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Need to Know


The lubricants business can be divided into three market segments. The largest of these, as described in last months column, is industrial lubricants. Including process oils, they account for an estimated 49 percent of the total lubricant demand in the United States. Consumer automotive lubricants follow, at roughly 30 percent of the total. The remaining 21 percent is gobbled up by the commercial automotive market segment.

Commercial automotive lubricants include heavy-duty engine oil, gear oil, grease, transmission fluid, tractor hydraulic fluid, and hydraulic fluids used to actuate rams, lifts, dumpers, loaders and other mobile hydraulic equipment. But anyone who has ever had the opportunity to sell commercial automotive lubricants is well aware that heavy-duty engine oil accounts for the lions share of this market segment.

In fact, HDEO demand in the United States was roughly 450 million gallons, or 75 percent of all commercial automotive lubricants consumed in 2005. That would be close to 50 million oil changes for a fleet of Class 8 trucks. For those who like to think visually, if you assume an average tractor-trailer length of 60 feet, there would be a line wrapping around the earth 23 times if every truck in this flotilla decided to get its oil changed at the same time and place. (I hope the last guy in line has a sleeper.) But truckers are not the only ones buying commercial automotive lubricants.

Off and On

The commercial automotive market holds two distinct groups of end users, who are nearly even in terms of the volume of lubricant they consume. The slightly larger of the two groups – by only about 2 percent – is off-highway fleets.

Agriculture is the largest segment among off-highway fleets. Demand for lubricants in agriculture is dominated by tractors, planters, combines, stationary engines and pumps, and other equipment used to plant, cultivate, harvest and handle crops and livestock. Construction is a distant second in demand for lubricants in the off-highway segment, followed by mining.

The other group, on-highway users, includes for-hire carriers, private fleets, lease rental fleets, a number of government fleets, and buses and other commercial fleets involved in the transport of people. For-hire carriers are by far the leading end-use application in the on-highway segment. For-hire carriers include both owner-operators and companies that are paid to transport cargo belonging to others. In 2005, for-hire carriers together consumed more than twice the lubricant volume of private fleets (see graph).

Based on these data it should be apparent that most of the action in the commercial automotive market focuses on engine oil, and is fairly well split between on- and off-high-way applications.

And if one overlays geography onto demand, it becomes clear that PAD District 2 (primarily the Midwest) is the hot spot for demand. This region alone accounted for nearly 35 percent of U.S. commercial automotive demand in 2005. The remaining demand is fairly balanced among the other PAD Districts (excepting of course PAD District 4, which consumes just under 5 percent.)

Staking a Claim

The other important hot spot in the commercial automotive segment spans the entire country, not just one PAD District. This hot spot revolves around the new 2007 EPA-compliant engines which, believe it or not, will start hitting the fleets and streets in a couple of months. These freshly minted, 2007 diesel powerplants will require the use of an HDEO that is significantly different from todays API CI-4 and CI-4 PLUS oils. That new oil, API CJ-4, is already approved and waiting in the wings.

And therein lies the hottest spot in the commercial automotive market segment, bracketed by uncertainty and opportunity. Uncertainty lingers around the performance, backward compatibility, price and anticipated demand for CJ-4. Theres also uncertainty about just how far drain intervals can be extended when using CJ-4 in the new engines, and whether drain intervals must be reined in if CJ-4 is used in pre-2007 equipment.

Although answers to these questions are starting to emerge, there is still a good deal of uncertainty in the marketplace about them. And where there is uncertainty there is opportunity. In this case, theres opportunity to capture business through education, product differentiation and pricing strategies.

This window of opportunity will not be open for too long. So take a look around, see who is talking about CJ-4, listen to what they are saying. Ask lubricant manufacturers, engine builders, additive companies and others what they know about CJ-4 and its price/performance ratios and likely drain intervals. Ask the American Petroleum Institute and Engine Manufacturers Association – the creators of CJ-4 – what, if any advertising they plan to do to promote its use, and when and where theyll do it.

When you do, you might very well find that API CJ-4 is truly a significant performance upgrade over CI-4 PLUS, and the majors, OEMs, additive companies and others are motivated to move it. So how will they do it, and how long will it take for end users to embrace it? Thats the white-hot spot right now in the commercial automotive market segment.

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