippines, followed by Group III. Group I penetration is expected to fall below 50 percent in the next two to three years, with Group II taking its position with about 50 percent market share. Penetration of synthetic lubricants is expected to remain below 10 percent in these markets in the next two to three years, he added.

ASEAN automotive sales and production remained strong last year with automobile sales increasing 7 percent and two-wheelers 8 percent, according to figures released by the ASEAN Automotive Federation last week.

Sales of passenger and commercial vehicles increased to 3.6 million units. Thailand and Vietnam recorded double-digit growth of 20 and 15 percent, respectively. Myanmar jumped by 113 percent, but volumes remained small compared to its neighbors, at 17,524 units. Sales in Indonesia and Malaysia increased 7 percent and 4 percent, respectively.

[Thailand was] driven by robust replacement demand, new model launches, a booming economy and expansionary fiscal and monetary policies, said a U.K-based business consultancy, LMC Automotive, in a light vehicle sales report last month.

New vehicle sales in Indonesia exceeded the 1 million threshold for the third consecutive year. The launch of new seven-seater models and increased government spending drove much of the upturn, said the report.

The Philippines posted negative growth - down 14 percent year-on-year - largely as a result of higher excise taxes for passenger vehicles and a pull-ahead in demand to 2017. In the early part of 2017, the government hinted at future vehicle tax hikes, which was followed by an official announcement in December. This prompted a buying rush before vehicle prices increased in 2018 as a result of the excise tax hike, added the report.

Sales of motorcycles and scooters in the ASEAN region increased 8 percent to 10.2 million units. Sales in Singapore and Philippines grew 21 and 25 percent, respectively. Indonesia continues to be the largest motorcycle and scooters market and grew 8 percent to 6.4 million units, while Thailand dipped 1 percent to 1.8 million units.

Production remained strong for motor vehicles with an increase of 8 percent to 4.4 million units, and output of motorcycles and scooters increased 3 percent to 3.8 million units.Thailand remains the dominant motor vehicle production hub with 2.2 million units, while Indonesia produced 1.3 million units.

Production of motorcycles and scooters increased 3 percent to 3.8 million units. Thailand produced 2 million units, the largest volume in ASEAN, followed by the Philippines and Malaysia with 1.3 million units and 465,000 units, respectively.