“Auto lubricants industry is continuously evolving”

OEM specifications and government regulations are increasingly directing the auto industry towards more fuel-efficient lubricants. While the deadline for the BS VI rollout is 2020, auto makers have already started working on models compliant with the new policy. For the lubricant companies, especially in India, the move to BS VI and its smooth implementation demands for them to be at par in supplying technologically advanced lubricant products when the demand rises, says Praveen Nagpal, Chief Technology Officer, Shell Lubricants India. For Shell, India is the third largest market (after US and China) with close to 5 per cent market share. In this interview with Rakesh Rao, Praveen Nagpal tracks emerging trends in the auto lubricant market and the company’s growth plans for India.

How is Shell catering to the India’s automotive industry?
Shell Lubricants keenly focuses on forging partnerships for collaborative research and product development with Indian industries. Our business is divided into B2B and B2C in India. Specific to the automotive industry, being one of the world’s leading suppliers of hydrocarbon products and services, we strive to meet the needs of our valued customers with a diversified product range. We understand that every machine has diverse, specific and unique demands. For instance, when it comes to engine oils, we focus on what kind of engine oil should be used for different components. Be it oils or greases we have host of products for critical applications.

In terms of formulation, while we have products with various chemical compositions, we are constantly moving to superior quality offerings and improved technology. For instances, we have recently introduced Shell Helix HX8 - a fully synthetic motor oil, manufactured with 100-percent synthetic base stock. We have also developed new generation synthetics gear and compressor oils. As technology continues to evolve, we continue to focus on new generation synthetic and low viscosity diesel engine and passenger car motor oils. We offer products of various formulations ranging from conventional mineral oils to synthetic/semi-synthetic ones, depending on the machine’s demands.

We have products for every segment – passenger vehicles, off-highway equipment, 2W motorcycles, 3W vehicles, and commercial vehicle segments along with other sectors. We offer Shell Advance for two wheelers, Shell Helix for passenger cars and Shell Rimula for the CV segment. Our strategy is to continue working with major OEM’s and develop customised lubricants for them across the CV and passenger cars segment. We always put the customer at the heart of what we do. We are working with key OEMs like John Deere, Maruti Suzuki, Hyundai, Komatsu and Thermax, to name a few.

How has been the demand for your auto lubricants in India? Are you seeing high demand for any specific type of lubricants?
In India, Shell’s portfolio of lubricant brands in the automotive sector includes Shell Helix, Shell Rimula and Shell Advance. India is a $ 2.6 billion lubricant market which is growing at 2.2 per cent annually. After US and China, India is the third largest market for Shell, where it has close to a 5 per cent share.

Traditionally, we had a very industrial and OEM focus. However, we eventually realised the immense potential in reaching out to the consumer directly. We realised that to win in India, we need to win in the automotive sector which is the key pillar of our strategy.

For this, we implemented a two-pronged approach:
Distribution through entry level and mainstream products: We are looking at low cost packaging solutions to address the entry level in the MCO category. With our focused strategy, we have already doubled volumes in the last two years.

Rapidly educating and encouraging Shell loyalists to shift to synthetics: OEM specifications and government regulations are increasingly directing the industry towards more fuel-efficient lubricants. As per the latest information by Kline, there are over 31.5 million passenger cars in India growing at 5 per cent CAGR. The Indian PCMO (Passenger Car Motor Oils) market is undergoing a shift from heavy viscosity oils towards lighter synthetic oils, with the share of synthetics (both semi synthetic and full synthetic) amounting to 26 per cent. With increasing consciousness towards reducing emissions, this category is growing faster, at a CAGR of 12 per cent.

Are you seeing demand for synthetic and semi-synthetic lubricants growing at a rapid pace than mineral oils in near future?
With evolving market dynamics, we do see a significantly growing demand for products formulated with the latest state-of-the-art technology. For instance, Shell Helix HX8 is a fully synthetic motor oil, manufactured with 100-per cent synthetic base stock to achieve higher performance levels than semi-synthetic and mineral oils. This has been introduced after the Shell Helix HX7 formulated with a semi-synthetic base, meaning that it utilises a combination of synthetic technology and mineral oils.

The key differences between these are the unique combinations of base oils and additives in each of the formulations. Compared to mineral oils, synthetic base oils are purer and of better quality as they have fewer unwanted components such as sulphur-containing compounds, reactive or unstable hydrocarbons, etc. Also, synthetic base oils have more uniform molecular compositions giving lower fluid friction, excellent viscosity control and outstanding stability over a wider temperature range.

Synthetic motor oils offer superior performance over mineral oils and are optimised for today’s more advance engines to provide better cleansing power, less engine wear, better low-temperature flow, reduced oil consumption and better oxidation stability.

What are the emerging trends in auto lubricants industry?
The auto lubricants industry is continuously evolving and witnessing several developments. As the automotive industry is becoming more dynamic and vibrant with changing customer preferences toward energy-efficient and performance automobiles, OEMs are offering efficient lubricants that can protect components from wear and tear and increase the replacement interval.

According to research and surveys conducted, the top three emerging market trends driving the automotive lubricants market include a growing usage of synthetic oils in APAC, a shift towards thinner oils and a constant need for technological updates.

Moreover, electrification is the future of automotive industry and EVs have caught the fancy of automakers and policy makers alike in India and around the world. With the government’s massive push, this is going to be the new face of the Indian automotive sector.

Lastly, the government's decision to leapfrog from BS IV emission norms to BS VI to drive a step change in reducing emissions will also be the face of the future of Indian automobiles. While the deadline for the BS VI rollout is 2020, several leading car and commercial vehicle manufacturers have already started working on new models compliant with the new policy. This is a great sign on how fast we are adapting to the norms. For the lubricant companies, especially in India, the move to BS VI and its smooth implementation demands for them to be at par in supplying technologically advanced lubricant products when the demand rises.

Electric vehicles (EV) are gaining traction. Will rising EV numbers have an impact on auto lubricants consumption in the future?
Electric vehicles do not require petroleum and hence are environment friendly as there is less or no gas emissions involved. These EVs do not have any internal combustion engine; their system is based on electric motor.

While electric motors don’t require engine oils and lubricants, Shell is in the business of reducing friction in moving parts, and not just offering engine lubrication. We are friction reducers. So, for every machine to run efficiently, today, we may be doing it through lubrication but tomorrow we may be doing it through data analytics. Innovative mobility solutions in the near future would create a need to get into the business of running data analytics, telematics, sensors, AI, and machine learning. Also, for EVs there is a need for high performance products like transmission fluids, which provides us with opportunities.

We, as a lubricants major, are fully committed towards providing energy efficiency and carbon footprints through our offerings to our end consumers. Therefore, as a company, we want to fully embrace it, because it’s in line with our vision to provide cleaner and energy-efficient solutions. Shell majorly believes that the implication of EVs in the economy will open several doors and will provide us numerous opportunities as well.

What are the growth plans for your auto lubricants business?
In terms of our current lubricant output in India, the growth rate in the last few years has been around 20 per cent and we expect this to continue as we aggressively plan to expand our business. At present, our production is around 150 million liters, and we expect it to rise by 20 per cent in coming years too. We also plan to take our total fuel retail outlets from 100 to 1,000 in the next few years. India is a $ 2.6 billion lubricant market which is growing at 2.2 per cent annually. There is no other market in the world which can provide you this kind of an opportunity. It is one of the top three growth markets for us and we are making continuous investments in people, processes and technology. There is a lot of scope in the automotive lubricants market and we plan to increase our market share from 5 per cent to 15 per cent and significantly increase our digital spend.