With China’s slowing GDP, many changes and new economy sectors will play an increasingly important role in the country’s future economic growth. China’s economic structure is transforming from investment- and export-driven to consumption-driven, with manufacturing and growing domestic consumption. Its changing economic strategy will bring both opportunities and challenges to different end-use industries.
Consumption of industrial lubricants is closely tied to end-use industry production, particularly process oils and metalworking fluids. Smart manufacturing is expected to have a profound influence on China’s manufacturing industries and shape the overall industry landscape in the long term. Furthermore, the trend toward automation and intelligent manufacturing has pros and cons for industrial lubricants suppliers.
While total consumption of industrial lubricants in China is predicted to decline between 2018 and 2023, at a CAGR of (0.7%), opportunities reside in various parts of the segment.
Within lubricants for commercial transportation in China, engine oil is the leading product category, and on-highway is the largest subsegment; the truck sector is the largest in the on-highway subsegment.
With bus sales declining, the biggest challenge to engine oil demand growth in buses is the penetration of battery-electric buses. BEV buses will be concentrated in public transport in cities, as well as coaches to travel between cities. Most will be large and medium-sized buses. Launched in 2015, the government plans to expand the new energy public bus population to 200,000 units by 2020.
Unlike buses, the truck population has experienced steady growth, which is forecast to continue. The heavy and light trucks have grown faster and gained market share in the truck market over the last five years. One of the primary reasons is the “One Belt One Road” policy, which stimulates the demand for heavy trucks, as many goods are exported to Central Asia by road.
In terms of consumer automotive, car sales had a sharp decline in 2019 to 20.06 million vehicles but are expected to gradually recover to 22.21 million units by 2023, still, that figure is around 1 milion to 2 million lower than new cars sales in 2016, 2017, and 2018. Since the majority of authorized repair garages’ maintenance business is from cars within the warranty period, the continued decline of new car sales is expected to put pressure on lubricant sales in authorized repair garages.
Furthermore, the growing share of EV cars in the new car sales mix will make the situation even worse.
The growth of e-commerce will negatively affect the authorized workshop channel, as the newer generation of vehicle owners are more likely to shop online for engine oil.
Buying lubricants either at retail or through e-commerce in China always brings the risk of acquiring counterfeit or adulterated products. This is a problem not typically encountered at authorized workshops. Increasing new government regulations focusing on the online sales of counterfeit merchandise and stricter enforcement will help grow the segment’s share of lubricant sales.
These and many other market conditions are analyzed in Kline’s thorough research of the Chinese lubricants market. To gain a basic overview, REGISTER FOR OUR WEBINAR. To plan future strategies for your business, whether you’re a local supplier or international manufacturer, subscribe to this timely study.