OTL Lubricants joins top lubricant brands in China
By Alison Gaines
Banking on the brand-conscious Chinese consumer, OTL Lubricants, which recently officially launched its lubricant product line in China, is going after the top-tier market segment that traditionally has been the purview of large multinational oil companies like Shell, ExxonMobil and BP Castrol.
OTL Lubricants is part of Hong Kong-based OTL Group, which has car dealerships in China; a storage-racks business called Easy Racks; and, an automotive spare parts business, which OTL operates under its own brand. OTL has about a dozen car dealerships selling foreign brands like Audi, Honda, Volkswagen, Toyota and Fiat.
Henry Li, general manager of OTL Lubricants, knows that now is not the easiest time to break into the Chinese lubricant market. With more than 1,000 lubricant brands in the country, and international names such as Shell, Mobil, Castrol, Total and national brands like PetroChina, Sinopec and CNOOC, the competition is extremely high, to say the least. Brand presence and prestige matter as much as, if not more than, the quality of the lubricant inside the bottle, Li said.
OTL Lubricants will begin its lubricant sales with fully- and semi-synthetic gasoline engine oils. The fully synthetic motor oils are branded as SynXtra, and the semi-synthetic motor oils are branded as SynNeo. Both have the API SN classification, as well as ACEA A3/B3 and A3/B4, and some viscosity grades also have ILSAC GF-5.
Currently, SynXtra is available in five SAE viscosity grades (0W-30, 0W-40, 5W-20, 5W-30 and 5W-40), and SynNeo is available in 5W-40 and 10W-40.
OTL Lubricants are manufactured by The Arabian Petroleum Supply Company (APSCO), which has a 55,000-metric-tonne lubricant blending plant per shift per year in Jeddah, Saudi Arabia. APSCO blends and packages the products, and sends them to China in one- and four-litre bottles. While it may be more expensive to have the product blended and packaged in Saudi Arabia, this is justified, as it helps guarantee the product quality for its customers, Li said.
OTL Lubricants’ first foray into lubricants is directed toward the high-end market. Li explained that it makes sense for brand prominence, especially in China.
“As we know, China is the most important market in the world,” he said, referring to automobile ownership. “Every year, it’s still growing.”
While the lubricant market is moving toward over-saturation, customers in China tend to upgrade their cars faster, always wanting the newest models.
“That’s why we target the high-end market first, to give the brand prestige,” Li said.
Quick lube services also are becoming more popular in China, Li said, and OTL Lubricants has plans to launch quick lube stations as well in select cities. Normally, fully synthetic engine oils can last at least 2010,000 kilometres (km) without being changed. In Europe and the U.S., Li said, drivers will often go for 20,000 or 30,000 km without changing the oil. Chinese drivers, however, have the habit of changing their oil at 105,000-8000 km, even if the oil is still good, he said.
At OTL’s workshops, an oil change can cost between RMB500 and RMB600, said Li, and understandably, only OTL-branded fully synthetic or semi-synthetic oils are used.
OTL Lubricants has already lined up 16 distributors in China “even though our products will only be available in the market in early November 2016,” Li said. At the moment, the company is not selling its lubricants online, as other companies do.
“On the internet, there are lots of lubricants available and the quality is not guaranteed,” Li said. “We must control our sales channel. We don’t want to see fake oils with our brand.”
However, he said that messaging apps, such as WeChat, are very popular in China, and could be a possible outlet for OTL Lubricants.
Perhaps the most promising channel for OTL Lubricants is its existing automotive spare parts business. According to Li, OTL Lubricants expects that this will be one of the main channels for marketing its lubricants in China.
If OTL Lubricants’ gasoline engine oils do well, the company hopes to expand into diesel, marine, industrial and eventually aviation lubricants as well. The low- to medium-end segment of automotive engine oils is also a possibility, Li said. Once the brand is prominent, it may be possible to provide the lubricant to a wider variety of customers, he said.