We Are Shifting Towards Synthetic Oils: Shell Lubricants India
Shell Lubricants India is a 100 per cent subsidiary of Royal Dutch Shell and is one of the leading oil and gas major which have invested multi-billion dollars into the Indian market. In an interview with BW Businessworld, Mansi Madan Tripathy, MD, Shell Lubricants India said her in the synthetic oils are increasingly gaining eminence in India. Below are the edited excerpts:
You have been with Shell Lubricants for more than six years. So have you been able to maintain your stranglehold in India especially when state-owned players like IOC, HPCL, etc. are well ensconced?
I personally feel our competitive advantages are in five areas. How we stand our brand equity for trust, Innovation and technology. So that really brings in the fact that (at a global level) we spend close to about 500 million in terms of R&D every year and have a group of 200 scientists working on the future of technology. So that's our number one competitive Advantage which is our technology strength right now. The second one is the fact that we are a global, connected company. So for example, when we have gone to Mahindra (and Mahindra) or when we sit in front of Hyundai (Motor India), they can have Shell (onboard)as a very strong (lubricants) partner because they want to export so they can have a single face of the lubricant company and if they want suppliers in Korea, Turkey, São Paulo (or) anywhere in the world, we can be a single point of contact and face to manage their account end-to-end globally which in today's world and time we'll get even more critical as we go forward. Thirdly, the quality of people which we are able to attract from the top universities and later groom hem through our training programs, we feel that there is a very strong engagement of our employees And fourthly, we potentially see ourselves getting revenue streams in the future purely from digital and services and we are investing a lot to be ensuring that we run our business in the most cutting edge (manner) in line with the industry 4.0. Last but not the least; we see our strength in terms of our ability to be really working on the product portfolio, which will be future-oriented as we go forward. So I think with all these things if you look at where the future is and which company is really suited to be in line with that future trend, it's going to be a technology play, people play, digital play, portfolio play, you know and global play and I think in all of them, Shell is really way ahead in terms of where the rest of the industries in that sense.
As the auto industry is leapfrogging towards BS-VI emission norms, are you revamping your operations?
On the BS-VI front, you know the norms, as well as the transition (from BS-IV), are very clear in terms of where it needs to be transited. We already have the experience of doing the same thing in the US, China, Europe, etc., where they have gone through this transition (EuroV to Euro 6). The point I'm making is that Shell has the experience of what the technology in BS6 needs. So we have already done it a couple of years back so we know what the product needs, what the engine needs, what the whole transition plan need is, etc. So we have those blueprints in terms of what needs to be done and are now working OEM by OEM on their BS-VI journey (in India) what is their technology roadmap is.
So you are also well geared For EV norms?
For the electric vehicle Journey, I think there are lots of things which need to be true for India unlike a lot of other places which is what the government policies are going to be, whether it will be plug-in electric vehicles, will it be the battery? Will it be replaceable batteries? Will it be solar etc.? There are many versions of what the electric vehicle ultimately can be (the) basis that I think a lot of them back and needs to be made on. What will be the overall engine in terms of you know where it is drawing? And hence what's the infrastructure which is needed so plug-in technology will need massive infrastructure Investments. A replaceable can mean a very different distribution Center which will have further implications on the cost to the consumers and will have further implications on other norms which need to be put in so that it is truly environmentally friendly. It should not be just exchanging, you know X source of energy to why source of energy that won't be very meaningful.
But I guess the key for us would be as we go into the electric vehicle journey for players like lubricants. What the whole set of fluids are which we can bring in (etc.). So transmission oils axel oils, power oils, etc., which will be needed in the electric vehicles. And also what kind of digitally enabled analytics we can be provided to the driver so that they are operating frictionless in that sense.
Are you also geared up to cater to new players like MG, Kia Motors, etc.?
There's a lot happening in the auto space as well as the lubricant space and in the overall space. There is a lot happening in the B2B space as well which is not as visible. But with the technology (adoption) with smart cities development, which has initiated construction work, which is got initiated a lot of work which is happening in power mining agree. So there are lots happening in the B2B space as well. I think what it poses to us is different business models by different volumes in terms of how they want to be looking at the market how they can bring in the Innovation and for us what gets challenging or is the next Frontier is. How we can keep a portfolio of different volumes and then build our own capability along the way to be ensuring that we are in line with what the expectations are
As we all know, GST was implemented last year. How has the lubricant industry responded accordingly? And do you think it has been a boon for Shell or there are still teething troubles that need to be ironed out?
I think on the operational part of it, which is how the back ends of the operational mechanism, it is going to happen that got cleaned out within 3-4 months in terms of both Shell. For Shell we got on day one, but. Connect interconnections with our vendors' interconnection with the entire network kind of it, but that got sorted out pretty fast in terms of versus what was the expectation. On the part of like the consumer or the retailer, it has not been 100% convergent right now. We do see initially there was a lot of adherence but as we have gone further in everybody is found again some mechanism by which they are able to juggle around stuff in terms of how they're going to manage the whole GST processor. I think that's something which we still need to work on to ensure that the last mile piece on GST is also connected end to end.
Lubricant, unlike other products, is a low involvement product. So what are the challenges that would face in selling your product?
Yeah. I think it is as easy or difficult as selling a (bottle of) mineral water or salt which again you (as a consumer) can argue that why should I buy mineral water (brand) A vs. (brand) B. Having said that, the market is about segmentation. So we do see a part of the segment which is very involved in the category. So they're very involved with their bikes. They're very involved with their cars. They were involved with their vehicles because it's the source of the income like the fleet owners, farmers, owner drivers and bike segment. We see a very big part of the consumers who are very involved with their vehicles. Because of the emotional connect it's a direct source of money and they know exactly what oil is going in. What is happening, how long did they service it, and they would be very particular about what oil will be going in, they would do their own research or ask the right experts to come to that conclusion. Then there is a part of the segment who will depend on some experts like the mechanic and get influenced by what is there and then there's a third which is very uninvolved and unattached and don't care in that sense. But that last segment is so what we're finding is like slowly reducing in terms of ‘not being informed or not being bothered’.
One major megatrend that is shaping the global automotive industry is shared mobility wherein service providers like Ola and Uber are majorly disrupting the market. So how are you responding to it?
So I think though the fleet segment is very big, important and emerging segment and if the future trends are to have relied on, it will become the most prevalent form of transportation because if you ask the millennial today, they don't want to own anything. They don't want to own or maintain a car. They're very happy with (the) shared vehicle (concept) as they don't have to park it. They don't even (want to) have a house so they don't want to have to own anything was the need to maintain his right? So the future looks like it is a very strong trend and will remain so as we can see it in different markets. So what we are trying to do is one from a portfolio perspective, we will be introducing oils which are just for cabs cars which will be meant only for the fleet customers. The specific need over there is that how we can increase the service interval between A and B. So the number of kilometres oil can sustain will be much higher. So the level to which we are thinking about that segment and then we have on ground tie-ups with (companies) like Uber. That will ensure that when their cars are getting serviced, they have a network of workshops, which they can go into. So that will ensure that Shell is the preferred oil (partner) for their direct owned fleet. So we have a tie-up with Uber, Cars Zippy and other service aggregators. So we have tied up with a lot of service aggregators as well as so for that last mile connectivity. So you will be focusing extensively on that on that particular vertical on the shared services.
What about the performance segment which is seeing a lot of traction?
So I think we do have the premium synthetic oils which go in all these performance vehicles and performance as a clear vertical of where Shell wants to stand for and hence there's a very high overlap between performance segment growing and shell really be bridging (the gap) because we have good technology strength in that. Proof points-we have a global exclusive tie-up with BMW which will ensure that the supplier they are going with is passing some of the highest standards. Likewise, Ferrari is another good example where we have a global tie-up now for almost 85 years and we have been developing and co-developing technology with them as we go forward. Ducati is another great example where we have been working for them. Likewise in India, as you see the performance segment growing, we will be working with most of the OEMs in that segment and that space be it bikes, cars, where we will be bringing in the technology. More importantly, even for the likes of Hyundai, Suzuki, etc., they do have their premium segment. And hence, the shift (in Indian Automobile market) is actually more towards the synthetic oil because they give a better performance in the engine, longer life, fuel economy is all the variables which the OEMs are also looking for. So for the consumer and for the OEMs actually, it's a very nice and a good trend to be in.
Shell’s main business is lubricants and oils. So now it is also moving on new technologies.
Fifteen years back, I would have called it an oil and gas company. Well today, I would call it as an energy company because what we are interested is in okay in 2050, what will be the energy needs of the world and that could be coming much from Renewables or it could be coming from new sources of energy etc. where we will play from now till then a very important part of the energy transition itself, and we will actually shape and you know (to) enable the whole energy transition along the way given our size and width.
So Lubricants is just one vector obviously. Then we have obviously fuels, we have chemicals, have bitumen we have a whole host of new energy spaces including solar biogas CNG, LNG natural gas, entire portfolio, integrated gas portfolio and then interconnectedness as well, which is like, you know for a given application or a city it's not just important as to how your source of energy could be coming from electricity and solar and how do you ensure that the right mix is made so that what reaches you and your factories in the most efficient manner. So it's also getting into the infrastructure part of it, which is how do you disseminate the entire energy, which is coming into the market.
So it's really more about ensuring that we are in the right space and then changing our portfolio along the way so that it is in line with where the future needs to be and technology will play an important part in that specifically the digitally enabled technology, which will play a very important part of it and we are investing quite a lot in that segment as we move forward.
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