Once the market normalizes after the global lockdown, automakers and lube companies will need to look again at the long term for their respective industries.
The electric vehicle revolution is rattling the gates of the passenger car motor oil market, but industry insiders advise that lubricant suppliers should closely examine other opportunities in the EV sector. What might be less evident now could save the lube industry from flat lining in the near future.
The four-wheeled EV has traveled a long road from what once was a viable transport mode in the early 20th century to near extinction at the hands of the internal combustion engine. One of the first EVs made by a major automaker that did not use lead-acid batteries, the Honda EV Plus, quickly failed in the 1990s after being mocked by the auto industry as something only Grateful Dead fans and tree huggers would drive. The GM EV1 suffered a similar fate. They were by any measure ugly cars, which did them no favors, and the odds of success were stacked against them back then.
Despite the blow to the auto industry dealt by Covid-19, which hammered all vehicle sales in 2020, EVs sales are gradually gaining on their piston-powered peers. Whether they are making much of an impact of lube sales volume is debatable at this point, but producers are investing in EV fluid development.
From GM to BMW to Nissan, automakers around the world are migrating to battery-powered vehicles, slashing the amount of engine oil they’ll use and even reducing the amount of greases. While most EVs are small to mid-size cars, the market has recently expanded into sport utility vehicles, medium-duty commercial and buses.
In 2019, finished lubricant demand inched just above 40.5 million tons, according to consultancy Kline & Co., with automotive accounting for more than half. But automotive lube demand is forecast to start declining in 2025, leaving some in the industry fearing a fate similar to that of Eastman Kodak, the camera company that failed to adapt to the digital revolution.
Such fears are overblown according to Matthew Wade, the CEO of the Electric Vehicle Institute in Baltimore, United States.
“There are still components that need to be greased and lubed,” he said, adding that the rise of EVs will not make the lubricant industry obsolete but will affect sales. EVs may require a higher volume of coolants than ICE vehicles, but the amounts of 40 other types of lubes are less in EVs.
“These fluids, which are exposed to high voltages, have very specific properties,” CNBC reported Francois Benard, prospective and innovation manager at Total Lubrifiants, as saying at a CTI Symposium on automotive transmissions and powertrainsin Berlin last year. “They’re subjected to high temperatures and must protect key components, such as coils, from corrosion while preventing short circuits. The vehicle’s lifetime and safety depend on it.”
A number of lubricant suppliers are getting into the EV lubes market with new products. The world’s largest supplier of finished lubricants, Shell, has developed a number of fluids geared specifically for the powertrains for EVs and hybrids. Total introduced two EV lubrication products in 2019, and Petronas released its own EV line of fluids. Meanwhile, BP Plc is overhauling its Castrol lubricants for EVs.
“I’m very conscious of the world changing,” Dave Hall, automotive lubricants and additives director at Castrol, also told Bloomberg. “I’d like to think we’re trying to address and prevent a Kodak moment and not just lock it away in a cupboard as maybe they did.”
“The bottom line is the volumes are not going to make up the loss that we’re going to see from engine oil going away.”
— George Morvey, Kline
Both Castrol and Fuchs have put together teams focusing exclusively on development and marketing of lubricants for electrified vehicles.
EV markets in Europe and China – the two largest for battery-powered vehicles – continue to grow, albeit at slower pace than previously. Despite the opportunities that product diversity could offer, there is no substitute for sales volume.
“The bottom line is the volumes are not going to make up the loss that we’re going to see from engine oil going away,” said George Morvey, industry manager for Kline’s energy practice.
While demand for heavy-duty diesel engine oil is predicted to take a dive over the next two decades, only a small part of that will be from the electrification of heavy-duty vehicles, according to a Kline study of 15 markets around the world. As we reported in November 2019, Kline forecast on-highway HDEO demand will decrease by 1.6% per year to 2 million metric tons by 2040 from about 2.5 million in 2018. Kline calculated demand in those countries would fall at 1.3% annually without electrification, finding one of the key factors to be the extension of drain intervals.
Kline also projected EV penetration of on-highway commercial vehicles by then to exceed 25% in countries such as Canada and Germany and to reach just under 20% and 15% in China and the U.S., respectively. Currently, Japan has the highest proportion at approximately 5 percent.
Like all revolutions, there will be casualties, but Wade said the age of EVs will also have victors. “When it comes down to it, the technology in EVs is evolving so quickly, the winners will be companies that evolve with the industry.”
One sector of the lubricant market that is preparing for the EV wave is the packaging and transport sector. Lubricants come in many containers, from small plastic bottles, perhaps the most common, to drums, flexitanks and intermediate bulk containers.
For Randy Austin, director of Scholle IPN’s North America packaging production line, the change from ICE to battery-powered vehicles was inevitable, and the packaging industry is starting to make the switch, but at a slow pace.
“I don’t think the industry was surprised …. We were reliant on the combustion base engine, but now we’re looking at packaging for EVs.” He explained packaging for fluids can come in nearly any size from as little as 10 milliliters to flex containers.
Part of the switch in his sector is focusing on technology for specialized packaging. He said the packaging industry can develop containers such as a lock-out package system that only fits openings or ports of equipment for which that lubricant is intended. But, “I don’t think that will be next week,” he predicted.
Kline’s George Morvey added that he suspects EV lubricants will go mostly to factory fill, which involves shipment to an assembly plant in either drums or IBCs.
“I can’t image a Tesla owner going to Walmart to buy a quart of battery coolant and changing the fluid in the street outside of his or her home,” he said. Austin agreed, saying the downside to EVs complex systems is the “end of the shade-tree mechanic.” This should result in an increase in visits to dealerships and repairs, which purchase specialized lubricants in large packages, such as drums or flexibags.
However, there is an environmentally friendly trade-off, Austin said. Currently, most lubricant packages end up in landfill. But with EVs owners headed to the dealership or repair shops for fluid changes, an eco-friendly cycle can begin, Austin explained.
“Going to those places will impact the end-of-life product. What happens when the package is used? Customers don’t clean or recycle the package, but repair shops that use EV packaging recycle, which reduces waste.”