Marketing Challenges in Indian Lubricating Oil Industry

Published by MBA Skool Team, Published on November 14, 2013

The importance of oil in the engine is just like blood in the body. Blood flows through all the veins to vital organs to keep them healthy and alive, similar is the function of lubricating oil in the engine. Across the world, lubricant oil is primarily used for cooling automobile engine, marine engine and for industrial purposes. Globally, more than 50% of the total lubricant volume is being used for automobile, around 40% is for industrial purpose and rest is for marine industry. Shell, ExxonMobil, BP - Castrol, Sinopec, Chevron – Texaco, Total, Lukoil, Fuchs, Nippon Oil and Valvoline are the major global players in lubricant manufacturing industry.


In the coming future global demand of lubricant will remain stagnated or grow at a very low rate due to following reasons:

  • Low emission norms for industries and automobile sector
  • Advancement in engine oil technology
  • Use of high performance oil
  • Saturation in automobile sector for developed countries

Currently, USA is the largest consumer of lubricant oil across the world. China and India comes at second and third position respectively. But, in the next 7-8 years china will overtake USA in terms lubricant consumption. Reason behind this is that US automobile sector has reached at its saturation level, while the developing countries like India and China, it is still growing.

The consumption pattern In Indian lubricant oil industry is similar to world lube industry. Majority of lubricant is being consumed by automobile sector (55%), rest is being used for Industrial purpose and marine industry. Major players of the Indian lubricant oil industry are IOCL - Servo, BPCL-MAK, HPCL and Castrol.

These four players approximately hold 80% of the market share in Indian lubricant industry. IOCL is the market leader in the overall lubricants industry, with its market share at 40%. However, Castrol dominates the automotive lubricant oil market, with 19% share of the bazzar segment, followed by IOCL, which has 14% share of the bazzar segment according to industry estimates. Private players like Castrol, Shell, Gulf Oil, etc. account for 75% of the bazzar segment while the oil PSUs account for 25%.

In 1993 lubricant industry in India got liberalized, which attracted the private players to enter into the Indian lube market. Before liberalization auto lube oil in India was sold mainly through petrol filling stations. Decline in margin due to rising base oil (main raw material for lubricating oil production) prices, increasing competition due to large number of private players, very low consumer awareness about the brands and quality and too much price sensitivity has led Indian lube oil industry to a major marketing challenge for the companies involved with it.

For understanding the marketing issues pertaining to the lubricating oil market in India let us first understand the overall common flow followed by almost all companies to sell their product into the market.

Blending plant is the place where base oil is processed; additives are mixed and converted into final product i.e. lubricating oil. These final products are move towards carrying and forwarding agents i.e. stock points or depots, as the name suggests these C&F agents are third party and they provide the infrastructure support for storing of goods and in turn earn commission. On an average 37-45 stock points or depots are there for any lube oil company in India. That is on an average 10-12 distributors order from a single C&F agent or depot, thus they are geographically positioned accordingly. Primary sale is the C&Fs sale to Distributors, Secondary sale is the Distributors sale to Dealers and Tertiary sale is Dealers sale to consumers. Thus in this flow, three of the important stakeholders for lube oil sales are distributors, mechanics and the DSRs (Distributors Sales Representative) employed by distributors. Why each of them is important is explained one by one.

First let us discuss about the distributors, an important channel partner for sales of any product. They can greatly affect the sales in a market that is driven on credit dealings. The greater the credit period he can offer the more the trust the mechanics/dealers have on him. Robustness of distributor plays a major role. In case of lubricant oils following are some of the important roles of a distributor.

—  Market Information

—  Buying and Assortment Building

—  Selling and promotion

—  Customer Relations

—  Risk Bearing

—  Branding

—  Financing ,Warehousing & Transporting

—  Management of DSRs

Another major stakeholder that affects sale in lube oil is mechanic. End users are mostly less or not aware about the quality, brand and other technical factors associated with the product. If it is a commodity like toothpaste or a shampoo than consumer can differentiate but for the product that is meant for their vehicle they usually follow the suggestions of their mechanic. Mechanic is also a person who is less aware about technicalities and works with different myths spread around in market and spreads that to end customers. For a mechanic earning some extra money on filling a pack of engine oil of a particular brand which gives him good return will be lucrative business and thus comes the role of sales and marketing at the companies end. Company which is able to come up with good promotional offer for their dealers and mechanics wins the battle. It is sometimes distributor also who come up with offers in order to increase their sales volume and get good return. But, company can bear the cost of promotional cost all the time so comes the role of advertising and branding. Ambassador like M.S Dhoni will create more connect with mechanics and consumers than any other as cricket is being loved and watched by mechanics as well as end consumers. Also the ‘desi’ image of Dhoni grabs attention of mechanics.

DSR that is Distributors Sales Representative, these are the people who become the face of the company in terms of sales to dealers and mechanics. Distributor must be smart enough to appoint them wisely and manage them properly. They must be given proper route plans and soft skill training as sweetness and calmness in their nature can earn more sales volume for the company. They must strike the balance between distributors and companies reputation in market, though they are paid by distributor but they are liable towards the brand image of company. Some of the major problems faced overall in the market are Delivery time from distributor to dealer, tracking of the scheme issued to dealers or mechanics, proper use of branding materials. So these are the things to be taken care by DSR.

To conclude, the major parameters are margin, schemes, promotional activities, and branding of product. In India a product can‘t be placed in the market on the basis of brand only, but it should match the spending power of customers. An industry where switching cost is negligible, person relationship plays an important role to capture maximum market share. Regular schemes have become part of the lube market. Not only the product, but also the superior service differentiates one company from another. An effective distribution channel as well as hard working sales team drives a company on front foot.

The article has been authored by Samarth Mewada School of Petroleum Management,PDPU, Gandhinagar.



Kline. (2012). The Dynamics of the Global Lubricants Industry, 2012 to 2020. International Symopsium on Lubricants, Additives and fluides. Sao Paolo.

Bothra, S. (2012). Castrol India. Motilal Oswal.


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