Month: November 2010

AMSOIL Magazine: AMSOIL has had a reputation as an extended-drain motor oil company. Why is it now offering a line of motor oils recommended for OEM drain intervals?

Dean Alexander: AMSOIL is not exclusively an extended-drain motor oil company; it’s a synthetic motor oil company (The First in SyntheticsTM), and our extended-drain oils provide the absolute best value for consumers. AMSOIL OE Synthetic Motor Oils are intended as a door-opener for AMSOIL Dealers. There are many synthetic options on store shelves today, and 92 percent of synthetic motor oil customers are choosing synthetic oils recommended for 3,000-mile or OEM-recommended drain intervals. Whether it’s for the lower initial cost, warranty concerns, API certification or because they’re simply not yet comfortable with extending their drain intervals, that’s 92 percent of the market that we weren’t addressing.

Alan Amatuzio: OE gets us into that portion of the market that has been a more difficult sell, and once customers experience the benefits, it will be easier for Dealers to say, ‘If you like the performance of OE, perhaps you’d be interested in an even better AMSOIL product.’ Then, explain the extendeddrain benefits and cost-savings of switching to one of the top-tier AMSOIL synthetic motor oils.

In addition, we’re seeing manufacturers recommending longer and longer drain intervals. Most owners’ manuals now recommend drain intervals of at least 5,000 miles. In fact, Ford will recommend 10,000-mile drain intervals with its model-year 2011 vehicles. As OEM-recommended drains continue to increase, more people will turn to synthetics to protect their vehicle investments over these intervals. AMSOIL OE ensures customers’ vehicles receive excellent protection for the entire length of the manufacturer-recommended drain interval, whether it’s 3,000 miles or 10,000 miles.

AMSOIL Magazine: How does OE fit into the installer market?

Dean Alexander: AMSOIL OE is ideal for the do-it-for-me installer market, which includes quick lubes, car dealerships and other oil change centers. The installer market is growing fast, with an ever-increasing number of customers choosing to pay someone else to change their oil rather than changing it themselves. In fact, the do-it-for-me market is expected to account for 80 percent of oil changes by 2018.

AMSOIL motor oil has traditionally been a tough sell in this market due to its extended drain recommendations. Installers balk at offering 25,000-mile/one-year drain intervals that would limit the number of times they see their customers. In order to help Dealers penetrate this market, AMSOIL introduced the Extended Life (XL) Synthetic Motor Oil Program in 1997. XL Synthetic Motor Oils come with API certification and have recently been upgraded from a 7,500-mile/sixmonth drain interval recommendation to a 10,000-mile/six-month drain interval recommendation. By charging customers a premium for this high-quality, extended-drain product, installers have boosted their profits, despite seeing their customers less often.

Alan Amatuzio: While many installers have implemented very successful XL programs, many are still resistant to the idea of extended drains. A recent National Oil & Lube News article noted that 90 percent of fast lube operators continue to recommend 3,000-mile drain intervals to their customers. With this in mind, it’s not difficult to see why AMSOIL has sometimes been a difficult sell in the installer market.

The new OE line provides installers with another option and Dealers with another tool to increase their sales. The OE line eliminates every potential installer objection, including objections related to price, extended drain intervals, API certification, warranty concerns and frequency of customer visits. And by charging a premium, they make more money than they do on conventional oil changes.

AMSOIL Magazine: How do OE Synthetic Motor Oils measure in terms of quality?

Alan Amatuzio: AMSOIL OE Synthetic Motor Oils are formulated to the same high standards as XL Synthetic Motor Oils, but without the extra additive boost required for extended-drain performance.

Like the entire line of AMSOIL synthetic motor oils, OE provides outstanding wear protection and fuel economy; resists shear, thermal breakdown, sludge and deposits and provides easier cold-temperature starts and quicker circulation.

AMSOIL Magazine: How is OE priced compared to competing synthetic products?

Dean Alexander: At $5.50 a quart retail [$4.20 wholesale], or $5.39 a quart retail [$3.99 wholesale] when purchased by the case, AMSOIL OE is more competitively priced with other synthetics on the market. This will appeal to customers who recognize the AMSOIL name, know its reputation for quality and have wanted to use the products, but have balked at the higher prices or extended drain intervals of the XL or top-tier line.

We all know many customers are driven by price. In today’s economy, price is especially important. That’s not to say price is the only determining factor. Products that combine value and quality, of course, are ideal. AMSOIL is introducing OE to protect the company and its Dealers from low-cost synthetics that are attempting to eat into our market share. People are moving up to synthetics, but many aren’t ready for extended drains. If they’re going to use a synthetic, it needs to be an AMSOIL synthetic.

Although AMSOIL sales have been strong and growing, and we expect sales to continue growing in the future, AMSOIL needs to diversify, offer greater opportunities for Dealers and take momentum away from our competitors. The lower cost of OE Synthetic Motor Oils is less intimidating to new customers, and will help AMSOIL gain more new customers as they take that first step from petroleum oils to synthetics.

Alan Amatuzio: Again, AMSOIL OE is a stepping stone to our top-tier extendeddrain products. Although the initial price is lower than the price of our top-tier synthetic motor oils and the XL Oils, our top-tier oils provide the best overall value to consumers.

For example, a vehicle specifying 5,000-mile oil changes requires five oil changes over 25,000 miles. Let’s say this vehicle takes five quarts of 5W- 30 oil, the customer buys at suggested retail price and performs the oil changes himself. The cost of 5W-30 OE Synthetic Motor Oil (OEF) works out to $27.50 per oil change and $137.50 for the five oil changes required over 25,000 miles.

If this customer upgrades to the top-tier AMSOIL 5W-30 Synthetic Motor Oil (ASL) with a 25,000-mile drain interval, his total cost of oi
l for 25,000 miles is $45.75. That’s over $90 in savings and doesn’t even take into account the cost of filters or time spent in the garage performing the oil changes.

Once OE customers are established, it is examples like these that will help Dealers later upgrade them to a top-tier AMSOIL synthetic motor oil. And that should be the ultimate goal. Experiencing all the benefits associated with the top-tier line is what develops loyal customers.

AMSOIL Magazine: How much profit are Dealers poised to earn on OE Synthetic Motor Oils?

Dean Alexander: When compared with other AMSOIL products, the profit margins are slimmer per unit, but the profit potential is much greater overall because OE customers change their oil more often.

Dealers earn $21.30 retail profit per case of XL, and they earn $16.77 retail profit per case of OE. Consider two customers who each drive 20,000 miles a year and have vehicles with five-quart capacities that specify 5,000-mile drain intervals. Customer A uses AMSOIL XL, with a drain recommendation of up to 10,000 miles, and changes his oil twice a year. The servicing Dealer sells the customer one case of XL a year for a profit of $21.30. Customer B uses AMSOIL OE, recommended for OEM drain intervals, and changes his oil four times a year. The servicing Dealer sells the customer two cases of OE a year for a profit of $33.54.

But that’s not the whole story. OE is going to increase Dealers’ earnings exponentially through all of the new customers it will generate. Not only that, but OE is a great choice for many of our current customers who already buy AMSOIL Motorcycle Oils, Formula 4-Stroke Oils, 2-Cycle Oils or filters, but aren’t interested in extending the drain intervals in their cars and trucks. In fact, a full 50 percent of AMSOIL Preferred Customers who made a purchase in the past 12 months did not purchase any passenger car motor oil. AMSOIL OE is a great stepping stone for these people to start experiencing the benefits of AMSOIL motor oil in all their vehicles.

The fall months are the time to place boats, motorcycles and lawn care equipment into storage and prepare snowmobiles, snowblowers and other vehicles for the coming winter.

AMSOIL products are formulated to provide maximum protection for engines and fuel systems during storage, while AMSOIL synthetic motor oils’ low pour points provide superior cold-temperature protection and performance in two- and four-stroke winter equipment.

Fall Storage Protection
Gasoline can break down in as little as 60 days, causing varnish and gums that clog injectors, fuel lines and carburetors, leading to poor engine performance and starting problems. In many applications, draining the fuel system can be impractical, and doing so can expose the system to corrosion on the bare metal in the tank and fuel system and cause gasket and seal cracking.

AMSOIL Gasoline Stabilizer reduces the oxidation that occurs when fuel is stored for extended periods, improving performance, extending equipment life and decreasing maintenance expenses.

During storage, fluctuations in ambient temperatures can form condensation within the engine that can cause surface corrosion on cylinder liners, piston rings, anti-friction bearings and steel/iron contact surfaces on rotational seals. Long periods of storage can also dry out cylinders, often resulting in permanent damage when the equipment is dry-started in the spring.

AMSOIL Engine Fogging Oil offers superior film retention, providing long-term protection against corrosion and dry starts, extending engine life and reducing operating expenses. Its aerosol spray formulation offers easy and clean application, while reaching more components and offering complete distribution of the oil, something especially beneficial in applications with horizontal cylinder orientation, such as outboard motors.

Winter Four-Stroke Performance
Conventional oils thicken in the cold, which can result in inadequate lubrication to critical engine parts at cold start-up, or even prevent the engine from starting.

AMSOIL Formula 4-Stroke Power Sports Synthetic Motor Oil provides serious protection and performance in four-stroke engines, including ATVs and snowmobiles. Its broad 0W-40 viscosity rating effectively protects in both hot and cold temperature extremes.

AMSOIL Formula 4-Stroke Synthetic Small Engine Oil provides exceptional protection in the severe-service conditions common in both gasoline- and diesel-fueled small engines, including welders, skidsteers, compressors, snowblowers and more. It remains fluid at subzero temperatures for superior cold-weather protection.

Winter Two-Stroke Performance
AMSOIL DOMINATOR and INTERCEPTOR Synthetic 2-Cycle Oils provide exceptional performance in snowmobiles and other two-stroke equipment. AMSOIL DOMINATOR is formulated with heavier base oils for “on the edge” operation, while also protecting pistons and bearings subjected to the rigors of extreme riding.

AMSOIL INTERCEPTOR is engineered specifically for powersports applications and engines equipped with exhaust power valves. It contains the finest synthetic base oils and additives for exceptional cleanliness, while controlling exhaust valve sticking and providing outstanding overall lubrication.

Gasoline Additive
AMSOIL Quickshot SE is formulated to thoroughly clean varnish, gums and insoluble debris in two- and four-stroke gasoline-powered small engines and powersports equipment fuel systems, restoring peak performance. It effectively addresses performance issues related to ethanol, water and dirty pump gas, while stabilizing fuel between uses and during short-term storage periods.

Dan Peterson | TECHNICAL DIRECTOR

The European motor oil market has always been different from the North American market. European engine oil drain intervals have consistently been longer than those in the U.S., and oil formulations and additive packages have also differed from those of North American engine oils. These differences are due primarily to European emissions legislation, fuel economy concerns and stringent severe-service oil durability requirements.

In the United States, oil classifications and requirements are developed through a process involving a number of trade associations and organizations, and the classifications are finalized and managed by the American Petroleum Institute (API) and the International Lubricant Standardization and Approval Committee (ILSAC). In Europe, industry wide specifications are developed by the Association des Constructeurs Européens d ‘Automobiles (ACEA).

The API-governed engine oil specification has traditionally been the most common in the U.S., and oils meeting current API specs are still widely used today. More recently, ILSAC, which has a more global focus, is having a greater influence on North American specifications due to the rising number of Japanese vehicles sold in the U.S. As a result, the new ILSAC specification, GF-5, differs more from its API counterpart, SN, than in the past.

ACEA does not have the recognition and influence in Europe that API does in North America because individual vehicle manufacturers in Europe strongly support their own engine oil specifications. As a result, there are a number of different widely used European engine oil specifications, and oil manufacturers are tasked with building appropriate engine lubes for each.

As these new European vehicles make their way to the U.S., consumers are discovering they can’t necessarily use just any oil. One recognized example of a very particular specification is Volkswagen VW 504.00/507.00 (504.00 covers gasoline engines, 507.00 covers diesel engines). This specialized engine oil specification was designed by VW to help protect emissions-reduction equipment and support proper operation and longevity of the vehicle. Until recently, AMSOIL did not offer a product meeting this specification, and there are only a handful of oils available in the U.S. that do. New AMSOIL European Car Formula 5W-30 Synthetic Motor Oil (product code AEL, see p. 13) does meet the spec, as well as the ACEA A3/ B4 specification, which was created with slightly different priorities than the VW 504.00/507.00 spec.

ACEA oils engineered for the A3/B4 category meet the requirements of direct-injected gasoline and diesel engines in addition to the requirements of A3/B3. In order to provide optimal performance in direct-injection diesel engines, an oil must be highly stable and durable; direct-injection systems are notoriously hard on engine oil. ACEA A3/B3 European oil specifications require stable, stay-in-grade engine oils to ensure these high-performance engines are protected from inadequate oil supply and excessive wear. For an oil to be considered stay-in-grade, it must resist thickening or thinning out of an established viscosity range. The table below outlines the general differences between four ACEA sequences for gasoline and light-duty diesel oils in regard to fuel economy benefits and drain interval recommendations.

Moving forward, Volkswagen plans to maintain three global engine oil specifications for its light-duty gasoline and diesel vehicles: VW 504.00/507.00, VW 502.00/505.01 and VW 501.01/505.00. New AMSOIL European Car Formula 5W-30 Synthetic Motor Oil is recommended for Volkswagen vehicles requiring VW 504.00/507.00, while AMSOIL European Car Formula 5W-40 Synthetic Motor Oil is designed for Volkswagens requiring VW 502.00/505.00/505.01. Both formulations are recommended for the ACEA A3/B4 specification, among others.

The ACEA European Oil Sequences define performance requirements for gasoline and light-duty diesel engine motor oil. Each sequence (class and category) reflects different engine oil performance levels. As shown in the chart above, different categories are required to meet key criteria including fuel economy and oil drain interval.

New Line Offers Tremendous Opportunity for Dealers

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History of Synthetics
In 1972, AMSOIL pioneered the synthetic lubricant industry by introducing the world’s first synthetic motor oil to pass API service requirements. Because synthetic lubricants were new and revolutionary, the market for them started small. Through the AMSOIL Dealer network, the public was slowly educated on the benefits of AMSOIL synthetic lubricants, attracting loyal high-performance and extended-drain customers along the way. AMSOIL and its Dealers owned the synthetic lubricant market, but as AMSOIL gained momentum, other lubricant companies took notice and developed their own synthetic variations. When Mobil 1 was introduced in 1974, its drain interval recommendation mirrored the AMSOIL recommended drain interval of 25,000 miles or one year, whichever comes first. Although Mobil 1 soon scaled back its drain recommendation, AMSOIL officially had competition in the synthetic motor oil market.

Synthetics Today
As an increasing number of companies have introduced synthetic lubricants through the years, the market has continued to grow. Today, synthetics comprise 7-9 percent of the total lubricant market, a sharp increase from the 5 percent share they held in 2005. Although some are recommended for extended drains, the majority are formulated and recommended for standard 3,000-mile or original equipment manufacturer (OEM)- recommended drain intervals, allowing them to be sold at a lower cost. These lower-cost synthetics have attracted an ever-growing number of customers who like the lower initial price and want the improved protection and performance qualities associated with a synthetic, but aren’t ready to extend their drain intervals.

AMSOIL has watched the competition infiltrate the market it pioneered. With 92 percent of synthetic motor oil customers purchasing synthetic products recommended for standard drain intervals, AMSOIL and its Dealers are missing out on the vast majority of the synthetic market.

Modern Drain Intervals
The oil drain interval recommendations for many of today’s vehicles extend well beyond the traditional 3,000-mile interval. Ford recommends 10,000-mile drain intervals with its 2011 vehicles, while vehicles equipped with electronic oil monitoring systems often extend drain intervals up to and even beyond the 10,000-mile mark.

Installer Market Key to Growth
Although OEM-recommended drain intervals continue to rise, the installer market has mostly been resistant to this change. In fact, 90 percent of do-itfor- me (DIFM) oil change businesses continue to recommend 3,000-mile drain intervals to their customers. The DIFM market is expected to account for 80 percent of all oil changes by 2018, and penetrating this market is essential to ensure future growth. Although AMSOIL Dealers have developed very successful installer accounts centered around XL Synthetic Motor Oils (which were developed to overcome installer objections related to price, warranty and API certification), there is still resistance from many installers who fear that extended drain recommendations limit their profit potential.

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Synthetic PCMO Market 1972	Synthetic PCMO Market 1980	Synthetic PCMO Market Today
Recommended for extended drain intervals, AMSOIL synthetic motor oils comprised the entire synthetic passenger car motor oil (PCMO) market in 1972. In the years since, competing synthetics recommended for OEM drain intervals have taken the majority of the market share.

OE Meets Demand
In order to meet the demand for a lowercost synthetic motor oil, and to provide customers a stepping stone to the toptier line of AMSOIL synthetic motor oils, AMSOIL is introducing the AMSOIL OE Synthetic Motor Oil line. Priced competitively with other standard-drain synthetic motor oils, OE Synthetic Motor Oils offer the protection and performance benefits of a high-quality synthetic for OEMrecommended drain intervals, providing Dealers with a huge opportunity to reach new customers.

OE Ideal for Installer Market
AMSOIL OE Synthetic Motor Oils are ideal for capturing increased sales in the installer market. Because they are API-certified (meet API SN/ILSAC GF-5 requirements), recommended for OEM drain intervals and competitively priced, they effectively overcome all potential objections from installers. Installers now have a choice between offering their customers standard drain intervals with OE Synthetic Motor Oils, extended drain intervals with XL Synthetic Motor Oils, or both.

Because customers change oil more often with OE, both Dealers and installers stand to increase profits (see graphs).

* Based on 15,000-mile/year national average. While most installers recommend 3,000-mile intervals, most motorists practice 4,500-mile intervals. Source: 2009 NOLN Operators Survey & poll of AMSOIL accounts	* Based on 15,000-mile/year national average

Unprecedented Opportunity
AMSOIL OE Synthetic Motor Oils are designed as an entry-level product for customers who want to move up to synthetic quality, but won’t pay a significantly higher price than a conventional product and/or aren’t initially interested in extending their drain intervals. OE Synthetic Motor Oils are an excellent door-opener for Dealers, who can later teach satisfied customers the benefits of stepping up to a top-tier AMSOIL synthetic motor oil and saving money through extended drain intervals, as well as introduce them to the rest of the AMSOIL product l
ine.

AMSOIL OE Synthetic Motor Oils will help AMSOIL and its Dealers penetrate a portion of the motor oil market that has been a more difficult sell, including the installer market, commercial fleets, cost-conscious customers and customers hesitant about taking advantage of extended drain intervals.

See the Voice-over PowerPoint Presentation in the Dealer Zone for more details about OE Synthetic Motor Oils, why they’re needed and how Dealers will benefit.

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