Solidiance has produced this white paper for information purposes only. While every effort has been made to ensure the accuracy of the information and data contained herein, Solidiance bears no responsibility for any possible errors and omissions. All information, views, and advice are given in good faith but without any legal responsibility; the information contained should not be regarded as a substitute for legal and/or commercial advice. Copyright restrictions (including those of third parties) are to be observed.

September 2014

WINNING MYANMAR’SA U T O M O T I V E L U B R I C A N T M A R K E T

3www.solidiance.com2 www.solidiance.com

EXECUTIVE SUMMARYThis white paper focuses on the lubricant market in Myanmar’s

automotive sector to deep dive in the industry by looking at

consumption level, current and future trends, value chain structure,

product segmentation and competition intensity. During the course

of the research, a number of vehicle types e.g. passenger cars,

commercial vehicles and two wheelers have been observed to

analyze its lubricant consumption patterns.

The automotive lubricant market in Myanmar has recorded

significant changes within the last 3 years, with the emergence of a

mid-end and a nascent higher-end segments. Main drivers for these

changes are the end of international sanctions against Myanmar

and regulatory change in car importation which positively affected

car imports, boosting its circulation number by 8% in the last 3

years. The increase in purchasing power and reception of loans

from international institutions to modernize infrastructure have

also positively impacted two wheelers and commercial vehicles

sales, raising the lubricant consumption -- especially engine oil.

The market share of low-grade lubricant has now shrunk to 60%

from 90% before 2010, while at the same time medium-grade and

high-grade lubes account for 35% and 5%, respectively.

Although there are more products available, customers’ knowledge

about lubricants and its benefits for their engine remain limited.

Moreover, price-sensitive Myanmar customers are often lured by

promotion and sales incentives, making the current competition

fiercer among more than 200 brands including local, Asian and

International brands.

ConTEnT12 Myanmar’s Automotive Market Overview21 Automotive Lubricants in Myanmar26 Myanmar’s Automative Lubricant Market

3www.solidiance.com2 www.solidiance.com

5www.solidiance.com4 www.solidiance.com

CoUnTRY oVERVIEw• Economy• Population• Roadinfrastructure

5www.solidiance.com4 www.solidiance.com

GDPH A S B E E n S T E A D I lY I n C R E A S I n G F o R T H E PA S T F I V E Y E A R S A n D I S F o R E C A S T E D T o G R o w AT 6 .7% I n 2014

The country’s economy expanded to an estimated 6.3% in financial year April 2012/March 2013

compared to an average of 5% in previous 5 years. The accelerating GDP growth reflects business

optimism, buoyed by the government’s policy to liberalize the economy since 2011 and prospects

for further reform. Increasing industrial output and services had offset a modest growth in

agriculture due to floods in 2012/2013.

Source: Solidiance Analysis, ADB, World Bank

GDP

20.2

31.4 35.2

45.4 51.4 52.6

58.9 66.0

5.5

3.6

5.1 5.3

5.5

6.3 6.5

6.7

0

1

2

3

4

5

6

7

8

0

10

20

30

40

50

60

70

2007 2008 2009 2010 2011 2012 2013e 2014e

Growth

7yearGDPgrowthaverageis5.46%

52.6

6.5%

5.1%

BillionUSD

2012GrossDomestic

Product(atcurrentprices)

2013GDPGrowth(est)

2013InflationRate(est)

Myanmar’s Nominal GDP (in US$ Billion) and GDP Growth (2007-2014)

GDP growth averages 5.46% per year in 7 years

7www.solidiance.com6 www.solidiance.com

MYAnMAR RAnKS 24TH AMonG THE woRlD’S MoST PoPUloUS nATIonS wITH AnnUAl PoPUlATIon GRowTH oF 1.3% BETwEEn 2007-2012

57.5

58.4 59.1

59.8 60.4

61.1

55

56

57

58

59

60

61

62

2007 2008 2009 2010 2011 2012

Population

Myanmar’s population had tripled in a span of 50 years from just 21 million people

in 1960 to 61.1 million people in 2012. It ranked 24th among the world’s most

populous countries. The country covers an area of 676,578 square kilometer,

making it the second largest country in Southeast Asia and the world’s 40th

largest by size. Myanmar is home to 135 ethnic groups with main ethnicities are

Kachin, Kayah, Kayin, Chin, Banmar, Mon, Rakhine and Shan.

Myanmar’s Population (in million) and Population Growth (2007-2012)

Annualgrowthaveraged1.3%in6years

Source: ADB, UN, Ministry of Foreign Affairs Myanmar

7www.solidiance.com6 www.solidiance.com

9www.solidiance.com8 www.solidiance.com

MAnDAlAY• Second largest city with over 1 mn population

• Increasing growth of Chinese population with 25% increase over 20 years

nAY PYI TAw• Relatively new capital city

• Population approximately 1 mn

YAnGon• Capital city until 2007

• Remains Myanmar’s business center

• Largest consumer market of the country, with nearly 5 mn population and

highest purchasing power in the country

• Accounts for 20% of total country’s GDP

• Home to a number of industrial companies

Yangon

Mandalay

NayPyiTaw

YAnGon IS THE MoST DEnSElY PoPUlATED AREA, FollowED BY MAnDAlAY AnD nAYPYITAw

Myanmar’s 10

Most Densely

Populated

Regions, ‘000

Inhabitants

(2011)

TotalCountryPopulation:61Mn

Thailand’s 10

Most Densely

Populated States

/ Regions, ‘000

Inhabitants

(2011)

TotalCountryPopulation:61Mn

City comparison between Myanmar and Thailand shows a much higher population density in Thailand cities.

For a comparable population size (61 Mn vs. 65Mn), Myanmar inhabitants are more spread in rural areas.

Source: Encyclopedia Britannica, ADB

190

194

194

199

258

266

482

998

1,322

4,889

- 1,500 3,000 4,500 6,000

Mergul

Sittwe

Meiktila

Monywa

Pthein

Bago

Mawlamyine

Naypyitaw

Mandalay

Yangon

1,479

1,546

1,605

1,636

1,659

1,749

1,878

1,896

2,829

11,574

- 1,500 3,000 4,500 6,000 7,500 9,000 10,500 12,000 13,500

Songkhla

Sisaket

ChiangMai

UdonThani

Buriram

NakhonSiThammarat

UbonRatchathani

KhonKaen

NakhonRatchasima

Bangkok&Vicinities

9www.solidiance.com8 www.solidiance.com

To SUPPoRT RoBUST EConoMIC GRowTH AnD PoPUlATIon, MYAnMAR HAS BEEn EXTEnDInG ITS RoAD lEnGTH AT ~6% BETwEEn 2004 - 2012

Key barriers • No clear lines of responsibilities: there are many ministries involved i.e.. Ministry of Transport,

Ministry of Construction, Ministry for Progress of Boarder Areas and National Races and

Development Affairs.

• Budget constraint: Remote areas with typically mountainous terrain and sparsely population

make construction costs remain high for Myanmar.

0

20

40

60

80

100

120

140

160

2004 2005 2006 2007 2008 2009 2010 2011 2012

8 year growth average is 6.37%

According to the National Transport Policy, there will be 36 new roads from North-South and 49 new roads from East-West, across 7

regions and 7 states by 2030. For the existing roads, there will be extensions and upgrades mostly running from North-South

148,690 Km

456

17

Roadlengthforthewhole

countryasof2012

People/Km.

Population/roadlength

ratioasof2012

Vehicles/Km.

Vehicles/roadlength

ratioasof2012

Source: ADB, Ministry of Construction and Solidiance

Myanmar’s road length (‘000 Km)

11www.solidiance.com10 www.solidiance.com

MoST RoADS In MYAnMAR ARE UnPAVED, HIGHlIGHTInG THE nEED FoR MoRE InVESTMEnT In InFRASTRUCTURE

79% VS 21% THE PRoPoRTIon BETwEEn UnPAVED RoADS AnD PAVED RoADS, AS oF 2011

Note:Paved roads include concrete and asphalt roads. Myanmar is made

up of 135 national ethnicities, of which the main national ethnicities are

Kachin, Kayah, Kayin, Chin, Bamar, Mon, Rakhine and Shan.

CITy RoaDS – yaNGoN HIGHway yaNGoN – BaGo INTeR-STaTe RoaDS – CHIN UNPaveD RURal RoaDS

Source: ADB, Ministry of Construction and Solidiance

Pavedroads

21%

Unpavedroads

79%

11www.solidiance.com10 www.solidiance.com

TRAnSPoRTATIonIn MYAnMAR CITIES

YangonMawlamyine

Mandalay

NayPyiTaw

• ThanlwinbridgelinksthesoutheasternregionwithYangon

• Rapidlyincreasingnumberofvehiclesandtrafficcongestion

• Mainroadsofteninpoorcondition• Residentsrelyonpublictransport,

whichisinadequate• Mostinter-citybusesoperateout

ofAungMingalarTerminal,outsideofthecity

• Completionofthecity’struckterminalsinFebruarywillincreasecommercialvehicletraffic

• Fewvehiclesandbarelycongestion

• MainroadtoYangon:2-lanesthatareheavilycoveredinpotholes

• Manyroadsarestillunderconstruction

• Completednewstreetsarewideandstraight

13www.solidiance.com12 www.solidiance.com

MYAnMAR’S AUToMoTIVE MARKET oVERVIEw

• Changesinimportregulation• Carbrandsinthemarket• Growthdriversandbarriers

13www.solidiance.com12 www.solidiance.com

REGUlAToRYR E F o R M S H AV E A l l o w E D E A C H M YA n M A R C I T I Z E n T o I M P o R T 1 PA S S E n G E R C A R S I n C E 2012

BEFoRE 1998

1998-2010

2010 – SEP 2011

SEP 2011 – MAY 2012

MAY 2012 – MAY 2013

MAY 2013 UnTIl ToDAY

Western countries applied sanctions against Myanmar, banning car imports.

Imported cars were only available for government authorities, NGOs, and foreign embassies in Myanmar

• Imported passenger cars were fewer than 500 units a year.

• Imports of commercial vehicle were strictly controlled. Imports for commercial purpose were not allowed. For

example, a mining company that planned to import a truck for carrying out business, had to submit a request letter

and sought approval from Ministry of Mining and Directorate of Trade.

Opening imports for certain types of commercial vehicles:

• Imports for commercial purpose were allowed for: Trucks over 3 tons, passenger buses with more than 15 seats,

heavy equipment.

A breakthrough rule for imported car market was passed.

• The Old Car Substitution Program allowed application of permits for importing cars to replace older cars which

were 20-40 years old, for newer models that were manufactured after 1995.

Any Myanmar citizen aged 18 years-old and older could import 1 passenger car under his/her own name (for personal

use only). Meanwhile, imported passenger cars for commercial purpose were still limited.

The government allows individuals or companies to import light trucks less than 3 tons, lifting limits on imports of any

kind of commercial vehicle for commercial purpose.

Source: solidiance interview & analysis, Myanmar Times, Myanmar Ministry of Transport

15www.solidiance.com14 www.solidiance.com

All local production is Semi Knocked-down (SKD) assembly, and takes up less than 10% of new annual sales. The rest are Complete Built Up (CBU)

imports.

The government monopolies local car production. The Ministry of Industry (MOI) operates 3 factories in Myanmar and remains the only Original

Equipment Manufacturer or OEM that manufactures cars with certain scale in the country. There were total 8,500 vehicles produced from 2008

to 2012 with about half of the vehicles were built in the last 2 years. The auto brands manufactured under governmental joint ventures (JVs) are

Chery in majority, and a few Tata and Isuzu.

Other smaller scale auto producers include Super Seven Star Motor Company, whose production was controlled and reduced to fewer than 100

per month after 2011 by the government. Suzuki, a former JV with government between 1998-2008, produced 4,800 vehicles back then. The

government cancelled Suzuki’s investment permit in 2008, stopping its production altogether. In May 2013, Suzuki announced that it resumed

its car production under its 100% owned entity, with a target of around 1,000 units per year, making it the very first foreign-owned producer in the

local market.

l E A D I n G T o A R I S E I n V E H I C l E o w n E R S H I P w I T H A l M o S T 4 M I l l I o n V E H I C l E S B E I n G R E G I S T E R E D I n M YA n M A R A S o F J U lY 2013

15www.solidiance.com14 www.solidiance.com

vehicles import proportion, 2013 Thailand’s vehicles production by sales, 2013

3,838,206 KM

3,302,692

318,397

117,842

Roadlengthforthewholecountryasof2012

MotorcyclesregistereduntilJuly2013

PassengercarsintotalregistereduntilJuly2013

CommercialvehiclesregistereduntilJuly2013

Source: MIDC, Solidiance interviews, Ministry of Transport

Almost all cars sold in Myanmar are imported (mostly from Japan), only 8% are locally produced, so import laws have a very

strong impact on car sales in the country. Market dynamics are very different in Thailand where most of cars sold are locally

produced, and a great share of local production is exported overseas.

Importedcars,92%

Locallyproducedcars ,8%

Locallyproducedcars,54%

ExportSales,46%

17www.solidiance.com16 www.solidiance.com

2% 1%oTHERS

15% 10% 5%

2%

65%

MYAnMAR’SV E H I C l E I M P o R T S A R E D o M I n AT E D B Y PA S S E n G E R C A R S , w I T H S E D A n S A C C o U n T I n G F o R A l M o S T H A l F o F T H E C A R I M P o R T S

Previously in Myanmar, imported cars were only accessible for government officials and NGOs. It

is not until recently that the government introduced “Old Car Substitution Plan” in Sep 2011. The

car imports market has witnessed a real breakthrough – imported cars have become accessible to

individuals and businesses.

estimated imported car sales breakdown By car brands (apr. 2013)

Of imported car segment is dominated

by Toyota brands, both left hand drive

(LHD) and right hand drive (RHD) cars

covering almost all variety of models.

Source : Solidiance interviews

17www.solidiance.com16 www.solidiance.com

Passengercarsincludinghatchback,van,sedan

Commercialvehiclesincludinglighttruck,heavytruck,pick-up

Passengerbuses

Othersincludingtractors,trawlergyi,etc

25%

45%

20%

10%

Hatchback

Sedan

SUv/MPv

92%

1%

7% 1%

159,457unitsimportedfromOct2011toApr2013(cars,trucks,buses)

IMPoRTEDCAR SAlES BREAKDown BY CAR TYPE (ESTIMATED, 2013)

The car segment has 4 types:

.

Source:Solidianceinterviews

19www.solidiance.com18 www.solidiance.com

Toyota80%

Nissan10%

Suzuki5%

Others5%

Japan80%

China5%

US5%

Othercountries10%

Breakdown of Cars in Circulation by Country of origin (2013)

Myanmar’s Price of Imported Cars by Country of origin

Breakdown of Cars in Circulation by Japanese Brands (2013)

The share of Chinese imported cars is increasing because they are more affordable and are brand new cars

although they are manual gears, not automatic ones. Imported Japanese cars are mostly second-hand ones

whose prices are double than Chinese cars but still much cheaper than U.S. cars. Other sources of imported

cars include Germany, Taiwan, etc.

In TERMS oF BRAnDS, MYAnMAR ConSUMERS PREFER JAPAnESE CAR MAKERS ESPECIAllY ToYoTA wHICH PERCEIVED To HAVE HIGHDURABIlITY

Toyota cars are popular in Myanmar because of their

durability, as the road infrastructures in most parts of

the country are still poor and inadequate for car tran-

sportation, especially in the rural areas.

6.6

12.2

30.6

0 10 20 30 40

Chinese cars

Japanese cars

US cars

Source: Road Transfer Administration Department(under Ministry of Transportation)

19www.solidiance.com18 www.solidiance.com

REGUlAToRY REFoRMS AnD EASInG IMPoRT RESTRICTIonS wHICH CREATE MoRE DRIVERS ARE THE KEY To GRowTH oF MYAnMAR AUToMoTIVE InDUSTRY

Rules & regulations for liberalizing car imports:

Relaxing import permits policy through the launch of Old Car Substitution

Program. Exemption of import permit application for cars produced in

2007 or after.

Decrease in imported car prices:

Although car prices remain higher than those in neighboring countries,

prices have tumbled by nearly 30% since July 2012 when the government

allowed all citizens to import vehicles manufactured in 2007 or later.

a cut on taxes for automobile, gasoline, diesel oil, auto spare parts

and accessories:

Cars with smaller engines and manufactured after 2007 enjoy the most

from recent tax cut; Taxes on gasoline and diesel oil have been reduced

to 10% from 170% and 90% respectively.

Newly opened, unsaturated market for international auto & auto-part

manufacturers:

Myanmar is unable to manufacture auto and auto-parts with high

standards and in large quantity, to cater to the rising demand.

Infrastructure and road upgrading projects :

The government forecasts that the transportation sector will grow by

22.5% over the next 3 years.

Increasing trade volume with neighboring countries under aeC

(aSeaN economic Community)

2015 will fully come into effect, signifying higher usage of commercial

vehicles in the future.

1

2

3

4

5

6

Growth Drivers

21www.solidiance.com20 www.solidiance.com

low Income for Majority of Population:

Automobiles are still confined to few wealthiest households in Myanmar.

The country has the lowest car ownership number in Southeast Asia with

only 6 automobiles per 1,000 people.

Political risk & unpredictable regulatory changes,

making it difficult for foreign vehicle manufacturers to invest in Myanmar

and have guarantee on investment benefits.

lack of technology & skilled engineers:

Domestic manufacturers are not ready to produce vehicles in large

commercial scale due to lack of technology. There is a shortage of skilled

engineers in car manufacturing industry as 70% of labor force remains in

the agriculture sector.

Unstable power supply, poor road and financial infrastructure,

hindering the international auto and auto-part makers to enter into the

market.

1

2

3

4

Growth Barriers

Source: Soldiance Research and Analysis, Irrawaddy, Eleven Myanmar, Bangkok Post

21www.solidiance.com20 www.solidiance.com

AUToMoTIVE lUBRICAnT PRoDUCTS In MYAnMAR

• Keyproductgradesinthemarket• Usagebehavior• Purchasingbehavior

23www.solidiance.com22 www.solidiance.com

Keyfastmovinggrades FullySynthetic Semi-synthetic Multigrade Monograde

aPI SNorSN/CF SNorSM/CF SGorSL/CForSM/CF SForSC/CC

Sae 5W30/5W40 10W30/10W40 15W40/20W50 40or50

TYPES oF AUToMoTIVEl U B R I C A n T S AVA I l A B l E I n M YA n M A R

AutoMotive LubricAnts

synthetic

seMi - synthetic

FuLLy synthetic

MinerAL

MuLti - grAde Mono - grAde

Source: Solidiance interview & analysis

23www.solidiance.com22 www.solidiance.com

Wheretogo Whentochange Whatgradesandbrands Howmuch(volume)

Retail shopTimeperioddue:mostlyevery1-3months

• Noproductknowledge:end-usersusuallydonotknowaboutwhichgradetobeused

• Awarenessoflong-establishedbrands:end-usersarefamiliarwithonlylong-establishedbrandsbecausemanyhousebrandsareavailableinthemarketandtheyappearonaregularbasis

• Retailerspushforabrand:retailersusuallywouldpushforthebrandsbyofferingattractivepromotionstoend-users

Standardpackagesize• 1Litrepack

Car workshop/ Service Center

• Runningperioddue:mostlyevery5,000-10,000Kmorevery3-5months

• Someusersdonotpayattentiontolubechanginguntilacarproblemoccurs

• Noproductknowledge:end-usersusuallydonotknowaboutwhichgradeistobeused

• AwarenessofWesternbrands:end-usershaveheardofUS&EUbrandsandsomeAsianbrands

• Workshopsrecommendproductandbrand:workshopsusuallyrecommendproductsandbrandsthattheytrustandofferpromotionsthatmatchwithend-userbudget

Standardpackagesize• 4-5Litrespack:forcarusing

gasoline• 6Litrespack:fordieselcar

own services/ workshop• Timeperioddue:mostly

every1month,dependingonfleetroutes

• Littleproductknowledge:end-usersusuallyknowaboutgradetobeusedbasedonpastexperiences

• Awarenessoflong-establishedbrands:end-usersarefamiliarwithonlylong-establishedbrands

• Suppliersbidforthetender:Usually,alargeoperatorbuysproductsviatender.Brandswithlong-termrelationshipnormallywillwintheprojects

Drumsize• 200Litrespack

HowEVER, ConSUMERS ARE UnAwARE ABoUT THE PRoDUCTS; lUBRICAnT USE In MYAnMAR IS

DETERMInED BY CAR woRKSHoPS AnD RETAIl SHoPS

Source: Solidiance interview & analysis

25www.solidiance.com24 www.solidiance.com

ConSEqUEnTlY,I T I S I M P E R AT I V E T o E n G A G E l o C A l I M P o R T E R S T o M A R K E T A U T o M o T I V E l U B R I C A n T S I n M YA n M A R

Importer/Distributor

Wholesaler

Carworkshop/Servicecenter

LubricantRetailshop

End-user

B2C value Chain: Privatevehicles(asof2013)

B2B value Chain: Commercialvehicles(asof2013)

~3.5 million vehicles

~100,000 vehicles

Importer/Distributor

FleetOperator BusinessEnd-user

Wholesaler(outsideYangon)

There are two types of value chain: B2C and B2B. The majority of lubricant players are in B2C business because the market size is

big. All players have local importers to market products and many importers have wholesalers to distribute the products, particularly

outside Yangon. In both B2C and B2B chains, sellers are highly influential on consumers’ decision because end-users are lacking

awareness about lubricants.

Source: Solidiance interviews & analysis

25www.solidiance.com24 www.solidiance.com

MoST STAKEHolDERS M A K E D E C I S I o n T o P U R C H A S E B A S E D o n P R I C E A n D I n C E n T I V E S R AT H E R T H A n l o o K I n G AT B R A n D A n D q U A l I T Y

StakeholderEstimated

numberofplayers RoleandResponsibility Purchasecriteria

B2C

Importer/Distributor 100+Influencer:• Importersworkcloselywithforeignsuppliersinterms

ofsettingupmarketingstrategiesanddistributions

1. Price2. Brand3. Quality

Wholesaler 100+

Decisionmaker:• Wholesalersdealwithmanybrands.Theyhavethe

powertosetpricesforretailers• WholesalersaremainlylocatedoutsideYangon

1. Profitmargin2. Promotion3. Brand

Retailshop 1000+

Decisionmaker:• Retailerscaninfluenceend-users’choiceofbrands.

Usually,retailerscarrymanybrandsand‘push’certainbrandsthatgivethemhighprofitmargin

• Retailersalsoprovide‘lube-changing’servicetoend-user

1. Profitmargin2. Promotion3. Brand

Carworkshop/Servicecenter

300+

Decisionmaker:• Carworkshopsincludingcar-careservicescarrya

fewwell-knownbrandsandprescribethebrandstoend-users

1. Brand2. Quality3. Price

End-user >3.5million

User:• Mostend-usersaresensitivetopricesandpromotions.

Onlyafewcarownerschoosetheirownbrandsoflubes.Thesecustomersusuallyownnewcarmodelsorluxurycars

1. Price2. Promotion3. Brand

B2B FleetOperator 100+

User:• Bus&Truckoperatorsbuyproductsdirectlyfrom

supplierswhileTaxioperatorsletthedriverschoosetheproductsthemselves

1. Price2. Quality3. Brand

27www.solidiance.com26 www.solidiance.com

10 BusinessBrochure

MYAnMAR’S AUToMoTIVE lUBRICAnTS MARKET

• Automotivelubricantsector• Marketsizeandshare

27www.solidiance.com26 www.solidiance.com

AUToMoTIVEl U B R I C A n T A C C o U n T S F o R 65% o F T o TA l l U B R I C A n T C o n S U M P T I o n I n M YA n M A R , M A K I n G I T A l U C R AT I V E TA R G E T S E G M E n T

• Myanmar imported 78.8 million litres of lubricant in 2012 of which more than half was

consumed by automotive sector.

• Importers / distributors also estimate that lubricant consumption for automotive is higher

than that for the industrial segment due to surging imports of car and motorcycle in recent

years. The industrial lubricants come only from a limited number of machines used in large

manufacturing plants and mining business.

• Marine lubricants represent a small share of Myanmar’s lubricant market because most

marine operators change lubricants in Singapore port

~ 52 million Litres

65%

30%

5%

Automotive

Industrial

Marine

Automotive lubricant includes motorcycles , passenger cars, and commercial vehicles

Total lubricant consumption:

Source: Official Customs data, Solidiance interviews & analysis

lubricant consumption volume by sector (2013)

29www.solidiance.com28 www.solidiance.com

M YA n M A R ’ S A U T o M o T I V E l U B R I C A n T S M A R K E T V o l U M E wA S E S T I M AT E D T o R E A C H o V E R 6 0 M I l l I o n l I T R E S I n 2013

3136

4252

61

0

10

20

30

40

50

60

70

2009 2010 2011 2012 2013e

automotive lubricant market size volume from 2009-2013, CaGR +18%

Market size volume:

Imports of automotive lubricants reached around 52 million liters in 2012. This number had increased by ~60% from 2009 (based

on custom data). From 2010s, there were changes in vehicle import regulation and on registration of illegal vehicles, which had only

showed impact in 2011/2012. Imports were expected to reach 61 million litres in 2013.

Note:Historical data is based on lubricant official import volumes and adjusted with vehicles in circulation

Source: Solidiance interviews & analysis

29www.solidiance.com28 www.solidiance.com

BUSES & TRUCKS A R E T H E l A R G E S T C o n S U M E R T Y P E S w H I l E E n G I n E o I l A C C o U n T S F o R ~75% o F A U T o M o T I V E l U B R I C A n T C o n S U M P T I o n

75%

10%

5%5% 3%2%

Engineoil

Gearoil

Coolant

Brakeoil

Grease

Others

45%

35%

20% Bus&Truck

Motorcycle

Passengercars

Market segment:

automotive lubricant consumption:

Buses & trucks in the B2B business are the biggest consumers of lubricants because each vehicle needs large amount of lube on a regular basis.

Although motorcycles account for 80% of vehicles that operate in Myanmar’s roads, motorcycle’s lubricant consumption only accounts for 35%

of the total market as it only needs small amount of lube.

Engine oil represents about 75% of the automotive / two wheelers lubricant consumption. Gear oil comes second, but the product is still

substituted with detergent by car owners with small budget.

Source: Solidiance interviews & analysis

automotive lubricant consumption volume by vehicle type (2013)

automotive lubricant consumption volume by product type (2013)

31www.solidiance.com30 www.solidiance.com

MID-EnD SEGMEnT STARTED To EMERGE AFTER 2010S, AlTHoUGH low-EnD MARKET REMAInS STRonG DRIVEn BY THE Two-wHEElERS

“ My service center is focusing on high-end customer who can afford the premium products from global brands. This type of customer is a niche market where majority of end-users particularly motorcycle still prefer to use the low priced product. “

While the market has been dominated by products from low-end grades, the demand

for high-end lube has been expanding due to the expected increase in demand

for new car models in line with more favorable conditions to import vehicles. This

has prompted key international players to pay more attention to the high-end lube

segment. They are seeking to increase usage of synthetic type oil by educating the

market. All players also offer various grades in the high-end lube segment.

Global, Middle East, and Asian brands now pay more attention on the synthetic types

- with local and Asian brands having been dominating this segment for decades. This

segment is mostly for motorcycle market.

High-end(5%)+

Mid-end(~35%)

High-end(~5-10%)

Low-end(~90%)

Low-end(~60%)

Past segmentation

Before2010sCurrent segmentation

After2010s

End of international sanctions against Myanmar, easier

procedures for imports have started to impact the market

-ManagingDirector,acarservicecenter

Source: Solidiance interview & analysis

31www.solidiance.com30 www.solidiance.com

onlY 50+ oUT oF oF 200+ REGISTERED lUBRICAnT BRAnDS ARE PUSHInG FoR MoRE MARKETInG AnD ADVERTISInG oF HIGH-GRADE lUBE PRoDUCTS

USBrands EUBrands AsianBrands Low-EndLocalBrands

UAE:

Thailand:

Japan:

Korea:

Singapore:

Malaysia:

Indonesia

Malaysia:

Ninja,Alpha,Dragon,Rev-1,Molla,Unitedoil,Robot,LuckyBell,

etc.

Ministry of Commerce have registered 209 of both international and local house brands - all of which are imported products. For local

brands, Myanmar companies imports lubricants in bulk from overseas to be later repackaged and re-branded under their own name,

generally categorized as low-end lubes. It is estimated that around 50+ brands are currently active and have on-going marketing activities

in the market.

Source: Ministry of Commerce and Solidiance interviews & analysis

33www.solidiance.com32 www.solidiance.com

FAlCon AnD TRADE HAVE BEEn DoMInATInG MYAnMAR lUBRICAnT MARKET FoR DECADES

Total Market Share in 2012 for all vehicles

(with total market size in vol = 52 million litres)

Falcon is the leader in overall market, thanks to its strong presence in motorcycles and commercial

cars. This brand is a household name especially outside Yangon. Trane is trailing second and has

been strong in the passenger cars market for decades; however it is starting to lose share to other

players due to fierce competition. PTT followed after those two, yet viewed as the most aggressive

player and is expected to surpass Trane in the future.

Market share:

Source: Solidiance interviews & analysis

Falcon

12%

10%

8%

6%

6%

5%5%4%

4%3%

2%2%

12%

21%

Trane

PTT

TipT op

ElfStallion

KixxToyo

ta

Caltex

Cosm

ic

NasaTot

al

Other

brands

brands

33www.solidiance.com32 www.solidiance.com

ConClUSIonF U T U R E o P P o R T U n I T I E S A n D T R E n D S

VIDEo

Competitionwill remainstrongacrossallsegments,but increasingpurchasingpower

andimportsofnewercarswouldfosterfurthergrowthforthemediumandhigh-grade

lubes.Low-endbrandswillcontinuetodominatethemarketasconsumersareexpected

toremainprice-consciousforthecomingyears.However,itwilllikelyloseshareinthe

passengercarssegment.

International and Asian brands which target medium to high-end car lubricants are

enteringthemarket,creatingfiercercompetition in thesegments.Theywillbe forced

topromotetheirbrandimage,makingthemvisibletocompeteinthismediumtohigh-

endlubesmarket.Asthecompetitionincreases,internationalbrandsarenowseeking

partnershipswithservicecentersandauthorizeddealerstoexclusivelydistributetheir

brands.Moreover,giventhatthebrandawarenessremainslow,lubricantmanufacturers

will push their distributors to offer more promotions and incentives to increase the

penetrationandmarketshare.

YangonandMandalaywillremainthedistributionlubricanthubsforthemediumterm,

whilerelaxingimportsregulationandtheincreaseinpurchasingpowerwillcontinueto

boostthenumberofvehiclesandhenceraisesthedemandforlubricants.

Mickael Feige, our Associate Partner, shares a quick view on how the Automotive

Lubricantsector inMyanmarhasbeensignificantlychangingover the last fewyears,

andwhatstrategyisneededtosurviveinthemarket.Watchthevideobelow.

35www.solidiance.com34 www.solidiance.com

ABoUT USwhat we Do

Soldiance is a corporate strategy consulting firm with focus on

Asia Pacific. We advise CEOs on make-or-break deals, define

new business models and accelerate Asia growth. Through

our 10 offices across Asia, we provide our clients with a better

understanding of intrinsic regional issues. To learn more about how

Solidiance has helped many Fortune 500 & Asian Conglomerates

to succeed in Asia, please visit: http://www.solidiance.com/clients.

what we are Focusing on

Our industry experience is centered on industrial applications,

chemicals, downstream oil, lubricants and the automotive

industry. Our Asian market entry and growth strategy services

provide the required insights and the necessary roadmap to

capture a profitable market share in the region.

additional Details

Solidiance has offices in China, India, Indonesia, Malaysia,

Myanmar, Philippines, Singapore, Thailand, UAE and Vietnam.

We are fast expanding and always on the lookout for exceptional

people.

35www.solidiance.com34 www.solidiance.com

AUTHoRSMICKael FeIGe - aSSoCIaTe PaRTNeRMickaelFeigeisanAssociatePartnerbasedinThailand.Mickaelhasmorethan10yearsofprofessional

experience.HemanageslargeprojectsforFortune500invarioussectorssuchasautomotive,chemicals,

construction,energy,heavyindustriesandhealthcare.Hisexpertiseliesmostlyinmarketentry,growth

strategy,industryandcompetitivebenchmarking,andcommercialproblemsdiagnostics.Mickaelspeaks

French and conversational Japanese.Heholds aMastersDegree froma joint programbetween Lyon

PoliticalScienceInstituteandSenshuUniversity.HeholdsanMBAfromINSEAD.

NaITHy CyRIaC - SeNIoR CoNSUlTaNTNaithyisaSeniorConsultantbasedinourMyanmaroffice.Withoverfouryearsofconsultingexperience

acrossa rangeofsectors including telecom,healthcareandconstruction,shehasworkedextensively

withMNCsexploringinvestmentopportunitiesinASEAN.PriortojoiningSolidiance,Naithywasasenior

associateataMoody’sgroupcompany,wheresheledvariousconsultingprojectsincludingmarketentry

strategy,investmentopportunityanalysisandcompetitivebenchmarking.NaithygraduatedwithanMBA

fromtheNationalUniversityofSingaporeandparticipatedinanexchangeprogramatCornellUniversity.

MIe Ko - aNalySTMieKoisanAnalystbasedinourMyanmaroffice.MieKoworkedonseveralprojectsforSolidiancein

Myanmarwhereshesupportedfeasibilitystudiesand investmentprojectsforFortune500companies.

Priortojoiningourteam,sheworkedattheFinanceDepartmentofalargehospitalitygroupinYangon.She

obtainedherBachelorsdegreeofComputerStudiesfromtheUniversityofComputerStudiesMandalay.

MieKoholdsanMBAwithspecializationinStrategicInternationalMarketing fromtheAsianInstituteof

Technology.

SHIN THaNT - aNalySTShinThantisanAnalystbasedinourMyanmarofficeandhasservedclientsindoingmarketlandscape

analysisandcommercialduediligence.PriortojoiningSolidiance,heworkedasanauditandadvisory

associate forKPMGonfinancialadvisoryservices responsible forauditingMNCsand INGOs.Withan

in-depthknowledge inaccountingandengineering,ShinThanthasobtainedhisadvanceddiploma in

engineeringandaccounting.He isalsomemberofAssociationofCharteredCertifiedAccountantsUK

(ACCA).

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