India Leads Lubricant Demand Growth, Kline & Co. Study Reveals Sluggishness in Other Markets

According to Kline & Co.'s 'Global Lubricants 2022: Market Analysis and Assessment' report, India's lubricant market is set to experience significant demand growth. Among the top five major lubricants-consuming countries, India stands out as the only one with a solid potential for growth, while other markets like the United States, China, Japan, and Russia are likely to witness a decline or slowdown in demand.

Consistent Growth Despite Electric Vehicles

Despite the rise of electric vehicles, India's lubricant consumption is expected to continue growing in the next decade. The emergence of electric vehicles will also create a demand for specially developed fluids known as EV fluids or e-fluids.

Strengthened Supply Chain

Milind Phadke, Vice President of Kline & Co., predicts that by the end of the decade, India's lubricant supply chain will be further bolstered with an increased domestic supply of base oils due to capacity additions by national oil companies.

Resilience Amid Challenges

Despite facing challenges posed by the COVID-19 pandemic and geopolitical issues such as the Russia-Ukraine war, India emerged as the fastest-growing major economy in the world during the financial year 2022-2023. The International Monetary Fund anticipates that India will maintain this growth momentum, with an annual growth rate of 6% over the next five years.

Growth Factors

Digital Economy and Industrialization

Factors driving the progression of India's lubricant market include the growth of the digital economy, industrialization, and urbanization. Increasing discretionary spending and investments in infrastructure development are also expected to play crucial roles.

Shift in Mobility Usage

With the majority of population growth occurring in the lower-income segment or middle class, mobility usage is undergoing a transformation with a focus on low-cost and flexible options. Two-wheelers are leading the personal mobility space due to their affordability, making motorcycle oils in high demand.

Car Ownership Aspirations

India has the potential to increase car ownership, as owning a car is seen as a status symbol. With car ownership expected to double between 2022 and 2040, consumer automotive lubricant demand is projected to grow at a CAGR of 3.5% between 2022 and 2027.

Focus on High-Value Viscosity Synthetic Products

The market value is expected to grow even higher at a CAGR of 6.0% during the same period, driven by increased consumption of high-value viscosity synthetic products. Original equipment manufacturers (OEMs) are recommending low viscosity grades, necessitating the use of fully synthetic lubricants.

B2B Segment Outlook

In the B2B segment (commercial automotive and industrial lubricants), growth is projected to be slightly lower at a CAGR of 2.7% between 2022 and 2027. However, the value in this segment is expected to grow faster at a CAGR of 6.9% than volume.

Transition in Commercial Automotive Lubricants

The commercial automotive lubricants market will undergo a transition with increased adoption of higher-quality lubricants due to the Vehicle Scrappage Policy. The policy will lead to the scrappage of older vehicles and support the addition of new vehicles in the vehicle parc. Lower viscosity grades are also being recommended in the heavy-duty motor oil market.

Industrial Lubricants Demand Growth

In the industrial segment, increasing mining projects, cement manufacturing plants, power plants, and steel plants will drive demand for industrial lubricants. Foreign and government investments in the domestic manufacturing sector through programs like 'Make in India' and 'Invest India' will further support growth in industrial lubricants demand.

Moreover, the global shift toward electric vehicles could potentially position India as an export hub for select lubricants.

Megatrends Shaping India's Industrial Lubricant Demand

Three key interconnected megatrends - digitalization, servitization, and sustainability - will shape the growth of India's industrial lubricant demand. Digitalization, which includes smart manufacturing and robotics, along with increased servitization (lubrication-as-a-service/equipment-as-a-service), can lead to efficiency gains and make the industrial sector more sustainable.

Conclusion

India's lubricant market is a bright spot amidst the global slowdown in demand. With a forecasted significant growth potential, particularly in the automotive and industrial sectors, India is poised to continue its upward trajectory.

The embrace of digitalization and sustainability, along with the country's strong aspiration for car ownership and increased industrialization, will play key roles in shaping the future of India's lubricants market.