LOCAL REPORT India Shailendra Gokhale, Rosefield DAA International Consultancy LLP

With a population of 1,366 billion, India is becoming the fastest growing country for energy consumption in the world. Just to give an idea on the magnitude, India adds one Australia every year in terms of population. The country is the world’s fifth largest economy by nominal GDP of 2.87 trillion USD (2019) and continues to remain the world’s sixth largest consumer market. With rising middle-class income, huge investments in infrastructure and rapid urbanisation over next 20 years, it is expected that the Indian economy will overtake the USA by 2050, as per PwC analysis. Since the start of the 21st century, India’s annual average GDP growth has been 6-to-7%, one of the highest in the world.

The vehicle parc, manufacturing and sales The country’s automotive industry accounts for around 7.1% of the country’s GDP, in which the two-wheeler segment accounts for a share of around 81%, making India the largest manufacturer of 2 wheelers in the world. For the Financial Year 2019-20, India’s domestic sales of Commercial vehicles has been 0.7 mn; that of Passenger Cars 2.7mn and 2 wheelers 17.4mn. Interestingly in the ‘new normal’ world, Automobile sales have picked up and, going by the massive sales in last quarter, India is witnessing V-shaped economic recovery. This has encouraged all leading manufacturers to launch new models over next 12 months.

Base Oil Production India is the world’s third largest finished lubricant market but doesn’t have the domestic base oil capacity to match, making it one of the biggest base oil importers globally. The country’s annual base stock production capacity is estimated to be around 1.2 million tons and it imports more than 2.5 million tons every year (which goes in process oils, which are not factored into lubricant sales). API Group II accounts for the biggest share of consumption (60% approx.), followed by Group I, Group III and Naphthenics.

Indian base oil manufacturers, IOCL, HPCL and BPCL have announced expansion plans to fill the gap partially.

46 LUBE MAGAZINE NO.162 APRIL 2021 The Lubricants Market

The Indian Lubricant market is expected to grow at the CAGR of 3% YOY. The Indian lubricants market is 2.7mT in terms of volume and US$ 6 billion in terms of value.

Automotive lubricants contribute the most with 55% of the market share. Industrial lubricants contribute a further 40% and the remaining 5% made up by Greases.

As a signatory of the Paris Agreement, India has embarked on an ambitious plan, migrated directly to BS VI on 1st April 2020 from BS IV over the course of the preceding 3 years. This was a herculean task, considering that India had taken 7 years to go to BS IV from BS III. It is expected that Internal Combustion Engines will continue to dominate Indian Market, in spite of advent of Electric vehicles. Currently EV penetration in two wheeler sales is just 1%. ‘Make in India’ will also help India to position as a manufacturing hub, since many companies are adopting China+1 strategy for security of supplies, which will result into growth for Industrial lubricants.

Summary As seen earlier, the Lubricants industry seems recession-proof and even COVID has not dampened future prospects for the Lubricants industry in India. Lubricant companies are quick to turnaround and post strong financials year after year. Consolidation of the lubricant industry is going to happen, with cash-rich companies finding this the most appropriate time to acquire companies, with a strong outlook of the industry, in spite of advent of EVs.

Apart from consolidation of the industry, it is expected that quite a few new brands will hit the Indian lubricants market over next 12-18 months, as it will continue to offer opportunities and space on the shelf for new brands.

Overall India will offer exciting opportunities to Lubricant, additive and base oil players!


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