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Smooth Ride Ahead: Malaysia’s booming Automotive Lubricant Market shifts into High Gear. Where will it head in the future?

June 06, 2023
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Motorcar and motorcycle ownership is increasing in Malaysia due to high per capita income and inefficient public transport system. This has been boosting the demand for the automotive lubricant industry in the country. Presently, the market is growing at a CAGR of ~11% between 2015 and 2020 but as per Ken Research report, the industry has a high potential to touch MYR 13 billion on the basis of revenue by 2025. Want to know the supporting factors behind this growth? Read the complete white paper now.

1) With more than 32 million vehicles on road in 2020, Malaysia is the 3rd largest Automotive Industry in SEA region

Vehicles on Road Increasing at CAGR(2015-2020) of 4.1%

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2W and Motorcars on Road in Malaysia, 2018-2020

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Key Takeaways

  • On average, a passenger car and motorcycle travel ~2,300 km and ~1,800 km respectively on a monthly basis.2
  • Engine oil in motorcycles and passenger cars is usually changed after traveling 3,000-6,000 km, 3,000-10,000 km.2
  • Motorcycles and passenger cars have engine oil tank capacities of ~1L and 4L respectively.
  • In a year, a motorcycle and passenger car requires 2-3L and 8-12L of engine oil.
  • Vehicle sales volume is expected to grow due to factors including lower interest rates for loans to buy cars and the introduction of new vehicle models such as Electric Vehicles (EV) indicating demand for Automotive Lubricants in Malaysia

New Registration - 2W and Motorcars in Malaysia, 2019-2020

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2) More than 90% of the New Vehicles Registered are Passenger Vehicles which provides a Huge Target Audience for Automotive Lubricants in Malaysia

Pick-Up and Truck Fleet Owners Should be Targeted in the CV Category, 2020 (Sales in ‘000 units)

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Passenger Vehicle Accounting for Maximum Share in New Vehicle Registration, 2020

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Passenger Car Owners are Major Target Audience in PV Category, 2020 (Sales in ‘000 Units)

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Passenger and Commercial Vehicles Produced and Assembled in Malaysia, 2015-20201

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Key Takeaways

  • The ownership ratio of passenger car in Malaysia is 3.3 people per 1 car, the largest ownership in the ASEAN region showcasing the need for ramping up the production capacity of automotive lubricants in the future
  • Passenger and commercial vehicle production and assembly in Malaysia declined from 571.6 Th units in 2019 to 485.1 Th units in 2020 due to the temporary shutdown of production units in 2020 as part of the restrictions caused by the lockdown in Malaysia.
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3) Presently, the Lubricants sector is in a Growing Phase with Increasing number of Vehicles on Road

  • Prior to 1980s, cars utilized the slippery crude oil to help protect the various metal parts. Manufacturers used their own fuel and lubrication techniques, leading to inconsistencies and failures.
  • In 1963, Shell began operating its refinery in Port Dickson, Negeri Sembilan and in 1985, Shell launched its Helix motor oil in Malaysia
  • In 1974, PETRONAS was incorporated under the Petroleum Dev Act.
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I: EMERGING PHASE <2000s

Phase driven by Introduction of Global players to capture significant Market Share

  • Phase from year 2000 witnessed significant growth in the demand for Automotive Lubricants in Malaysia.
  • Vehicle owners started utilizing synthetic and semi-synthetic lubricants with lower viscosity gradients.
  • Foreign players started expanding their distribution channel.
  • Online sales were introduced through Lazada and Shoppe Mall by distributors.
  • Growth in market was lead by entry of OEMs and increasing number of CV and PV.
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II: GROWING PHASE 2000-2025

Automotive Lubricants is in its growing stage (Revenue CAGR of ~11% during 2015-2020) driven by Increasing number of Vehicles on Road and Product Variants in the country

  • Market consolidation will take place as the automotive lubricant industry is a niche space and players with better geographical presence will take over others.
  • Introduction of electric vehicle will dampen the demand of traditional engine oil but will drive sales of E-lubricants in Malaysia
  • Companies will focus on Bio-Lubricants due to its high viscosity index and lower toxicity levels.
  • Many companies would introduce the recovered waste oil to prevent environmental damage.
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III: MATURITY PHASE >2025

Lubricants market in Malaysia is expected to grow with increasing number of passenger cars due to high income levels and unreliable public transport. The industry is expected to slow down with introduction of Electric Vehicles.

Source: Interviews with Malaysia Automotive Lubricant Industry Experts, Industry Articles & Ken Research Analysis
Note - E-Lubricants are the lubricants that are specially designed for EVs

4) Growing Used Car Sales, Online Presence, and Diverse Product Portfolio are some of the variables assisting Lubricant sales volume in Malaysia

Local Workshops, Wash shops and Garages

  • A large presence of motorcycle and car wash shops, workshops and spare parts shops all over Malaysia is one of the contributing factors towards the growth of Automotive Lubricants Industry in Malaysia.
  • The presence of lubricant experts in the form of mechanics at garages and wash shops makes this channel popular for automotive lubricant use and procurement for customers.

Used Car Sales

  • The used car sales volume has increased from 0.36 Mn in 2016 to 0.39 Mn in 2020 @ ~2% CAGR (2016-2020).
  • The average drain interval of a Lubricant is usually lower for used vehicles depending upon the total km travelled or the age of the car.

Product Portfolio

  • Companies such as Castrol, Petronas, Total are offering more than 50 grades of Automotive Lubricants in the market.
  • Latest technologies and formulations are being introduced in the market regularly, for instance Petronas has launched CoolTech technology providing ultimate power output with excellent fuel economy.

PV and CV Production & Assembly in Malaysia

  • 481.5 Thousand units of Passenger and Commercial Vehicles were produced and assembled in Malaysia in 2020 creating a demand for Automotive Lubricants.
  • Passenger cars accounted for ~94.35% of total production volume.

Online Presence

  • Companies in the Automotive Lubricant Market in Malaysia are making an official presence on e-commerce platforms such as Lazada and Shopee Mall.
  • Companies are also introducing home automotive maintenance services in partnership with workshops and garages increasing their sales of Automotive Lubricants in the country.

Demand for High Performing Lubricants

  • Synthetic formulations are gaining popularity in Malaysia, largely due to performance benefits, including enhanced fuel economy and improved engine protection.
  • Consumers in Malaysia are increasingly shifting towards synthetics, despite their premium price, in order to better protect their vehicle what is considered a significant household investment.
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5) However, the Sale of Fake Lubricants, Lower Pricing at Hypermarkets, and Dependence on Imports are some of the Challenges faced by Companies in the Automotive Lubricants Market in Malaysia

Low Prices at Hypermarkets

  • Hypermarkets sell automotive lubricants at a very low price, which hampers the sales from retail outlets. Lubricants are sourced in bulk and shipped into Malaysia, therefore they are able to sell lubricants at a very low margin.
  • The prices at hypermarkets are 20%-50% lower. For instance, Shell Helix Ultra 5W-40 at Shopee Mall is sold at MYR109, whereas at the retail price in the spare parts shop and Shell fuel stations is about MYR270.

Viscosity of the Lubricants

  • The selection of a lubricant’s viscosity must be optimized to enable needed protection and disable the danger from excessive viscosity, too much viscosity causes high energy and fuel consumption while too low viscosity can also lead to excessive volatilization and oil consumption in engines.

Sale of Fake Products

  • Fake lubricant is generally a low-grade oil that is passed off as a high-grade oil, or old engine oil that has been recycled, causes engine damage from overheating, seizing and warping in severe cases.
  • Used oil collected from motorcycle wash stands, repair shops and garages is mixed with additives by local vendors to produce fake lubricants.
  • Fake brand labels are put and these lubricants are sold at workshops, garages and online as well hampering the company’s brand value due to customer dissatisfaction.
  • Shell created “Made for Malaysia” labels for its products so that customers can differentiate fake and real products. Shell is also advising consumers who buy its lubricants to make use of QR codes on labelling to verify their purchases via its SHARE website.

Heavy Dependence on Imports

  • Malaysia is heavily dependant on imports for both raw materials and finished goods
  • Major players such as ExxonMobil, Total and Chevron import automotive lubricants from Singapore or Thailand.
  • The final lubricants price is impacted by import tariffs.
  • Companies such as Shell and Castrol are involved in domestic manufacturing but their major raw material i.e. crude oil and additives and some lubricants are also imported.

Depleting Crude Oil

  • A lubricant is composed of two substances: Base Oils, and Additives. Mineral base oil is obtained from a distilling process while refining crude oil.
  • There has been a global depletion of crude oil which will hamper the production of automotive lubricants in the near future.
Source: Interviews with Malaysia Automotive Lubricant Industry Experts, Industry Articles, Company Website & Ken Research Analysis

6) But the industry has a strong potential to grow with double-digit CAGR owing to Increasing Automobile Demand, Consumption of Synthetic and Semi-Synthetic Lubricants in Malaysia

    Technological Upgrades
  • The rapid technological advances in the manufacture of machinery and automobiles are intensifying the need for environment-friendly and high-performance lubricants and lubricant additives.
  • Lubricant manufacturers constantly upgrade their production capabilities and product portfolio to match the revised requirements.
    Increasing Consumption of Synthetic and Semi-Synthetic lubricants
  • The rapid technological advances in the manufacture of machinery and automobiles are intensifying the need for environment-friendly and high-performance lubricants and lubricant additives.
  • Better characteristics such as high Viscosity Index (VI), high level of thermal stability, low freezing point, high boiling point and others, therefore collectively helping in reducing friction.
    Introduction of Bio-Lubricants
  • Introduction of environmental protection laws such as The Environmental Quality Act 1974 has led to the introduction of bio-lubricants.
  • These lubricants are found to exhibit superior lubricant properties over the conventional mineral lubricants, with renewability and biodegradability being their strongest suit.
  • Currently, bio-lubricant very less proportion of the overall demand, but with increasing awareness its demand is expected to increase.
    ASEAN Economic Community
  • Formation of ASEAN free trade policy in 2015, led to the emergence of MNCs in Malaysia.
  • The stability of ASEAN’s economy, availability of skilled labour, coupled with its pro-business climate and improving infrastructure led to increase in FDI by automotive OEM.
  • Fall in import tariffs on automotive vehicles and automotive parts, with zero rates applied to 99% of all intra-ASEAN tariff lines for Brunei Darussalam, Indonesia, Malaysia, the Philippines, Singapore and Thailand.
    Viscosity Grade Preference
  • New cars generally use lower viscosities and therefore vehicle population age is one factor that impacts the demand for viscosity grade.
  • Currently (2020) in Malaysia, 10W 40 is the most commonly demanded viscosity grade for motor oil.
    New Refining Techniques
  • Major oil companies have started to focus on developing new refining techniques, and sources to overcome the obstacle of scarcity of the crude oil reserves.
  • This trend has led to an establishment of patented refining technologies that are limited to established companies and their alliances.
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Some of the Intelligence Curated by Ken Research in Automotive Lubricant Market Space:
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