Automotive Engine Oil Market: Is the Market Growth Declining?
Automotive engines have been undergoing an evolution since their origin. Huge investments into research and development are bringing about significant changes in engine designs and their performance. Throughout the evolution of automotive engines till now, engine oils have continued to play a key role. Engine oils, irrespective of their type, are meant to offer required lubrication to engines as their continuous exposure to changing temperatures makes them more prone to wear and tear, which affects their lifespan. As temperature inside the engine remains in a state of continuous change, depending on the state of the vehicle, friction between mechanical parts of engine, and environmental conditions, their cooling becomes an essential part of ensuring their efficient functioning. Furthermore, combustion of fuel is known to oxidation and, therefore, rusting of engine parts. Capability of engine oils to slow down this process and keep it under control, along with providing additional benefit of preventing clogging inside an engine, gives engines a longer lifespan, which is one of the major reasons vehicle owners should look for good engine oil for their vehicles.
The demand for automotive engine oils is closely tied to the growth of automotive industry. Although declining automotive sales might seem a red flag for this market, the market is still performing well despite the slump in automotive sales in recent years. According to a data from the International Organization of Motor Vehicle Manufacturers, year 2018 and 2019 witnessed a decline in automotive sales. This was the first time after the global recession which kicked in in the year 2007 and remained very significant till 2009. The figure given below shows the trend in automotive sales from 2006 to 2019:
Global Automotive Sales, 2006 to 2019
Source: International Organization of Motor Vehicle Manufacturers
A blow to people’s spending power in the year 2008 and 2009 acted like a speed-breaker for the global automotive sector as the automotive sales showed a consecutive decline over these two years. This time it is not the spending power of people, but the penetration of vehicles which is a major reason for the shrinkage in sales. Mature economies in the North America and Europe have high penetration of passenger cars which is slowing down the sales of new cars among people. But, since there are already a good number of vehicles on road, the automotive aftermarket is witnessing a good growth. Increasing awareness among people regarding the importance of regular servicing of vehicles and how this can extend the useful life of vehicles is driving up the number of people taking their vehicles for servicing each year. This trend is driving the demand for automotive parts which often require replacement due to wear and tear. This, as a result, is increasing the demand for engine oils, thus fuelling the market growth. However, declining automotive production in many parts of the world is offsetting the contribution of this growth to global automotive engine oil market to some extent. A data from the International Organization of Motor Vehicle Manufacturers shows that year 2018 and 2019 saw a continuous decline in automotive production, and this was the first time in this decade when the production of vehicles showed a downturn. The figure given below shows the trend:
Global Automotive Production, 2011 to 2019
Source: International Organization of Motor Vehicle Manufacturers
This dip, which was majorly attributed to shrinking automotive sales worldwide, has now become even greater as the outbreak of the novel coronavirus disease in Wuhan, China, in the first quarter of 2020, and its exponential spread across the globe gave another blow to the sector. Disruptions in global supply chains, which are result of closing of borders by countries as part of their efforts to contain the spread of the virus, have brought many automotive production facilities to a halt. Although automotive production will see some recovery as the situation improves, it won’t be enough to aid the sector in recouping the slump. Unless some disruptive trends gain traction in the sector, it is expected to show a slow growth. This is expected to continue contacting the demand for automotive engine oils among OEMs, thus affecting the overall market growth. Yet, increasing focus of governments on preserving the environment will continue to add some impetus to the market growth. Since vehicular emissions are key contributors to environmental pollution, engine oil manufacturers are being expected to manufacture oils which minimize harm to the environment. Manufacturing of eco-friendly engine oils is also part of manufacturers’ responsibility towards a cleaner word. Huge investments by market players into research and development are bringing engine oils, which facilitate lower fuel consumption and CO2 emission, into the market. Overusing of engine oils, which happens when they are not replaced soon enough, or when their level in an engine goes below the recommended level due to constant heating, leads to an increase in friction between moving parts of engine thus affecting the efficiency. Higher fuel consumption due to this low efficiency is becoming a concern for many governments where per capita ownership of vehicles is high. To combat this issue, manufacturers are manufacturing eco-friendly engine oils which cost a little more than conventional oils. Increasing sales of these engine oils is contributing to the growth of the overall market.
Geographically, the report, titled Global Automotive Engine Oil Market, segments the market into North America, South America, Europe, Middle East and Africa, and Asia Pacific. The Asia Pacific automotive engine oil market is anticipated to show a good growth over the projected period. North America and Europe are expected to continue holding a significant market share till 2025.
About the Author:
Dhiraj Kumar Sharma is a Market Research Analyst at Knowledge Sourcing Intelligence. He combines his outright understanding of technologies with years of experience working in the industry to deliver actionable information to clients who span across industries and geographies. Dhiraj often works closely with clients in order to better understand their requirements and is known for the quality of market insights he delivers to them.
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