By Thangapandian Srinivasalu
After few years of austerity and pent-up consumer demand, India’s automotive market is finally entering the fast lane.
Rising incomes in one of the world’s fastest-growing economies are driving purchases of cars and motorcycles in cities and rural areas. At the same time, improvements in engine technology and environmental regulations are transforming the needs of consumers. Motorists are looking for lubricants that not only protect, clean and extend engine life but also optimize consumption and performance.
A partnership between GP Petroleums Ltd. and Repsol SA may offer a model for how India can satisfy this anticipated surge in consumer demand without accelerating the nation’s dependence on imported petroleum products or adding to its carbon footprint. GP Petroleums, a subsidiary of UAE-based Gulf Petrochem Group, will produce Repsol automotive lubricants at its manufacturing units in India and begin marketing the Spanish company’s products in October 15th. Repsol’s record of successful innovation is especially relevant because Indian motorists will be facing new and unfamiliar challenges from now to 2020.
Engine technology has evolved rapidly in recent years, and pressure has mounted on engine manufacturers to do more to control harmful emissions amid growing global concern for the environment. This transformation in technology is creating a market for hybrid and electric cars in developed countries, and many Indians will probably develop a similar taste for greener vehicles.
Indian domestic automotive standards traditionally follow European norms, and lubricant manufacturers are now catching up with technology and specifications to match the new European requirements for engines. Meanwhile, infrastructure improvements in India are narrowing the gap between prices for petrol and diesel and contributing to growth in demand for both types of engines and cars. Unprecedented economic and demographic changes are also shaping the automotive market. Indians are among the world’s biggest buyers of motorcycles, and increasing prosperity will accelerate this trend, just as it’s already doing for sales of smart phones.
This is especially true for the millions of young people who value convenience and aspire to a more affluent lifestyle than that of their parents. In the countryside, higher incomes are spurring demand for motorcycles and farm vehicles. In cities, India’s expanding middle class is hungry to own cars.
Each new vehicle that hits the road this year is more technologically advanced than those that preceded it last year, and motorists need sophisticated lubricants that can protect their engines and enhance their driving experience. However, this rising demand risks aggravating India’s reliance on imported additives and oil products. India imported 38 percent of its fossil fuels in 2012, up from 15% in 1990, according to the US Energy Information Administration. In 2013, the country was the world’s fourth-biggest consumer and net importer of crude oil and petroleum products, after the United States, China and Japan. India consumed an average of 3.7mn barrels a day of petroleum products that year, almost four times its total liquids production.
Consumers in India receive large subsidies for retail prices of LPG and kerosene, and this puts more upward pressure on overall demand. Consumption of fuel products grew by 2.9% in May from the same month a year ago, while petrol sales increased by 8.9% over the same period. On the supply side, insufficient investment in producing more crude oil and liquids has resulted in output growing more slowly than demand.
All of this creates a policy conundrum for the government as it seeks to meet rising demand, secure affordable energy supplies, and attract investment in hydrocarbon production and infrastructure. There is a bright spot. Despite India’s status as a net importer of crude oil, investment in new refining capacity has made it a net exporter of petroleum products. Its total oil-refining capacity amounts to almost 250mn tonnes per year compared with an annual consumption of less than 175mn tonnes. Most of the nation’s refineries have been modernised or are being upgraded. Conditions are ripe, therefore, for Repsol’s partnership with GP Petroleums. GP has plants in Daman and Vasai and a project to build a third 100,000-tonne-per-year blending facility at Pipavav, Gujerat.
GP already has a strong niche in the market for industrial lubricants, and it aims also to acquire assets to expand its bunker fuel business. By tying up with Repsol, the company can now push aggressively into automotive lubricants. Repsol, for its part, has one of Europe’s biggest commercial technology centers, where some 400 scientists and researchers are working to create more efficient and environmentally sustainable products. The company’s development of clean-burning LPG for use in cars is one example of its success in finding greener solutions to motoring needs. By harnessing its ample manufacturing capacity and marketing network to an innovative product line of lubricants, GP Petroleums can make a significant contribution as India, like the rest of the world, seeks to reduce harmful carbon emissions.
