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High Inflation Drive Value Growth of Motorcycle Engine Oil Market in Vietnam’s two key cities to reach nearly USD 71 million in 2011

Vietnam’s double digit inflation has spiked oil prices significantly, propelling a significant 18 percent value growth in the overall motorcycle engine oil market in the country’s two major cities of Ho Chi Minh and Hanoi last year.

GfK Vietnam’s retail audit in 2011 reported a decline in consumer demand for motorcycle engine oil by 6 percent in volume as compared to a year ago, but the market managed to expand due to unfavorable economic conditions in the country which saw oil prices surge thrice last year, raising motorcycle engine oil prices by some 25 percent. As a result, average price per liter jumped to USD 3.70 as compared to USD 3.20 in 2010.

“The significant price hikes have resulted in deliberate changes in the spending habits of Vietnamese consumers in order to reduce expenses and save cost,” noted Mr. Van Tran Khoa, General Manager of GfK Vietnam. “One example in this case is that more people last year chose to go for the cheaper alternative of buying engine oils off the shelf of motorcycle accessories retailers rather than head to motorcycle workshops which generally charge higher prices for their products and services.”

GfK Vietnam findings comparing 2011 and 2010 data showed a 4 percent increment in overall sales volume coming from the motorcycle accessories channel to reach 8 percent of the total contribution. In comparison by channels, motorcycle workshops which occupy the majority share of 73 percent of sales volume had corresponding decline by 3 percent as compared to last year.

Another noteworthy trend is that more users are turning to local motorcycle engine oil brands which are more affordable the competing multinational counterparts. Although the market is still clearly dominated by international brands, the market shares of Vietnam’s local brands have registered some growth in 2011 over the past year.

“Vietnam’s motorcycle engine oil scene has seen some developments for the local brands last year as the collective share of the country’s four biggest local brands—Mekong Oil, Prolimex, Vilube and Mipec have grown substantially from 7 percent in 2010 to 11 percent in 2011 percent” commented Mr. Van.

Vietnam’s motorcycle market is the fourth biggest in the world after China, India and Indonesia. The country is currently one of Asia’s fastest growing economies transitioning from an agricultural base towards manufacturing and services.

“The motorcycle and engine oil market in Vietnam is a dynamic one which is seeing increasing number of entrants from the Middle East, Korea, and other Southeast Asian countries,” Mr. Van observed. “As these players aggressively compete to make their mark in the market, it is eventually the consumers at the receiving end of the wide range of improved quality of products and services who emerge the biggest gainers,” he concluded.