Removal of Tax on Import of Lubricants from South-East Asian Nations has Stimulated the Competition and Hence the Growth in the Lubricants Industry in Vietnam
“Rapid Industrialization and Rising Passenger Vehicle Sales have led to rise in demand for both Automotive and Industrial Lubricants simultaneously in Vietnam.”
Analysts at Ken Research in their latest publication “Vietnam Lubricants Market Outlook to 2023 – By Grade (Mineral, Semi-Synthetic and Synthetic Lubricants), By Application (Automotive and Industrial) By Type of Automotive and Industrial Lubricants, By End User of Automotive and Industrial Lubricants End User, and By Distribution Channel of Automotive and Industrial Lubricants” believe that rising vehicle sales, increasing industrial capabilities, growing quantum of incoming FDI from ASEAN and other countries, improving sales and promotion / advertising of lubricants, introducing facilities for recycling and effective disposal of used oil will aid the lubricants market in Vietnam. The market is expected to register a positive CAGR of 9.2% in terms of revenue and 6.7% in terms of sales volume during the forecasted period 2018-2023.
The ASEAN Economic Community’s Trade in Goods Agreement (ATGI), which abolished tariffs on trade of lubricants within ASEAN nations, supplemented the re-design of the competition scenario in the market, with multiple companies from neighboring nations such as China, Taiwan, Indonesia, Singapore and Japan entering the Vietnamese market.
CAGR in the automotive segment of the lubricants market in Vietnam of around 2.0% was stimulated by healthy sales growth of passenger cars owing to the rising personal disposable income of the ever expanding middle income segment of the population in Vietnam.
Emergence of Vietnam as a manufacturing and production hub, as evident in the all time-high USD 39.2 billion GDP contribution of the manufacturing sector to the GDP of Vietnam in the year 2018, spearheaded growth in demand for industrial lubricants in Vietnam.
Low level of customer awareness regarding lubricant quality and overt dependence on brand name and reputation for decision making puts the consumer on the back foot with respect to holding bargaining power in the market.
Bio Based Lubricants are the newest product segment to be introduced in the market, with an increasing focus on sustainability and on curtailing environment degradation. Environment-friendly and made from bio-degradable substances, bio-based lubricants have been introduced by number of lubricant-providing companies in the market. For instance, Green Lube Vietnam and others introduced bio-based lubes within Vientam.
Rising Passenger Car Sales were observed during the period, accruing to a rise in the personal disposable income of Vietnamese citizens and a rise in the middle income segment in Vietnam. Sales of passenger cars grew at a compounded rate of 27.0% year-on-year during the period 2013-2018. A shift in consumer’s mindset towards more comfortable mobility solutions and a perceived slowdown in the growth of the two-wheeler retail segment in the country were also behind the increasing demand for passenger cars and therefore lubricants for passenger cars.
Major industrial end users such as construction, manufacturing, steel and power generation utilize machineries that require usage of lubricants to stimulate heat resistance and smooth running of machinery. Industrial growth in terms of a high value added by the industrial sector to GDP, has led to an increasing demand for industrial use lubricants in the country.
The spread of Used Oil and Re-Used Lubricants has prompted the Vietnamese government to mandate the collection and proper treatment of used oil. The guidelines have encouraged lubricant companies towards developing used oil treatment and collection plants and facilities in addition to encouraging the entry of waste management companies in Vietnam.
Competitive landscape within the market has evolved with increasing number of international companies entering the space. Major Players in the market include joint venture Castrol BP Petco and other international companies such as Shell, Total, Chevron, JX Nippon and Idemitsu among others. Local competitive presence includes state-run Petrolimex Petrochemical Corporation (PLC) and Mekong Lubricants primarily.
For more information on the research report, refer to Vietnam Lubricants Market