There is a wave of change moving through the auto industry which we in the lubricants and additives industry cannot ignore, and that is the influence of ride sharing. It is clear that the auto manufacturers are taking this very seriously and have invested significant money in order to participate in the way that vehicle ownership may be changing. Toyota has invested in Uber; GM has invested in Lyft; and VW has invested recently in Gett, a black car sharing service in New York. In addition, there have been high profile investments from Saudi Arabia in Uber and from Apple in Chinas Didi Chuxing.
What influence will ride sharing have on the lubricants and additives industry? This is obviously a bigger question than a 1,000-word column can answer, but I will offer up some food for thought.
The first issue that comes to mind is how the ride sharing trend will over time affect the number of vehicles on the road. Interestingly, I have seen references to conflicting viewpoints on this. In one survey by AlixPartners in 10 U.S. cities, they concluded that each shared fleet vehicle could displace 32 personal vehicle purchases. Of course each of these shared fleet vehicles would wear out much more quickly and require replacement; however, it is likely that if this survey were true, it would imply fewer vehicles on the road as ride sharing services grow.
I have also seen an analysis by Deutsche Bank indicating that up to 50 percent of the miles driven by ride sharing vehicles are empty legs (i.e., unproductive miles getting from one customer delivery to the next pickup). This implies that overall miles driven will increase with ride sharing, and combined with heavier vehicle usage will lead to more vehicles on the road. In addition to all of this is the potential that ride sharing will enable more people to go places that they may not have otherwise gone, which would have a positive impact on overall miles driven. This is clearly a complex but important question requiring further analysis.
The next question that may be important to our industry is the degree to which the ride sharing trend will influence the type of vehicles utilized. This is clearly important to the auto manufacturers and must be one of the main reasons they are investing in ride sharing and other mobility systems like Zipcar. It is conceivable that longer term there could be specific vehicles purpose-built for ride sharing, and this could introduce significant efficiencies into the system. It is also conceivable that the control, or at least influence, of the type of vehicles that are used by the ride sharing companies will be important to the market share of the auto manufacturers in the longer term.
In such a scenario I begin to see potential opportunities for lubricant and additive companies to customize lubricants for heavily utilized ride sharing vehicles and for specific auto manufacturers. Of course there have always been taxis on city roads, and their needs are similar to those of ride sharing vehicles; certainly, taxis have been a typical testing ground for new lubricants.
What is changing, though, is that the number of vehicles with taxi-type needs may be growing, and such vehicles in the future may be controlled or influenced to a greater extent by the original equipment manufacturers. Perhaps there are opportunities too for quick-lube outlets and service stations to be set up specifically for such vehicles. Lubricants that could be demonstrated to extend vehicle time on the road before service, reduce emissions, simplify the supply chain or offer other efficiencies could be very attractive to both ride sharing services and OEMs. The lubrication solutions that make the most sense could be different in different geographies, too. It is notable that ride sharing is becoming important in cities in China, and the solutions that make the most economic sense there could vary widely from those that make sense, say, in New York City.
Of course in the context of the auto industry, the potential for electric vehicles also looms. Electric vehicles could make sense longer term for ride sharing companies, as these vehicles could reduce air pollution in cities. However, there are significant issues such as charging infrastructure, range and vehicle costs. In this context, the success (or not) of Tesla and the raft of competitive products being touted by other auto manufacturers should be carefully watched.
So what should one do in response to these changing times? Here are a few practical ideas:
Stay the course on current plans related to passenger car motor oils that will deliver returns within the next five years. It is unlikely in my view that ride sharing will materially impact such shorter-term projects.
Review longer-term or lower-return projects specifically related to PCMO for potential impacts.
Spend more time with the OEMs, and specifically try to understand their strategies and plans with regard to ride sharing and its impact on the industry.
To the extent possible, develop contacts with the larger ride sharing companies to understand their strategies and plans.
Hold a strategy session to develop some different future scenarios and your potential response to such scenarios.
Develop signposts to watch for. These markers could include such things as percent growth in ride sharing volume, overall auto manufacturing data, OEM market position and new deals/investments in this space.
Consider how the potential move to ride sharing and the OEMs attitudes toward it and influence on it could provide a disruptive opportunity for your company.
Sara Lefcourt of Lefcourt Consulting LLC specializes in helping companies to improve profits, reduce risk and step up their operations. Her experience includes many years in marketing, sales and procurement, first for Exxon and then at Infineum, where she was vice president, supply. E-mail her at saralefcourt@gmail.com or phone (908) 400-5210.