Although some drivers still remain price-sensitive when approaching the cash register, pour-in engine oil additives and fuel-enhancement products for both gasoline and diesel continue to formulate greater acceptance among motorists the worldwide.
Global fuel additives posted revenues of $4.1 billion in 2014, and a recent study from Frost & Sullivan is forecasting that sales will top $4.5 billion by 2017. A report by Grand View Research is equally optimistic as it points to an annual growth rate of 46 percent through 2020, culminating in an $8.5 billion international marketplace.
And according to a worldwide Frost & Sullivan analysis of lubricant additives, this market is expecting 2020 revenues to reach $16.2 billion; sales in 2013 amounted to $11.7 billion. Much available research into automotive chemical additives includes the aviation, marine and industrial segments.
“While more expensive and safer lubricant additives boost revenue growth in North America and Western Europe, Asia-Pacific markets will see high-volume growth of conventional additives,” says F&S principal consultant Raghu Tantry.
The growing demand for engine oil additives, which account for the overall lubricant additive category’s largest market share at 66 percent, is attributed mainly to an increasing vehicle population and more miles being driven.
“However, this growth will be tempered by the introduction of lubricants with extended drain intervals, since OEMs continuously seek lubricant solutions that decrease maintenance costs and the frequency of servicing,” he notes.
“Further, the complex, technical nature of additives requires highly sophisticated, expensive testing and evaluation methods achievable only by investing in a well-equipped R&D facility and qualified scientists. This restricts the global market to a few integrated companies,” says Tantry.
“To address these challenges, additive vendors must create account managers in the base country, as well as in key global locations, to meet the needs of each major customer. This will be especially important in the near-future, considering the anticipated rise in the number of operational industrial machinery and driven vehicles,” he continues. “Participants must upgrade their marketing and sales support systems to remain one step ahead in the intensely competitive market.”
Stringent regulations aimed at reducing carbon footprints, toxic emissions and effluents -- particularly in North America and Western Europe – are also propelling demand for lubricant additives that are free of metals, halogens and phosphorous. Other growth factors on the two continents are linked to technological advances, new engine designs and the need for high-value, high-performance additives. “Suitable additive packages are needed not only at the level of OEMs for newly produced vehicles and machinery, but also for the maintenance of older cars and equipment,” says Tantry.
“Asia-Pacific and Rest of World (ROW) markets have general regulations for emissions, yet urbanization and economic development increase both vehicles on the road and industrial hubs where modern equipment demands quality lubricants and additives,” he explains.
Surging fuel additives
Higher levels of economic development in the Asia-Pacific and ROW/emerging market regions, as well as higher fuel consumption brought about by better economic conditions in Europe and North America, “will guarantee a bright future for fuel additive suppliers,” says F&S senior research analyst Soundarya Shankar.
“Significant advancements in engine technology necessitate fuels that are effective at higher temperature and pressure conditions, leading to a surge in additive consumption,” she says. “Further, challenges in terms of ensuring the cleanliness of fuel injectors in tier three and four diesel engines are accelerating innovation within the fuel additives space.”
Although demand for high-performance, premium fuel additives is following an upward growth pattern, Shankar says several challenges are holding the market back, including customer price sensitivity, especially in the Asia-Pacific and ROW nations, plus a “lack of awareness among end-users on the advantages that additives offer, such as engine cleanliness, fuel efficiency, long-term cost advantages and environmental sustainability.”
The absence of regulations on fuel efficiency and sustainability in several Asia-Pacific and ROW countries is another factor, as is the rising popularity of alternate fuel types such as bio-diesel, ethanol, hydrogen, natural gas and propane, she says.
“Fuel additive manufacturers will increasingly look to establish strategic partnerships with distributors in order to reach out to smaller and regional customers,” Shankar observes. “Offering sophisticated additive packages, products with optimum price-performance index, and a robust customer-service model will propel fuel additive manufacturers to a position of strength in the global landscape.”
Fuel efficiency is becoming increasingly relevant as global governments enact more mandates calling for reduced exhaust emissions, sparking OEMs and drivers to seek superior fuel properties.
“We have therefore noticed an extensive use of cetane improvers in Europe and North America, as it significantly improves fuel efficiency,” Shankar tells Aftermarket Business World. “Also, there are a number of countries restricting sulfur content in fuels, and the reduction of sulfur results in reduced lubricity in the fuel, thereby driving the demand for lubricity improvers in these regions.”
The ratio of whether drivers of older or newer vehicles are more likely to buy fuel additives can vary according to customer behavior and preferences within a specific marketing sphere. “For instance, vehicle owners in the Asia-Pacific and ROW regions have reduced focus and awareness on vehicle maintenance compared to North American and European Union regions,” says Shankar.
In some markets the enthusiasm for ongoing maintenance among motorists is more pronounced within the first few years after buying a new vehicle, and then it tends to diminish over time. “In EU and NA regions, focus towards vehicle maintenance remains comparatively higher,” she points out. “Especially during the weak economic scenario, there was an interest towards vehicle maintenance as purchase of new vehicles remained difficult owing to reduced disposable income and purchasing power.”
Differences are also apparent in deciding whether a name brand or private label additive is preferred. “More than regional variations, this may vary by the type of customer. For instance, a DIY customer would choose a branded additive while a professional in a repair shop would prefer a private label. Private label additives preferred by repair shops are partly to reduce costs along with the fact that these professionals have a stronger technical know-how on different formulations,” says Shankar.
“DIY remains more common within EU and NA regions, and therefore additives such as cetane improvers and cold flow additives are sold easily through retailers to DIY customers. However, in Asia-Pacific and ROW markets awareness regarding additives remains lower,” she elaborates.
“Within the personal auto segment, there is a significant difference,” according to Shankar. “For instance, an owner of a premium car is more likely to rely on a professional repair shop for additives than purchasing from a retailer.”
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