Shell reveals new India growth plan

Global lubricants leader Shell has launched a range of services in India collectively called ‘Product PLUS’, including a web-based customer advisory service called LubeMatch. It is aimed at driving sales of Shell lubricants within the country by giving customers advice about choosing the right products at the right time. According to Shell, these services would also provide business customers with a clear competitive advantage by improving the performance and fuel economy of their vehicles and e

Autocar Pro News DeskBy Autocar Pro News Desk calendar 01 Apr 2009 Views icon2248 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
Shell reveals new India growth plan
According to Donald Anderson, country head – lubricants, Shell India, “The launch of the Product PLUS service portfolio reinforces our strong commitment to providing value to our customers. Shell has been a global frontrunner in the lubricants industry in providing customers with products that have state-of-the-art technologies. We are determined to bring to our customers in India the same success drivers to enable them to experience their benefits.”

The new Product PLUS portfolio has a range of services to meet the needs of both B2C and B2B customers. It includes LubeAnalyst, LubeClinic, LubeVideoCheck, LubeAdvisor, LubePlanner, and LubeCoach with the latest addition being LubeMatch. This web-based tool is designed to help customers match their vehicles and engines with the correct lubricants, in the commercial vehicle, industrial or off-road sectors. The website which is located online at www.shell.com/lubematch, uses drop-down menus and provides recommendations to end users. Commenting on the launch, Mark Raynes, Shell’s global services manager, said: “We have had a tremendous response to the launch of our new range of Product PLUS service across the world. For example, the on-line service Shell LubeMatch has over 2.5 million users already. It is available in 94 countries and 19 languages, and is one of our most important services as it contains information that enables our customers to make the right lubricant decision through a free online tool. Our services are already demonstrating the value that our product can deliver in terms of real world cost savings and improvements for our customers.”

These services bring together online lubrication recommendations; field-based technical expertise and practical tools to monitor the performance of lubricants while in service. They are backed by a team of the industry’s strongest and most competent local technical experts, and are designed to help customers realise real improvements to their vehicles and equipment.

India strategy

Discussing Shell’s growth strategy in India, Anderson said, “We have very strong brands like Helix for passenger cars, Advance for bikes and Rimula for diesel engines and are investing across the supply chain to grow in India. This includes the initial fill of the vehicle at the factory, then the franchise workshops, while the vehicle is under warranty and finally the fragmented retail market. This last part is the biggest challenge for us in India and we are working to ensure that our products are available here and that we offer good service to our customers through distributors. This is a big challenge for us.”

Shell estimates that the total size of the Indian lubricants market is currently around 1.7 billion litres per annum, growing at a rate of two percent every year. In value terms the market is estimated to be worth around Rs 17,000 crore. The company has a share of 13 percent of the global lubes market and it is targeting a 15 percent share in the future. India currently has a share of three percent of the global lube market, making it the fifth largest market in the world. In its core sectors Shell currently has an 11 percent share of the Indian market and expects to grow this number substantially in the future.

Talking about the state of the auto market at present, Anderson added: “The commercial vehicle market was hit very hard particularly in the initial-fill business since a number of plants shut down temporarily. So the production of trucks dropped dramatically. Also in the aftermarket, business was much lower from those truckers who are involved in the import-export business. However, demand is still there from the agricultural markets in the North. The investment decisions in terms of buying a new truck are being pushed back, there’s no business case for it. But now we see some interesting green shoots, where you see some demand picking up which is a good sign. I think a lot of the problem is also psychological. Overall, things are a lot better than say, two months ago and demand is picking up.” The company explains that this revival is also due to the re-stocking being done by distributors, as the excess inventory in the system gets absorbed by growing demand.

Shell believes that the overall demand for lubricants will drop, but there are conflicting trends at work. Anderson explains: “Globally the demand for our products will come down because of the higher durability of our lubricants. In the US market, you can see that there is a downsizing of vehicles and engines due to the recession, so the demand there will drop due to this trend. In India, it’s very hard to say, but the weighted average consumption will probably drop because more people will buy smaller cars like the Nano. So on average, the engine sump size will become smaller. But at the same time, a whole lot of people who today own a hatchback will want a saloon and then a luxury car. So that will mean engine sizes will get bigger. So these two forces are pulling in opposite directions. I think that the first force will be much stronger in terms of volume growth, so the overall demand will drop. But we will continue to see good growth in emerging markets, especially in places like India and China.”

Explaining the rationale behind Product PLUS Anderson clarifies, “The whole idea of these products is to give peace of mind to the customer and also encourage them to delve into and understand lubricants and their equipment through lubricants. They can also challenge us by asking ‘where is the benefit?’. What we are trying to do is actually record and prove a rupee number of what the benefit is and what we save for them.”

Discussing the trend in oil prices Anderson confesses: “If you look at oil price forecasts, they’re normally wrong. No one can predict it with any accuracy and there are a lot of variables impacting the price. In the long run, the demand for oil will grow very fast, and the supply will struggle. It doesn’t matter if you’re talking about traditional crude oil, gas-to-liquids that produce nice, white, transparent diesel. Or, whether you’re talking about bio-fuels or non-conventional fuels. We are going to need a wide range of technology just to meet future demand. Of course this creates huge challenges in terms of protecting the environment. Some people say that people should not be travelling so much and that we should look at altering consumer behaviour. This is partly true, but you should not deny people mobility, because that is crucial to economic growth. We just have to find more efficient ways of providing that.”

Regarding low-cost cars like the Tata Nano, Anderson is optimistic about the growth prospects for Shell. “Major opportunities will emerge as people trade up. With cars like the Nano, the jump from bikes to cars is now much smaller. There will be a massive jump in the number of vehicles on the road, which is good because it means that there is a lot more mobility which helps drive the economy. I think low-cost cars are a powerful new trend and other companies will enter the market later and try to catch up with Tata. However, I don’t think that these cars will take anything away from the other segments, since it’s much more of a trading up, so the market as a whole should grow dramatically. In that sense this is a big opportunity for us.”

He adds, “We do not have a tie-up for the Nano with Tata Motors at the moment. But we do have the biggest global footprint and if they want help to go all over the world, and then we are the obvious first choice partner. So those sorts of things are what we will be looking at.”

The trend towards higher emission standards also provides Shell with an opportunity to grow its business in India. “This is a big opportunity for the OEMs, for Shell and for society at large. But we have to do the job of explaining the benefits. It’s not like everything is suddenly more expensive because you have to meet these norms. You need to consider the total cost efficiency over the life of the vehicle and the benefit to the environment. The hard truths are that demand will increase, supply will struggle to keep up and the environmental impact needs to be minimised," concludes Anderson.
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