Issue: Apr 2006


Quick Lubes Driving Growth in the Chinese Installed Oil Market, According to Kline Study



by James Hilton

As the new car market in China accelerates at a brisk pace, Chinese drivers are opting to let someone else do the dirty work of changing the oil. This trend in Chinese car care is driving growth in finished lubricant sales through the quick lubes channel and is creating new opportunities for oil marketers, according to a new study by Kline & Company.

"Traditionally, Chinese car owners would go to the dealership or buy motor oil at a store and take it to a garage for changing, but as the quick lubes concept becomes more widespread, people are opting for a standardized level of service at a lower price than the car dealerships offer," says Li Wang, director of Kline's office in Shanghai. "Like in the more mature markets in Europe and the U.S., Chinese quick lube centers offer convenience with the oil included in the price of service, but virtually all locations need to offer extras like car washes and small repairs to make the business profitable."

According to the Kline study, BUSINESS OPPORTUNITIES IN THE CHINESE LUBRICANTS MARKET, 2004-2009, quick lube centers now comprise the fastest growing sector of the consumer automotive lubricants market in China, with 17% average annual growth expected over the next five years. Kline pegs the overall finished lubricant market in China at more than 4.5 million metric tons, valued at almost $6 billion. The consumer segment represents about 10% of this volume, and engine oils account for about 90% of consumer sales.

Kline's report states that new car purchases in China are expected to grow at 10% to 15% a year over the next five years, and this alone will boost consumption of consumer automotive lubricants. But other factors are driving growth as well.

"Along with the increase in the number of cars on the road, the Chinese government is working to upgrade the standard of car repairs by eliminating thousands of mom-and-pop garages all over China," says Dr. Frans van Antwerpen, project manager for Kline's Petroleum & Energy practice. "In order for these garages to survive, they could upgrade to become a certified quick lube center. The lube marketers are going out and upgrading these small garages, providing marketing materials and contracting for exclusive use of their products."

"In this instance, consumer demand, government programs, and business interests are all converging to grow the consumer automotive market in China, so there's a real opportunity to capitalize on this trend by franchising small garages as quick lube centers," says Bill Downey, vice president and head of Kline's Petroleum & Energy consulting practice.

Caltex is the largest quick lubes player in China at the moment, with more than 2,000 franchised garages providing quick lube services.

In addition to the quick lube oil market, the Kline study also points to significant prospects in the market for automatic transmission fluid (ATF).

"Right now, ATF is not being produced in China, but the number of cars with automatic transmission is growing," says van Antwerpen. "This is another great opportunity for multinational lubricant manufacturers to capitalize on one of the fastest growing automotive markets in the world."

BUSINESS OPPORTUNITIES IN THE CHINESE LUBRICANTS MARKET, 2004-2009 provides an in-depth analysis of commercial automotive, consumer automotive, and industrial lubricant products, markets, and suppliers. Primary research conducted by Kline Asia's Shanghai office comprises 95% of the overall research methodology for this comprehensive report. It is specifically designed to assist marketers and formulators of lubricants in understanding the market dynamics and in capitalizing on the developing business opportunities.

For more information on this study, go to http://www.klinegroup.com/y584.htm or contact Geeta Agashe at +1-973-435-3484 or geeta_agashe@klinegroup.com. Those based in Europe should contact Erin Durham at +39-0331-931807 or erin_durham@klinegroup.com. In China, contact Li Wang at +86-21-5382-6677 or li.wang@kline-asia.com.

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