As the autonomous vehicle (AV) space continues to evolve and vehicle OEMs and mobility providers make announcements about million and billion dollar investments and initiatives, it is important to understand from a commercial perspective just where/how/why/when these vehicles will be serviced and the impact on suppliers of branded aftermarket engine oil and related lubricants.
Waymo, a business unit of Alphabet, announced on December 5, 2018 that it is launching a commercial self-driving, ride-hailing service in Phoenix, Arizona called Waymo One.
Waymo One is using Chrysler Pacifica minivans equipped with an internal combustion engine, which means at some point in time, it will need an engine oil and filter change. Waymo is in the business of providing mobility and not servicing and maintaining a fleet of vehicles like a rental car company. So what does Waymo do? It enters into a service agreement with a rental car company ̶ in this case, Avis Budget Group, which is in the business of servicing and maintaining a fleet of vehicles on a daily basis in every major metropolitan area and putting them back in service as quickly and cost effectively as possible. Waymo can now check that box.
When the AV needs parts such as brakes and tires replaced, what does Waymo do? It signs a deal with AutoNation ̶ one of, it not the largest, automotive dealership chains in the United States ̶ to quickly and cost effectively do that work and put the vehicle back in service. AutoNation recently launched its own private label line of vehicle replacement parts, which means, at some point, the brakes used on the Waymo One Chrysler minivan may not be genuine Mopar.
As more of these examples become mainstream, the opportunities for aftermarket lubricants suppliers to sell branded lubricants is limited. Whichever lubricants supplier has the national account business with Avis Budget Group wins; all others are on the outside looking in. At some point, does Avis Budget Group go closed loop/re-refined for all of its engine oil needs like its peer competitor, Enterprise Holdings, did with Safety Kleen for its North American airport operations back in 2016? Or does Avis Budget Group go AmazonBasics and simply buy based on SAE viscosity grade, OEM approval, API service category, and price?
The reality is, examples such as this creates another potential barrier to selling branded aftermarket lubricants to this evolving market segment and end user. Lubricant suppliers need to monitor developments in the AV space and think creatively to ensure their branded products are selected by mobility providers and the installed service providers that maintain these vehicles.
Kline’s PCMO 2040 report published in April 2018 provides a detailed independent assessment of the changing passenger car motor oil market in context of electrification of passenger vehicles, growth in ride-sharing, and the emergence of autonomous vehicles in 15 of the leading country markets.