China exported 1.2 million EVs in 2023, more than double the previous year. These low-cost vehicles are entering Southeast Asian and European markets in large volumes. Western governments are now considering tariffs or industrial reshoring to counter China’s dominance, which is creating uncertainty across global supply chains, said Group Chief Technology Officer Ravi Tallamraju at an industry conference in June.

In the United States, revisions to the Inflation Reduction Act, which initially spurred EV investment through tax credits, have reduced the number of eligible EV models. Several states are now easing mandates or delaying bans on internal combustion engines, while major OEMs such as Ford and General Motors are postponing EV rollouts in favor of hybrid vehicles.

This shift is creating confusion among OEMs. Suppliers are facing regional disparities in incentives, battery sourcing requirements and market conditions, said Tallamraju.

Still, most automakers have EV targets, although some are slowing their transitions. There is a high level of uncertainty and significant pullback by OEMs, with the market now trending toward hybrids and more cautious timelines, he added.

In this environment, blenders face challenges such as customizing formulations for a wide range of OEMs, balancing thermal efficiency with decreasing viscosity, improving heat transfer coefficients and insulation, and ensuring safety, material integrity and hardware compatibility.

Hybrid technology appears to be the preferred interim solution for most automakers, and this will significantly impact transmission fluid requirements, Tallamraju noted.

Future changes to EV fluids may include a move toward very high-performance, fully synthetic products using API Group III, Group III+, and specialty low-viscosity PAOs and esters, largely for fill-for-life applications. Additional focus areas include additives for electrical conductivity, copper and material compatibility, the continued use of traditional fluids for hybrid and ICE vehicles, and increased investments in complex supply chains and operations.

Tallamraju also emphasized the lack of standardized testing or specifications for EV fluids. Lubricant companies often lack access to test protocols and methodologies, which necessitates substantial investment in testing capabilities and the proximity of test facilities to OEMs and Tier 1 suppliers.

EV sales reached 14 million in 2023 and are estimated at 17 million in 2024, accounting for more than 20% of global car sales. China holds a 60% share of the market. From 2022 to 2023, about $500 billion was invested in EV and battery technologies. However, profitability remains under pressure due to tight margins and volatile material costs, he said.

Amid these rapid transformations, a report published this year by Kline may serve as a valuable reference. The report forecasts that by 2030, 30% of new passenger car sales will be hybrid. By 2040, 70% of vehicles in operation will still be equipped with internal combustion engines. By 2050, battery electric vehicles are expected to become the dominant powertrain technology.