Carbon dioxide emissions by vehicles, after the implementation of the new norms, are projected to come down from 142 gm per km in 2010-11 to 129.8 gm by 2021-22 and 113 gm 2022 onwards. This reduction of CO2 means guideline for fuel economy development from both hardware and lubricant side.
In the first phase, the government expects the passenger cars to consume 5.49 litres of fuel on average to cover 100 km by 2016, thus increasing the average mileage to 18.2 km per litre from 16.5 km in 2010-11, when the norms were initially proposed.
In the second phase, the consumption of fuel will come down to 4.77 litres for 100 km, increasing the mileage to 21 km per litre. The same as per our understanding will be also considered for commercial vehicles and two-wheeler segment.
This means that in coming one-two years the lubricants are not only required to ensure durability with extended drain but also improving fuel economy of vehicle which cannot be obtained by traditional lubricants but has to be met by co-engineered advance lubricants, especially designed for chosen hardware. Different models will require different type of advance technology lubricants as stress factor will vary from model to model but all models have to meet the same set of guidelines as set by government.
Main demand drivers
The market and future trends as reported by Kline & Company, Inc. in the ‘Opportunities in Lubricants India Market Analysis’ report are:
Total commercial lubricant market: In 2013, the on-highway segment consumes an estimated 460.2 kilotonnes or 61 per cent of the total commercial lubricant market, while the off-highway segment accounts for 299.8 kilotonnes or 39 per cent of the total
* Engine oil is the highest-selling product at about 60 per cent of total commercial automotive demand, followed by gear oil and hydraulic transmission fluid (HTF) at 18 per cent each.
* SAE 15W-40 and SAE 20W-40 account for 45 per cent and 39 per cent, respectively, of the total HDMO sales in the commercial automotive market for engine oils.
* The use of monogrades, which account for 12 per cent of total HDMO consumption in 2013, has been constantly declining.
* The use of fuel economy oil is slightly increasing, accounting for 2 per cent of the overall HDMO consumption.
* The usage of CNG vehicles is increasing, and CNG lubricants account for 2 per cent of the total HDMO sales in 2013.
The introduction of Euro IV-based Bharat Stage (BS) IV emission standards in April 2010 has led to technical changes in diesel vehicles, such as introduction of Exhaust Gas Recirculation (EGR) systems in vehicles. The sulfur limit under BS IV emission standards has been reduced to 50 ppm from 350 ppm.
CNG and LPG as an alternate fuel demand are picking up in India, especially in cities with access to CNG and LPG for CV segment other than passenger car. Demand for CNG specific lubricants is expected to grow in line with the growth in CNG vehicle population.
Euro V-based BS V is expected to come into force by 2020 in India.
For oil companies, having tie-ups with OEMs is becoming increasingly important to increase their foothold in the country. The profit margin is relatively low for suppliers in the OEM market, but it provides them access to the after-sales market as well.
A few suppliers are also coming up with co-branded oils with OEMs, which will help vehicle owners to associate the OEM brand with that particular supplier, and is expected to create a better brand image.
In an attempt to increase their penetration in the market, many suppliers as well as OEMs have been expanding their distribution reach and dealerships, respectively, in semi-urban and rural areas.
Oil drain interval extension
Most of the new BS IV vehicles that are being launched have engines that require better quality lubricants, which typically offer longer drain. Shell has established technology in fuel economy lubricants for CV and fill for life lubricants for transmission. Consequently, overall growth in lubricant demand due to the growth in vehicle population has been to an extent arrested by lubricants with long drain interval.
Shift in viscosity grades
In engine oil, the demand for 15W-40 has superseded demand for 20W-40, and it is expected that the ratio would get further skewed in the coming years, as most of the OEMs now recommend the use of the former.
Amongst gear oils, demand for monogrades has declined considerably over the last few years, while demand for multigrade has increased correspondingly.
As per Kline the overall lubricant consumption in India will grow at an annual rate of 2.5 per cent over the next five years. The commercial and industrial lubricant segments will exhibit a moderate growth of 2.3 per cent and 1.6 per cent per year, respectively.
To meet the challenges on soot induced wear and viscosity increase posed by high EGR rates combined with high sulfur fuel while maintaining the ODI, OEMs are now recommending engine oils with API CI-4 plus specification for their latest models.
Engine oils with API CJ-4 specifications confirming to Low SAPS (sulfated ash, phosphorous and sulfur) which were designed for low sulfur fuels like ULSD (ultra low sulfur diesel) should be used with caution for extended drain intervals in India.
Fuel economy benefits across engine and driveline are becoming increasingly important and OEMs are looking at Lubricants to contribute to their overall fuel economy target. This would mean a further downshift in viscosity grades.
However, many of these developments depend on Emission Norms Phasing Plan laid out by the government and availability of low sulfur fuels.