Kline found lubricant quality levels are improving, driven by factors such as modernization of Indias cars and commercial vehicle population, the need for longer life oils and increasingly stringent emission limits.

Kline estimated that 1 million tons of Indias lubricants market is accessible to international suppliers, and just 305,000 tons is quality products, much of which is imported.

Industrial lubricants accounted for 51 percent of Indias market. Commercial automotive lubricants accounted for 39 percent of the market, and consumer automotive the remaining 10 percent, according to the study.

Industrial
Kline estimated Indias 2009 industrial lubricants consumption at 950,000 tons. Power generation and power transmission accounted for 24 percent, followed by chemicals with 20 percent, metals at 12 percent, general manufacturing (including automotive manufacturing and components, machine tools and agriculture equipment) with 11 percent, mining with 7 percent, and non-road transportation at 7 percent.

Indian Oil is the largest supplier with 18 percent of the market. Other top suppliers, which are all predominantly suppliers of process oils, include Apatar at 16 percent, Columbia Petro with 11 percent and Raj with 8 percent.

Kline found growing use of synthetics in applications such as wind mill lubrication, captive power generation, textile machinery and compressors. In all of these applications, the reliability of operation is very important, he added. The downtime caused from failed lubrication far exceeds the cost of lubrication, and hence we see a greater use of synthetics. We are also seeing the use of synthetics in certain gear oils used in the cement and steel industry.

The study found growth potential in practically all of Indias end use industries, as the government is investing heavily in transportation infrastructure and power generation.

Commercial
According to Kline, Indias commercial automotive segment in 2009 totaled 732,000 tons. The on-highway segment accounts for about 480,000 tons, or 66 percent, of the commercial automotive market. The off-highway portion accounts for the remaining 252,000 tons.

About 55 percent of the on-highway segment consisted of owner operators, meaning small fleets with six vehicles or less. Large fleets – including private, state and local government fleets – accounted for 25 percent. Dealership volume, including lubricant consumption by under-warranty vehicles owned by fleets and owner operators, made up the remaining 20 percent of the on-highway segment.

Government-owned Indian Oil is the commercial market leader in India, with 26 percent market share. It is followed by Castrol at 16 percent, Hindustan Petroleum with 15 percent, and Bharat Petroleum at 13 percent.

According to Klines study, the Indias commercial automotive segment is broadly trending towards higher quality lubricants in all three segments. Quality levels in the off-highway segment are not improving as dramatically as in the on-highway segment, he said, but eventually we think that quality levels would start improving in this segment, especially with the entry of international OEMs. For example, weve just seen introduction of products such as universal tractor fluids in this segment, which were not used in the past.

In the on-highway segment, a major driver is the introduction of Bharat Stage (BS) III and IV emission standards. These norms have been developed on the basis of Euro norms, and they are to be implemented in 2010 across India, Phadke said. As a result, the new model trucks and buses will be required to use various emission control technologies like diesel particulate filters and exhaust gas recirculation technology. It will also necessitate the use of higher performance oils.

Another factor in the trend towards higher quality lubricant products is conversion of old trucks and business to compressed natural gas as the distribution infrastructure for such gas develops. This will also contribute to an improvement in the HDMO quality levels that are consumed in this segment, he added.

Lubricants for agricultural vehicles account for 50 percent of the off-highway segment, with the remainder consisting of construction at 35 percent, and mining with 15 percent. Government subsidies and easy credit for the agricultural sector have driven an increase in the amount of mechanization that has followed in this industry.

In construction and mining, the main driver towards higher quality lubricants products is the need to minimize maintenance costs and equipment downtime.

Consumer Market
Kline estimated Indias 2009 consumer lubricants market at 182,000 tons. It is dominated by general repair garages at 34 percent, and dealerships at 27 percent. Franchised and independent workshops account for 14 percent, factory fill makes up 13 percent and retail outlets have the remaining 12 percent of the market. Car production and sales as a percentage of the total car population is quite high, and thats the reason why we see such rapid growth in the car population, and thats why the factory fill volume accounts for nearly 13 percent, Phadke added.

Among suppliers for Indias consumer market, Castrol leads with 24 percent, followed closely by Indian Oil at 23 percent, BPCL at 14 percent, Shell with 10 percent, Idemitsu at 8 percent, Total at 6 percent and HPCL at 5 percent. Phadke noted the market shares are influenced by agreements that lubricant marketers form with dealerships and OEMs.

Indias car and motorcycle population is growing rapidly, he said, in part due to increasing disposable income in India. Consumers there also have greater options at the economy end of the car market, which is driving an increase in ownership of cars. Within the car and motorcycle population, synthetic engine oil consumption is increasing.

India has also seen a trend away from 20W-40 grade PCMO for cars to 5W-30 and other 5W grades. The market is essentially leapfrogging from using 20W grades to 5W grades mainly due to OEM recommendations to the marketing push by lube marketers, Phadke explained. In higher capacity motorcycles, 20W-50 and 10W-30 continue to be recommended and used, according to Phadke.

Klines report is titled Opportunities in Lubricants 2010: India Market Analysis.