Chinese oil giant Sinopec decided recently to begin selling its flagship line of motor oils through its expansive network of gasoline stations – a move that is part of a broad and ongoing effort to boost lube sales, especially for premium products.
The company is also seeking automaker endorsements of its products, but at least one observer expressed skepticism about its chances for success.
Sinopec Corp. is one of two large state-owned oil companies – the other being PetroChina Co. – that have traditionally dominated Chinas lubricants industry. Together the pair claims 54 percent of the burgeoning lube market, which consumes 3.7 million metric tons per year. Both have lagged behind multinational competitors in the growing high-end segment, however, and now are striving to increase sales of more profitable products.
Until this summer, Sinopec automotive lubes were available primarily through repair shops – a vestige of the days when the state-owned companies had no competition, and therefore little incentive for innovation. But a company spokesman confirmed recently that Sinopec Lube Oil Branch decided this summer to begin marketing its Great Wall brand of products throughout its chain of gasoline stations, which number more than 24,000.
Gasoline stations in China are not yetas large a lubricant channel as they are, for example, in the United States. But multinationals already market through stations and Sinopec sees the practice as a way to boost sales and the reputation of its brands.
The sale of lubes in forecourts is seen as being trendy and portraying a better image than oil shops, said Roger Field, business manager for petroleum at Etonwood Pte., a Singapore consulting firm that represents the U.S. firm Kline and Co. in the Asia-Pacific region. We believe the practice will become more widespread, with even low quality oils being available from forecourts in country areas.
Sinopec is also trying to rectify the fact that its motor oils are not recommended forservice fill by auto manufacturers. The company contends that this situation places it at a disadvantage to multinational oil marketers, many of which have arrangements with OEMs.
Most Chinese car manufacturers are joint ventures with foreign companies and they advise motorists to use foreign lubricants, said the Sinopec spokesman. To some degree, Chinese drivers believe the recommendations. And to some degree, they feel that they have to follow them. The company insists that it has made advances in quality and that its premium products now perform as well as or better than those marketed by multinationals.
Sinopec officials have said they are in discussions with some automakers, but Field expressed doubts about the companys chances of making a breakthrough.
At this point, we do not see any Chinese suppliers winning OEM endorsements, he said. This may change as overall quality improves.