Solidiance has produced this white paper for information purposes only. While every effort has been made to ensure the accuracy of the information and data contained herein, Solidiance bears no responsibility for any possible errors and omissions. All information, views, and advice are given in good faith but without any legal responsibility; the information contained should not be regarded as a substitute for legal and/or commercial advice. Copyright restrictions (including those of third parties) are to be observed. September 2014 WINNING MYANMAR’S AUTOMOTIVE LUBRICANT MARKET
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Solidiance has produced this white paper for information purposes only. While every effort has been made to ensure the accuracy of the information and data contained herein, Solidiance bears no responsibility for any possible errors and omissions. All information, views, and advice are given in good faith but without any legal responsibility; the information contained should not be regarded as a substitute for legal and/or commercial advice. Copyright restrictions (including those of third parties) are to be observed.
September 2014
WINNING MYANMAR’SA U T O M O T I V E L U B R I C A N T M A R K E T
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EXECUTIVE SUMMARYThis white paper focuses on the lubricant market in Myanmar’s
automotive sector to deep dive in the industry by looking at
consumption level, current and future trends, value chain structure,
product segmentation and competition intensity. During the course
of the research, a number of vehicle types e.g. passenger cars,
commercial vehicles and two wheelers have been observed to
analyze its lubricant consumption patterns.
The automotive lubricant market in Myanmar has recorded
significant changes within the last 3 years, with the emergence of a
mid-end and a nascent higher-end segments. Main drivers for these
changes are the end of international sanctions against Myanmar
and regulatory change in car importation which positively affected
car imports, boosting its circulation number by 8% in the last 3
years. The increase in purchasing power and reception of loans
from international institutions to modernize infrastructure have
also positively impacted two wheelers and commercial vehicles
sales, raising the lubricant consumption -- especially engine oil.
The market share of low-grade lubricant has now shrunk to 60%
from 90% before 2010, while at the same time medium-grade and
high-grade lubes account for 35% and 5%, respectively.
Although there are more products available, customers’ knowledge
about lubricants and its benefits for their engine remain limited.
Moreover, price-sensitive Myanmar customers are often lured by
promotion and sales incentives, making the current competition
fiercer among more than 200 brands including local, Asian and
REGUlAToRYR E F o R M S H AV E A l l o w E D E A C H M YA n M A R C I T I Z E n T o I M P o R T 1 PA S S E n G E R C A R S I n C E 2012
BEFoRE 1998
1998-2010
2010 – SEP 2011
SEP 2011 – MAY 2012
MAY 2012 – MAY 2013
MAY 2013 UnTIl ToDAY
Western countries applied sanctions against Myanmar, banning car imports.
Imported cars were only available for government authorities, NGOs, and foreign embassies in Myanmar
• Imported passenger cars were fewer than 500 units a year.
• Imports of commercial vehicle were strictly controlled. Imports for commercial purpose were not allowed. For
example, a mining company that planned to import a truck for carrying out business, had to submit a request letter
and sought approval from Ministry of Mining and Directorate of Trade.
Opening imports for certain types of commercial vehicles:
• Imports for commercial purpose were allowed for: Trucks over 3 tons, passenger buses with more than 15 seats,
heavy equipment.
A breakthrough rule for imported car market was passed.
• The Old Car Substitution Program allowed application of permits for importing cars to replace older cars which
were 20-40 years old, for newer models that were manufactured after 1995.
Any Myanmar citizen aged 18 years-old and older could import 1 passenger car under his/her own name (for personal
use only). Meanwhile, imported passenger cars for commercial purpose were still limited.
The government allows individuals or companies to import light trucks less than 3 tons, lifting limits on imports of any
kind of commercial vehicle for commercial purpose.
Source: solidiance interview & analysis, Myanmar Times, Myanmar Ministry of Transport
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All local production is Semi Knocked-down (SKD) assembly, and takes up less than 10% of new annual sales. The rest are Complete Built Up (CBU)
imports.
The government monopolies local car production. The Ministry of Industry (MOI) operates 3 factories in Myanmar and remains the only Original
Equipment Manufacturer or OEM that manufactures cars with certain scale in the country. There were total 8,500 vehicles produced from 2008
to 2012 with about half of the vehicles were built in the last 2 years. The auto brands manufactured under governmental joint ventures (JVs) are
Chery in majority, and a few Tata and Isuzu.
Other smaller scale auto producers include Super Seven Star Motor Company, whose production was controlled and reduced to fewer than 100
per month after 2011 by the government. Suzuki, a former JV with government between 1998-2008, produced 4,800 vehicles back then. The
government cancelled Suzuki’s investment permit in 2008, stopping its production altogether. In May 2013, Suzuki announced that it resumed
its car production under its 100% owned entity, with a target of around 1,000 units per year, making it the very first foreign-owned producer in the
local market.
l E A D I n G T o A R I S E I n V E H I C l E o w n E R S H I P w I T H A l M o S T 4 M I l l I o n V E H I C l E S B E I n G R E G I S T E R E D I n M YA n M A R A S o F J U lY 2013
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vehicles import proportion, 2013 Thailand’s vehicles production by sales, 2013
3,838,206 KM
3,302,692
318,397
117,842
Roadlengthforthewholecountryasof2012
MotorcyclesregistereduntilJuly2013
PassengercarsintotalregistereduntilJuly2013
CommercialvehiclesregistereduntilJuly2013
Source: MIDC, Solidiance interviews, Ministry of Transport
Almost all cars sold in Myanmar are imported (mostly from Japan), only 8% are locally produced, so import laws have a very
strong impact on car sales in the country. Market dynamics are very different in Thailand where most of cars sold are locally
produced, and a great share of local production is exported overseas.
Importedcars,92%
Locallyproducedcars ,8%
Locallyproducedcars,54%
ExportSales,46%
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2% 1%oTHERS
15% 10% 5%
2%
65%
MYAnMAR’SV E H I C l E I M P o R T S A R E D o M I n AT E D B Y PA S S E n G E R C A R S , w I T H S E D A n S A C C o U n T I n G F o R A l M o S T H A l F o F T H E C A R I M P o R T S
Previously in Myanmar, imported cars were only accessible for government officials and NGOs. It
is not until recently that the government introduced “Old Car Substitution Plan” in Sep 2011. The
car imports market has witnessed a real breakthrough – imported cars have become accessible to
individuals and businesses.
estimated imported car sales breakdown By car brands (apr. 2013)
HowEVER, ConSUMERS ARE UnAwARE ABoUT THE PRoDUCTS; lUBRICAnT USE In MYAnMAR IS
DETERMInED BY CAR woRKSHoPS AnD RETAIl SHoPS
Source: Solidiance interview & analysis
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ConSEqUEnTlY,I T I S I M P E R AT I V E T o E n G A G E l o C A l I M P o R T E R S T o M A R K E T A U T o M o T I V E l U B R I C A n T S I n M YA n M A R
Importer/Distributor
Wholesaler
Carworkshop/Servicecenter
LubricantRetailshop
End-user
B2C value Chain: Privatevehicles(asof2013)
B2B value Chain: Commercialvehicles(asof2013)
~3.5 million vehicles
~100,000 vehicles
Importer/Distributor
FleetOperator BusinessEnd-user
Wholesaler(outsideYangon)
There are two types of value chain: B2C and B2B. The majority of lubricant players are in B2C business because the market size is
big. All players have local importers to market products and many importers have wholesalers to distribute the products, particularly
outside Yangon. In both B2C and B2B chains, sellers are highly influential on consumers’ decision because end-users are lacking
awareness about lubricants.
Source: Solidiance interviews & analysis
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MoST STAKEHolDERS M A K E D E C I S I o n T o P U R C H A S E B A S E D o n P R I C E A n D I n C E n T I V E S R AT H E R T H A n l o o K I n G AT B R A n D A n D q U A l I T Y
AUToMoTIVEl U B R I C A n T A C C o U n T S F o R 65% o F T o TA l l U B R I C A n T C o n S U M P T I o n I n M YA n M A R , M A K I n G I T A l U C R AT I V E TA R G E T S E G M E n T
• Myanmar imported 78.8 million litres of lubricant in 2012 of which more than half was
consumed by automotive sector.
• Importers / distributors also estimate that lubricant consumption for automotive is higher
than that for the industrial segment due to surging imports of car and motorcycle in recent
years. The industrial lubricants come only from a limited number of machines used in large
manufacturing plants and mining business.
• Marine lubricants represent a small share of Myanmar’s lubricant market because most
marine operators change lubricants in Singapore port
~ 52 million Litres
65%
30%
5%
Automotive
Industrial
Marine
Automotive lubricant includes motorcycles , passenger cars, and commercial vehicles
Total lubricant consumption:
Source: Official Customs data, Solidiance interviews & analysis
lubricant consumption volume by sector (2013)
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M YA n M A R ’ S A U T o M o T I V E l U B R I C A n T S M A R K E T V o l U M E wA S E S T I M AT E D T o R E A C H o V E R 6 0 M I l l I o n l I T R E S I n 2013
3136
4252
61
0
10
20
30
40
50
60
70
2009 2010 2011 2012 2013e
automotive lubricant market size volume from 2009-2013, CaGR +18%
Market size volume:
Imports of automotive lubricants reached around 52 million liters in 2012. This number had increased by ~60% from 2009 (based
on custom data). From 2010s, there were changes in vehicle import regulation and on registration of illegal vehicles, which had only
showed impact in 2011/2012. Imports were expected to reach 61 million litres in 2013.
Note:Historical data is based on lubricant official import volumes and adjusted with vehicles in circulation
Source: Solidiance interviews & analysis
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BUSES & TRUCKS A R E T H E l A R G E S T C o n S U M E R T Y P E S w H I l E E n G I n E o I l A C C o U n T S F o R ~75% o F A U T o M o T I V E l U B R I C A n T C o n S U M P T I o n
75%
10%
5%5% 3%2%
Engineoil
Gearoil
Coolant
Brakeoil
Grease
Others
45%
35%
20% Bus&Truck
Motorcycle
Passengercars
Market segment:
automotive lubricant consumption:
Buses & trucks in the B2B business are the biggest consumers of lubricants because each vehicle needs large amount of lube on a regular basis.
Although motorcycles account for 80% of vehicles that operate in Myanmar’s roads, motorcycle’s lubricant consumption only accounts for 35%
of the total market as it only needs small amount of lube.
Engine oil represents about 75% of the automotive / two wheelers lubricant consumption. Gear oil comes second, but the product is still
substituted with detergent by car owners with small budget.
Source: Solidiance interviews & analysis
automotive lubricant consumption volume by vehicle type (2013)
automotive lubricant consumption volume by product type (2013)
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MID-EnD SEGMEnT STARTED To EMERGE AFTER 2010S, AlTHoUGH low-EnD MARKET REMAInS STRonG DRIVEn BY THE Two-wHEElERS
“ My service center is focusing on high-end customer who can afford the premium products from global brands. This type of customer is a niche market where majority of end-users particularly motorcycle still prefer to use the low priced product. “
While the market has been dominated by products from low-end grades, the demand
for high-end lube has been expanding due to the expected increase in demand
for new car models in line with more favorable conditions to import vehicles. This
has prompted key international players to pay more attention to the high-end lube
segment. They are seeking to increase usage of synthetic type oil by educating the
market. All players also offer various grades in the high-end lube segment.
Global, Middle East, and Asian brands now pay more attention on the synthetic types
- with local and Asian brands having been dominating this segment for decades. This
segment is mostly for motorcycle market.
High-end(5%)+
Mid-end(~35%)
High-end(~5-10%)
Low-end(~90%)
Low-end(~60%)
Past segmentation
Before2010sCurrent segmentation
After2010s
End of international sanctions against Myanmar, easier
procedures for imports have started to impact the market
-ManagingDirector,acarservicecenter
Source: Solidiance interview & analysis
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onlY 50+ oUT oF oF 200+ REGISTERED lUBRICAnT BRAnDS ARE PUSHInG FoR MoRE MARKETInG AnD ADVERTISInG oF HIGH-GRADE lUBE PRoDUCTS