Things might be looking up for China’s lubes producers – at least for those following a valued added strategy.
Even though private reports indicate that some producers are not hitting sales goals for 2013, National usage is still on track to grow by around 8-10% a year through 2016 and could ultimately double by as early as 2020. Sales of light vehicles are also growing significantly, especially in the SUV and MPV segments, which grew by 46% and 160% year-on-year in August, respectively, driving up the performance levels, increasing demand for the better quality lubricants and putting pressure on the lower-grade (often local) products.
Increased competition in China’s base oil sector has made the market favourable to lubricants blenders over the past decade as well and may continue to be a long-term buyer’s market for the foreseeable future. We shall see.
In 2001, Sinopec and CNPC controlled over 80% of base oil supply, a figure which shrunk to just 44% in 2012 as foreign and domestic oilcos found new supply lines through South Korea, Singapore and Taiwan. CNOOC has been busy acquiring overseas assets and collaborating with international firms in domestic ventures, too, to ensure a steady supply.
A major management reshuffle might be on the cards at PetroChina, after a former chairman and numerous other senior level employees were removed from their posts. Internal sources say the company could be divided into several regional entities focusing on different business sectors, which would also be likely bring down costs for lubes producers.
As the market develops and increases in confidence, the number of joint ventures and collaborations is also surging. Great Wall Lubes and Shanghai Petrochemical Corp are developing new synthetic oils; Dongfeng Castrol have released two new high quality lubricants lines; and Shell Tongyi has recently claimed three industry awards for its versatile U-Series lubricant.
Combining and sharing expertise in a diverse market could be a winning strategy for lubes producers trying to manage the complexity of the Chinese market, especially with respect to marketing.
A recent report from Horizon Research Consultancy, a Beijing-based agency, found that mobile users’ habits varied greatly depending on their geographical location. Participants from major cities were much more likely to actively use their mobile devices for shopping, navigation and networking, while those from smaller cities used them primarily for entertainment purposes.
Large-scale producers planning nationwide campaigns will need to be aware of the changes in requirements and habits at a regional level when devising a comprehensive sales and marketing strategy.
OATS has now gathered data for over 80% of the cars operating in China and OATS’ new systems will support Chinese and English based text searching. When combined with the new product matching service, this will allow different recommendations to be supported in different parts of China, accommodating variations in temperature and local state of development.
If you want to find out more about how OATS Global Solutions can help you stand out in the China market (and elsewhere) contact Diana Shen Dshen@oats.co.uk.
Sebastian Crawshaw
Chairman and Owner, OATS