Europe is the third largest finished lubricants region, consuming approximately 17% of the global demand. The top five lubricant markets in Europe account for nearly two-thirds of the regions demand. Russia, Germany, and the United Kingdom make up about 50% of the market.
While other European markets remain flat, the United Kingdom, the third largest consumer of finished lubricants in Europe, is on the upswing due to a variety of factors, according to the recently published Global Lubricants: Market Analysis and Assessment report from global market research and management consulting firm, Kline.
The consumer automotive lubricants market in the United Kingdom is stable, forecast to increase at a compound annual growth rate of 1% to 2019. Demand for PCMO in the United Kingdom accounts for approximately 84% of the consumer automotive segment. Following the global trend, the United Kingdom is witnessing a migration to lower viscosity grade PCMO resulting in higher penetration of synthetics and semi-synthetics. Original equipment manufacturer (OEM) recommendations play an important role in driving this shift.
Sales of synthetic 0WXX grades are expected to increase in an otherwise flat passenger car motor oil (PCMO) market, as OEMs shift their factory fill requirements to lower viscosity grades in order to improve fuel economy. Due to the increased presence of Asian OEMs in the United Kingdom and their tendency to recommend 0W for service fill, as well as European OEMs recommendations of 5W grades, the growth for these viscosity grades is forecast to accelerate according to Kline.
Two viscosity grades, SAE 10W-40 and 5W-30, account for a combined 84% of the total demand for PCMO in the United Kingdom. Demand for 10W-40 has been on the decline. Conversely, fuel economy grades started to become the leading viscosity grade in the market, in particular the 5W-30 grade.
According to Sharbel Luzuriaga, Project Lead in Klines Energy Practice, The good shape of the economy and enhanced consumer confidence encourage people to purchase new vehicles. On average, two million new units are projected to be registered in the United Kingdom through 2015, and 2016 is paving the way for increased use of low-viscosity, fuel economy grades, developed to meet more stringent emission norms. The use of synthetic grades will lead to longer drain intervals and lower volumetric growth.
Finished lubricants are marketed in the United Kingdom through two distribution channels: installed and retail. The increased prevalence in the installer establishments will negatively impact the retail lubricants sector.
Do-it-for-me (DIFM) consumers represent the majority of the population. Franchised car dealers conduct an estimated 25% of overall installed sales in 2014 compared to 50% in 2010. Within the installed segment, franchised car dealers have been eroded by the proliferation of independent workshops and the increasing tendency for DIFM consumers to have their oil changes performed by independent workshops.
The recovery of the economy in the European Union has been steady in recent years. Expanding at a strong 3.2% in 2014, the United Kingdom is exhibiting robust growth. Lubricant demand generally trails GDP growth; therefore, it can be anticipated that demand for consumer lubricants will grow at a slightly slower pace than the performance of the overall economy, adds Luzuriaga.
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