• What are the most important trends with respect to automotive e-mobility — electric and hybrid cars, autonomous driving, government decrees, and other technology developments? Why are they important? What are the timelines for each?
1. Decarbonization of vehicles: Initially, the automotive market had taken environmental regulation as a big threat to the business rather than considering it as an opportunity for the greater good. But now every car maker is focusing on low carbon vehicles. Certain car makers, such as Volvo, have announced the plan of going completely electric by 2019. BMW is also exploring the path but has not announced any specific date for a complete changeover.
2. Governments declaring a ban on gasoline- and petrol-based vehicles: Many countries believe that climate change cannot be addressed without a radical decarbonization of vehicles. According to the European Enviornment Agency, from 1990, EU transport has witnessed a 29% rise in emission. Thus, countries such as the U.K., France, Germany, Norway, the Netherlands, and India have announced a precise year for the ban on sales of internal combustion engine vehicles. Countries such as Austria, Spain, Denmark, Ireland, Korea, Portugal, Japan, China, and the U.S. have set an official target for the sales of electric vehicles. Given these developments, we can draw the inference that very soon other countries will also announce the precise dates on the ban on petrol- and diesel-based vehicles. This will further increase the total share of electric vehicles across different countries
3. Volatile oil prices and low range of conventional vehicles: Low range of conventional vehicles and ever-increasing oil prices in the past have weakened the passenger vehicle market. This has further shifted the focus of OEMs and customers towards electric drivetrain.
4. Government regulations and incentives: Stringent government regulations will reduce vehicle emissions, improve the operational efficiency, and address challenges in the current market. Government support initiatives such as incentives on tax will further drive the plug-in electric vehicles market.
5. Lithium is the new green: The battery driven vehicles will have no operational emission from the tailpipes. This further addresses the current challenge with respect to the operational emission. The batteries will further help increase the range of the vehicle and will get broadly commercialized once it reaches the target price point of $150/kWh level. The key to increasing the adoption of electric vehicles is to bring down the cost of electric vehicles.
6. Charging Trends: Electric vehicles are slowly shifting from plug-in chargers to inductive charging (wireless charging). The wireless electric vehicle charging technology is the friendliest charging system. It is a powerful feature that makes the electric vehicles more convenient and more futuristic without the need for plug-in cables or adaptors.
8. Incorporating energy harvesting to increase vehicle range: According to IndustryARC analysis, an electric vehicle can potentially use 5 to 6 different types of energy harvesting technology such as thermal, solar, RF, piezoelectric, kinetic, and electromagnetic. The industry is already using kinetic energy for regenerative braking.
9. Developing new value proposition: In both developed and developing countries, consumers have different mobility needs. The rapid urbanization will provide consumers with various options apart from traditional car ownership. In the developing countries, the idea of multiple car ownership has not caught the attention of buyers. In developed economies, integrated mobility and car sharing will gain more traction. In the developing countries, infrastructure will not keep up with the demand and OEMs will offer more services based on the needs and diversify the portfolio. So ICE cars are not going anywhere so soon, the product will witness certain advancements where increase in energy efficiency will reduce the carbon emission.
- What will be the scale and timeline for the impact of each trend?
Short Term: 1 to 5 years
Medium Term: 6 to 10 years
Long Term: More than 10 years
- What potential impacts will each of these developments have on the global base oils / lubricants market and why?
1. Engine oil which generates majority demand in the lightweight automotive lubricant sector would take a hit in the long run. The demand for wheel bearing and chassis grease, HVAC coolants, motor oil, automatic transmission fluid, and radiator fluid top-ups would continue to experience steady demand.
2. With the development of electric vehicles taking place at a rapid pace, the demand for PHEV and ICE vehicles is expected to continue in the Asian and African regions as the required technology and infrastructure for charging is not available and would require time to develop. This will not hamper the demand for base oils in Asian and African region.
3. The low range of conventional vehicles and increase in oil prices will shift peoples’ focus from conventional vehicles to electric vehicles. Incentives and tax rebate will further add fuel to the fire.
4. Lithium represents not only an enormous and largely untapped market, but its development may also pave the way for further applications such as batteries for heavy trucks, trains, and airplanes. Once the total value of Lithium carbonate production decreases, it will further reduce the battery cost and have a huge impact on the market. This will further reduce vehicle ownership cost.
5. Wireless electric vehicle charging will bring about a paradigm shift in electric vehicles. Furthermore, dynamic charging will enable the charging of vehicles on the move, further reducing the battery size and overall vehicle weight and increasing the total range. Once dynamic charging is implemented, vehicle owners do not need to stop anywhere for recharging, the vehicle will be charged on the move. This will further widen the scope of electric vehicles and have an adverse impact on the oil/lubricant market.
6. The visible decline in the lubricants market for the automotive sector would experience a dip only in the long term when the majority of the countries would have shifted their base to an electric fleet.
• What specific technical impacts can be anticipated?
1. Demand for synthetic lubricants, which are majorly used in HEVs and PHEVs would increase.
2. Demand for less greenhouse gas emitting oils would come into the picture with countries trying to reduce global warming.
3. Demand for new technology that reduce emissions will increase.
4. SP3H has developed a fuel quality in-line sensor, which categorizes the fuel quality by its molecular structure. By analyzing fuel properties, the technology constructs a profile match between fuel features and the engine unit, which enhances engine performance, increases fuel efficiency, and reduces pollutant emissions. There is a need for this type of technology, which will further reduce the emissions from ICE vehicles.
• What roles should OEMs play in driving the trends and impacting the base oils / lubricants market?
1. The OEMs need to conduct and support research on technologies to increase the efficiency of the oils that are used in the PHEV and ICE vehicles.
2. With the increasing demand for EVs the price of oil is anticipated to go down by 2040, which would further reduce earnings before the interest and tax of the oil-producing countries.
• How well is the base oils industry positioned to effectively respond to these trends in the automotive sector? What can/should base oil producers do to prepare?
1. The oil industry has ample time to respond to these trends. The players would need to shift the focus towards heavy vehicles (in the automotive segment), which would take longer than 2040 to be completely electrified.
2. The players also would have to shift the focus on developing and catering to the aviation, waterways, and industrial sectors, which would require time to switch to alternate fuel sources.
3. Lubricant manufacturers in the short term need to extend their focus on the Asian and African countries where the shift to electric vehicles would require time.
The shift towards E-mobility is expected to gain traction earlier than expected with consumers responding positively to the developments. The shift can be witnessed in the European region, the U.S. and China earlier than expected.