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LOCAL REPORT China Paul Stephenson, OATS Ltd


With 1.44 billion people, China accounts for 18.5% of the world’s total population and has experienced unprecedented economic growth over the past 40 years. GDP has risen exponentially from $2.3tr in 2005 to an IMF-forecast $15.5tr in 2020. However, real growth has declined from 14.2% in 2007, to a forecast 6.1% in 2020 (pandemic impact excluded).


China is a voracious raw materials and finished products consumer, while also becoming a global industrial hub offering significant scale and low-cost labour. Now it is turning from supplier to global OEM leader, particularly in the automotive sector.


The vehicle parc, manufacturing and sales In July 2020, China’s total vehicle parc was 360m (comprising 20% of the world’s entire four-wheel plus vehicles), with around 70m motorcycles and four and a half million “new energy” vehicles. Some 4.36m vehicles were sold in the first half of 2020 alone - 85% from domestic, state-owned SIAC, Chang’an Automobile, Dongfeng and FAW, along with independents such as Geely, BIAC, GAC and Great Wall Motors.


Since 2009, China’s annual vehicle production has exceeded the EU, USA and Japanese combined. In 2019, some 21.3m passenger cars and 4.3m commercial vehicles were built, many through domestic/Western JV alliances – the largest being Shanghai General Motors, as well as FAW-VW, Volvo Cars (wholly owned by Geely since 2010) and SAIC-owned MG Rover. China has set its sights on dominating world EV manufacturing, including battery and storage technology.


Chinese OEM’s also populate the top 20 off-highway manufacturing list, with names such as Sany, XCMG and Zoomlion.


Base oil production Coal is China’s primary energy source, providing 58% of the country’s energy supply. Petroleum and other liquid energy fulfils 20% of demand. Despite ambitions to cap coal consumption, renewables only provide 5% of current energy supply.


50 LUBE MAGAZINE NO.160 DECEMBER 2020


Although a net importer of crude, China’s is the world’s largest petroleum and petrochemicals supplier. Domestic oil and gas comes from legacy fields with production capacity of almost five million b/d. China also CTL capacity of 108,000 b/d and about half a million b/d of methanol production.


Refining is dominated by three main national companies: Sinopec, CNPC and CNOOC. Consumption in 2018 of 14.5m b/d of petroleum liquids is forecast to decline slightly due to falling GDP growth and China’s increasingly draconian environmental legislation.


The lubricants market As China’s automotive engine technology has become more sophisticated, dominant API CD and CF-4 type lubricating oils are being replaced by higher-spec products. This has been accelerated by China’s emissions regulations, with China 6a set for national roll-out in 2021. Existing specifications must meet the latest National Standard GB11122 and newer vehicle engines require low ash engine oils such as ACEA C Grades, API CJ-4, JASO DH-2 and DL-1. These developments have led Chinese OEMs and oil companies to consider creating domestic lube specifications.


The consumer car oil market remains predominantly ‘do it for me’ rather than DIY. Increased high-performance demand has reduced market- dominant 5W-30 consumption in favour of 0W-20 and even 0W-16 oils.


Summary


The sheer scale of China’s vehicle and lubricant markets has already influenced global sales strategies and is set to become more influential as China’s prosperity grows. The calls for a domestic lubricants standard indicate the speed and maturity of the industry.


With its challenging emissions regulations and aim of leading world EV technology, China’s global influence on the lubricants market can only increase. Overseas producers looking to access the market should expect tough questions about finished products and competition from fast-moving, imitative domestic developers.


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