An electrifying market

With increasing pressure coming from both legislators and consumers to reduce emissions and improve fuel economy, OEMs are making significant investments in future technology towards a goal of zero emissions. While we are continuing to see exciting innovations in internal combustion engine (ICE) technologies, the bulk of OEM resources are shifting towards vehicle electrification.

But, despite this trend towards electrification, the ICE platform looks set to be with us for several decades to come. That’s mainly down to the fact that OEMs have a wide array of available options, and electrification does not necessarily mean fully electric. However, the extent to which the battery is used for vehicle propulsion greatly impacts the fuel economy improvement that can be achieved.

The most basic form of electrification is stop-start, which provides a small improvement in efficiency. While a more durable starter may be required, the engine, transmission and their fluids remain unmodified. In the mild-hybrid, a small motor-generator is added to the ICE-powered vehicle that further improves efficiency by assisting the engine and regenerating during breaking. Here again, the transmission and fluids remain unchanged. The full- and plug-in hybrids incorporate larger motor generators into the transmission case and propulsion comes from either the ICE or the electric motor. In addition to lubricating these electrified transmissions, the fluids come into contact with the motor and power electronics. This means that transmission fluids need careful formulation to ensure they deliver sufficient lubrication to the transmission while also providing new e-specific attributes including materials compatibility, electrical properties and heat transfer. In extended range and full battery electric vehicles (BEV), the electric motor alone is responsible for propulsion. In both cases, rather than a transmission, these motors drive reduction gear boxes, which typically use gear oils.

Fluids will need to deliver performance and protection along with e-specific properties such as materials compatibility, heat transfer and electrical properties.

So just how fast can we expect to transition to these new electrified technologies? In the global light-duty market most of the new installations are currently ICE and stop/start, which last year accounted for >90%. But, the outlook is expected to be quite different, with these conventional technologies expected to drop to less than 50% of new installations in 2026, the balance being hybrids and electric. However, on a regional basis, the uptake of electric and hybrid vehicles is expected to vary considerably – in the main driven by legislation and incentives. Looking further ahead, to 2040, BEVs are forecast to account for 58% of global sales. Again, high regional variations are expected, with China likely to be out in front.

While the pace of a transition to electrification may still be the subject for much debate, the future direction is clear.

In the long term outlook, complexities of plug-in and full hybrids and lower costs of batteries mean we can expect BEVs to win out.

So how will these trends influence the lubricant industry? Ultimately, as the sales of ICE vehicles fall, the volume of engine oil required will drop. And, as OEMs focus on electrification, ICE hardware changes can be expected to decrease over time, which means only limited revisions to lubricant specifications are likely.

Air quality, climate change and geopolitics have been, and are continuing to be, the driving forces for change. However, the impacts of a new influence, sustainability, are now being felt. As some of the world’s most recognisable brands, including Amazon, Uber and Walmart, set sustainability goals, which often include electrification targets, OEMs can be expected to pivot their production accordingly.

However, sustainability means more than implementing tactical solutions, it also means quantifying the life cycle contributions of a product to the environment. This goes beyond the traditional focus of product and production sites to include the impacts it may have on human health, ecosystems, carbon footprint, water footprint and natural resources across its whole life cycle.

While this life cycle thinking is a philosophy, Life Cycle Assessment (LCA) is a scientific measurement methodology, governed by ISO standards, that can help quantify these contributions. Standardising the methods of assessment in our industry is important if products, processes, raw materials and even sources of energy are to be compared.

Clearly, amidst all these longer term trends, it is impossible to ignore the impacts of the pandemic. COVID-19 has the potential to accelerate and decelerate the rate of electrification. In some regions of the world, acceleration elements such as government legislation in support of zero emission vehicle uptake and economic stimulus may take effect. However, we may also see deceleration elements, including growth in used car sales and de-urbanisation. It remains to be seen how much these factors might affect the timeline to full electrification. While it is reasonable to believe that the technical evolution of the ICE will continue to slow, there is little doubt that it will still be important in future vehicles.

Environmentally focused legislation means we will see some ICE hardware innovation that will lead to new opportunities for lubricants and provide significant opportunities for value creation. And, at the same time, as the BEV market grows, the demand for specialised fluids to protect the gearbox and cool the electric motors is expected to increase.

It is important for our industry to be agile in order to adopt new products and delivery platforms to meet changing customer needs. As we do so, we must look at the life long application of our products, which is a much deeper requirement than traditional product environment and performance measures. Something to keep in mind, as we look out to this uncertain future, is that the lubricants industry is resilient and that it has demonstrated the ability to adapt to changing market conditions and to seize opportunities that arise.

The full presentation was part of the ILMA 2020 Virtual Annual Meeting

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