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ELECTRIC VEHICLES AND SHARED MOBILITY ARE STRUCTURALLY CHANGING THE AUTOMOTIVE ENGINE OIL MARKET The global passenger-car motor oil (PCMO) demand in the long term (up to 2040) is expected to remain flat or decline slowly. While on the face of it, the outlook is grim, the future holds opportunities as well as challenges to lubricant suppliers and original equipment manufacturers (OEMs). In recent years, the market has started feeling the impact of increasing penetration of electric vehicles (EV), growth in ridesharing/ride hailing apps, and the emergence of vehicle subscription services. In light of these developments, this article discusses the current state of the PCMO market and its long-term outlook to 2040.

EVs Are Emerging as an Alternative to Internal Combustion Engine Vehicles The EV market has seen accelerated growth in the current decade due to advancement in technology. It is dynamic and highly influenced by government regulations, as well as technology advancement and availability of necessary charging infrastructure in a country. EVs in comparison to internal combustion engine (ICE) cars are more expensive; therefore, government support in the form of favorable polices and subsidies is the main growth driver for these vehicles. It is expected that with gradual penetration and market acceptance, EVs will become affordable to broader population. However, the industry faces difficult headwinds due to insufficient charging infrastructure and high battery pack costs, which represent one of the largest cost components for EVs. Global passenger vehicle population in a select 15 countries (covered in the study The PCMO Market In 2040: A Long-Term Outlook) is estimated at 830 million units in 2017. These countries constitute more than 65% of the world passenger vehicle population, more than 90% of the global EV population and are the largest PCMO markets around the world. Out of these 15 countries, the United States, Japan, the United Kingdom, and France together account for 90% of EV population. Among the different EV options available in the market, battery EV (BEV) and plug-in-hybrid EV (PHEV) are still a niche market. Hybrid EV (HEV) has a higher market penetration in countries like the United States, Japan, and the United Kingdom. HEV technology, as the name suggests, is a hybrid of electric propulsion system with ICE. www.klinegroup.com

Share of Different Engine Technologies in Select 15 Countries, 2017 and 2040 100% 90%

E EV

80% 70% 60% 50% 40% 30% 20% 10% 0% ICE

2017 EV

2040 BEV

PHEV

HEV

Note: ICE includes diesel, gasoline, biofuel, and natural gas. The countries included are France, the United Kingdom, Japan, China, the United States, Canada, Germany, Australia, South Korea, India, Mexico, Russia, Brazil, South Africa, and Saudi Arabia

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