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The base oil market is expected to witness a CAGR of around 2% during the forecast period. The major factors driving the growth of the market studied is rapid industrialization in developing nations. On the flipside, automobile manufacturers focusing on engine downsizing and extended oil change intervals are likely to hamper the growth of the market studied.
- Group I segment dominated the market, but it is likely to decline during the forecast period, owing to its replacement by Group II and Group III base oil.
- The expanding production capabilities in developing countries are likely to provide opportunities for the market studied during the forecast period.
- Asia-Pacific dominated the market across the world, due to the growing automotive production and sales, and growing industrial sector due to increasing investments from multi-national companies in the region. This has been further driving the demand for base oil.
Key Market Trends
Engine Oil Segment to Dominate the Market Demand
- Engine oil segment dominates the demand for base oil, due to the growing demand for engine oil from industries, such as automotive, power, heavy equipment, metalworking, chemicals, and others.
- Engine oils are widely used to lubricate internal combustion engines and are composed of 75-90% base oils and 10-25% additives.
- They are typically used for applications, such as wear reduction, corrosion protection, and smooth operation of the engine internals. They function by creating a thin film between the moving parts, for enhancing heat transfer and reducing tension during the contact of parts.
- The automotive industry stands to be the largest consumer of engine oil. Currently, high-mileage engine oils are in demand in the automotive industry, owing to the properties that help in oil leak prevention and reduction in oil-burn offs.
- Most light and heavy vehicle diesel and gasoline engines use 10W40 and 15W40 viscosity grade oils, globally.
- Thus, with an increase in automotive production, the demand for engine oil is expected to increase significantly in the coming years, which is further expected to drive the growth of the base oil market.
Asia-Pacific Region to Dominate the Market
- The Asia-Pacific region dominated the global market share. The growing industrial sector due to rising investments in the region by multinational companies, and high demand for gear oil, grease, etc., from industries, such as heavy equipment, power, and metalworking, are some of the key drivers for the base oil market in the region.
- China, the world’s largest automotive producer, is majorly focusing on increasing the production and sale of electric vehicles in the country. For this purpose, the country plans to increase the production of electric vehicles (EVs) to 2 million a year by 2020, and 7 million a year by 2025.
- Besides, countries such as Indonesia, Malaysia, and Thailand have also been witnessing strong growth in the production of vehicles in the region. Hence, all such trends in the automotive industry in the region is expected to add to the demand for base oil in the region during the forecast period.
- In addition, growing investments in the construction sector are anticipated to boost the demand for lubricants used in construction activities and in heavy equipment.
- Countries, such as India, China, Philippines, Vietnam, and Indonesia, have been witnessing strong growth in the construction industry. Investments in residential and commercial construction in these countries have been increasing at a robust rate. This is further expected to increase the demand for base oil in construction applications in the coming years.
- Hence, all the favorable market trends are expected to drive the demand for engine oil, greases, gear oil, etc., which are further projected to drive the growth of the base oil market in the region, during the forecast period.
The base oil market is a highly fragmented market, where numerous players hold insignificant share to affect the market dynamics individually. Some of the noticeable players in the market include Exxon Mobil Corporation, Royal Dutch Shell plc, China Petrochemical Corporation, Evonik Industries AG and Chevron Corporation, among others.
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