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The number of electric vehicles on the world’s roads has been growing rapidly over the last decade. In 2018 the global stock of electric passenger cars passed 5 million – an increase of 63% from the previous year. Interestingly, some countries are adopting electric vehicles at a faster rate than others. In 2018, 45% of the electric cars on the road were in China, whilst 24% were in Europe and 22% in the US. However, Norway is the global leader in terms of plug-in cars averaging 56 electric cars per 1,000 people.
There is no doubt that this trend is set to continue; countries across the world are looking to address environmental concerns and one such way is through tackling car emissions. Both the UK and France have both announced plans to ban the production of petrol and diesel ran vehicles by 2040, largely down to concerns around air pollution and the associated health impacts, with poor air quality linked to around 40,000 premature deaths a year. The UK government recently announced it will aim to bring this date forward to 2035 in order to achieve its target of emitting virtually zero carbon by 2050, and they are also now looking to ban hybrids, although many say this may not be achievable.
The increase in carbon emission regulations is also contributing to the rise in electric vehicles as car manufacturers are rethinking the new models they are producing. For example, Volvo has made the bold step of no longer launching new diesel cars with all new vehicles either hybrid or electric due to the costs associated with complying with legal regulations. In addition, the number of charging points in the UK is now more than 25,000 and the distance vehicles can travel on a full charge is increasing, such as Tesla’s Model S reaching over 300 miles. These developments are making electric vehicles more attractive to consumers, a demand vehicle manufacturers cannot ignore.
Whilst it is clear the rise in electric vehicles is impacting automotive manufacturers, there are also widespread implications on the lubricant industry.
As BEVs do not have internal combustion engines, they do not need engine oil – a product that not only dominates lubricant demand but also provides a large source of revenue for many operating in the sector. However, battery electric vehicles still need fluids to operate and there is plenty of opportunity for lubricant manufacturers looking to retain or grow market share. Whilst hybrid vehicles still have a combustion engine, factors such as differing engine temperatures means innovation is still needed to support these vehicles too. However, future long-term plans to ban hybrid vehicles could hinder the developments of this market.
But how soon will it be until the popularity of electric vehicles causes a significant decrease in revenue for traditional lubricant manufacturers? Whilst there are many different statistics on electric and hybrid car adoption, there is a consensus that there will be a very notable increase in the next 5-10 years. Market research firm IHS Markit predicts vehicles using some form of electrification will hold a market share of roughly 40% by 2028, which will have a big impact on traditional lubricant sales. Having recently spoken with senior-level leaders in the UK and US automotive lubricant market, they have suggested over the next 5 years the overall demand for traditional automotive lubricants in the UK could decrease by 5% with the increasing usage of electric vehicles and emobility lubricants. According to McKinsey & Company, there is still room for total lubricant demand in 2030 to grow 1.5% p.a. to about 11 million metric tonnes in 2030 led by demand in Asia. However, they predict demand will decline by around 1% p.a. in Europe and North America. They also predict the impact will be more pronounced after 2030.
Whilst Asia could potentially offer an opportunity for growth of traditional lubricants, manufacturers will need to diversify into products for electric vehicles in order to keep market share and revenue in Europe and North America. Large volumes of lubricants are produced for car manufacturers (OEMS) and so if, like Volvo, their product launches are going electric then companies need to develop products to match this. The key going forward for many companies is to be aware of the growth of electric vs hybrid to understand where to focus more of their product development. As with any industry change, companies also need to be aware of innovative new market entrants.
At a point when lubricant manufacturers will need to embrace innovation to support electric vehicles, it is worth noting that the availability of fossil fuels means all lubricant manufacturers will eventually have to move onto developing more sustainable products for all vehicles. Without an additional focus on sustainable innovation during the next few years, the overall revenues of these companies will decrease.
Over the next 5 years, the impact on those working within the industry will be minimal; the market will remain a similar size meaning that job stability, as well as the number of job opportunities, will likely be the same. The area that may see change at this point is research and development as companies switch their focus and expertise to begin developing the lubricants specifically designed for EV’s that will rise in popularity in the next few years. In the long term though the market will change as new manufacturers focus their product range on electric vehicle lubricants, whilst existing automotive lubricant manufacturers will move their portfolio of products to electric vehicles. This means that existing sales positions for traditional lubricants will be reduced as the demand for these products decreases. The change will force sales professionals and senior leaders to educate themselves on these new products and target different markets to be able to sell them to manufacturers. For those who have upskilled to sell or market these new lubricants, new job opportunities will arise as new organisations dedicated to electric lubricants begin to launch.
The rise in electric vehicles is not something that will happen overnight, but the increase in demand for electric vehicles is something lubricant manufacturers cannot afford to ignore. If you operate in the automotive lubricant market, We'd be interested to hear your thoughts on how you feel electric vehicle adoption will impact your business .
BBC News, How Will the Petrol and Diesel Ban Work?
McKinsey & Company, Impact of Electric Vehicles on Lubricants Demand
F+L Magazine, Lubrication Challenges of Hybrid and Electric Vehicles
Lubricant World, Electric Vehicles and Engine Oils Market
Lubrizol Additives 360, EVs Need Different Lubes
IEA, Global EV Outlook 2019
Planete Energies, The State of Electric Vehicle Adoption Worldwide
Wikipedia, Electric Car Use by Country
BBC News, Petrol and Diesel Car Sales ban Brought Forward to 2035