China Looking Inwards for Strength - An Opportunity for Global Lubricant Majors, Projects Kline & Company
PARSIPPANY, N.J., Jan. 31, 2012 /PRNewswire/ -- Changing market geographies in China are prompting a need for dual strategies for marketers tapping into China's estimated USD 18.7 billion lubricant market, indicates the recently published report Opportunities in Lubricants 2011: China Market Analysis by international consulting and research firm Kline & Company.
As a logistical consequence of China's vast exporting, manufacturing facilities tended to be coastal; however, in an effort to offset declining exports, China is increasingly shifting to a domestic consumption-driven economy. China is also investing significant resources in developing infrastructure within the country's interior, encouraging companies to expand and establish a presence to service what were until recently low priority domestic needs. This realignment affords both opportunities and challenges. Backed by government incentives, the hitherto underdeveloped interior of the country is emerging as a new and hungry market. Astute marketers therefore need to employ dual strategies: one for the traditional and more sophisticated developed regions of China, and another for the upcoming interior regions.
Kline's analysis also finds that China's state-owned players dominate the market, with PetroChina remaining China's leading lubricant supplier, claiming approximately 23% of the market mainly due to its strength in the industrial sector, while Sinopec claims a further 20% market share through its dominance of the automotive sector. These and other domestic companies, with their well-established reach and low price points, hold a distinct advantage in servicing the burgeoning lubricant demand and capturing market share. This is reflected by Shell, the leading foreign supplier in China, securing a relatively modest estimated 7% market share. Kline estimates that the combined sales of lubricants by foreign suppliers amount to around 27% of the total volume.
However, great opportunities exist for foreign lubricant suppliers as global companies increase their investments in China and are likely to choose the same or other trusted Western oil suppliers to fulfill their lubricant needs.
With the expectation that the car population in China will grow on average between 18% to 22% per year between 2010 and 2015, and given that most of the large automotive producers in China are multinational or joint venture companies with global sourcing as a common strategy, multinational lubricant producers can fare well by fostering and emphasizing proven and standardized product performance and value-added relationships. Additionally, with the absence of locally produced ATF and the growing popularity of automatic transmissions, there are largely uncontested opportunities for multinational lubricant suppliers to strengthen their position in the transmission oil market.
Due to increased investments in large power generation projects in recent years and further projects anticipated, more imported power generation equipment and other large electrical equipment will be introduced. "It is expected that this will lead to a rapid growth in demand for high-end lubricants in this market segment, with equipment manufacturers stipulating standardized, tested, and trusted fluids," commented Geeta Agashe, vice president of Kline's Energy Practice. "This is an opportunity for global majors, such as ExxonMobil, Shell, and BP, who have a strong relationship with the OEMs of imported equipment."
China's shifting economy affords considerable opportunities and foreign oil suppliers can significantly benefit by offering value-added services, specialty, proven, or trusted fluids, and capitalizing upon relationships with OEMs of imported equipment and parent companies.
Opportunities in Lubricants 2011: China Market Analysis is a comprehensive analysis of the Chinese lubricant market focusing on market size and growth, quality evolution, key trends, developments, challenges, business opportunities, and threats.
About Kline
Kline is a worldwide consulting and research firm dedicated to providing the kind of insight and knowledge that helps companies find a clear path to success. The firm has served the management consulting and market research needs of organizations in the chemicals, materials, energy, life sciences, and consumer products industries for over 50 years. For more information, visit www.KlineGroup.com.
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Vera Sandarova
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SOURCE Kline & Company
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