The car sales figures say it all!
In the US, car sales were up 16% in February, whereas in Western Europe they were down 11% and forecast to fall by six percent in 2012, with China's economy also slowing slightly. But, it's clear that Presidential election year is delivering the growth required in the US. The country's PMI is continuing above 52%, indicating further expansion; employment is up while unemployment is falling and even construction is beginning to rally. John Deere is reporting solid increases in Sales revenues at 22% and forecasting a further 18%.
Only the Eurozone remains a serious source of concern. Kicking the tin of the Greek “Default” a bit further down the road has at least offered more buying time for Europe's banks to repair their balance sheets.
It will take some time before the world's economic growth brings us back to the 2007 level of lubes consumption at $37bn annually. As I reported in my introduction to the OATS China Bulletin earlier this month, presentations at the ICIS conference in London highlighted a range of different trends, with a further rebalancing of investment toward the growth economies likely in the East and elsewhere.
New players are also emerging as the lubricants industry enters a new phase of change. Brazil has now become the world's sixth largest economy, overtaking the UK, exemplified by COSAN (which bought ExxonMobil's Brazilian operations in late 2011) announcing the acquisition of Comma, the UK based European aftermarket-focused Lubes business, also from Exxon.
A presentation by Lubrizol's Dan Sheets highlighted the BP 2030 report. While the car parc is forecast to expand 70%, leaving the President of Ford to worry about global gridlock and where these cars are actually going to go, electricity is expected to provide just one percent of transport fuels. While around 30% of vehicles may be full or partial hybrids, the reality is that oil will continue to be the dominant fuel. So, thankfully, there is still a future for lubricants.
The new Ford EcoBoost 3 cylinder engine drew attention to the continued improvements in engine performance over the last decade. Capacity may only have fallen two percent but power has increased 12%. Vehicle mass is down five percent with CO² reduced by a massive 25%. Part of this is dependent on the continued development to push the boundaries of optimised engine oils, with Ford establishing their own EcoBoost specification with the help of Castrol.
As Sheets highlighted, the level of investment needed by the additive industry to achieve these kind of improvements is around $600m per year. Researching new chemistries is expensive and, in a slow growth/flat overall market where the number of components per blend is rising, the price of additives will have to rise too and the blenders will have to pay. No wonder Warren Buffet likes this particular business model!
Yet, what appears to be forgotten in most of these presentations is the societal benefit of these improvements. It is not just about saving car manufacturers the hefty fines being imposed by the EU and other authorities. What do these changes mean to the general public? Why should we, as consumers, invest in the best quality lubricants? How much longer will the earth’s finite resources last? These questions are not being asked, or the key messages being transmitted effectively, but they most definitely need to be!
To recover these financial, environmental and social costs, effective marketing and positioning are essential and this is a key discussion OATS is undertaking with existing and prospective clients. If you would like to talk to us about your lubricants marketing development or, as always, anything you read in this Bulletin, simply contact us.
Sebastian Crawshaw
Chairman, OATS