Steady growth of new vehicle registrations is pushing up automotive lubricant demand in Uganda, a landlocked country of more than 44 million people. The East African nation also continues to experience stable overall economic growth, with the potential to expand by 5.5 percent in 2019, up from an estimated 5.3 percent in 2018, according to the African Development Banks 2018 Economic Outlook for Uganda.

A contributing factor to the growth of both the economy and lube demand is the rising use of private transport, especially in major urban areas, where some 24 percent of Ugandans live. Even so, with an estimated 1 million vehicles on the road, according to the Uganda Revenue Authority, per-capita vehicle ownership is comparatively low, at 4.4 percent, giving plenty of scope for growth. But try telling that to someone stuck in a Kampala traffic jam.

The countrys Bureau of Statistics reported that sales of new four-wheel vehicles rose 24.4 percent to 42,005 in 2017, up from 33,750 the previous year. New registrations of all vehicle types combined totaled 135,032 units in 2017, up 16 percent from 116,881 in 2016. Passenger cars alone accounted for 17,325 new registrations the same year, up from 11,119 in 2016.

On Your Bike

By far the preferred mode of transport is two-wheelers, which offer a much more affordable personal transport option, in part aided by a tax waiver on new machines. New motorcycle registrations rose by 12 percent to 93,027 in 2017, representing a whopping 69 percent of all new vehicle registrations in 2017. Between 2007 and 2014, the number of motorcycles on Ugandan roads swelled by 59 percent, reaching 405,124 units. The country is currently among the top 10 two-wheeler markets in Africa, according to TechSci Research, a United States-based consultancy firm.

The cost of a new 150 cc machine is around $1,000; for a country with annual per capita income of just over $600, thats still a high price to pay.

Currently, Ugandas two-wheeler market is dominated by Indian brands Bajaj and TVS, and the country is the third-biggest importer of motorcycles from India behind Nigeria and Angola, according to data gathered by Standard Bank Group.

Oil companies such as Total and Vivo Energy are targeting this segment with several specialty products. Vivo Energy recently launched Shell Advance in two varieties: Shell Advance AX3, which is formulated for motorbikes with small, hot-running engines such as boda bodas, the ubiquitous two-wheeler taxis; and Shell AX5, designed for mid-sized engine bikes, the company says in its promotional literature.

French oil company Total also offers a wide array of two- and four-stroke engine oils sold under the brand name Hi-Perf. The company markets the range of 15 different oil formulations from its network of 155 fuel retail service stations in the country, many acquired from Caltex in 2008, where a large share of its lubricants are channeled to consumers.

Rapidly expanding uptake of motorcycles is especially seen in the capital Kampala, a city with chronic traffic jams and an inefficient public transport system that is dominated by myriad matatus, or minibuses, often well-loved 1990s Toyota HiAce vans. There are 12,000 registered matatus on Ugandas roads, but estimates put that figure at 20,000 including unregistered operators.

Into the Mix

Ugandas lubricants market has grown almost threefold since 2013, with demand for automotive and industrial lubricants close to 40 million liters per year, said Ankit Thakur of Mount Meru Group, a Ugandan lubricant supplier. The market is dominated by four main players, including the local subsidiary of French energy giant Total, which markets a range of automotive and industrial lubricants; Vivo Energy, the exclusive distributor of Shell-branded Helix products in Africa, which claims 130 percent growth in lubricant sales in Uganda since 2014; Chevrons petroleum products brand Caltex, which markets Havoline and Delo oils; and Emirates National Oil Co., with local firm City Oil holding sole distributorship of its products throughout the country.

Other players include Gasco, Mount Meru Group, which has a blending plant in Zambia, imported Turkish brand Potenza and local firm Uni Oil, among others.

Many local blenders have started producing lubricants domestically and in the past five years, domestic production has increase sixfold, Thakur claimed in an interview with Ken Research. However, the market still continues to be driven by imported products.

The average price of a liter of conventional passenger car motor oil is U.S. $3.24, semi synthetic $6.08 and full synthetic $8.00, mostly sold through business-to-consumer channels at fuel stations, workshops and other retail networks, Thiakur said.

Second-hand Problem

Aside from the small amount of new car purchases, Uganda cleared through customs some 50,000 used cars in 2016/17, according to local media reports, with about 95 percent of them originating in Asia. Like many African countries, Uganda is on the receiving end of a steady stream of used autos from around the world markets. These aging cars often fall foul of tightening emissions regulations in Europe, North America and Asia, with some being decades old, contributing to worsening air quality in urban areas. This issue was amplified by the backlash against the Volkswagen diesel engine scandal – in which the German automaker fixed its diesel engines software to show lower emissions of particulates than was actually the case – leading to diesels in developed markets being dumped.

In response to worsening air pollution caused by old engine technology exacerbated by low fuel standards (Kampala suffers the second-worst air quality in Africa, according the 2018 World Air Quality Report), a law enacted in October 2018 by the Ugandan government stipulates that imported cars cannot be more than 15 years old. This could increase demand for higher-performance auto lubes but decrease overall demand because of longer drain intervals for relatively more up-to-date engine equipment.

Even so, parliament rejected in September a government proposal to limit the age of imported used cars to eight years, although legislators extended the age of cars exempted from an environmental protection penalty to eight years from the original five years.

Fair Outlook

Despite these useful registration figures above, Uganda lags countries such as South Africa and Kenya in the collection and analysis of vehicle data, with the Ministry of Energy and Mineral Development stating in a report on the Fuel Efficiency Initiative project that there is scant baseline data and gaps in information such as the total number of registered vehicles and their types. This paucity of data is compounded by a general reluctance by both the authorities and private lubricant companies to divulge information. (The majority of those contacted for this article did not respond to requests for comment.)

However, continuing growth in vehicle ownership, with the government projecting 1.8 million registered vehicles and motorcycles in 2018, and potential demand from Ugandas nascent domestic car manufacturing industry, suggest there is significant growth potential ahead.

With Ugandas population expected to reach 75 million by 2040, up from 44 million today, according to the United Nations, pressure on the provision of public road transport services is expected to be high because of the slow pace of rehabilitation of existing networks or constructing new ones, a likely further upward driver of demand for two-wheelers in the country.