The Indian automotive lubricator market is the 6th largest market in the universe with grosss of about $ 1. 30 billion in 2002. It is besides one of the fastest turning retail markets in India. Until 1993. it was a extremely regulated market with a clear laterality of the public sector. Companies like Bharat Petroleum ( BPCL ) . Hindustan Petroleum ( HPCL ) . and Indian Oil Corporation ( IOC ) held more than 75 per centum of the market portion. In recent old ages. with the coming of the increasing figure of multinationals in the Indian market there is a turning presence of private companies.
Companies like Castrol. Elf Total-Fina. Gulf. and Shell Oil have made their presence felt in the market. Market Size Total production of automotive lubricators in India is about 8 to 10 per centum of planetary lubricant production. Unlike other states where lubricant demand has witnessed stagnancy. the Indian market has been turning at about 7 per centum per annum for the past 2 old ages. The public sector contributes to over 60 per centum of the grosss for this market. MNC’s have 5 per centum market portion and the staying portion is held by the unorganised sector. Automotive lubricators are farther divided into Diesel lubricants and gasoline lubricants.
Diesel lubes comprise 70 per centum of the market and gasoline based lubricators cover the remainder. As Diesel lubricants are used by commercial vehicles. which have to cover greater distances. their market portion is higher. Engine oil constitutes around 83 per centum of entire gross revenues volumes. Gear oils. transmittal fluids. hydraulic brake fluids. and engine coolants contribute to the balance. Competitive Analysis The first seeds of competition were sown in the early 1990’s when following the liberalisation of the Indian economic system. the authorities decided to open the Indian market to foreign competition.
Import of base oil. the cardinal natural stuff. was de-canalized with IOC losing its position as the exclusive canalizing agent. Pricing of base oil was deregulated in a phased mode and presently it is market determined. Basic usage responsibility on base oil stock was besides reduced from a extremum of 85 per centum to a degree of 25 per centum. All quantitative limitations were besides removed. These developments of course encouraged the entry of foreign participants on Indian shores who were already confronting a lag in demand in their local markets.
The coming in of foreign participants created an extra supply state of affairs in the Indian automotive lubricant market. which made it more hard for the Indian lubricant makers to last. Recent deregulatings in the lubricator market have promised many new chances for the private lubricant makers. With the dismantlement of Administered Price Mechanism ( APM ) the load of subsidies is now being passed on to the authorities. Private participants will besides derive a presence in the Indian oil and gas sector and hence there will be competition between participants that will guarantee the growing of the sector.
In the following twosome of old ages. the industry is traveling to witness sea alterations. Retail webs. logistics direction. and hazard direction are traveling to be the important factors. The stand-alone refineries will hold to be merged with the selling companies. as they do non hold the distribution substructure to sell their merchandises in a deregulated market. Companies like Reliance are already selling their merchandises through gasoline pumps. The monopoly of the public sector retentions will no longer be. MNC’s will be able to sell their merchandises through gasoline pumps.
Lubricants manufactured by Reliance Petroleum. Castrol. Elf. Gulf Oil etc. which are now sold at gasoline pumps. In medium to long term. Frost & A ; Sullivan expects private sector companies to hold a market portion of around 25 per centum. Distribution Structure There are two cardinal markets for lubricators in India. Given high degrees of competition original equipment. linkages are deriving importance. The original equipment market contributes about 70 per centum and 30 per centum of the market is comprised by the retail gross revenues section. The channel for replacing market or the retail section is petrol pumps or retail shops.
About 70 per centum of the lubricators in India are sold through gasoline pumps. Most of the MNC’s have tied up with oil big leagues for marketing their lubricators like Castrol with Escorts and Tata BP with Telco. After the deregulating of the gasoline pumps companies are keenly watching the developments in the lubes market. The distribution channel adopted by public sector units is through the gasoline pumps. Other private participants have had to put up an independent substructure comprising of distributers. stockiest and retail merchants through out India. MNC’s and private companies sell through retail shops.
To vie with dominant public sector distribution. constructs like “Bazaars” and “Super Stores” have besides been developed. Castrol developed the construct of “Bazaars. ” These are mercantile establishments meant merely for lubricant gross revenues. The construct of “User Outlet” is another new construct developed by Castrol. In this. the consumer selects his ain trade name of lubricant after giving his vehicle for service in the same mercantile establishment. Convenient shops and main road Michigans for vehicles are being built from where the vehicle proprietors can acquire their vehicles repaired and acquire their supply of lubricators.
In the lubricant market. Indian Oil Corporation Limited is taking the market with 30 per centum market portion. Castrol is following with 25 per centum of the portion and HPCL and BPCL are following with approximately 20 per centum and 15 per centum portions severally. Other private companies hold the staying market portion. Key Success Factors Frost and Sullivan believe that the cardinal factors for success in this extremely disconnected and competitory industry include: Brand Image With lubricators going a fast moving consumer good and the trade name penchant of the consumers witnessing a alteration. trade name image plays a cardinal function in impacting the consumer’s determination to purchase a lubricator.
In a recent survey by Frost & A ; Sullivan. it was found that vehicles owners’ determination to purchase a certain lubricator is affected by a garage machinist. retail storeowner. or the advertizements. Hence. it becomes of import to hold a good trade name name in the market. which can impact the customer’s determination to purchase a certain trade name. Distribution Channels With increasing figure of participants in the market. it is critical for the companies to make a wider section of clients. The lubricators market in India is really extremely disconnected and complex. Public limited companies selling chiefly through gasoline pumps manage to accomplish a deeper incursion.
Most of the MNC’s have tied up with oil big leagues to market their trade names like Castrol with Escorts. Tata BP with Telco. This will assist the private companies to set up a broad entree. trade name consciousness. every bit good as penchant. Margins and Discount Schemes Private companies largely sell their merchandises through stockiest. traders. distributers. mechanics. and retail shops. Maximal gross revenues are achieved through mechanics and retail shops. Margins and price reduction strategies offered to the storeowners and mechanics prompt them to sell and advance a peculiar trade name. Monetary values and Promotion
The transmutation from the administered pricing mechanism to free pricing has increased the importance of supplying cost effectual merchandise to the users. Thus merchandise costing and competitory pricing are cardinal factors impacting the market. Market Trend In the recent yesteryear. the Indian lubricator market has witnessed a stage of consolidation. Multinationals with better engineering. trade name name and fundss have the power to establish themselves on their ain in the market. However. with increasing figure of rivals it is non possible for every one to carve a nich in the market. This sector has witnessed considerable sum of amalgamations and acquisitions.
British Petroleum’s non so recent acquisition of Castrol is one illustration. The Indian lubricant market is a contentious market topographic point and lubricant companies find themselves contending a tough conflict for endurance. In the OE sector besides lubricant fabrication. companies are come ining into coactions with vehicle industries. Maruti Udyog. Hyundai Motors. Hindustan Motors. TAFE. Toyota. and Skoda have entered into coaction with IOC and Castrol for some of their theoretical accounts. Outlook In the hereafter. growing in the automotive lubricators industry will mostly depend on the overall public presentation of the economic system.
In the past 1 and a half old ages. the scenario has improved with higher gross revenues of commercial vehicles and two-wheelers. However. in the hereafter volume growing will be affected because of usage of better quality. long drain lubricant. This will increase the replacing rhythm for lubricant. In the shorter term. one will witness intense competition in a slow turning market marked by a consolidation activity. which has the possible to alter the face of the lubricant industry. Given the lifting competition. success of a merchandise would mostly depend how good it is branded and distributed.