India’s M&HCV lubricant market: Future outlook

Akhil Jha shares his insights on the current scenario and the trends in India’s Medium and Heavy Commercial Vehicle industry while relating it to the Commercial Lubricant Market.

Copy of Akhil Jha_Vice President_Technical (Lubricants)_Shell India Markets Pvt. Ltd 


The global lubricants market is rapidly changing. Ranking third behind the United States and China, India is one of the most important markets in the world. With GDP of USD 1,825 billion in 2012, India is the third-largest economy in Asia, after China and Japan. Historically, India has been one of the fastest growing major economies. The per capita lubricant consumption in India is quite low compared to developed countries. However, even a comparison with other developing countries like China and Indonesia reveals that there is a significant potential for growth in lubricant consumption in India.


The current market scenario for M&HCV (Medium and Heavy Commercial Vehicle) lubricants across India:


The automotive industry in India is one of the largest automotive markets in the world. It had previously been one of the fastest growing markets globally. India’s passenger car and commercial vehicle manufacturing industry is the sixth largest in the world, with an annual production of more than 3.9 million units in 2011.


Automobile production in India has experienced a strong growth of 14% from 2007– 2008 to 2012–2013. The market for commercial automotive lubricants declined in 2013 due to the retarded economic growth as well as its impact on sectors as logistics, construction, mining, and agriculture. In India, more than half of the commercial automotive lubricant market is supplied by oil PSUs.


Commercial Vehicle OEMs are currently looking at lubricants to provide reduction in Total Cost of Operation (TCO) through extension of oil drain interval and Fuel Economy benefits in the area of engine, gear box and rear axle oil. 2015 onwards commercial vehicles market in India is expected to move in this direction.


Carbon dioxide emissions by vehicles, after the implementation of the new norms are projected to come down from 142 gm per km in 2010-11 to 129.8 gm by 2021-22 and 113 gm 2022 onwards. This reduction of CO2 means guideline for fuel economy development from both hardware and lubricant side.


In the first phase, the government expects the passenger cars to consume 5.49 liters of fuel on average to cover 100 km by 2016, thus increasing the average mileage to 18.2 km per liter from 16.5 km in 2010-11, when the norms were initially proposed. In the second phase, the consumption of fuel will come down to 4.77 liters for 100 km, increasing the mileage to 21 km per liter. The same as per our understanding will be also considered for commercial vehicles & 2-wheelers segment. This means that in coming 1-2 years the lubricants are not only required to ensure durability with extended drain but also improving Fuel economy of vehicle which cannot be obtained by traditional lubricants but has to be met by co-engineered advance lubricants especially designed for chosen hardware. Different models will require different type of advance technology lubricants as stress factor will vary from model to model but all models have to meet the same set of guidelines as set by government.



Main demand drivers & future market growth:


The market and future trends as reported by Kline & Company Inc in the Opportunities in Lubricants India Market Analysis report:


Total Commercial Lubricant Market:


-In 2013, the on-highway segment consumes an estimated 460.2 kilotonnes or 61% of the total commercial lubricant market, while the off-highway segment accounts for 299.8 kilotonnes or 39% of the total

-Engine oil is the highest-selling product at about 60% of total commercial automotive demand, followed by gear oil and hydraulic transmission fluid (HTF) at 18% each

-SAE 15W-40 and SAE 20W-40 account for 45% and 39%, respectively, of the total HDMO sales in the commercial automotive market for engine oils

-The use of monogrades, which account for 12% of total HDMO consumption in 2013, has been constantly declining

-The use of Fuel Economy oil is slightly increasing, accounting for 2% of the overall HDMO consumption.

-The usage of CNG vehicles is increasing, and CNG lubricants account for 2% of the total HDMO sales in 2013.


  1. Emission standards:

The introduction of Euro IV-based Bharat Stage (BS) IV emission standards in April 2010 has lead to technical changes in diesel vehicles, such as introduction of Exhaust Gas Re-circulation (EGR) systems in vehicles. The sulfur limit under BS IV emission standards has been reduced to 50 ppm from 350 ppm.

CNG and LPG as an alternate fuel demand is picking up in India especially in the cities with access to CNG & LPG for CV segment other than Passenger car.

Demand for CNG specific lubricants is expected to grow in line with the growth in CNG vehicle population.

Euro V-based BS V is expected to come into force by 2020 in India.


  1. OEM tie-ups:

For oil companies, having tie-ups with OEMs is becoming increasingly important to increase their foothold in the country. The profit margin is relatively low for suppliers in the OEM market, but it provides them access to the after-sales market as well.

A few suppliers are also coming up with co-branded oils with OEMs, which will help vehicle owners to associate the OEM brand with that particular supplier, and is expected to create a better brand image.

In an attempt to increase their penetration in the market, many suppliers as well as OEMs have been expanding their distribution reach and dealerships, respectively, in semi-urban and rural areas.


  1. Oil drain interval extension

Most of the new BS IV vehicles that are being launched have engines that require better quality lubricants, which typically offer longer drain. Shell has established technology in Fuel Economy lubricants for CV & fill for life lubricants for transmission. Consequently, overall growth in lubricant demand due to the growth in vehicle population, has been to an extent arrested by lubricants with long drain interval.


  1. Shift in viscosity grades

In engine oil, the demand for 15W-40 has superseded demand for 20W-40, and it is expected that the ratio would get further skewed in the coming years, as most of the OEMs now recommend the use of the former.


Amongst gear oils, demand for monogrades has declined considerably over the last few years, while demand for multigrade has increased correspondingly.

As per Kline the overall lubricant consumption in India will grow at an annual rate of 2.5% over the next five years. The commercial and industrial lubricant segments will exhibit a moderate growth of 2.3% and 1.6% per year, respectively.


Recent technological trends for M&HCV lubricants in India


To meet the challenges on soot induced wear and viscosity increase posed by high EGR rates combined with high Sulfur fuel while maintaining the ODI, OEMs are now recommending Engine Oils with API CI-4 Plus specification for their latest models.

Engine oils with API CJ-4 specifications confirming to Low SAPS (Sulfated Ash, Phosphorous and Sulfur) which were designed for low sulfur fuels like ULSD (Ultra low sulfur diesel) should be used with caution for extended drain intervals in India.


Fuel Economy benefits across engine and driveline are becoming increasingly important and OEMs are looking at Lubricants to contribute to their overall Fuel Economy Target. This would mean a further downshift in viscosity grades.


However many of these developments depend on Emission Norms Phasing Plan laid out by the government and availability of low sulfur fuels.


(The author is Vice President Technical, Shell India Markets Pvt. Ltd.)