The global passenger car motor oil (PCMO) market is on the cusp of significant change triggered by forces shaping the future of mobility. Kline’s soon-to-be-published analysis The PCMO Market in 2040: A Long-term Outlook evaluates how and when PCMO demand will change as a reaction to emerging disruptive technologies redefining mobility, including the advent of ride sharing, autonomous vehicles, and the emergence of electric vehicles (EVs).
The emergence of fleet operators and ride-sharing companies like Uber and Lyft has already initiated a mobility revolution, impacting PCMO demand due to more frequent oil drain intervals in the near term. In the medium term, the impact is more difficult to model; however, opportunities for partnerships to market PCMO and other lubricant products or use it as a new channel to market are among the positive factors. “In the ride-sharing model, major PCMO brands need to look to the future, as questions such as who will be making the decision on the ‘brand’ of PCMO at the time of an oil change will be raised,” comments George Morvey, Industry Manager at Kline. “The Uber/Lyft driver or installed service provider? Each has its own interest in terms of product type to use. Do the current marketing messages of PCMO suppliers resonate with this group of buyers, decision makers, and influencers, or do they need to be modified for this new and growing segment of the market?”
Ride sharing also comes down to EVs as commercial fleet owners are expected to adopt them faster than the general population, and electric vehicles will have the greatest impact on PCMO demand.
In the medium-term, EVs have a marginal impact on PCMO demand mainly due to moderate population of battery-powered vehicles (BEVs). Hybrids (PHEVs and other hybrids) need engine oil and do not significantly impact PCMO demand. With many government programs in place, sales of EVs (BEVs+PHEVs/HEVs) have been growing over the last five years. Global original equipment manufacturers (OEMs) are also investing in electric vehicle technology, either proactively or as a reaction to regulatory and competitive pressures.
Moreover, once the technological challenges of EVs, notably battery costs and insufficient recharging stations, are surpassed, penetration will rise fast and have a negative impact on PCMO demand. Looking further into the future, autonomous vehicles could become another large disruptor of the broader transportation industry by transitioning to on-demand transportation models.
Kline estimates that between 2017 and 2040, U.S. PCMO demand will decline at a compound annual growth rate (CAGR) of 1.0% assuming the long-term growth in the car parc, continuing drain interval extension, and penetration of electric vehicles are held constant at 2017 levels. However, when the increase in electric vehicle penetration in the car parc is factored in, PCMO demand declines at a CAGR of 1.5% over the same period. In other words, the additional 0.5% CAGR decline for PCMO demand is purely due to the increase in electric vehicle penetration in the U.S. car parc.
The degree of EV penetration will vary at a regional and country level, reflecting socio-economic factors, existing infrastructure, and government interventions. In quickly growing economies in Asia-Pacific, PCMO demand will most likely continue to grow driven by robust vehicle sales, even under a high EV penetration scenario. Conversely, PCMO demand in the United States and Europe will be more susceptible to downward pressure, even under a low EV penetration scenario. It can be expected that the effect of EVs will be marginal on PCMO demand in emerging economies in the Middle East, Africa, and Latin America. These countries will post healthy growth driven by robust new vehicle sales based on passenger vehicles equipped with internal combustion engines.
The PCMO Market in 2040: A Long-term Outlook is looking at the electrification of vehicles, ride-sharing services, and autonomous vehicles and the impact of these factors on PCMO demand globally and in detailed profiles of 15 leading country markets. Each country market profile includes the description of passenger vehicle population by vehicle size, fuel consumed, vehicle age, leading OEMs, and trends in passenger vehicle production, sales, and population growth, as well as PCMO demand overall and by SAE viscosity grades, formulation types, and channels.
