Trucks & Buses to Grow

The number of trucks, buses and light commercial vehicles is also expected to rise, albeit at more moderate rates due to the slower replenishment of the park. In Russia, these vehicle types are aging, but their owners keep them longer. Light commercial vehicles show the strongest potential growth, and RAMR expects them to grow to 4.8 million units by 2018, up from 3.6 million units in 2012. The number of trucks is expected to increase from 3.6 to 4.7 million units, while buses could increase from 500,000 units in 2012 to around 600,000 units in 2018, Arbadzhi said.

Truck owners are the biggest consumers of automotive oils in Russia, purchasing 327 million liters in 2012. They were followed by owners of light commercial vehicles (88 million liters consumed) and buses (29.8 million liters consumed). RAMR found that truck motor oil consumption is expected to rise to 353 million liters by 2017, followed by light commercial vehicles, which could consume 102 million litters by 2017, and buses, expected to consume 33 million liters by 2017.

As in the recent past, far more foreign-branded cars are used in the country compared to Russian brands. However, this is not the case with trucks, buses and light commercial vehicles, the majority of which are Russian-made. Foreign-branded passenger cars held 53 percent share of the total number and are expected to grow to 60 percent by 2018, while the share of Russian-branded cars will decrease from 47 percent in 2012 to 40 percent in 2018, Arbadzhi said.

Because foreign-branded cars are more efficient and typically use synthetics, they consume less motor oil compared to Russian-made cars, according to RAMR. In 2012, foreign passenger cars consumed 122 million liters while Russian cars consumed 138 million liters. Increased sales of foreign-branded cars will lead to high oil consumption by this category, Arbadzhi observed. We expect it to reach 177 million liters in 2017, compared to 118 million liters for Russian cars in the same year.

Renewing the Vehicle Park

RAMR found that nearly half of the passenger cars on Russian roads in 2012 were more than 11 years old: 21 percent were older than 20 years, while 28 percent were over 11 years old. The situation is changing, but slowly, and the car park is being replenished at a rate of 1 to 3 percent per year, Arbadzhi said. By origin, a far larger share of zero to five-year old cars was foreign-branded models, compared to Russian-branded: 40 percent vs. 14 percent.

A significant share of trucks on Russian roads, over 75 percent, is more than 11 years old, and 55 percent are more than 20 years old. Trucks are built of tougher materials, and they last longer. Furthermore, they are much more expensive than cars and light commercial vehicles. In Russia, they are used until they dont run, Arbadzhi said. In the bus category, 31 percent were more than 11 years old, while 11-year or older light commercial vehicles represented only 17 percent of the total in 2012.

By engine type, gasoline engines accounted for the majority of motor oil used in Russia in 2012, except for the 9.4 million liters consumed by diesel engines in the same year. RAMR expects this ratio to be 284 million liters and 5 million liters, respectively, by 2017.

Gasoline-powered engines are the traditional drivetrain in Russia, Arbadzhi said. We do not expect much penetration of hybrid or electric vehicles in the country because of their high price tag, lack of infrastructure for recharge stations and government unwillingness to introduce subsidies and tax incentives as many western countries do. RAMR found that about 2,000 hybrid cars were sold in Russia annually in the last couple of years, while only several dozen electric vehicles operate in the country at the moment.

On the other hand, consumer sentiment leans toward more robust and bigger gasoline powered cars, such as compact sport utility vehicles, which comprise the highest demand for motor oils in Russia. Zero-to-three year old SUVs consumed 19 million liters of motor oil in 2012. They were followed by zero-to-three year old B and C class cars (hatchbacks and sedans), which consumed 13 million liters and 12 million liters respectively in 2012.

The Russian car Lada has always been the leading brand for motor oil consumption in Russia. RAMR found that in 2012 it consumed almost 10 million liters of motor oil, followed by Frances Renault (2.4 million liters) and Japans Nissan (1.9 million liters). RAMR expects Lada to remain the largest motor oil consumer in Russia, using 8.3 million liters by 2017, followed by Renault (3.6 million liters) and South Koreas Hyundai (2.8 million liters).

In geographic terms, Moscow and Moscow oblast were the biggest regional consumers in the country in 2012. That year, the city of Moscow used 23 million liters of automotive lubricants, followed by the Moscow oblast at 15 million liters. These regions were followed by Primorsky in the Russian Far East, which consumed almost 11 million liters of motor oil, Krasnodar region (10 million liters) and St. Petersburg (9 million liters). Moscow is the biggest consumer goods market in Russia, and it is normal to hold the biggest share of motor oil demand in the country, Arbadzhi said.

She noted the interesting position of Primorsky krai, where about 60 percent of all cars in the region are over 20 years old. It is expected that these older cars use more motor oils. The Japanese and South Korean car aftermarket has a significant presence in the Russian Far East region, Arbadzhi concluded.