Growing environmental concerns and tightening fuel efficiency norms, as well as lubricant product innovations, are bringing changes to the North American consumer automotive lubricants market. While it has remained flat in the last five years, the market is now experiencing a fast change in the quality levels of lubricants. The consumption of synthetic and semi-synthetic products, particularly in the United States and Canada, is growing, resulting in extended average drain intervals for passenger vehicle lubricants.
Thus, despite a growing passenger vehicle parc in these countries, the demand for consumer automotive lubricants is declining. Mexico, which on the contrary is a market with a growth story due to lower penetration of synthetics and a growing car parc, provides some buoyancy to the overall North American consumer automotive lubricant demand. All three country markets within North America—the United States, Canada, and Mexico—present a different set of challenges and offer different opportunities to the market participants.
The U.S. consumer automotive lubricant market is becoming highly competitive as suppliers are introducing new synthetic products to their portfolios along with protecting their margins on their existing lubricant products. Synthetic lubricants business acts as a double-edged sword for lubricant suppliers, with a rise in value and profits for every gallon of synthetic products while the overall lubricants demand shrinks. The most impinged by this trend is the engine oils market, which has been consistently declining in volume demand due to the growing penetration of higher value synthetic products.
The battlefield is becoming more intense for the retail and installed trade classes in the United States amidst a declining overall consumer automotive lubricant market. Demand for lubricants is experiencing a significant shift away from the retail channels toward installed channels. The U.S. passenger vehicle industry is experiencing a shift in consumer behavior from DIY practices to DIFM practices. Increasing complexity in modern vehicles is ushering vehicle owners to take their vehicles to franchise dealerships, quick lube centers, and other authorized service chains for maintenance. With a growing number of passenger vehicle owners wading away from performing maintenance of their vehicles on their own, the sales of consumer automotive lubricants at auto part retail stores, mass merchandisers, and other retail outlets are declining. Such market conditions will continue to drive business into the bays of installed service providers, which in turn have become the focus of lubricant suppliers for increasing the sales of their premium lubricant products.
Additionally, growing interest and demand for electric vehicles in the United States is expected to do collateral damage to the demand for consumer engine oils in the future. Environmental and air quality concerns, and evolving mobility patterns have paved the way for the emergence of electric vehicles such as battery electric vehicles, plug-in hybrid vehicles, and hybrid vehicles. The supportive policy environment in the United States will enable OEMs to develop electric vehicles that are appealing to consumers. OEMs in the United States are already divesting from conventional internal combustion engines, thus adding momentum to the growth of electric vehicles in the United States. The penetration of EVs in the United States is forecast to reach 34% of the consumer vehicle parc by 2040. Though a long-term trend, it is likely to dampen the demand for PCMOs in the U.S. market to some extent in 2023 as well.
Overall, the United States accounts for over 80% of the North American consumer automotive lubricant demand, and despite a negative outlook for volume growth in the U.S. consumer lubricants demand, this market still has plenty of opportunities for suppliers to capitalize. Detailed insights on key trends and market conditions provided in Kline’s recently completed study, Opportunities in Lubricants: North American Market Analysis, can help suppliers understand these opportunities.
Similar to the United States, the consumer automotive lubricants market in Canada is becoming increasingly competitive due to declining lubricant demand and increasing penetration of synthetic lubricants. A vast majority of products used in Canada meet the latest API and ILSAC specifications and, correspondingly, more than 50% of automotive lubricants are synthetic or semi-synthetic. This also translates to longer oil drain intervals and reduced demand for lubricants by consumer vehicles. In such a market scenario, suppliers are trying to defend their market shares by offering a wide range of lubricants for passenger vehicles, applying aggressive marketing efforts, and using their long-standing reputation in Canada to their advantage.
The demand for consumer automotive lubricants in Mexico, on the other hand, is accelerating. Mexico, still being a market for largely conventional mineral oil-based products, does not face challenges similar to those of the United States and Canada. Conventional multigrades and monogrades still account for more than 60% of the total engine oil demand in Mexico, requiring more frequent drains. This translates to a growth in demand for lubricants. However, the use of premium-quality lubricants is growing in factory-fill applications in Mexico’s export-oriented car manufacturing industry. This is expected to open up opportunities for global lubricant suppliers who can establish tie-ups with key OEMs and supply higher quality lubricants to them in Mexico.
Insights from the report will be discussed in an upcoming webinar that will be held on Wednesday, October 16, 2019 at 9:00 AM EDT. Please click here to register.