There are industry murmurs of a tough year ahead with China recording the lowest PMI for eight years at 48.1 (even France is now 51.6). There are jittery stock markets, worrying tales of local government debt and bearish economists anticipating the “hard landing”. Yet, China continues to remain an attractive destination for lubricants investment. There is a good deal of evidence to support this, too.
According to Research & Markets, engine oil revenues in the region should grow at an impressive CAGR of 11% through to 2018, driven by the strong auto sales and more commercial and construction vehicles being wheeled into infrastructure projects across the south and western regions of China.
Another report, this time from Qianzhan Research, a local data player, predicted that lubes demand would increase at around 5% per annum until 2020, when demand would overtake the US at eight million tons.
Lubricants and additives producers worldwide are clearly seeing a similar vision. Addivant has launched its new “Customer Formulation Centre” in Shandong province, aimed at servicing local OEMs with tailored additives solutions. Pertamina is also spending $114m to finance two new lubes and grease plants aimed at servicing the growing market and is in the process of acquiring a Thai plant with a Chinese lubes firm to help gain a foothold in the region.
While there remains little doubt that the Chinese lubricants market is slated to continue growing in line with analysts forecasts, the type of products and services required is likely to change. The arrival of newer, more sophisticated technology – both in vehicles and in OEM equipment – will present challenges as well as opportunities.
Majors such as ExxonMobil and Great Wall Lubes have been working to tailor their offerings to OEMs by increasing cooperation on a technical level, using technology exchanges as a method for educating customers whilst collecting valuable information about their needs.
As specifications become more diverse and exacting, lubes marketing in China will too evolve into a more solutions driven business.
Similar developments are afoot in the world of digital marketing. With the capacity to collect, process, analyse and deploy user data improving exponentially, companies will be under increasing pressure to style their offerings more closely to individual tastes.
Companies working hard to build customer relationships and deliver focused, specific solutions are likely to fare much better than those with more generic branding strategies.
To find out how OATS can help develop your lubricants brand strategy, or to comment on items in this Bulletin, simply contact Diana Shen.
Sebastian Crawshaw
Chairman, OATS