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U.S. Market Taps the Brakes

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Consumer automotive lubricants demand in the United States is projected to decline slightly to 2020, according to consultancy Kline & Co. Meanwhile, an NPD analysis of data from individual automotive aftermarket stores in the U.S. suggests major motor oil brands continue to use deeper discounts to promote their products.
According to Klines report, titled Opportunities in Lubricants: North America Analysis and Opportunities, 2014-2016, the United States commands between 2.2 billion and 2.3 billion gallons of lubricant demand in North America – more than 85 percent – with Canada and Mexico accounting for the remainder.
Map of the Market
Kline projects that demand for consumer automotive lubricants in the U.S. will decline by 0.8 percent per year from 2015 to 2020, said Sushmita Dutta, Klines project lead for energy, during a mid-summer webinar.
The consumer automotive lubricants demand in any country is dependent on two factors – the rate at which the vehicle fleet is growing or shrinking, and the frequency of oil changes, Dutta explained. The frequency of oil changes in the U.S. market is decreasing, while its car parc has been growing very slowly.
The U.S. is a developed country with a mature automotive market, so as a result of these two factors, we dont think the U.S. automotive consumer lubricants market will grow during the next five years, she said. It could grow in the optimistic scenario if the car parc would grow faster and if the oil change drain interval is not as high as what we are expecting under the most likely scenario.
Dutta noted that the industrial segment (including process oils) constituted close to 50 percent of demand volume in the U.S. in 2015. That was followed by consumer automotive with more than 25 percent, and the commercial segment, which made up the remainder.
The size of the U.S. consumer automotive market remained fairly stable between 2011 and 2015, Kline found, with a 0.2 percent compound annual growth rate over that period.
New vehicle sales have been good in 2015 due to low gasoline prices, a surge in demand and vehicle availability, [and] increasing vehicle activity, she said. In addition to this, the improvement in the economy has encouraged vehicle owners to travel for both business as well as leisure, take vacations and get their vehicle serviced at regular intervals. As a result of this, lubricant consumption has not declined, and has remained fairly stable although the industry continues to extend drain intervals.
The Consumer Route
Consumer automotive lubricant demand can be divided into two major segments, installed and retail, Dutta said. The installed segment caters to do-it-for-me customers who dont change their vehicles engine oil themselves, preferring instead to take the cars to an installer or workshop. Meanwhile, the retail segment caters to do-it-yourself customers, and also supplies some lubricants products to garages.
Kline projects that demand for consumer automotive lubricants in the U.S. installed segment will grow marginally at a 0.6 percent compound annual growth rate from 2015 to 2020.
Quick lube centers, with automotive lubricant sales estimated at 153 million gallons in 2015, are the leading trade class in the installed segment. Following are new car dealerships; tire, brake and muffler shops; general repair garages and others.
Dutta noted that in the case of new car dealerships, penetration of synthetic and semi-synthetic products is quite high, at more than 60 percent. This is because most of the OEMs are recommending synthetics and semi-synthetics for vehicles, she said. Our research finds some dealers use synthetic and semi-synthetic, and not conventional at all.
While other trade classes have not seen as high a penetration of synthetics as that, some gradual change has occurred. Synthetic and semi-synthetic products together last year reached more than 20 percent penetration among quick lubes for example, Kline estimated.
Some of the quick lube centers say its very challenging to sell synthetics to the owner of an older car, she said. They would rather sell additional services rather than a more expensive product.
On the retail segment side, Kline projects that U.S. demand for consumer automotive lubricants will decline drastically, losing 4.3 percent a year from 2015 to 2020.
This suggests that the installed segment is growing at the cost of the retail segment, Dutta explained. People are moving from retail segment channels to installed channels. This is happening because the new vehicle designs have made it more difficult for people to access certain parts of their cars such as drain plugs and oil filters. Another factor is the increased consumer awareness of proper waste oil disposal.
She noted the most important reason for this shift is the narrowing of the cost gap for an installer to perform a complete lube, oil and filter change, compared to consumers purchasing those parts and performing the oil change on their own. Right now there is no cost influence for DIY maintenance, she said. And as a result of this, we are seeing a shift towards the installed segment.
Prices Turn Downward
Perhaps in reaction to greater competition in the shrinking market, the average price per quart of motor oil in the U.S. automotive aftermarket industry declined 1 percent in the first six months of 2016, compared to a year earlier, according to retail sales data from NPD Group.
There are a number of things going on with motor oil pricing, Nathan Shipley, director and automotive aftermarket industry analyst for the research firm, told LubesnGreases. Private label is gaining share, and the major brands continue to promote their products at deeper discounts.
The two growing segments [of motor oil] – full synthetic and high mileage – experienced quart price declines thanks in large part to more promotions in the first half of this year, compared to last year, NPD stated.
Viscosity Shift
Dutta noted an increasing trend toward the use of SAE 0W-XX viscosity engine oils in the U.S., which Kline projects will expand from about 4 percent of the market in 2015 to around 20 percent by 2020.
We think the viscosity grade makeup will be quite different from what it is right now, she said. Because of OEM recommendations, we think we will see a shift to 0W. To this point, she noted, 0W-XX engine oils were most often used for servicing vehicles under warranty at automotive dealerships. However, as these vehicles move out of warranty and migrate to other installers, we are seeing usage of 0W in other channels such as quick lubes.
Although SAE 5W-30 is expected to remain the dominant viscosity grade, its share is expected to decline from more than 50 percent of the U.S. market in 2015 to around 45 percent in 2020.
Stocking the Garage
The largest branded suppliers combined accounted for 44 percent of the total North American lubricants demand in 2015. Shell led with around 350 million gallons, followed by ExxonMobil with almost 300 million gallons and Chevron with almost 175 million gallons. Chasing them were BP, Phillips 66 and Valvoline.
In the U.S. market alone, Shell also led with close to 300 million gallons, followed by ExxonMobils nearly 200 million gallons and Chevron with around 150 million gallons. Trailing were Phillips 66, BP and Valvoline.
Shell topped the consumer automotive lubricants segment in the United States in 2015 with nearly 150 million gallons, followed by Valvoline with nearly 100 million gallons. Behind were BP, ExxonMobil, Phillips 66 and Chevron.
The U.S. commercial automotive lubricants segment saw Shell leading again with about 100 million gallons, followed by Chevron at more than 50 million gallons and ExxonMobil with around 50 million gallons. Trailing were Phillips 66, BP and Valvoline.
ExxonMobil led the U.S. industrial segment with more than 50 million gallons, followed by Chevron and Phillips 66. Trailing again were Shell, BP and Valvoline. z

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