Market Trends of East Africa Lubricants Industry
Increasing Demand from Automotive Sector
- Lubricant is a fluidic material that is used to reduce friction between contact surfaces to avoid wear and tear. It is prepared with specific additives and specific group base oils depending upon the end-uses. Lubricants in the automotive industry are mainly used as engines, gear, and hydraulic oils.
- Different lubricants used for passenger cars include engine oils, automatic transmission fluids, axle and manual transmission oils, greases, maintenance and additives, brake and steering fluids, coolants and antifreeze, and windscreen fluids.
- Car production in Kenya increased significantly. According to the Kenya National Bureau of Statistics, in 2022, car production in Kenya amounted to 13,473 units, up from 10,096 units. Further, in the first seven months of 2023, the country produced 7,416 units.
- The East African region is considered a hub for innovations in e-mobility. Many local companies in the region are creating business models that aim to fill gaps in transportation services. The companies are focusing on launching new models of passenger buses and two-wheeled motorbikes.
- The growing electric vehicle market in the region is attracting world-leading car companies and local start-ups to establish plants to produce advanced vehicles.
- In June 2022, BasiGo, an early-stage e-mobility start-up in Kenya, launched an electric passenger bus that traveled 250 kilometers on one charge. The electric bus is assembled locally using the parts a Chinese car-making giant BYD designed.
- In March 2022, Tata Motors, an Indian car manufacturer, launched its compact SUV-Tata Nexon in the Tanzanian market. The country's automotive market is fast-growing and expected to boom soon, with many global players launching their models in the market. The primary mode of transportation in the country is the small bus rapid transit (BRT) fleet. The United Nations Environment Programme (UNEP) is helping African cities drive toward soot-free public transportation, including electric-powered buses.
- In July 2023, a Swedish-Kenyan technology company, Roam, opened the largest electric motorcycle assembly plant in East Africa, with an annual production capacity of 50,000 units. The 10,000-square-meter plant offers sustainable transportation solutions for motorcycle taxis operating in the region.
- Hence, the growing automotive industry in the region is anticipated to drive the demand for the lubricants market during the studied period.
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Increasing Demand of Engine Oil in the Region
- Engine oils are composed of 75-90% base oils and 10-25% additives. Engine oils are primarily used to lubricate the moving parts in the engine, such as internal combustion engines. They are typically used for other applications such as wear reduction, corrosion protection, and smooth operation of engine internals.
- They function by creating a thin film between the moving parts to enhance the transfer of heat and reduce tension during the parts' contact. High-mileage engine oils are in demand lately, owing to the properties that help in the prevention of oil leaks and reduction of oil consumption.
- Engine oils find applications in various end-user industries, including automotive, power generation, heavy-duty equipment, construction, and other end-user industries.
- The construction industry employs heavy equipment for various purposes. The industry has been on a growth path in the last few years in the East African region.
- In 2022, the construction sector in Kenya registered a growth of 4.1%, owing to various regulatory environments and developments in infrastructure. According to Kenya's Economic Survey 2023, the number of building plans approved increased by 58%.
- A few major construction aggregate-consuming projects have recently been completed in the region in 2022, such as the USD 9.8 billion Kenya-Uganda-Rwanda-South Sudan rail project and the USD 5 billion Lamu project in Kenya.
- East Africa has resources capable of generating vast amounts of renewable energy, such as wind, hydro, and solar power. This energy is untapped mainly in Tanzania and Uganda, and most of their populations remain unconnected to an electric grid, thereby increasing the demand for lubricants.
- According to the Kenya National Bureau of Statistics, electricity generation in Kenya reached nearly 12,985 gigawatt-hours in 2022, representing an increase of about 4.5% compared to the previous year, thus boosting the market growth.
- Therefore, all the abovementioned factors are going to impact the market studied during the forecast period.
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