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Beijing Tongyi Petroleum Chemical Co Ltd, China's largest privately-owned lubricant oil brand, is to step up research and development this year and is looking to achieve a sales revenue of 3.2 billion yuan (US$385 million), up 60 percent from 2.1 billion yuan (US$253 million) in 2004.
The firm plans to pump some 1.5 to 2 percent of its sales income into research and development, compared with last year's 1 percent, while cutting the proportion spent on advertising.
Five percent of its income was spent on advertising last year, with the figure expected to be knocked down to 3.5 percent this year, Li Jia, Tongyi's president, told China Daily Monday.
The company wants to establish an image of strong technical strength among consumers after a massive bombardment of advertising.
"We will prove to our customers that our stunning growth is soundly backed by research and development," said Li, who has become somewhat of a celebrity for the firm's advertising TV shows and its sponsorship of big sports events such as the Paris to Dakar Rally.
The lubricant brand was the successful bidder at US$4.3 million for a much-coveted 15-second advertisement on CCTV (China Central Television) last December.
"Our focused efforts in advertising and marketing have gained us an equal footing in China's lubricant oil market with State-owned Sinopec and PetroChina in just over a decade," said Li, adding that his firm, established in 1993, leads the pack from 4,000 local lubricant producers in China.
"And now we will give our consumers more confidence in our products through our technical edge."
The company plans to introduce a record number of 120 to 130 new products this year, compared with 70 last year, Li told China Daily.
It launched an oil saving standard for its lubricant oil products last Monday, in line with the country's repeated appeals for energy-saving economic growth.
Coupled with technology in accordance with the standard, Li said, improved lubricant oil is able to save as much as 4 to 6 percent of fuel oil consumption.
Li sees great market potential for his firm's new standard products, as the energy-hungry economy and the government's foreseeable taxation on fuel oil to replace the current road maintenance fee will prompt car drivers to choose more cost-efficient lubricants.
Experts say Tongyi's move indicates a developing trend in the lubricant oil market, as supply has exceeded demand in China's middle- and low-end lubricant oil market, and the fight becomes increasingly fierce among multinational players.
"Both foreign and domestic names such as Shell and Sinopec's Great Wall are upping technical research to gain a competitive edge in the market," said Zhang Jian, a petrochemical industry analyst with Beijing-based China Securities.
According to Li, his company spent six months developing the fuel-saving technology. It reduces mechanical friction and increases engine power to enhance performance.
Developed countries including the United States and members of the European Union also have lubricant oil standards to cut fuel consumption, but the production of such lubricants in these countries is 30 percent more expensive than it is in China, said Li.
From April to June, the privately-owned lubricant oil giant will launch a variety of new products to satisfy demand in the ever-growing domestic lubricant oil market.
"Some of the products are designed to resist the high temperatures seen in hard working engines in the summer, and some are made to last longer to satisfy the needs of long-distance drivers," Li said.
The company has also started co-operating with its foreign counterparts in technical research, according to Li.
"We have established partnerships with lubricant oil firms from Japan and the United States to suck in the latest technologies," he said.
But the focus on research and development does not mean advertising and marketing are being neglected, Li said.
(China Daily March 29, 2005)
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