But the country has a number of attractive characteristics, such as healthy per capita lube consumption and economic and political stability. All things considered, it is a market worth checking out.

Over the past decade, the Czech Republic has boasted one of the strongest Central European economies. Thanks to aggressive political and economic reforms, the country met all criteria to join the EU in 2004. Consequently it became a viable and significant destination for manufacturers relocating factories from Western Europe, offering skilled manpower, well-established infrastructure, strategic geographical location and lower labor costs.

Despite its well-reputed industrial heritage, Czech Republic today has primarily a service economy, with services accounting for an estimated 59 percent of national gross domestic product, while the industrial sector accounts for just 38 percent , according to the U.S. CIA Factbook. However, manufacturing remains a key sector of the Czech economy, and Czech lubricant demand reflects this economic profile. The industrial sector consumes approximately 65 percent of the total lubricant demand of 90,600 metric tons per year.

Major industries include machinery manufacturing, iron and steel production, chemicals, electronics, textiles, and food processing. The auto industry remains the single largest component, accounting for as much as 20 percent of all Czech manufacturing. The country has 6.5 million vehicles, 71 percent of them passenger cars.

With a population of just over 10 million inhabitants, the per capita lube consumption in the Czech Republic works out to approximately 9 kilograms per person per year, which is remarkably near that of Western European countries. This is partly due to the fact that price remains a key purchasing determinant in the Czech market, supporting sales of lower quality lubricants that call for more frequent oil changes and thus higher consumption volumes.

Of all vehicles registered in the Czech Republic, approximately 29 percent are between 10 and 15 years old, and 32 percent are over 15 years old. Vehicles manufactured after 2007, represent 17 percent of the total vehicle fleet. The country is one of the European Unions largest car manufacturing nations. In 2011 production surpassed 1 million vehicles, representing an increase of 10 percent over 2010. An estimated 80 percent of this total production was exported.

Local car manufacturer Skoda remains the leading automotive OEM in the Czech Republic, claiming over 55 percent of overall vehicle sales, followed by TPCA (a joint-venture comprised of Toyota, Peugeot and Citron) and Hyundai, which account for 23 and 21 percent of production, respectively.

This extended mix of vehicles has required engine oil marketers to find the right balance between supplying top-tier synthetic lubricants for the growing number of new vehicles, and conventional, lower specification and lower price-point lubricants that cater to the aging majority of the automotive fleet.

A number of factors, including the growing uptake of liquefied petroleum gas and hybrid vehicles, as well as increasing biofuel consumption stand to offer growth opportunities for product differentiation. Indeed, first generation biofuels already account for 10 percent of the countrys total fuel consumption. The key message is to avoid unnecessary product line complexity.

There are three tiers of companies operating in the Czech lubricant market: large global multinationals such as BP, Shell and ExxonMobil; regional suppliers such as Slovnaft/MOL and OMV; and Paramo – a local company that is part of Polish PKN Orlen. The leading suppliers in the Czech Republic are Paramo and BP. Paramo, with both fuel and base oil refineries, holds the leadership position in the industrial segment, while BP leads in the automotive segment. Other important players in the industrial segment include Slovnaft/MOL, Shell and ExxonMobil.

Unlike the shrinking lubricant consumption in some Western European countries, demand in Central Europe, and specifically in the Czech Republic, is increasing.

So far, the Czech Republic has weathered the impact of the Eurozone debt crisis relatively unscathed; however, uncertainty about the future performance of the countrys economy is growing. Moreover, market volatility and high fuel prices are raising concerns about the countrys lubricant sector.

By striking a balance between market drivers and restraints, it can be confidently extrapolated that on average the Czech Republics demand for finished lubricants will increase. The growth rate is expected to be 2 percent annually over the next five years. Despite the modest volumetric growth, the value size of the market will be more significant due to improving quality demands, driven by the modernization of the countrys vehicular fleet.