The Growing Business of LUBRICANTS

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The Growing Business of LUBRICANTS

--BY REBATI ADHIKARI

Globally, the automotive market is shifting towards electric vehicles with governments announcing stringent measures to control CO2 emission. However, Nepal is still an emerging auto market where there is huge potential for internal combustion engine (ICE) vehicles thereby making the South Asian nation a lucrative market for lubricants.

Official data related to the import of engine oil shows the growth of demand for lubricants in the last five years.

While the commercial and passenger four-wheelers, heavy vehicles and two-wheelers are the major segments with the highest lubricant consumption, the demand for industrial lubricants is also growing slowly, according to distributors.

The Growth of Nepali Lubricant Brands
Home-grown brands such as PLO, Control, MB Lube and Superb have also come up as players in the market. Purbanchal Lube Oil has been producing PLO lubricants whereas Control, MB Lube and Superb are produced by Fujima Oil Company, MB Petrolube Industries and Superb Lube, respectively. Similarly, Nepal Lube Oil Limited (NLOL), a Chaudhary Group company, has been producing and distributing Gulf lubricants in Nepal for the last three decades.

“The presence of home-grown brands in the market is growing which has helped to reduce the dependence on imported lubricants,” says Krishna Prasad Dulal, managing director of Purbanchal Lube Oil. According to Dulal, who is also the president of NADA Automobiles Association of Nepal, domestic brands collectively hold around a 35 percent share of the Nepali lubricant market. The domestic industries that began their operations by simply bottling and packaging lubricants have now expanded their activities. For instance, Purbanchal Lube Oil, which has PLO, Star, Mega and Prime as its major brands, has started production of packaging materials such as bottles, cartons and labelling stickers on its own.

Dulal argues that the time has come for the government to recognise domestic lubricant producing companies as industry. “When an industry producing products with 10 percent of value addition can be called a ‘national industry’, why can’t we get the recognition? Our products are value added,” he claims. According to Dulal, PLO currently commands a 10 percent share of the market, sells 3 million litres of lubricants annually and provides employment to 500 people. Dulal says that Nepal is on its way to become self-reliant on grease as domestically produced grease fulfills over 90 percent of market demand. “For PLO, grease is the highest selling product at present,” he informs.

A licensee of the American lubricant brand Gulf, NLOL is another major lubricant manufacturer in Nepal. According to the company’s General Manager Ganga Raj Bhattarai, NLOL produces 2,200 kilolitres of lubricants while also importing 1,200 kilolitres from India and UAE. The company is currently planning to double its production capacity from the existing 5,000 kilolitres and plans to increase the filling capacity by three-fold. “NLOL is also preparing to produce synthetic engine oil. We are in the process of installing the required machines which is expected to be completed in the next two months,” he informs. Synthetic engine oil is a high-grade lubricant used in high performance vehicles with technically advanced internal combustion engines.   

 Meanwhile, PLO is seeking to export its products to international markets. According to Dulal, the company’s plan is in the initial stages of conceptualisation and will require time and government support to materialise. “To be able to export products, we need subsidies. As there are chances that customs duty waiver on import of raw materials can be misused, there should be a waiver in income tax for exporters of lubricants,” he suggests.

To facilitate the growth of the domestic lubricant industry, the government has provided incentives for producers in the Federal Budget for FY2020/21. As per the arrangements in the budget, domestic Industries enjoy a customs duty difference of 10 percent in import of raw materials and imports of finished goods; there is a 15 percent customs duty on import of raw materials while a 25 percent customs duty is levied on import of foreign lubricants. “Similarly, there is a mandatory provision for industries to purchase domestically produced industrial lubricants. We are discussing with various organisations for the implementation of this provision,” mentions Dulal.

Presence of International Brands
For the last several decades, foreign brands have dominated the Nepali lubricants market. Castrol, Total, MAK, HP, Servo, Mobil, Gulf, GS Caltex, Motul and Veedol are among the major international brands offering different types of engine oils, coolants and other lubricants for four wheelers and two wheelers.

Castrol is among the international brands with longest presence (of over two decades) and commands a market share of around 15 percent. The brand of the UK-based petrochemical giant BP is distributed in Nepal by Nepal Overseas Trading Concern (NOTC) from its 30 distribution channels across the country. “Currently, we are distributing 90 percent mineral-based and 10 percent synthetic-based engine oil in the market,” says Amar Jyoti Ranjit, marketing manager of NOTC. According to him, the company has been selling popular Castrol brands including Activo, GTX and Vecton, respectively, for two-wheeler, car and heavy vehicles. Ranjit says that synthetic lubricants are becoming popular in the car segment and NOTC has recently launched Castrol Power 1 engine oil targeting this segment.

Indian lubricants also have a strong presence in Nepal. MAK, HP and Servo are the biggest Indian brands competing in the Nepali market at present.  “MAK holds a 15 prcent share of the market,” claims Roshan Malla, assistant marketing manager of Sipradi Trading, the authorised distributor of MAK lubricants in Nepal. According to him, 4T Stallion, 4T Scotech and 4T Blaze are the highest selling products of MAK in Nepal. “All of our engine oils, greases and coolants have good sales. Last year we sold around 2,850 kilolitres of lubricants across the country,” says Malla.

Growing Sales of Industrial Lubricants
As automotive lubricants account for the major portion of the Nepali lubricant market, industrial lubricant is rather an untapped segment. But with growing industrial activities, the demand for such lubricants has grown.  Manufacturing activities require a lot of lubricants and coolants as machines and equipment operate under high pressure and temperature. “As per the rules, only API license holders are eligible to enter in the industrial lubricants business. As we got in lately, we are taking a steady step in this segment with satisfying sales of lubricants to cement factories,” says Malla.

According to NLOL General Manager Bhattrari, there is a huge growth potential for producers of industrial lubricants. According to Bhattarai, NLOL has increased its industrial lubricants sales from 5 percent to 30 percent in the last five years.

Concerns of Producers and Distributors
Nepal is predominantly a price sensitive market where low-priced products account for huge sales in every segment. According to dealers, the lubricant market is flooded with cheaper products as many vehicle distributors import these lubricants and recommend them to the buyers of their vehicles. “Cheaper and low-quality products affect the business of genuine products. So only those brands having a presence in two or three international markets should be allowed to enter the Nepali market. This will give a lift to home-grown brands and customers will also not be cheated,” says Dulal. He thinks that the government should allow lubricant imports only through the registration of agents or companies that have ISO and API certificates. 

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