Russia Strives to Retain Market Share


MOSCOW – Individuals from several corners of Russias lubricant industry called for government intervention to help stem the loss of market share to foreign companies, during an industry conference here last month.

Speakers at the Lubricants Russia 2008 conference held Nov. 12 and 13 expressed alarm over the speed at which local companies have lost market share. They suggest that the government could help in several ways – by helping to establish a testing center, to requiring foreign suppliers to blend lubricants locally, to setting quotas that require Russian engine oils for factory fill.

Foreign lubricant suppliers have especially strong sales in the engine oil segment, and their success is tied to a shift in new vehicle sales from domestic to foreign models.
Russian lubricant companies continue to lose market share to foreign companies, and at least some observers worry that outsiders will come to dominate the market.

The conference included a panel discussion that was asked to address the topic. Some members suggested that the government needs to step in to prevent foreign companies from taking over the market.

I understand competition and all of this, but since we allow them to make money in Russia, we need to protect the Russian market, said Boris Bunakov, the director of Moscow scientific center Nami-Khim. His comments, like those of all panel members, were translated. So the question is, how should we regulate this?

Several panel members supported the idea of a cooperative effort to establish a laboratory that could test engine oils for compliance with industry specifications, such as the ACEA standards followed in Western Europe. Russian companies can send oils to be tested in labs in Western Europe, but some speakers said it would be better to have a lab in-country. A local facility would be more convenient and economical for lubricant marketers, and it would help promote expertise at home.

The country does have a few facilities that offer lubricant testing, but many agree that their equipment is out of date and that they cannot perform tests used in current international standards.

Tamara Kandelaki, director general of consultants InfoTek Consult, said foreign companies should be allowed to sell lubricants in Russia, but that they should be expected to blend their lubricants locally. If this were the case, she contended, the country would benefit from wages and from the dissemination of technical know-how.

I would like to say let the importers be here, but let those companies become Russian companies, Kandelaki said. We need to build facilities in Russia and we need to create more jobs.

Several foreign automobile manufacturers have recently built factories in Russia or are in the process of doing so. Bunakov noted that these companies receive tax benefits for their first five years of operation. He floated the idea that these plants should be required to buy 50 percent of their parts from Russian suppliers during that period.

Some panel members argued that Russias lubricant industry is still getting up to speed, suggesting that it may be hasty to judge now whether it is capable of competing. Although LukOil and TNK-BP have focused on the lubricants market for several years, some other Russian oil companies are only now beginning to.

Our lubes business is quite young, said Shafranskaya Elena, deputy head of Rossnefts Oil and Greases Division. We are upgrading our facilities.

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