'Lubricants demand in 2020 sharply lower compared to 2019'

BL Research Bureau

The pandemic-related lockdowns resulted in overall demand in the lubricants reduce radically this year - and though it is picking up, demand in 2021 too may be lower compared to 2019, says Raman Ojha, Country Head, Shell Lubricants India in an interview with BusinessLine . Edited excerpts.

What was the impact of the pandemic on the lubricants industry and the company's business? How good has the recovery been with the unlocking?

These are unparalleled times for everyone, and that includes the lubricants industry. At the beginning of the ongoing pandemic, as the country went into lockdown due to Covid-19, the use of passenger cars and two-wheelers for personal mobility was one of the first areas to be impacted. Workshops and general repair garages were also shut down, causing a demand reduction. In the early stages, even the manufacturing sector, especially the automotive industry, literally paused, reducing the demand for lubricants radically. If we speak about the overall demand, there has been a downside in the 2020 demand by 20 to 30 per cent as compared to 2019.

With the gradual unlocking of the economy, the traffic is returning on the roads. Gradually we are getting back to pre-Covid levels by ensuring that we focus on care, continuity and cash – care for our employees, consumers, distributors and mechanics; continuity in ensuring supply security so that our key OEM customers get a regular supply of lubricants to run their business and cash to maintain business liquidity as well as the liquidity of our customers. Having said that, at an industry level, 2020 demand has declined significantly. We are not expecting that the demand in 2021 will be close to the pre-Covid levels. So, in that context, Corona has severely impacted the industry dynamics.

Our guiding mantra during this time has been to evaluate changing customer and mechanic needs and see where we can alleviate some of their pain points. We know that consumers want to make sure their oil change happens in a safe, sanitized environment. We are also aware of the fact that mechanic livelihoods have been severely impacted because of Corona. This is what motivated us to launch our recent partnerships with Pitstop and Hoopy, Bengaluru-based start-ups. With these partnerships, we are now providing zero-contact doorstep servicing of cars and two-wheelers in 20 cities across the country and thus enabling safe mobility. At the same time, with these partnerships, we also aim to generate additional business opportunities for the mechanic community whose livelihood has been affected in the wake of Covid-19.

Which segments of the company's business contributed to the recovery? Is it recovery sustainable?

In India, the agri sector has been less impacted by Corona. The demand seems to be there. So, we also pivoted towards the agri sector earlier. We also see October, November, December to be strong for agri and we are working with some of our large OEMs to make that happen.

It is tough to say when we will get back to pre-Covid levels as this is a developing situation. Industries will degrow this year versus 2019. And even in 2021, the demand may degrow in comparison to 2019. It may grow versus 2020, but it may degrow versus 2019. In that context, we as a business, expect to outgrow the market. That’s our aspiration.

What is the market share of Shell Lubricants India?

There has been a switch in the market shared due to the pandemic, but it’s difficult to share the exact percentage change as there are no audited reports available to determine that correctly.

What are the key risks to the industry and company in the new normal?

One thing in which we believe is that the companies which are closer to the consumer, closer to the retailer and are cognizant of the retailer and consumer’s needs have gained volume even during the pandemic. Companies who have been rigid, I think they have lost.

How do you see the future of the lubricants industry with the likely adoption of electric vehicles? What strategies are Shell adopting to deal with this?

The EV market has indeed witnessed rapid evolution with ongoing developments in the automotive sector and favourable government policies. In terms of a larger picture, automotive lubricants are involved in reducing friction in moving parts, not just offering engine lubrication. In June last year, we launched a range of e-transmission fluids, e-thermal fluids, and e-greases that will drive greater efficiency and performance in EVs. We have also been working closely with automotive and component manufacturers to engineer these ‘first fill’ fluids that effectively and efficiently meet a broad range of battery EV performance requirements.

In terms of the larger lubricants industry, as we are in the business of energy efficiency solutions and seamlessly reducing friction, what we offer today via engine lubricants, we may be achieving with data analytics tomorrow. Innovative mobility solutions may soon create a need to get into the business of running data analytics, telematics and machine learning. Also, for EVs, there is a need for high-performance products like transmission fluids, which provides us with opportunities.

COMMENT NOW