Lube-maker believes transition to EVs won’t have a big impact on its business
After setting up Castrol’s business in Turkey and Saudi Arabia, Omer Dormen worked across West Asia, Europe, Russia and Central Asia, before taking over as Castrol India managing director in 2015. With three decades of experience in the lubricants business, Mr. Dormen says he has found ‘nirvana’ in India because Castrol has a well-established business with huge room for growth, here. In an interview, he talks about the company’s strategy for growth, competition, and the company’s role in the context of EVs. Excerpts.
How different has been your India experience in the last three-and-a-half years?
I always say that this is the nirvana of all roles in Castrol, because India is a very well-established business. The brand is really strong and the basic foundation of the business is very strong. You also have quite a huge room for growth.
This comes with the exposure of being a listed company, which you don’t have in any other country. So that’s why when I got the opportunity, I jumped at it. It’s been quite rewarding, rich, in terms of the last three-and-a-half years.
From a business perspective, we went through quite a significant transformation during this time, because we realised that although we were very successful, that wasn’t going to be enough to carry to the next decade.We completed a majority of that transformation in the last three-and-a-half years. I believe that we are a much stronger company and stronger business and a stronger team as a result of that.
Are electric vehicles (EVs) a potential threat to your business? How are you readying yourself?
Although there is the discussion on EVs, there would be a phased approach in transitioning to EVs — starting with two or three wheelers and may be in the public sector transport. This is not going to have a large impact on our lubricant business, that’s why we focus on the core business which would continue growing.
At the same time, we also try to explore what else we can do with the brand, strength of the brand, and the strength of the distribution that we have, to test other models or revenue models going forward. So that’s why it’s quite exciting.
What diversification areas are you looking at, as EVs could become a reality in the next 10 years?
We expect the market growth rate to fuel growth in the business. So, if you look at 10 years, 99% of the growth or revenue comes from the core businesses. What we are trying to do in the meantime is test new models and Castrol is a strong brand in the automotive space and the maintenance space. Do not forget that EVs also use fluids, whether it is coolants, greases or brake fluids. So, there will be or there is a role a lubricant can play, but what else can we do in terms of playing into that space is something that we are exploring. So, for that, globally we have a couple of teams. One is looking at advanced mobility and the other one at inorganic options in terms of testing some of these.
So, in a nutshell, yes, there will be some new revenue models. Obviously when we start testing them, we will share them.
What’s the size of the Indian lube market and at what rate is it growing?
India is about 2.4 billion litres in terms of market size. And half of that is industrial. Now industrial includes all the process oils… which is low tier in terms of the technology required. So, we don’t play into that sector. Where we play in is the select industrial products which [constitute] the high tier. The market is growing 2-4% according to estimates.
What’s your market share in India and how do you plan to grow amid competition?
The data that we have and track, is the retail market, which is based on Nielsen data. Our market share is about 20%. But if you look at the breakdown, personal mobility for example, is much higher than that… four wheelers at about 25%. Our CVOs would be around 17-18%. Where we are investing is personal mobility; where we are investing is new product introductions in the personal mobility as well as into commercial.
As a standalone lubricant firm, isn’t Castrol disadvantaged compared to integrated refining and marketing firms?
On the contrary, I think it is a huge advantage, because we have huge skills globally that we can leverage, and flexibility to use different sources rather than just one source.