BUSINESS PROJECTIONS OF

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BUSINESS PROJECTIONS OF INDIAS LUBRICANT
INDUSTRY
ARUN JYOTI, MD, IBP B. DATTA,GM(LUBES),
IBP S. S. SUBRAMANI, CLM, IOC
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• LUBE MARKET IN INDIA
• 1.1 MMTPA Market of value more than US 1
  Billion.
• Sixth largest automotive market in the world.
• Expected Growth Rate -- 2 in 2003-04.
• Ratio of automotive/ industrial lubricants 6535.
• Emphasis on concern for environment
• Quality at least price.

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LUBE OIL CONSUMPTION BREAK-UP
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Retail Auto Lube by Market Segment
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• INDIAN LUBE INDUSTRY
• Liberalization of the Indian economy has brought
  about tremendous changes in the Indian lubricants
  scenario
• No Government Controls On Import Of Lube Oil Base
  Stocks, Additives And Finished Lubricants .
• Industry liberalized in 1993 resulting in entry
  of MNCs
• Over 30 recognized Lubricant brands
• Consolidation process is on
• Market Dominated By PSUs - 68.

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CONSOLIDATION OF LUBE INDUSTRY IN INDIA

• INDIAN LUBE INDUSTRY FOLLOWING GLOBAL PATTERN OF
  CONSOLIDATION
• TOTAL FINA ELF, EXXONMOBIL CALTEX CHEVRON TEXACO,
  BPCASTROL ETC.
• INDIAN JVS WITH MNCS MOSTLY NON STARTER- EXCEPT
  BPC SHELL
• PSU OIL COMPANIES ARE AGGRESSIVELY POISED AFTER
  INITIAL LOSS OF MARKET SHARE AND CONTINUE TO
  REMAIN DOMINANT PLAYERS IN INDIA.

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• CURRENT MARKET STATUS
• BUOYANT
• COMPETITIVE
• PRICE SENSITIVE
• EXPANDING
• DIMINISHING
  MARGIN
  
• HIGHER AD
  SPENDS

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• ENTRY OF MNCs (AUTO MAKERS) - CARS, HCVs, LCVs
• IMPROVED TECHNLOGY
• HIGH COMPRESSION RATIO
• MULTI POINT FUEL INJECTION (MPFI)
• IMPROVED FUEL EFFICIENCY
• HIGHER OUTPUT
• LONGER DRAIN PERIODS
• LESS OIL TOP UP
• ENVIRONMENTAL CONSIDERATIONS

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• VARIED REQUIREMENT OF DIFFERENT OEMs
• Tailor made grade to suit individual OEM
• Increased number of grades

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• 2/3 WHEELERS- TWO STROKE
• TILL APRIL 2000 DOMINATED BY JASO FB
• APRIL 2000 ONWARDS ONLY JASO FC OILS PERMITTED.
• 2 OIL FUEL RATIO.
• GROWTH 8.5 PER ANNUM PRESENTLY

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• 2/3 WHEELERS- FOUR STROKE
• EXPONENTIAL INCREASE IN DEMAND
• INCREASE IN MARKET FOR 4T OILS
• API SG/JASO MA SPEC RECOMMENDED
• VISCOSITY GRADE 20W 40 / 20W 50

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• PCMO
• LIBERALISED AUTO POLICY ENTRY OF MAJOR
• AUTO MNCs
• WIDELY VARYING PERFORMANCE LEVELS
• (API SC TO API SJ) CONTINUE TO
  CO-EXIST
• API-SF/CC WILL CONTINUE ON ACCOUNT
• RECOMMENDATIONS OF INDIAN CAR
• MANUFACTURERS PARTICULARLY MARUTI,FIAT,
  AMBASSODOR AND INDICA
• 20W-40 20W-50 DOMINATE MARKET

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PCMO PERFORMANCE LEVEL WHERE WE ARE
SL
SJ
SH
SG
SF
SE
Philippines
USA
China
India
Thailand
Korea
Indonesia
Malaysia
Taiwan
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• DEO CHALLENGES
• Engine modification
• Diesel fuel additives
• Exhaust gas recirculation
• Alternate Fuels
• DEO Needs continuous upgradation / modifications

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CV MARKET

• CV Market dominated by Indian Manufacturers
• Continuous upgradation of Technology

• Good growth in LCV

• Sluggish HCV Market- Signs of pick up now

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DEO- Performance Levels
CH-4
2002
CG-4
1999
1997
CF-4
1990
CE
CD
1977
CC
1972
1968 1972 1976 1980 1984 1988
1992 1996 2000 2002
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DEO PERFORMANCE LEVEL WHERE WE ARE
CI-4
CH-4
CG-4
CF-4
CE
CD
Philippines
India
Thailand
China
Indonesia
Malaysia
Taiwan
Korea
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• Industrial Sector
• Industrial lubricants potential about 385
  TMTs/ annum (35 of the market)
• In 2002-03 growth is 1.5 to 2.0.
• In 2003-04 expected growth is 2.4
• Major consumption by core sector industries
  Steel, Cement, Fertiliser, Mining and Engineering
  industry.
• Highly knowledgable and updated customers
• Purchases by specifications and OEM approvals
• High customer emphasis on technical services
• Price sensitive- procurement through tenders.
• Total lube service concept-a recent concept

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• Base Oil Scenario

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BASE OIL SCENARIO

• Base oil production capacity
• Lube Refinery Present capacity
• (TMT)
• IOC, Haldia 222
• CPCL, Chennai 270
• HPCL, Mumbai 335
• Total 827

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ADDITIVE SCENARIO
Total Market 55 TMT (US 100 mn)
MAJOR PLAYERS
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BLENDING CAPACITY

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GROWTH POTENTIAL / OPPORTUNITIES
Per Capita Lube Consumption Kg/Annum
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GROWTH POTENTIAL/OPPORTUNITIES

• Lube market anticipated to grow higher than
  global growth
• Expected growth in vehicle production
• Two Wheeler 8.8 Three Wheeler 6.4
  and
• PCVs 10.2
• Road Infrastructure development expected
  investment of 23 thousand Crores of Rupees.
• Emphasis on Construction activities for housing
  and industries

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BUSINESS PROJECTIONS INDUSTRIAL LUBES

• GROWTH IN INDUSTRIAL LUBRICANTS IS RELATED TO
  GROWTH IN GDP WHICH IS EXPECTED TO GROW UP FROM
  4.30 IN 2002 TO 8.00 IN 2007.
• DUE TO AVAILABILITY OF HIGH PERFORMANCE LUBES,
  INCREASED OIL CHANGE PERIODS, BETTER DESIGN OF
  CIRCULATION SYSTEMS AND ON-LINE ANALYSIS FOR LUBE
  OILS IN USE IN LARGE SUMPS, LUBE SALES IN
  INDUSTRIAL LUBES NOT ON EXPECTED GROWTH PATH.

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BUSINESS PROJECTIONS AUTO LUBRICANTS

• GROWTH IN PRODUCTION OF
• PASSENGER CAR 8.0 TO 10.0
• COMMERCIAL VEHICLE 4.0 TO 5.0
• 2-WHEELERS 14.0 TO 18.0
• EXPECTED GROWTH IN AUTO LUBRICANTS NOT SEEN ON
  ACCOUNT OF
• INCREASED CAPACITY OF MODERN GENERATION TRUCKS
  FROM 9 TO 15 TONNERS AND MORE, FITTED WITH
  COMPARATIVELY SMALLER OIL SUMP CAPACITY ENGINES.
• INCREASING AWARENESS AMONGST DRIVERS ON
  MAINTENANCE OF LUBRICATION SYSTEMS
• TRUCKS FITTED WITH MULTI-AXLES INSTEAD OF SINGLE
  AXLE
• DEMANDING INCREASED PERFORMANCE LEVELS WITH
  REDUCED SUMP CAPACITIES

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BUSINESS PROJECTIONS TRACTORS

• REDUCED USE OF TRACTORS IN DROUGHT PRONE AREAS.
• YEAR NUMBER
• 98-99 262322
• 99-00 273181
• 00-01 254825
• 01-02 225280
• 02-03 106086
• (Till Dec.02)

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BUSINESS PROJECTIONS TWO WHEELERS

• TWO WHEELER PRODUCTION HAS GONE UP BY 16.0
• 2T SALES DROP OBSERVED DUE TO REVISED
  CONSUMPTION NORMS ADVISED BY ENGINE MANUFACTURERS
  PLUS ABUNDANT AVAILABILITY OF DUPLICATE 2T IN
  BARRELS.

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BUSINESS PROJECTIONS 3-WHEELERS

• PRODUCTION INCREASED BY 7.0
• EXPECTED INCREASE BY 4.5 IN 2003-04
• SWITCHOVER FROM MS TO CNG -USE OF WHICH
  NECESSITATES BETTER MAINTENANCE HENCE REDUCED
  LUBE CONSUMPTION

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BUSINESS GROWTH ENVISAGED

• EXPECTED LOSS TO MANUFACTURERS DUE TO
  COUNTERFEITING/ DUPLICATION 15.
• STRICT ENACTMENT AND ENFORCEMENT OF REGULATIONS
  TO CURB THE MENACE.
• ENFORCEMENT WOULD MEAN
• GOVERNMENT EARNING MORE REVENUE BY WAY OF TAXES
• CONSUMERS GET BENEFIT OF IMPROVED QUALITY OF
  LUBES RATHER THAN USING SPURIOUS LUBRICANTS
• WILL LEAD TO REDUCED ENVIRONMENT POLLUTION
• ORGANIZED OIL SECTOR WILL GET BENEFITTED ON
  ACCOUNT OF IMPROVED SALES AND BRAND IMAGE.
• SIGNIFICANT ROLE PLAY EXPECTED FROM ILMA

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ROLE OF ADDITIVE SUPPLIERS

• ADDITIVE SUPPLIERS OFFERING READYMADE
  FORMULATIONS TO ALL LUBE OIL MANUFACTURERS.
• CHECK ON RELEASE OF FORMULATION FOR
  NON-ESTABLISHED BRANDS WHO TEND TO USE LOWER
  PERCENTAGE OF ADDITIVES- WILL INCREASE ADDITIVE
  SALES FOR ADDITIVE SUPPLIERS AS
• WELL AS SALES FOR GENUINE OIL
  MANUFACTURERS/MARKETEERS.

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ROLE OF BASE OIL SUPPLIERS

• BASE OILS TO BE SOLD ONLY TO REGISTERED LUBE OIL
  MANUFACTURERS.
• WILL ELIMINATE POSSIBILITY OF MISUSE

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ROLE OF CONTAINER MANUFACTURERS

• SUPPLY OF CONTAINERS ONLY TO GENUINE BRAND
  MANUFACTURERS OR MARKETEERS
• SYSTEM TO ENSURE ELIMINATION / CIRCULATION OF
  CONTAINERS

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ROLE OF OIL COMPANIES

• ENSURE ALL STEPS TAKEN TO PROVIDE TAMPER PROOF
  CONTAINERS
• ENSURE EDUCATING THE USERS THE ADVANTAGES OF
  USING RECOMMENDED LUBRICANTS
• EDUCATING THE CUSTOMERS THE BENEFITS OF USING
  BRANDED LUBRICANTS

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• LUBE OIL COMPANIES TO ENSURE THAT BRANDS DO
  NOT BECOME COMMODITIES.
• WIN-WIN SITUATION FOR LUBE OIL MARKETEERS AS
  WELL AS END USERS

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THANK YOU