Sitting Comfortably

Speaking at the Middle East Base Oil, Lubricant & Wax conference in Dubai in January, Shailendra Gokhale, managing partner at Mumbai-based consultancy Rosefield DAA, buoyed delegates’ optimism by reminding them that conventional engines will be around for some time to come and that the business case for ICEs is still strong. The global motorization rate is about 150 vehicles per 1,000 people, or 15 percent. The rate is expected to grow to 23 percent by 2035, propelled by growth in Asia, the Middle East and Africa. The total number of vehicles by that time is projected to be 2 billion, up from the current 1.2 billion. Estimates of how many of those cars will be EVs vary wildly from 100 million to 330 million.

The EV revolution is still a formidable threat to the lubricants industry, but additive companies currently look better placed to meet the challenge, Gokhale believed, and that was before the outbreak of the coronavirus epidemic at the end of 2019. The virus has severely disrupted global supply chains in the medium term amid crumbling demand in China, the world’s largest automotive market.

The challenge for lubricant companies will be to reformulate for electric, hybrid and alternative fuel vehicles. Gokhale says that will be require a shift in focus to include EV-specific transmission fluids, gear oils, battery coolants and greases. Fill-for-life fluids further challenge lube companies to replace the lost volumes that historically have produced recurring revenues. 

Even under the Clean Energy Ministerial 30@30 initiative, which predicts that EVs will take a 30 percent market share of the global four-wheeler vehicle parc by 2030, demand for lubricants will still be robust, he argued. It predicts EV sales will reach 43 million and the EV fleet will be more than 250 million in 2030

Noor in Our Backyard

With easy access to crude oil and gas, the Middle East is likely to be a late adopter of alternative fuel vehicles. Despite efforts already underway to address energy use in the region – the Dubai Clean Energy Initiative, Abu Dhabi’s Masdar clean technology company and the 1.18 GW Noor solar power plant – or indeed the prospect of peak oil, regional policymakers underestimate the shift at their peril. 

“I do not think penetration of EVs will be that high, compared to countries in … other regions. The Middle East will enjoy easy access to oil and with advanced fuel-efficient ICE models, the economics will be still favor ICEs. It is not easy to define a tipping point for the Middle East,” Gokhale told Lubes’n’Greases via email. 

But how long the Middle East can hold off on EV adoption is uncertain, especially considering the Clean Energy Ministerial’s 30@30 forecast into account. By any measure, those are startling statistics. Yet often overlooked is the potential strain, not to mention the environmental impact a spike in electricity demand will cause. Electricity demand to serve EVs is projected to hit almost 1,110 terawatt hours in the same period  

As a comparison, the global EV fleet consumed an estimated 58 TWh of electricity in 2018, similar to the total electricity demand of Switzerland in 2017 according to Rosefield. Aside from large oil and gas reserves, the Middle East might struggle to cope with additional stress on the electricity grid from the demands of EVs. During peak summer months some areas of the United Arab Emirates and reportedly Saudi Arabia already face blackouts. Yet both sides of the EV coin are a cause for concern for Middle East Gulf oil producers. CEM estimates in the EV30@30 scenario, reduced oil demand will be 4.3 million barrels a day. 

That looks like it could presage a change in the commodity pecking order. Let us face it, Gulf oil producers have reigned supreme over global commodity markets for decades but the EV movement could put pay to that. Demand for cobalt and lithium is expected to rise significantly in 2030, a point not lost on China. 

The Tipping Point

Gokhale said as battery prices keep falling, BEVs will become cheaper to operate than the ICE counterparts. PHEVs already have a lower total cost of ownership than ICE vehicles when fuel prices are historically high, even with high battery costs. To be competitive with a conventional ICE vehicle will require battery prices of around U.S. $100/kWh for a BEV with a range of 200 km at a fuel price of $0.80/L and 18,000 km/year mileage for a comparable ICE vehicle. 

Using NMC 811 cathodes, average battery sizes around 80 kWh and 30 to 50 GWh a year factory capacities, BatPac, a software modeling tool developed by Argonne National Laboratory, suggests battery costs in the medium term could fall to between $105 and $120/kWh. It might be work in progress, but Gokhale predicts a major market transition could come as early as 2025 if not before. 

There is no escaping the impact a wholesale switch to EVs would have on future lubricant consumption. Estimated demand for automotive oils of 17.3 million metric tons in 2020 is likely to shrink to 16.9 million tons by 2030, as EVs grow to 15 percent of the total vehicle parc in the best case scenario (for lube companies) to 25 percent in the worst case. But the good news is that industrial fluid consumption will increase to 27.2 million tons from 23.8 million over the same period, Gokhale predicted.  

Adding to uncertainty for lube companies is the trajectory of government policies and technological development during the decade of hybrids, EVs, greater efficiencies of ICEs and how they interact with each other from a total cost of ownership perspective. E-fluids face daunting formulation challenges from both HEVs and BEVs with the former likely to be a large part of the EV market in the short term. Meanwhile, ICEs operating temperatures are lower than EVs with significant risks of condensation and fuel dilution of crankcase lubricants, both of which could lead to sludge and wear. 

To E or Not to E

Formulating the optimal e-fluid will need a full range of additive components, including corrosion inhibitors, de-emulsifiers, antioxidants, dispersants, friction modifiers and antiwear protection, Gokhale said. New lubricants tailored for the EV and alternative fuel markets, such for electric dual clutches in hybrids, electric automatic transmissions and electric axles will emerge, he told delegates. Creating specific fluid formulations for hybrids is one of the major challenges facing the industry, and these different technical demands over ICEs may be an existential decision for some companies. 

E-fluids must be able to dissipate static charge but not insulate too much, protect copper against corrosion and incorporate excellent oxidation and sludge control. That is not all. E-fluids are likely to get hotter than their conventional axle counterparts requiring a higher viscosity index, probably based on a synthetic base oil. Automotive electric motors operate at higher rotational speeds than most industrial applications, leading to higher shear and higher temperatures in bearings. 

The viscosity of the base fluid needs to be low to reduce energy losses due to friction or drag in all parts of the drivetrain, but high enough to maintain an oil film under all operating conditions. Stop-start operation will likely be prevalent in EVs than in most industrial applications, Gokhale added. Still, despite the complexity, e-fluids are an enormous opportunity for formulators, the Mumbai consultant believed. 

But is not just about lubricants and fluids. Greases also need to be reformulated for the emerging EV market and the key challenges will be electrical, thermal and energy saving, Gokhale said.

Into the Known-unknown

A decade is a long time in the lubricants business, and for everyone who says it is game over for the ICE, there is someone else who says the opposite. Gokhale is agnostic, and instead says ICEs and EVs will coexist for a fair while to come. But when the time is that EVs will dominate remains a known-unknown. Does the future still look rosy for engine oils? That depends how lubricant and additive companies react to a new set of formulating challenges and performance requirements. 

Meanwhile, the Middle East will probably be dragged kicking and screaming into the EV future, unsurprisingly preferring ICE evolution over extinction.

Uncertain Year Ahead for EV Sales

The global plug-in electric vehicle fleet doubled between 2017 and 2018 to some 5.1 million units, including full battery and hybrids, and that number is likely to pass 7 million in 2019 and 2020. Still, they represent a fraction of the world’s passenger car parc. Spurred on by evolving government incentives and legislation, this fraction looked likely to continue expanding apace, especially in Western Europe, North America and China. While many European and American automakers are ramping up the number of hybrids and plug-ins in their lineups, China is still the world’s leading manufacturer of EVs, with almost 500 models on the market. That was until the outbreak of Covid-19, which killed EV sales in China stone dead and slashed the price of oil globally, making automotive fuel cheaper. 

Lubricant companies are starting to launch EV-specific fluids, but many products currently used by hybrids and BEVs are yet to be optimized for these vehicles. The industry is working toward fluids that can meet the challenges of conductivity, thermal management and copper corrosion. 

Many governments in the world’s largest internal combustion engine markets, including the United States, Europe and Asia, are continuing with policies that encourage EV uptake and even curb ICE vehicle sales over the next decade. Even so, some governments are rolling back or amending incentives now that these vehicles have emerged from their niche. Meanwhile, Latin America and Africa are beginning to ride the EV wave, especially two- and three-wheelers and public transport. 

There is still no consensus on the rate of growth over the next 20 years, but there is agreement that the growth trend will continue and that the electrification of cars is inevitable. This momentum could be a threat to base oil refiners, additive companies, lubricants blenders and marketers. About one-fifth of all finished lubricants sold globally are passenger car motor oils. Once the EV shift is in full swing, that volume could be gravely eroded.

To find out more visit www.LubesnGreases.com/electric-vehicles