Lubricants for a modern China

July 1, 2003
CHANGE HAS COME to China in a big way, and it has come quickly. Unless you have traveled to China in the past six months, the image you have is probably

CHANGE HAS COME to China in a big way, and it has come quickly. “Unless you have traveled to China in the past six months, the image you have is probably out of date,” says Jim Hennessy, Asia Pacific regional director for ExxonMobil Lubricants & Specialties. “The country is modernizing its industrial capacity across the entire geography, from Shanghai to Harbin, from Beijing to Urumqi.”

Old industrial facilities using outmoded equipment to turn out products of limited quality are rapidly disappearing. “They are being replaced with plants using the world's most advanced technology to manufacture a vast array of high-quality products,” says Hennessy.

While other economies are struggling to grow at even modest rates, China is expanding at nearly 10% a year. Investment in new productive capacity grew 9.3% in 2000, and foreign investment is up 14.9%. Foreign direct investment is expected to reach $50 billion in 2002.

Infrastructure expansion

Meanwhile, the government is modernizing and expanding China's transportation and energy infrastructure.

For example, more than 120,000 miles of paved roads will be constructed in China between 2001 and 2005, for a total of 900,000 miles — second only to the total in the United States. An additional 9,500 miles of expressways will provide a network that will join major cities across the entire country.

Railway and seaport networks are also being expanded. More than 1,300 miles of railway track were added in 2001 as part of a program to bring total track length to around 50,000 miles by 2005. Over the same period, some 140 deepwater berths will be built, including 50 container berths.

Airport construction is also on the rise. Some 20 projects to either expand or build new airports are under way to handle the growing demand for air traffic.

In the energy sector, China has more than 1,000 dam projects under construction to add 78,000 megawatts of power, including the world's largest hydroelectric dam.

“All of this construction means there is a mammoth need for modern machinery and the high-quality lubricants that keep it moving,” says Hennessy.

Competition and cooperation

“There are more than 200 brands of lubricants in the market across China,” says Hennessy. “So our challenge has been to demonstrate the benefits of the technology and reliability of our products over those of our competitors.”

That approach won ExxonMobil a contract as sole supplier to Sunwin City Bus Ltd in Shanghai. A joint venture of the Swedish Volvo Bus Co and Shanghai Bus Mfg Corp, Sunwin produces buses that are replacing Shanghai's aging fleet. Sunwin's new plant opened in 2001 and will soon reach annual production of 800 buses.

“In Sunwin, we recognized a local company that embraced high-end technology through its partnership with Volvo and that valued the technical support and customer service we could offer,” says Terry Neal, Shanghai-based China lubricants manager for ExxonMobil Lubricants and Specialties.

From cars to steel mills

The growth in lubricant demand is occurring across all sectors of the lubricant market.

New highways have strengthened demand for commercial trucks and buses. The government's focus on rapid infrastructure development is feeding demand for off-road vehicles needed for excavation, mining, and road-building.

A growing and modernizing agricultural industry is boosting farm machinery orders. Growth is strong in the industrial sector, including steel mills, pulp and paper mills, cement mills, power plants, and general manufacturing.

As all these businesses participate in China's robust economic growth, buoyed by its recent entry into the World Trade Organization, demand for high-quality lubricants continues to climb.

For ExxonMobil, one focus is on products that appeal to performance buyers in the industrial sector.

“That area plays to our strength because technologically sophisticated equipment requires the highest-performance lubrication,” says Hennessy. “Chinese companies want to be sure that the expensive high-quality machines or vehicles they've purchases will run at peak performance for a long time.”

Efficient logistics required

Because of China's large size — stretching more than 3,100 miles from east to west and some 3,400 miles from north to south — product distribution can be a challenge. ExxonMobil chose to build its presence through a local distributor network. The majority of its accounts are served through a network of more than 400 distributors.

“In particular, the training of staff and distributors is essential to maintaining our leadership position,” says Neal. “We maintain a multimillion-dollar center in Shanghai, where we offer established classroom-style training. We also conduct a wide range of on-the-job seminars and workshops associated with the launch of sales campaigns and to hone selling and technical-support skills.”

About the Author

Thomas L Torget