As its dependence on imported lubricants increases, Vietnam’s government is grappling with enforcement of its national lubes standard, analysts with a market research firm told Lube Report.
“Vietnam’s lubricant market is currently in its growth stage, with demand exceeding supply, leading to a rise in lubricant prices,” said Khanh Ngo, senior consultant at Ipsos Business Consulting. “The market has been growing mainly due to rising vehicle sales, emergence of Vietnam as a manufacturing and production hub, increasing industrial capabilities and growth in demand and retail prices of lubricants leading to an increase in imported automotive and industrial lubricants.”
However, he said that due to the COVID-19 pandemic, the import value of other petroleum products, including lubricants, fell to U.S. $428 million in the first six months this year, 6% lower than in the same period last year.
“In the short-term, the lubricant import market will be driven by motorcycle lubricants,” Ngo added. “Vietnam is one of the world’s largest and fastest-growing markets for motorcycles, and this growth will continue. In the longer-term, car lubricants sales will grow, as Vietnam approaches the tipping point when car demand takes off.”
According to the Vietnam Association of Motorcycle Manufacturers, motorcycle sales fell 3% to 731,007 units in the first quarter of 2020. “The effect [of COVID-19] on the motorcycle industry is expected to be contained and in the most likely scenario for 2020, sales will decline 11%,” said Nghi Vo, consultant at Ipsos Business Consulting.
First quarter vehicles plunged 33% year on year. In June, however, the government reduced first-time buyers’ registration fees for locally-manufactured and assembled cars by 50% and delayed payment of excise taxes until late this year, according to Vo.
As a result, “monthly data from VAMA showed the number of cars sold in Vietnam increased sharply by 26% month to month to 24,002 units in June, after surging 62% month to month to 19,081 units in May, indicating the gradual recovery of the auto market in the post-COVID-19 period,” said Vo.
However, local news reports and Ipsos officials suggest the government’s bid to control counterfeit lubricants and those not meeting national standards is lacking. In May 2018, the Ministry of Science and Technology implemented the National Technical Regulation on Lubricating Oils for Internal Combustion Engines. The regulation states that mineral and synthetic lubricants produced and imported for the Vietnamese market must be tested at approved testing centers and bear the national standard logo. Lubricants produced, imported and marketed before the implementation date were allowed to be sold until June 15 this year.
However, according to Ipsos, companies are taking advantage of a loophole in the approval process, leading to the government finding substandard imported lubricants in the market.
“They also take advantage of regulations on the exemption or reduction of group quality inspection,” Vo alleged, explaining that under one decree, certain commodities are exempted from quality inspection upon importation. For example, he said, an exemption could apply to imported goods with the same name, utility, brand, type, specifications from the same manufacturer and origin from the same importer. “After three consecutive imports [of such goods], the results of the assessment of conformity with national technical regulations shall be verified by the inspection agency in writing, certifying the exemption from state inspection of quality within two years.” said Vo.
“Therefore, through the post-customs clearance inspection process, the Directorate For Standards, Metrology and Quality detected lubricant products that did not meet the requirements on safety, according to relevant standards or technical regulations,” he added.
According to local media reports in July, the government said it found five batches of internal combustion engine oils – more than 49,400 kilograms – from five importing enterprises that did not meet national standards.
“A broad range of counterfeit engine lubricants products continue to be sold in the Vietnamese market due to the disproportionate size of its informal economy, corruption, weak enforcement mechanisms and especially a long coastline and border adjacent to several [Association of Southeast Asian Nations] members and China,” added Ngo.