Russia is a key market in the region for auto lubes, spurred by growing car sales and a recovering
economy. All is not rosy, however, and its aging truck fleet is still guzzling old-school grades. Boris Kamchev presents research by two Russian automotive
consultancies that monitor the market.

Russias automotive lubricant market has a split personality. On one side is a growing passenger car fleet, with about a third of new sales comprised of imported autos that need higher-specification engine oils. The other is a sluggish heavy-duty segment characterized by domestic truck makers that use outdated motor oils.

Vehicle sales are being bolstered by a slowly recovering economy, which has just about emerged from a recession that began when Russias invasion into neighboring Ukraine was met by international sanctions that struck at the nations cash cow: energy exports. At 2 percent in 2018 and 1 percent in 2019, according to the International Monetary Fund, GDP growth is not stellar but it is better than nothing. Industrial growth also ticked over at 1.5 percent in 2018.

Driving the Economy

New car sales in the country reached 1.8 million in 2018, catching up with pre-recession levels, according to the Association of European Businesses in Russia. However, the association forecasted 100,000 fewer sales in 2019, a 5 percent drop compared with the year before.

Despite slower sales, motor oil demand is expected to rise in the next five years, according to Russian Automotive Market Research, or Ramr, a Moscow-based consultancy. Ramr expects that the countrys passenger car motor oil consumption will rise modestly to almost 360,000 metric tons per year in 2024 from 339,000 t/y in 2019.

Engine oil consumption by light commercial vehicles and heavy-duty trucks is projected to rise as well: the former to more than 151,000 t/y in 2024 from 142,000 t/y in 2019, and the latter to 321,000 t/y from 297,000 t/y. By 2024, engine oil consumption for buses will rise too, to almost 27,000 t/y from 23,000 t/y, according to Ramr.

The countrys overall vehicle fleet is growing at 1 percent annually to 47 million units in 2024 from 44.2 million in 2019. Growth is much slower in the light commercial vehicle and heavy-duty truck segments, Tatyana Arbadji, head of Ramr, explained at the Global Lubricants conference in Moscow in October.

The heavy-duty truck fleet is expected to rise to around 3.8 million units in 2024 from 3.5 million in 2019, while light commercial vehicles are expected to reach 4.7 million units by 2024, up from 4.4 million in 2019.

The bright spot is the bus segment, which Ramr expects to grow to 470,000 units in 2024 from 400,000 in 2019. Russian authorities are seeking ways to solve the air pollution and traffic congestion problems in the big cities such as St. Petersburg and Moscow, Arbadji said.

Getting On

Urban pollution is not helped a great deal by the age of the vehicle fleet. Ramr found that almost 57 percent of passenger cars are older than 11 years, while about 43 percent is one to 10 years, with only 18.6 percent of all passenger cars newer than five years. In the light commercial vehicle segment, almost 65 percent of vehicles are 11 years and older, while a little more than 35 percent are one to 10 years, with only 14.2 percent younger than five years. The average age of Russian passenger cars and light commercial vehicles was more than 13 years in 2018, compared with nine years in Western Europe, according to commercial services firm EY.

However, exhaust emissions in Russia are gradually improving, as more passenger cars on the roads meet the decade-old Euro 5 standard and above. These cars are expected to reach almost 25 percent of the total fleet in 2024, up from 11 percent in 2019.

These vehicles also use updated quality motor oils that correspond with the latest OEM recommendations and approvals, Arbadji noted.

Keep on Trucking

Autostat, another consultancy that specializes in Russian and ex-Soviet states automotive sectors, found that the heavy-duty market in the country is static, with 76 percent of vehicles older than 11 years. Naturally, heavy-duty motor oil consumption depends on type, application and the conditions in which the vehicles are used.

Russian marketers dominate the countrys heavy-duty motor oil market and the age composition of the fleet is obsolete. More than 50 percent of the active fleet is over 20 years old, Viktor Pushkarev, deputy head of Autostats analytics department, told conference delegates.

The consultancy found that heavy commercial vehicles – truck tractors, dump trucks, special trucks, flatbed trucks and vans – consumed around 135,000 tons of HDMO in 2018.

In the same year, the countrys domestic lube marketers accounted for 65 percent of the market, foreign producers had 28 percent and original equipment manufacturer oils, primarily imports, had the remaining 7 percent of the market.

In 2018, there were 3.7 million trucks on Russias roads, of which 77 percent were domestic OEM brands, according to the consultancy. Also, 96 percent of the total heavy-duty vehicle fleet runs on diesel fuel while only 6 percent of these are foreign-branded OEMs, such as Volvo, Iveco, Mercedes-Benz, Scania or Renault.

Autostat found that the top-three Russian manufacturers are Kamaz, Gaz and Zil and together held 60 percent of the total heavy-duty vehicle fleet in 2018.

Gaz, Zil, Kamaz and [the Belarusian] Maz branded on-road trucks primarily use engine oils with outdated requirements. In total, 60 percent of the active truck fleet in Russia is still on the outdated Euro 0 emission standard [discontinued more than 25 years ago], Pushkarev said.

The majority of Russias truck fleet still operates on engine oils under the American Petroleum Institutes CE/SG, CF-4SG and CD/SG standards, obsolete since 1994 or earlier.

Contrary to this, just 82,300 new trucks were registered in Russia in 2018, and they use updated API engine oil standards, Pushakrev said, citing data from the manufacturers.

The consultancy also found that legal entities own 53 percent of Russias total truck fleet, while private individuals constitute the remaining 47 percent.

Slice of the Lube Pie

In 2018, the lube divisions of two Russian energy companies, Lukoil and Gazprom Neft, had about 25 percent of the HDMO market each. They were followed by the third-biggest energy company Rosneft, which had 20 percent. Foreigners Shell and ExxonMobil each had about 10 percent of the market, while the rest went to other marketers including Total, Fuchs, BP-Castrol, GS Caltex, Petro-Canada, Michang Oil, SK Lubricants and Delfin Group.

Autostat also found that 8 percent of the Russian truck fleet has capacity of more than 35 liters of oil per crankcase, 39 percent of the fleet has capacity of 20 to 35 liters, 13 percent has capacity of 10 to 20 and 26 percent has capacity of 10 liters, with other capacities accounting for the remaining 14 percent. This implies that 18-ton trucks account for the largest demand segment.

The average price of the most commonly used viscosity grade motor oil in Russias heavy-duty segment, an SAE 15W-40, ranges from U.S. $1.66 per liter sold by Gazprom Neft to $2.59 sold by ExxonMobil. These products are mostly sold through official truck dealerships followed by independent car and truck service centers, freight companies and retail sales points, according to Autostat.

Round Off

Russias automotive market is following mature market trends in the West and Asia in the pursuit of vehicle efficiency and reducing environmental impact, similarly encouraged by government regulation, reported Ramr.

The consultancy expects that commercial vehicles will be converted from liquid fuels to natural gas engines and more electric buses and taxis as a way to fight chronic air pollution and traffic congestion in Moscow and other large Russian cities.

If the economy can hold firm on its gentle upward trajectory, Ramr can continue reporting growing demand for higher-grade PCMOs and HDMOs into the future.