The lubricant industry has not grown since the start of the second quarter this year, though there were prospects in the first quarter, said Chevron Lubricants Lanka PLC CEO, Kishu Gomes.
He said that the market failed to keep the momentum of the first quarter due to unexpected volatilities in the macro economy as a result of global and local developments. The market in Bangladesh too is facing a similar or even worse situation, while the market volume of the Maldives grew by double digits.
“The increase in duty on vehicle importation to minimise the currency drain out of the country adversely affected vehicle growth in the past two years.
Another reason for the lubricant market volume contraction is the preference for products of higher technology, which offer extended oil drain intervals,” Gomes said.
“Modern tech savvy consumers keep moving up the value ladder which is encouraging for lubricant companies which believe in technology. ""The brand shift from Lanka brand to Caltex brand has been good for us. We, as the market leader have been investing heavily and put in a huge effort to educate customers in opting for superior technology,” he said.
CEO Gomes said that the European economic crisis has an indirect impact on the lubricant industry. If not for the global crisis our income as a country would have been at a much higher level than what we have experienced so far. Tourism, FDIs, expatriate worker remittances and exports would have done much better and it would have had a positive impact on the exchange rate and local inflation.“With the current issues we face, market consumption has reduced not only in the lubricant industry but across many industries due to lower purchasing power. This is true for many markets across the world. So we cannot complain about it as an isolated issue impacting only Sri Lanka,” Gomes said.
Depreciation has caused a bad impact on the lubricant industry. The devaluation of the rupee by over 15 percent within four to five months is affecting the economy. No one expected the currency to decline so sharply in such a short period. If it's a one time correction that was needed to create a more healthy medium to long-term economic environment, then there would not be an issue.
“The gradual strengthening of the rupee experienced over the past three weeks is a welcome sign and I hope it will gain more strength,” he said.We asked “What are Chevron's plans for expansion?” “Chevron will expand its export market to bring in more foreign revenue into the country. I believe, from the country's perspective, that there is no better time to do this than now. The company is observing the movement of the regional market with a lot of infrastructure development taking place in many parts. This would change the market size in those areas and we have plans to strengthen our distribution network and invest in targeted areas.
The North and the East markets continue to grow despite a challenging environment. The two markets will reach around 15 percent market potential which is higher than many industries,” Gomes said.