The Total Addressable Market (TAM) for Engine Oil was valued at USD 39.78 billion in 2022. It is estimated to reach USD 51 billion by 2031, growing at a CAGR of 2.8% during the forecast period (2023–2031).
Engine oil is a lubricating system explicitly designed for use in engines. It decreases friction between engine surfaces that come into contact with each other. It reduces energy waste caused by friction and is highly effective in cleaning, cooling, and protecting metal components from corrosion and rust. A good quality engine oil is critical for the proper operation of an engine as it enables smooth engine operations, prevents engine damage, and extends engine life.
Engine oils are used in internal engine applications. An ideal engine oil ensures a clean and rust-free engine, improves fuel economy and performance, extends engine life, and reduces vehicle emissions. Gear oils, such as manual and automatic transmissions, are primarily used in car gearboxes. They comprise high-viscosity base oil and specific additives and protect gear components from intense mechanical pressure. Hydraulic oils are used in hydraulic machinery to transmit power.
Environmental agencies have stringent emission regulations for vehicles to reduce the environmental impact. Moreover, various engine oil manufacturers, such as Shell (UK), ExxonMobil (US), and Castrol (UK), develop products and production processes in a way that will meet emission regulations and improve their productivity and profitability. Therefore, the demand for good-quality engine oils has increased.
Companies invest in R&D to develop vehicles that reduce GHG emissions, have a low environmental impact, and deliver high performance. The engine oil business must work with automobile manufacturers to develop products compatible with each manufacturer’s vehicle design and fall within the regulations set by various governments. In addition, global governments recognize the severe impact of vehicle emissions on the environment and human health and implement stringent rules on vehicle emissions. As a result, various companies, such as Valvoline (US), FUCHS (Germany), and Gulf Oil (US), invest in R&D to develop good-quality engine oils that will meet emission regulations. As a result, there is a significant need for engine oil of superior quality.
India, China, and Brazil are emerging economies with promising potential for the engine oil sector because of their sizable populations. The oil and gas, agriculture, automotive, and pharmaceutical industries are major demand generators in emerging economies. In addition, emerging economies have low-cost labor. Therefore, foreign companies establish manufacturing plants in emerging economies. As a result, emerging markets can increase their international presence and improve their exports to foreign countries.
Industrial development in developing countries in Asia and Latin America is also high. Emerging economies develop at a rapid pace and advance their production and manufacturing processes by investing in R&D, which creates a competitive market environment. Emerging economies invest in sustainable practices; reduce air, soil, water, and marine plastic pollution; and promote low-carbon transport to strengthen their infrastructure and financial capacity, thereby driving the market growth.
In 2020, battery electric vehicles (BEVs) constituted two-thirds of the stock of electric vehicles as well as newly registered electric cars. The European Union had set 2020 as the goal year for compliance with CO2 emissions standards for new automobiles per the IEA. Many countries loosened automobile license restrictions, letting more ICE cars be registered to help local car manufacturers in response to the pandemic's economic concerns. EVs do not need any ICE as they run on battery power and are driven by one or more electric motors powered by rechargeable batteries decreasing engine oil demand. The mentioned factors state that the EV market is expected to grow further, negatively impacting the global engine oil market.
Emerging economies, such as Brazil, China, India, South Korea, Saudi Arabia, and Russia, are developing rapidly, increasing their per capita income. In addition, the infrastructure in emerging economies developed over the past decades is boosting the global automotive industry's production capacity and competitive standard. Regulations laid down by governments in emerging economies help increase the production capacity of the automobile industry. The recent COVID-19 pandemic fueled the demand for passenger cars as they are the safest mode of transport.
The automobile industry in emerging economies experiences immense growth because of low-cost raw materials, R&D investments, low cost of skilled labor, and availability of employment opportunities. As a result, automobile manufacturers, such as Hyundai, KIA, Mahindra, Tata Motors, SAIC Motors, and FAW, invest in R&D. These companies launch passenger cars with better performance and fuel efficiency, deliver high-value products at reasonable prices as customers are price-sensitive giving rise to the demand for passenger vehicles. Therefore, the high demand for passenger cars in emerging economies also increases engine oil demand.
The global engine oil market is segmented by end-user and oil type.
By end-user, the global market is divided into automotive and transportation, heavy equipment, power generation, and others.
The automotive and transportation segment is responsible for the largest market share and is anticipated to grow at a CAGR of 5.71% over the forecast period. The automotive and transportation industry is the largest consumer of engine oil. ICE vehicles are subject to breakdowns due to different operating environments, extreme temperatures, and the formation of sludge and wax. Therefore, frequent engine oil changes are required to ensure the smooth operation of a vehicle. The transportation industry enables the movement of people and goods through roadways, railways, marine, and air transport—all these modes of transport use ICEs that use engine oils.
In addition, the transportation sector plays a vital role in the economic growth of economies globally. The increased global population increases the demand for transportation, which positively affects the demand for engine oils. Additionally, there is rapid infrastructure development in emerging economies, which also increases the need to transport heavy materials used for construction, industrial machinery, and equipment used in industries fueling the demand for engine oils.
Heavy equipment is generally powered by diesel engines owing to more power output required for their various operations. In addition, heavy equipment runs for long hours, work with heavy materials, and operates in dusty regions, which puts extreme pressure on the engine and generates a tremendous amount of heat compared with other vehicles. Therefore, high-quality engine oils are required for operating heavy equipment that can sustain in different operating environments and extreme temperatures and reduce the formation of sludge and wax. Agricultural vehicles mostly run on heavy-diesel engines equipped with hydraulic systems. Therefore, these vehicles require high-quality engine oils. Heavy equipment is used in construction and infrastructure development projects, reducing labor and time. Increased construction and infrastructure growth and technological developments with rapid industrialization raise the demand for heavy equipment. These factors will drive the demand for engine oils used in heavy equipment during the forecast period.
By oil type, the global market is segmented into semi-synthetic, fully synthetic, and mineral oil.
The semi-synthetic oil segment owns the market and is expected to grow at a CAGR of 5.47% for the forecast period. Mineral and fully synthetic oils are combined to create semi-synthetic oil. Semi-synthetic oils typically have a synthetic-to-mineral oil ratio of between 25:75 and 35:65. Semi-synthetic engine oils enable customers to obtain premium engine oils at affordable prices because they are more expensive than mineral oils but less expensive than fully synthetic oils. Semi-synthetic oils offer properties similar to fully synthetic oils, such as increased engine performance, excellent parts protection, and optimized performance. However, the cost of semi-synthetic oils is low compared with fully synthetic oils, as the properties offered by semi-synthetic oils are less than fully synthetic oils. Semi-synthetic oils are thinner, more durable than mineral oils, and compatible with modern engines. Semi-synthetic oils are an economical alternative to fully synthetic oils for engines that cannot use mineral-based oils.
Fully synthetic engine oils are produced from 100% synthetic base stocks and high-quality additives that offer higher performance levels than semi-synthetic and mineral oils. Fully synthetic oils are chemical compounds modified by mixing many synthetic components. Heat is generated due to friction when engine parts move at high speeds causing engine components to wear out and break down. Fully synthetic engine oils offer protection to these components at extreme temperatures. Therefore, fully synthetic oils are a good substitute for mineral oils. Fully synthetic engine oils provide better performance and security than conventional engine oils.
Furthermore, fully synthetic engine oils are specially formulated with additives to provide additional performance benefits, such as sludge deposit and wear reduction. Fully synthetic engine oils are derived through complex processes that remove impurities from crude oil, and each molecule is customized to the requirements of modern engines. Therefore, customized synthetic engine oils provide better performance and protection than other engines.
By region, the global engine oil market is divided into North America, Europe, Asia Pacific, Latin America, and the Middle East and Africa.
Asia-Pacific is the most significant global engine oil market shareholder and is anticipated to grow at a CAGR of 5.84% during the forecast period. China and India are the most critical engine oil markets in Asia-Pacific. Rapid urbanization, disposable income, and industrialization fuel the growth of the automotive, food processing, cosmetics, and textile industries and augment the demand for engine oils. The need for engine oil in the region is high due to demand from the automotive and transportation, mining, manufacturing, and machinery sectors. The accessibility of inexpensive labor and raw resources further stimulates the expansion of the regional market. In Asia-Pacific, China, India, Japan, and Indonesia are the major markets as the respective governments encourage foreign investments. An increase in purchasing power, economic growth, government subsidies and grants, and automotive and construction activities primarily support the market growth in the region.
North America is estimated to grow at a CAGR of 5.31% over the forecast period. The US and Canada contribute to the region's high demand for engine oil. Due to the expansion of the automotive and transportation sectors during the past ten years, the engine oil industry in North America has experienced tremendous growth. North America also accounts for a significant share of the engine oil market due to the high production and processing of oil and gas. The North American automobile sector will draw substantial investments throughout the forecast period.
Furthermore, stringent environmental regulations laid by governments compel vehicle manufacturers to invest in R&D. In 2021, Ford Motors and General Motors invested more than USD 34.5 billion in R&D. In addition, companies such as Castrol (UK), Gulf Oil (US), and Valvoline (US), form partnerships with car manufacturers to develop better engine oils. The North American Free Trade Agreement (NAFTA) compels US-based automakers to adopt North American-made equipment to strengthen their supply chains. Such advances in the vehicle-manufacturing industry fuel the region's need for engine oils.
Europe is one of the largest and most developed regions and is home to countries such as the UK, France, Italy, Germany, and Spain. The industrial revolution developed Europe in terms of standard of living, per capita income, advances in production, and adoption of new technology. The region's world-class automotive, construction, agriculture, and transportation industries drive the demand for engine oils. A sustainable and competitive European construction industry has many driving factors for engine oil demand. Environmental protection and energy efficiency policies that promote sustainable development affect the construction and infrastructure industry, ultimately boosting the demand for synthetic engine oils.
Mexico and Brazil account for a significant share of the engine oil market in Latin America. Increased oil exploration and discovery and growth of the automotive industry in Brazil, Mexico, Argentina, Chile, Colombia, and Venezuela drive the demand for engine oils in Latin America. In the first half of 2020, sales of light vehicles dropped by at least 29% from the previous year during the same period due to the COVID-19 pandemic, according to the OICA. Despite declining sales, Latin America accounts for 3.2% of global light vehicle sales. The factors mentioned above create a positive environment for the engine oil market.
Iran, South Africa, Saudi Arabia, and the UAE dominate the engine oil market in the Middle East and Africa. Abundant crude oil reserves, highly established infrastructure, and the presence of top-notch players in the country are the primary factors contributing to the region's engine oil market growth. Saudi Aramco, Gulf Petroleum Group, Qatar Petroleum, and Abu Dhabi National Oil Company are some prominent producers of base oil in the region.
The key players in the global engine oil market are
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