<div>After years, there is some degree of excitement in the Indian lubricants market. Some of that is due to the increased focus of the new government on energy efficient solutions. As technology has improved, vehicles travel longer distances due to improved engine technology and state-of-the-art lubricants.<br /><br /><strong>Businessworld’s Anup Jayaram</strong> spoke to <strong>Nitin Prasad, </strong>Managing Director, Shell Lubricants to understand the changes that are happening in a business that can result in higher efficiencies for the automobile industry and industry at large.<br /><br /><em>Excerpts:</em><br /><br /><strong>What is the big new trend in lubricants in the Indian market?</strong><br />The big change is the pace of technological change in the industry. More and more people are shifting to new generation of oil with advanced oil solutions. It may be one of the fastest that we’ve seen across the world in adopting next generation oils.<br /><br />My classic example is Tata and the commercial vehicle industry. Till five years ago, the oil replacement was after 20,000 kilometres. Today its 40-50,000 kilometres and they are already talking about next generation 80-100,000 kilometres. This change has happened over the last five years. There is also a growing consciousness on energy efficiency, lowering maintenance cost and increased productivity.<br /><br />However, the share of industrial and automobile lubricants is still 50:50. They are both growing at the same pace demonstrating good returns for everyone. On the industrial side, it is now about energy efficiency, total cost of ownership and reducing maintenance costs. On the automotive side, there is a clear focus on fuel efficiency and with oil prices heading upwards, commercial vehicle customers are talking about the fuel efficiency solution. They are working with us on oils that can deliver anywhere from 3 to 6 per cent worth of fuel efficiency savings..<br /><br /><strong>What kind of solutions are you offering?</strong><br />There are two sets of solutions. We do have the advanced oils available globally. But we are also working with many local OEMs to customise oil for Indian conditions and equipment both industrial and automotive. We are working with Eicher, Tata and Daimler here. Daimler in India has a different platform than Daimler outside in the commercial vehicle side. We work with Maruti, Hyundai, Ford, GM. In tractors we work with John Deere and in equipment with Atlas CopCo and Thermax.<br /><br />Essentially, it is about 2 to 2.5 billion litres, so that’s about 2 million tons roughly.<br /><br /><strong>Has the bazaar trade picked up?</strong><br />Bazaar trade has picked up, while sales at petrol pumps have declined because with 2T technology in bikes going away, the sales of lubricants have dropped dramatically. You don’t have the blending of oil and fuel anymore. Actually, development of independent workshops has also picked up. Mahindra’s First Choice is an example of companies looking to create independent workshops that are branded with high quality. And on the industrial side, it’s a lot more direct selling. So we are deploying technology to monitor engines.<br /><br /><strong>What kind of technology?</strong><br />We have a video check machine. Often you have to open up the engine fully. That means high cost and more time. But, putting the engine back together is not simple task and often it’s not the same again. So we have a video boroscope that you can go inside the engine without actually opening it up to be able to see the condition of the engine. Some of our partners are using it effectively to talk about wear and tear in the engine.<br /><br /><strong>Are others doing the same?</strong><br />This technology is exclusive to us. So this is one thing that we work with on the commercial vehicle side. So we have solutions by industry, by sector, cut across the automotive industry and even by the sub-segments.<br /><br /><strong>How has the slowdown affected your business?</strong><br />So, we see that our customers are running at low capacity. Most are averaging at 50-70 per cent of capacity. It hasn’t fully impacted our business because we have been able to increase our customer portfolio and add new customers. That has been able to replace the slowdown of existing business.<br /><br />So our business has continued to grow over the last couple of years. Our portfolio is technologically advanced. This is where Shell is quite good and strong. We are working with customers to increase the awareness and understanding about energy efficiency improvements, lower emissions and maintenance.<br /><br />We have something called Demonstrated Value Record. Here we may go into a very large customer, identify opportunities of cost reduction and improvement. We put in the new oils in their application of systems. We create a set of KPIs that we agree with the customer, monitor and track them over a period of 3, 6 or 12 months. Then we demonstrate to the customer how much they saved in plant maintenance. The customer gives us a sign off saying that I agree that I have saved this much money which is publically available. It’s like a customer testimonial that we create which we can share. But it shows that there are numerous examples of being able to go and save money for customers across segments.<br /><br /><strong>What’s your R&D base over here? How many people do you have?</strong><br />We have a big facility in Bangalore with 800 people today. We are expanding that to 1,500. This centre does global R&D. We spend about a billion dollars every year in global R&D for the entire Shell group. There are only three such centres and Bangalore is one of the main centres.<br /><br />We are looking to expand even further, so we have announced a new location. It’s under construction, and should be complete in the next couple of years. Shell has a big focus on technology, so we like to lead the world in new innovations, technology, and capabilities.<br /><br />We are looking into the next generation oil with more benefits, more fuel efficiency, with lower emissions, and we are working very closely with OEMs. One particular challenge that is coming up for example with new CAFC standards is lowering emissions and increasing efficiencies. When Europe went from Euro 4 to Euro 5, oil was no longer an afterthought. It became a part of the design of the entire solution. So what you see today across all the international players is the oil supplier is working very closely with engine manufacturers. And now that trend is also happening in India. Our specifications have also shifted. OEMs are working very closely with us in something called as Co-engineering partnership to develop those next generation oils.<br /><br /><strong>Do you see a move towards synthetic lubricants?</strong><br />Yes, there are mineral-based oils, semi-synthetic oils and fully-synthetic oils. And the world is shifting towards semi-synthetic oils and synthetic oils. India also we see more than double digit growth in semi-synthetic and synthetic oils because they have the best advantages in fuel efficiency, emissions and higher maintenance productivity etc.<br /><br />It is not just cars but also on the Industrial side. With the push towards higher uptime, higher productivity, industry needs lubricants that can last longer in all applications because anytime they need to go and change the lubricant that is effective downtime for the machine and can take several days. So this is where they are starting to adopt semi-synthetic and synthetic<br /><br />On the automotive side, it has to do with fuel efficiency. Synthetic lubricants not only take care of engine, but also you get better fuel efficiency. As the customer starts to understand this, they start shifting.<br /><br /><strong>What are the new things that one can expect from the industry?</strong><br />From our side, we are going to continue pushing to next generation oil technologies. We believe in semi-synthetic and synthetic oils. You are going to see a lot more customised oils; so you will see solutions that will be custom designed by OEM both on the industrial and the automotive side.<br /><br /><strong>What are the challenges in the industry today?</strong><br />The biggest challenge is the state of the economy. It loops us very heavily, correlated to GDP. So we say it’s GDP minus a couple of percentage points is the growth of the lubricant industry. So the main limitation is the growth of industry itself. As we shift to newer emission standards, I think the challenge will be on finding the next generation of technological solutions to develop them.<br /><br /><strong>Do you see any change with the new government coming in?</strong><br />I think it is still early days. There is more optimism and there are more projects that people are talking about. I think in the end of the day, what we see is interest building for new equipment. Consumer optimism and industrial optimism in terms of way forward has always been one of the leading indicators of lubricant sales. But one of the bigger things that probably is also really helping is the focus on productivity. The government has brought in a very sharp focus on improving the economy though productivity gains, through infrastructure gains and all of this need to be done.<br /><br />One of the things is of course we are doing is for example, that is high on the government’s agenda is energy efficiency. That’s one area we are working with CII. So in that sense, one of the things that we have taken up in the mandate because we are an energy company and because we understand energy very well, how we can have more energy efficient solutions.<br /><br />anup@businessworld.in</div><div><span class="gI"><span class="go">anupjayaram@gmail.com</span></span></div><div><span class="gI"><span class="go"><span>@anupjayaram</span></span></span><br /> </div>
