Market Dynamics
Market drivers
Rising demand for high-quality engine oil
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.
Market restraint
High demand and production of electric vehicles
The high demand and production of electric vehicles (EVs) significantly impact the engine oil market. As the automotive industry gradually transitions to electrification, the demand for conventional engine oils, which are primarily used in internal combustion engines (ICEs), is expected to decrease. According to the International Energy Agency (IEA), In 2023, there was a significant increase in electric car sales globally compared to 2022, with a rise of 3.5 million units, representing a 35% year-on-year growth.
The increase in EV demand can be attributed to a number of factors, including government incentives, increased consumer awareness of environmental concerns, and advancements in battery technology. Electric vehicles (EVs) typically use specialized greases and coolants for their electric motors and drivetrain components, which require different lubrication than ICEs. Thus, the growing adoption of EVs has a negative impact on engine oil demand, as these vehicles do not require the same lubricants as conventional gasoline or diesel-powered vehicles. Thus, these factors are anticipated to restraint the global engine oil market growth.
Market opportunity
Growing demand for passenger cars in emerging economies
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, thereby creating opportunities for global market growth.
Regional Analysis
Based on region, the global market is bifurcated into north america, europe, asia-pacific, latin america, and the middle east and africa.
Asia Pacific holds the largest share of the global engine oil market and is projected to experience significant growth during the forecast period. This expansion is primarily driven by the booming automotive industry in China, India, and Southeast Asian countries. China, as reported by the China Petroleum and Chemical Industry Federation (CPCIF), is the region's largest market, consuming 7.8 million metric tons of lubricants, including engine oils, in 2022. In India, the lubricant market is expected to grow at a compound annual growth rate (CAGR) of around 6% from 2023 to 2028, increasing from $5.6 billion in 2022, according to the Automotive Component Manufacturers Association of India (ACMA).
Furthermore, the ASEAN region, which produced over 4.2 million vehicles in 2022, according to the ASEAN Automotive Federation, sees high engine oil demand, with Indonesia, Thailand, and Malaysia leading the way. Moreover, the region's dominance in the engine oil market is underpinned by robust vehicle production and sales, rising affluence, and the presence of major automotive manufacturing facilities. Additionally, the significant population and urbanization trends across the Asia Pacific contribute to increased demand for both passenger and commercial vehicles, driving up engine oil consumption. These factors collectively highlight the region's crucial role in the global engine oil market, ensuring its continued growth and dominance.
North America stands as the world's second-largest engine oil market, with the United States and Canada at the forefront. In 2021, the US led the region by consuming approximately 2.4 billion gallons of engine oil, as reported by the Energy Information Administration (EIA). Canada's engine oil market, projected by the National Lubricating Grease Institute (NLGI), is expected to grow at a 3-4% annual rate, reaching $1.2 billion by 2022. This sub-dominance is driven by North America's vast vehicle fleet, encompassing passenger cars, trucks, and commercial vehicles, alongside the presence of key automotive manufacturers and lubricant companies.
Additionally, the demand for premium and synthetic engine oils is significant due to stringent emission regulations and a consumer preference for high-performance vehicles. The American Petroleum Institute (API) certifies and licenses engine oils in the US, ensuring adherence to high-quality standards and performance. Furthermore, the expansion of e-commerce and logistics industries has spurred demand for commercial vehicles, further propelling the engine oil market. Despite a 17.5% decline in engine oil consumption in 2020 due to the COVID-19 pandemic, the market is expected to recover and grow steadily, bolstered by the robust automotive industry and a continued preference for high-quality lubricants.
Segmental Analysis
The global market is bifurcated into oil type, engine type, vehicle type, end-user, and sales channel.
By Oil Type,the market is segmented into Mineral Engine Oil, Synthetic Engine Oil and Bio-Based Engine Oil.
Mineral engine oil, refined from crude oil, is hence the most traditional and common form of engine oil. It offers basic lubrication and engine protection and is often the least expensive option. Many older vehicles do not require the advanced properties of synthetic oils, particularly those with less complicated designs. Mineral oils can sufficiently lubricate such engines, thus maintaining performance and reliability.
Synthetic engine oil is a high-performance lubricant, designed from chemically modified petroleum components or other synthesized materials. It offers better protection and performance than conventional mineral oils since it has high viscosity stability, improved oxidation resistance, and higher thermal resistance to breakdown. It, therefore, affords enhanced protection against wear of the moving engine parts. According to Veedol India, Synthetic engine oils are reshaping the automotive industry, driven by evolving emission requirements in recent years. As of 2023, the engine oil market was valued at a staggering $77.5 billion, and it's on an upward trajectory, expected to soar to around $105.5 million by 2027.
Bio-based engine oils are lubricants that originate from renewable biological sources such as vegetable oils, animal fats, and other renewable sources. These types of oils are formulated to provide specific environmentally friendly characteristics with traditional engine protection and performance properties. Across the globe, governments are implementing stringent environmental policies while providing incentives to users who use renewable and environmentally friendly products. Government regulations and incentives enhance the use of bio-based engine oils.
Based on the engine type, the market is segmented into gasoline and diesel.
The gasoline engine oil segment dominated the global engine oil market due to the widespread use of gasoline engines in passenger cars, light trucks, and other vehicles. These oils are specifically formulated to meet the lubrication needs of gasoline engines, offering enhanced protection, performance, and efficiency. Gasoline engine oils reduce friction, prevent wear, and maintain engine cleanliness. The high volume of gasoline-powered vehicles on the road, particularly in regions with a high concentration of passenger cars and light vehicles, drives demand. Additionally, the increasing production and sales of gasoline-powered vehicles globally contribute to this dominance. Performance requirements, technological advancements, and stringent environmental regulations further boost the demand for high-quality gasoline engine oils, securing a larger market share compared to diesel engine oils.
Based on vehicle type, the market is segmented into passenger cars, light commercial vehicles, heavy commercial vehicles, and two-wheelers.
Light Commercial Vehicles (LCVs) dominate the market. LCVs are widely used for transportation, delivery, and logistics services, contributing to their high demand and, consequently, the need for engine oils. The growth of the LCV segment is driven by factors such as rising consumer class prosperity, rapid urbanization, and the increasing demand for goods transportation. Additionally, the demand for SUVs has surged in recent times due to the increasing leisure and tour activities globally, further contributing to the growth of the LCV segment. The LCV segment holds around 35% of the market share, growing at a CAGR of 2.3%. The dominance of LCVs in the engine oil market is established by their widespread use in various industries, including e-commerce, logistics, and transportation, which drives the demand for engine oils to maintain the efficiency and performance of these vehicles.
By End-User, the market is segmented into Automotive, Industrial and Agriculture.
Global increases in vehicle ownership and usage drive demand for automotive engine oils. Modern vehicles come with advanced engine technologies that often require specialized engine oils. For instance, turbocharged engines and hybrid vehicles may need high-performance or low-viscosity oils to meet specific performance and efficiency standards.
This segment includes oils formulated for heavy-duty engines and machinery used in sectors such as manufacturing, construction, agriculture, and mining. Industrial engine oils are designed to withstand harsh operating conditions, provide superior protection, and enhance the efficiency and longevity of industrial equipment. There is an expansion in industrial activity and industrialization takes place in various backward countries hence engine oil is essential in these segments.
The agriculture segment in the engine oil market involves engine oils specifically formulated for agricultural machinery and equipment, such as tractors, harvesters, plows, and irrigation systems. Modern agricultural machinery often features advanced technologies and high-performance engines that require specialized engine oils. These oils must meet specific performance standards to ensure optimal operation and longevity of the equipment, driving demand for tailored lubricants. For instance, John Deere, a leading manufacturer of agricultural machinery, offers the Plus-50 II engine oil specifically designed for their equipment.
By Sales Channel, the market is segmented into OEM Dealerships, Independent Workshops and Online Sales.
The OEM (Original Equipment Manufacturer) dealerships segment in the engine oil market includes the distribution and sale of engine oils through dealerships that are authorized by vehicle and machinery manufacturers. OEM dealerships offer engine oils that are recommended by the manufacturers to meet warranty requirements. Using the recommended engine oil is crucial for maintaining the vehicle’s warranty and ensuring optimal performance.
The independent workshops segment in the engine oil market comprises auto repair shops, service centers, and mechanics that operate independently from original equipment manufacturers (OEMs). These workshops provide a range of vehicle maintenance services, including oil changes, repairs, and tune-ups. Independent workshops service a broad range of vehicles from different manufacturers, which requires them to offer a diverse selection of engine oils. They provide products that are compatible with various engine specifications, accommodating the needs of both older and newer vehicle models.
This segment has experienced significant growth due to the increasing adoption of e-commerce and the convenience it offers to consumers. Online sales platforms provide a wide range of engine oil products, from premium synthetic oils to budget-friendly options, catering to diverse customer needs. E-commerce platforms often offer competitive pricing, special promotions, and discounts that attract price-sensitive customers. Online retailers frequently run sales and provide deals on bulk purchases, which can be appealing to both individual consumers and businesses.
By Application, the market is segmented into Passenger Cars, Commercial Vehicles,motorcycles, marine, aviation and Industrial Machinery.
Engine oil is crucial for maintaining engine performance, reducing wear and tear, and extending the lifespan of passenger car engines. With the growing number of vehicles on the road and advancements in automotive technology, the demand for high-quality engine oils continues to rise. Advances in lubricant technology have led to the development of engine oils with longer service life. These oils allow for extended oil change intervals, providing convenience to consumers and reducing maintenance costs. For instance, Europe accounts for 19.5% of global passenger car sales, coming third after Asia (51.6%) and the Americas (23.7%).
Commercial vehicles operate under demanding conditions, often covering long distances and carrying heavy loads. Engine oil is critical for maintaining the performance, efficiency, and longevity of commercial vehicle engines, which are subject to more intense wear and tear compared to passenger cars. The expansion of the e-commerce sector has led to an increased demand for logistics and delivery services. This growth drives the need for more commercial vehicles, boosting the demand for engine oils. For instance, 16.7 million trucks, vans, and buses are manufactured worldwide per year, 18% of which is produced in Europe (3,079,810 units) which boosts the demand for engine oil.
Standard bikes, sport bikes, cruisers, touring bikes, and off-road motorcycles have come under this segment. Engine oil is critical for the smooth operation, performance, and longevity of motorcycle engines. Unlike other vehicles, motorcycles often operate at higher RPMs and temperatures, making the choice of engine oil particularly important. Motorcycle owners are becoming more aware of the importance of regular maintenance and the use of high-quality engine oils. This awareness is driving demand for premium lubricants that offer benefits. For instance, the Global motorcycle industry will keep growing in 2024. After the first quarter global sales of scooters, mopeds, and motorcycles have been 15.3 million (+0.9%).
The marine segment in the engine oil market includes lubricants used in a variety of watercraft, such as cargo ships, tankers, passenger ships, fishing vessels, yachts, and recreational boats. Marine engine oils are essential for ensuring the smooth operation and longevity of marine engines, which often operate under harsh and demanding conditions. The expansion of global maritime trade drives demand for large cargo and tanker ships, which in turn increases the need for high-performance marine engine oils. For instance, UNCTAD announced Maritime trade is expected to grow 2.4% in 2023 and more than 2% between 2024 and 2028.
The increasing demand for air travel, driven by rising global connectivity and economic growth, particularly in emerging markets, boosts the need for more aircraft and, consequently, more aviation engine oils. The expansion of the commercial aviation sector significantly contributes to the demand for high-quality lubricants. For instance, The International Air Transport Association (IATA) announced that the recovery in air travel continued in December 2023 and total 2023 traffic edged even closer to matching pre-pandemic demand. Total traffic in 2023 (measured in revenue passenger kilometers or RPKs) rose 36.9% compared to 2022.
The industrial machinery segment in the engine oil market includes lubricants used in various types of industrial equipment and machinery, such as construction equipment, mining machinery, manufacturing machinery, and agricultural vehicles. These lubricants are crucial for ensuring the smooth operation, efficiency, and longevity of machinery that operates under demanding and often extreme conditions. Industrial machinery oils must provide excellent protection against wear, corrosion, and oxidation while ensuring optimal performance. For instance, according to the UNIDO globally, there was a 2.3% growth in industrial sectors in 2023.
