Multinationals Free to Pursue New Opportunities Created by Deregulation of the Indian Petroleum Industry
LITTLE FALLS, N.J., Aug. 25, 2005 -- The wheels are greased for multinational producers of automotive lubricants after government deregulation of the Indian petroleum market.
French oil and gas producer TOTAL has seized a prime opportunity and has entered into an agreement with Indian conglomerate Reliance Industries to sell automotive lubricants at 6,000 new gas stations Reliance is planning to open across India. Essar Industries, the only other privately owned operator of gas stations in the nation, is also undergoing rapid expansion of its services and is expected to open over 500 new gas stations by the end of 2005.
"The petroleum sector in India has been dominated from the very start by state-run Indian Oil, Bharat Petroleum, and Hindustan Petroleum, but this will be changing very soon," says Geeta Agashe, director of the Petroleum and Energy practice for the research division of Kline & Company. "The door is wide open for multinationals and privately owned Indian companies to move in and fight for market share."
The opportunities presented by these developments in India and in other emerging markets are providing the impetus for a newly proposed study by Kline. BUSINESS OPPORTUNITIES IN THE EMERGING LUBRICANT MARKETS OF SOUTH ASIA, THE MIDDLE EAST, AND NORTHERN AFRICA, 2005-2015 will provide an in-depth analysis of the world's fastest-growing markets, focusing on the current leading suppliers in these regions.
India is the fifth-largest finished lubricants market in the world and the largest of those to be examined in Kline's study. With the government's decision to deregulate the automotive lubricants industry, the market dynamics in this sector will change considerably.
"MNCs were restricted from selling their lubricants in the forecourts of fuel retailers, so they had to come up with creative solutions to market their products through 'kirana stores' and other outlets. Now they'll be able to compete head to head in the gas stations with the state-run enterprises," says Agashe.
While the deal between Reliance Industries and TOTAL is only the tip of the iceberg, it should be enough to make the nationalized petroleum companies of India very nervous. Reliance is a strong, diverse company with nationwide brand recognition in India, and it managed to capture significant market share in the already saturated cellular phone market in India within only two years.
"It would not be surprising to see Reliance manufacture and market their own branded lubricants in the near future and become a significant player in the auto lubes business," Agashe says.
As they start to prepare for open-market competition, another major disadvantage looms over the nationalized companies: the inefficiencies inherent in state-run organizations.
"While the MNCs are the new entrants to the gas station sales channel, they can operate much leaner than the nationalized firms and don't need to contend with the same bureaucratic and political pressures," says Bill Downey, vice president and head of Kline's Petroleum and Energy consulting practice. "The MNCs only need to worry about making a profit, but it's a different ballgame for Indian Oil and the other state-run companies."
South Asia, and India in particular, has emerged as a key growth region as well as a source of competitively priced lubricants that will eventually affect the mature markets of the United States and Western Europe. Changes are occurring rapidly from a volumetric standpoint; more people are purchasing and driving automobiles, and industrial production continues to increase. Consumption of higher-grade lubricants in emerging markets is also rising, and pricing strategies and marketing and promotional techniques are starting to change as well.
BUSINESS OPPORTUNITIES IN THE EMERGING LUBRICANT MARKETS OF SOUTH ASIA, THE MIDDLE EAST, AND NORTHERN AFRICA, 2005-2015 will assist lubricant manufacturers in understanding these changes and provide a unique way to monitor and analyze these developing markets.
For more information on this study, go to www.klinegroup.com/Y608.htm or contact Geeta Agashe at +1-973-435-3484 or geeta_agashe@klinegroup.com. In Europe, contact Pilar Pardo at +32-2-776-0737 or pilar.pardo@kline-europe.com.
To learn more about Kline's customized consulting capabilities in the petroleum and energy fields, contact Bill Downey at +1-973-435-3388 or bill_downey@klinegroup.com.
Established in 1959, Kline & Company (www.klinegroup.com) is an international business consulting and market research firm serving the petroleum and energy, specialty chemicals, life sciences, and consumer products industries.
For more information, contact: Geeta Agashe Director, Petroleum & Energy Practice +1-973-435-3484 geeta_agashe@klinegroup.com