Market Size and Overview:

The 2023 valuation of the International Automotive Base Oil Market stands at USD 10.51 billion, with a prospective expansion to a market magnitude of USD 12.41 billion by 2030. Anticipated over the forecast duration spanning 2024 to 2030, the market is expected to exhibit a Compound Annual Growth Rate (CAGR) of 2.4%.

INDUSTRY OVERVIEW

Base Oil holds significant importance globally, finding widespread application across various sectors, particularly in the formulation of lubricating oils. In the maritime industry, Group I base oils play a pivotal role in the production of marine lubricants, vital for preserving and enhancing engine and equipment performance in the shipping sector. The need for high viscosity in Group I base oils is imperative for optimal functionality in high-performance marine lubricants. The automotive industry stands out as one of the largest consumers of base oils worldwide. Despite the deceleration in the demand for certain lubricants due to the increasing prevalence of electric cars, the automotive sector continues to drive demand for lubricants in vehicle manufacturing. Lubricant manufacturers, particularly those catering to the automotive sector, are actively involved in innovative product developments to meet consumer demands for both standard and customized products. The surge in demand for base oils is anticipated to be fueled by the increasing utilization by lubricant manufacturers during the forecast period. Emerging economies such as China, India, and Indonesia are playing a pivotal role in driving the manufacturing industry globally, with factors such as readily available raw materials, cost-effective infrastructure, and lower labor costs contributing to this growth. Consequently, base oil producers are strategically relocating and expanding their production facilities in these developing nations.

COVID-19 IMPACT ON THE AUTOMOTIVE BASE OIL MARKET

The COVID-19 pandemic had a profound impact on the Automotive Base Oil Market, marked by transport restrictions, decreased industrial output, and disrupted supply chains. This led to a significant slowdown in market expansion globally. The automotive industry, being one of the most affected sectors, experienced disruptions in the supply chain due to halted Chinese parts supplies, industrial difficulties in Europe, and the decline of U.S. assembly factories. These challenges exerted pressure on the global automotive industry, already grappling with declining demand, indicating a potential surge in merger and acquisition activities. The pandemic further exacerbated the situation as social distancing norms led to a limited workforce in manufacturing companies, negatively impacting production in the automotive industry. Anticipated over 2020 and 2021, a decline in demand for automobiles and commercial vehicles is expected. The North American production of cars witnessed a reduction of over 80% due to the pandemic. Similar situations unfolded in Europe and the Asia Pacific, with major automotive companies such as Ford, General Motors, Fiat Chrysler Automobiles, Honda, and Tesla temporarily halting production. Even as these businesses resume operations post-pandemic, the automotive sector faces economic uncertainties and a decrease in consumer spending power.

MARKET DRIVERS:

The automotive sector is witnessing an increasing demand for premium oils

Advanced engine technology is propelling the demand for high-grade lubricants, capable of providing compatibility with fast-moving components and enduring high temperatures. The choice of base oil significantly influences the overall performance of final lubricants, with engine oils typically comprising 70–90% base oil and 10–30% additives. The escalating demand for high-grade engine oils is expected to stimulate the base oil market, benefiting diesel trucks, passenger automobiles, light-duty trucks, and stationary engines by enhancing resistance to harsh and demanding conditions. Consequently, the expanding market for base oil is directly linked to the rising demand for premium oils in the automotive sector.

Market growth is propelled by lucrative opportunities in the BRIC nations

The BRIC nations (Brazil, Russia, India, and China) present substantial market potential for lubricants during the forecast period. These nations, home to approximately 41% of the world's population (as per World Bank estimates), are expected to experience population growth. The governments in these nations are prioritizing economic growth to cater to the needs of their vast populations. Over the next five years, a rapid increase in both domestic and international investments is anticipated, reinforcing various interconnected industries, including the base oil and lubricants sectors within the automotive industry.

MARKET RESTRAINTS:

Market growth is hindered by fluctuating crude oil prices

The base oil market is significantly impacted by fluctuations in the crude oil market. The period between 2008 and 2014 witnessed a profitable phase for the crude oil market as prices surpassed the USD 100 per barrel mark, reaching USD 120 per barrel for WTI and USD 140 for Brent crude. However, historic lows in crude prices occurred in 2015. These price fluctuations have a pronounced effect on the profit margins of manufacturing enterprises.

The majority of base oil varieties are derived from mineral oils, themselves obtained from crude oil. Consequently, the price fluctuations in crude oil have a substantial impact on base oil prices. Manufacturers experience larger profit margins during periods of high crude oil prices, whereas the base oil sector faces challenges when prices rise, affecting profitability significantly.

AUTOMOTIVE BASE OIL MARKET – BY TYPE

• Group I
• Group II
• Group III
• Group IV
• Group V

The classification of the automotive base oil market by type includes Group I, Group II, Group III, Group IV, and Group V. As of 2021, the Group II base oil segment dominated the base oil market, holding the largest market share in terms of both value and volume. This trend is expected to persist throughout the forecast period due to the superior performance and cost-effectiveness of Group II base oil in comparison to other base oil categories.

AUTOMOTIVE BASE OIL MARKET - BY REGION

• North America
• Europe
• The Asia Pacific
• Latin America
• The Middle East
• Africa

Regionally, the Automotive Base Oil Market is segmented into North America, Europe, Asia Pacific, Latin America, The Middle East, and Africa. The North American base oil industry is foreseen to experience stable growth in the coming years, propelled by its well-developed industrial and automotive sectors. Automotive oils will continue to dominate the North American base oil market, driven by increased transportation-related activities following the pandemic. The Asia Pacific base oil market is expanding due to growth in the automotive industry and advancements in industrial machinery manufacturing. The increasing motorization rate in developing nations contributes to higher lubricant consumption, boosting demand for base oil. With a projected CAGR of 3.3% between 2022 and 2030, the Asia Pacific base oil market is expected to surpass US$ 5 billion by 2030. Europe's base oil market is stimulated by the need for fuel-efficient vehicles and stringent automotive fuel policies. Compliance with regulations such as the European Union's CO2 emission limits for new passenger cars is driving the demand for highly effective lubricants made from base oils. Europe is anticipated to achieve a valuation close to US$ 16 billion by 2030, maintaining its significance for base oil producers with a CAGR of 2.5% over the assessment period.

AUTOMOTIVE BASE OIL MARKET - BY COMPANIES

Key players in the Automotive Base Oil Market include:

• CHEVRON CORPORATION
• EXXON MOBIL CORPORATION
• ROYAL DUTCH SHELL PLC.
• ERGON INC.
• NESTE OYJ
• NYNAS AB
• S-OIL CORPORATION
• SEPAHAN OIL
• REPSOL S. A.
• SINOPEC LIMITED
• BP PLC
• EVONIK INDUSTRIES AG
• H&R GROUP
• SAUDI ARAMCO
• SK LUBRICANTS CO. LTD.

NOTABLE HAPPENING IN THE AUTOMOTIVE BASE OIL MARKET EXPANSION:

In August 2019, ExxonMobil Chemical Company, a division of Exxon Mobil Corporation, expanded its distribution of Group IV/V base stocks (synthetic base stocks) in Mexico, Central America, and the Caribbean through Synergy Additives Company S.A. de C.V. (Mexico). This strategic move aimed to enhance the company's regional presence.