With overcapacity in the lubricant market, how can we mitigate the risk of a price war?

According to statistics from Zhiyan Consulting, China’s lubricant industry performed strongly in 2024, with annual production reaching 7.71 million tons (up 11.8% year-on-year) and apparent consumption reaching 7.771 million tons (up 19.2% year-on-year). However, at the start of 2025, both supply and demand began to weaken: from January to April, production and consumption fell to 2.621 million tons and 2.636 million tons, respectively, representing year-on-year declines of 1.35% and 1.86%.

Faced with overcapacity and fierce price competition in the lubricant industry, how lubricant companies can break free from the quagmire of price wars has become a survival challenge that every lubricant supplier must confront head-on.

01 The Root Cause of Price Wars: Supply-Demand Imbalance and Technological Homogenization

The price war in the lubricant market did not emerge out of thin air—it is an inevitable consequence of overcapacity and homogeneous competition. Data show that China currently has more than 2,000 lubricant manufacturers, over 70% of which are small-scale enterprises whose products are concentrated in basic oil categories, making it difficult for them to differentiate themselves in the market.

Traditional lubricant products have shifted from being “technology-driven” to “price-driven,” leading to a continuous squeeze on profit margins. In the automotive aftermarket, the price of conventional mineral oil has fallen below 20 yuan per liter, leaving profit margins below 10%.

At a deeper level, the root cause of the price war lies in severe product homogenization, insufficient technological innovation, and low added value in services. When all competitors offer virtually identical products and services, price naturally becomes the sole means of competition.

02 Reshaping the Value Chain: From Product Sales to Value Partners

Faced with fierce price competition, lubricant suppliers need to completely shift their mindset: no longer viewing themselves merely as simple product sellers, but rather transforming into “lubrication solution partners” for their customers. This means that companies need to redefine their role and value within the industry chain.

A certain industrial lubricant supplier in Shanghai has successfully made this transformation. They no longer simply sell hydraulic oil; instead, they offer customers comprehensive hydraulic system maintenance solutions, including oil monitoring, recommendations for replacement intervals, and preventive maintenance services.

After the transformation, their customer churn rate dropped by 60%, and the average annual spending per customer increased by 150%. This case demonstrates that when suppliers can help customers solve problems rather than merely providing products, price ceases to be the sole determining factor.

03 Breaking Technological Barriers: From Base Oils to High-End Synthetic Oils

Technological upgrading is the core path to breaking free from the price war. Currently, the traditional mineral oil market has become a red ocean, while the high-end synthetic oil market presents a starkly different picture. The global synthetic lubricants market is growing at an annual average rate of 6.8%, significantly higher than that of the traditional lubricants market.

Leading domestic lubricant companies have already recognized this point. Changcheng Lubricants has launched a specialized oil product tailored for electric vehicle gearboxes, which not only boasts excellent high-temperature resistance but also features outstanding insulating performance, effectively addressing the lubrication challenges posed by the unique operating conditions of electric vehicles.

This type of technological innovation has increased product prices by 50% to 100% compared to conventional oil products, yet customers remain willing to pay—because the value brought by these technological innovations far outweighs the price difference. For suppliers, this means higher profit margins and stronger customer loyalty.

04 Deepening Services: From Selling Products to Selling Solutions

Simply selling lubricants alone can no longer sustain a company’s growth. Modern lubricant suppliers need to shift toward a comprehensive business model that integrates “products + services + solutions.” This means moving from merely providing lubricants to offering holistic equipment lubrication management services.

German company Fuchs Lubricants has set an exemplary standard in this regard. They offer wind power industry customers not just gear oils, but a comprehensive service package that includes oil analysis, condition monitoring, and predictive maintenance.

Under this model, the relationship between suppliers and customers shifts from one-time transactions to long-term collaboration. After a steel enterprise outsourced its comprehensive lubrication management services, its equipment failure rate dropped by 25%, and annual maintenance costs were reduced by 18%. Meanwhile, the lubricant supplier secured stable service revenue with considerable profits.

05 Digital Transformation: From Passive Response to Proactive Prediction

Digitalization has provided lubricant suppliers with a new tool to break the deadlock in the price war. By collecting equipment operating data through IoT sensors and combining it with AI analytics, suppliers can shift from passive response to proactive prediction.

The “Smart Lubrication” platform launched by Sinopec Lubricant Company uses online monitoring of equipment operating conditions and oil quality to provide early warnings of potential equipment failures and recommend the optimal timing and approach for maintenance.

This digital lubrication service not only creates additional value for customers but also establishes competitive barriers for suppliers. The value of suppliers no longer lies solely in the oil products themselves, but rather in their data analytics capabilities and expertise in providing decision support.

06 Strategic Focus: Shifting from Broad Outreach to Deep Diving into Vertical Markets

Against the backdrop of overcapacity, the “wide-net” strategy of trying to serve all customers has become ineffective. Successful lubricant suppliers are now adopting a strategy of “deeply cultivating vertical markets,” selecting one or two industry sectors in which they have the greatest competitive advantages and pursuing intensive development in those areas.

ExxonMobil focuses on the marine industry, developing a range of specialized lubrication products and services tailored for ship engines, thereby becoming a leader in this niche market. Its marine lubricants business accounts for more than 30% of the company’s total revenue, with profit margins significantly higher than those of its general businesses.

Deep engagement in vertical markets enables suppliers to accumulate industry-specific expertise, develop customized products, and forge closer collaborative relationships with customers, thereby effectively sidestepping the main battleground of price competition.

07 Green Transformation: From Traditional Products to Eco-Friendly Solutions

As global attention shifts toward sustainable development, green and environmentally friendly practices have become a key growth direction for the lubricants industry. Eco-friendly solutions such as bio-based lubricants and biodegradable lubrication products offer suppliers a new path to avoid price wars.

TotalEnergies’ Eco series bio-based hydraulic oils, made from renewable raw materials and boasting a biodegradation rate of over 90%, have gained popularity in the European market, which has stringent environmental regulations. Although these oils are 30% to 40% more expensive than conventional products, their market share continues to grow.

Eco-friendly products not only align with policy guidelines but also meet the growing social responsibility demands of businesses, creating differentiated competitive advantages and pricing power for suppliers.

Conclusion:

The “involution” in the lubricant oil industry is an inevitable outcome of low-quality development. The key to breaking this deadlock lies in recognizing that future competition will no longer be about who offers the lowest prices, but rather... Competition in technological sophistication, service depth, and value-creation capabilities. 。