MAY 2013 • LUBES‘N’GREASES EUROPE-MIDDLE EAST-AFRICA10

MARKETING MATTERS BY GABRIEL TARLE

Two-wheeler Market: Small but Going Places Quickly

Accounting for a little less than 3 percent of total global lubricant

demand, the two-wheeler lubricants market is often dismissed as too small to matter. Over the next decade, though, increasing mobility and rising income, along with evolving perfor-mance requirements, should create significant opportunities for lubes companies serving this segment.

The world’s two-wheeler popula-tion consists of nearly 490 million motorcycles, scooters and mopeds and is largely dominated by four-stroke engines. Although two-stroke vehicles persist in many parts of the world, it is safe to assume that in Europe and North America the technology is used

more in lawn mowing and snow blow-ing equipment rather than in two-wheeled vehicles. With sales of over 235 million new units extrapolated over the next five years, the global two-wheeler population is forecast to grow at a cumulative annual growth rate of 8 percent, led primarily by demand in the Asian region which already encompasses seven of the 10 biggest two-wheeler markets.

Engine oils account for over 95 percent of the total motorcycle oil market, with the balance consisting of products such as fork oils, rear suspension oils, greases and chain oils. Regionally, the Asia-Pacific market is by far the largest consumer, followed distantly by South America, Europe and North America.

Mostly commensurate with two-wheeler sales, global consumption of motorcycle oils – currently at 1.1 million tons per year – is projected to grow at just over 6 percent per year over the next five years. Asia and South America are expected to see the strongest growth, while a modest decline is forecast in Europe.

According to the most recent data, yearly motorcycle oil demand in Eu-rope is 44,000 tons. While consump-tion in Europe is projected to contract, the region remains a particularly lucra-tive market due to increasing pen-etration of synthetic products, which generally cost more.

The top three markets – Italy, Ger-many, and Spain account for nearly

60 percent of European demand, with Italy, home of Piaggio, respon-sible for just over a quarter by itself. Two-wheeler usage in Europe varies significantly by country. Germany, like other Central and Nordic European countries, tends to use two-wheelers for recreational purposes rather than transportation. By contrast, South-ern European countries tend to use two-wheelers primarily as means of transportation due to their low fuel consumption and taxation rates, relatively low cost and ease of parking and maneuverability.

Economic problems have made many suppliers and marketers more conservative in their business plans. But some companies have used ag-gressive pricing and promotions to grab market share, perceiving op-portunity where cautious consumers are investing in the maintenance of their two-wheelers rather than simply replacing them. The most effective strategies are targeting consumers or mechanics directly and cutting out middlemen.

Challenged by economic auster-ity, many European suppliers are struggling to maintain market share and to promote brand loyalty. OEM-franchised garages and workshops sell motorcycle oils as part of their service and maintenance packages, and they receive bulk oil directly from oil com-panies, which is more cost-effective. OEMs generally have service deals

Asia-Pacific

South America

Europe

North America

Rest of World

Two-wheeler Lube Demand by Region

Source: Kline & Co.

2011 Total: 1.1 million

tons

Continued on page 12

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MAY 2013 • LUBES‘N’GREASES EUROPE-MIDDLE EAST-AFRICA12

MARKETING MATTERS

with lubricant suppliers as part of co-branding strategies to increase overall exposure and sales.

The OEM co-branding strategy may benefit lubricant suppliers, but franchised dealerships might deal with multiple OEM brands, and it is up to the service advisor to decide whether to follow the OEM brand recommen-dations. At any rate, two-wheeler owners in most of Europe prefer to service their vehicles at quick lubes and dealerships.

Southern Europe has a growing high street segment, consisting of corner or part-time owner-mechanics running small, independent garages. The channel is called “high street” because the lubricant is purchased through the retail segment, either from mass merchandisers or from auto part stores, then installed at the independent garages. The ability to provide two-wheeler maintenance and repair services at significantly lower costs than franchised dealerships is the major reason for this segment’s growth, which is expected to continue in economically afflicted Southern European countries.

While the European market for motorcycle oils is contracting in terms of volume, it is expanding in terms of value. Penetration of synthetic and semi-synthetic products is ex-ceptionally high, accounting for well over two-thirds of the market. Semi-synthetics dominate with just under 50 percent, followed by full synthetics. Conventional or mineral products are the smallest segment.

Although European two-wheeler production and sales are currently slowing, there are strong signals that the motorcycle oil market will contin-ue shifting towards high-performance products. The main reasons include the increasing market share of high end, large cubic-capacity motorcycles requiring high-performance synthetic lubes, and a growing majority of

two-wheeler manufacturers in Europe recommending full and semi-synthetic products for service fills. Given that awareness of lubricants and mainte-nance practices is high in Europe, two-wheeler owners tend to follow the lubricants specifications recommended by the manufacturer, even if they do not use the recommended brand.

Demand may be shrinking, but the European motorcycle oil market re-mains an attractive proposition. That is especially true for marketers who can identify evolving trends – such as the popularity of the high street channel – and adjust accordingly. o

Continued from page 10

Italy

Germany

Spain

France

Turkey

All other

European Two-wheeler Demand,by Country

Source: Kline & Co.

2011 Total: 44,000 tons

GABRIEL TARLEis an analyst in the Prague, Czech Republic, office of Kline and Com-pany, a worldwide consulting and research firm. He can be reached at Gabriel.Tarle@klinegroup.com

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