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Lubricant impacts

William Downey
William Downey, Partner and Speaker at the 17th World Base Oils & Lubricants Conference
During the 17th edition of ICIS World Base Oils & Lubricants conference, which gathered 600 world's leading executives from the chemicals industry, our partner William Downey gave a speech on "Automotive 2025 - key global trends and the impact on lubricants". Downey delivered a strategic portrait over the perspective on how the global macrotrends mapped by Roland Berger Strategy Consultants will impact directly the way automotive consumers will buy lubricants worldwide and how companies can get ready to address the new reality. Read next the article published at ICIS Magazine on Downey's approach to the question.

How will changes in the automotive industry affect lubricants in 2025?


A joint discussion about the “connected car” by two top executives from vastly different industries – Verizon CEO Lowell McAdam and Ford CTO and VP Paul Mascarenas – at the International Consumer Electronics Show on January 8, 2013, came as no surprise to Roland Berger Strategy Consultants. “The convergence between communications, electronics, and automobiles,” as discussed by McAdam in his keynote address on the connected environment, is a concept that Roland Berger Strategy Consultants had previously identified as one of ten automotive trends in its recent study entitled Automotive Landscape 2025.

These automotive trends are derived from our research into the effects of five global megatrends that we believe will have a universal impact on all industries through 2025: environmental concerns and regulations; urbanization and the growth of megacities; the movement to a more web-based and connected population; shifts in culture; and the changing behavior of consumers.
Urbanization and the growth of megacities: a megatrend with impact on the automotive industry
Roland Berger Strategy Consultants leveraged its recognized thought leadership in the automotive industry and its relationships with a range of automakers and suppliers to identify the trends that will shape the future of both the automotive and lubricants industries. We also used our understanding of those five global megatrends to shape the discussions. In compiling and analyzing the data, we interviewed more than 60 experts to discuss the key trends that they foresee and to explore the implications for both industries.

These experts came from passenger vehicle manufacturers (OEMs), key component and system suppliers to those manufacturers (OESs), government agencies around the world, universities, and think tanks with transportation expertise. We also integrated the points of view of the more than 300 consultants and partners of Roland Berger Strategy Consultants that work full time in our Automotive Competence Center. Our analysis led us to identify ten trends that we believe will shape the future of the automotive industry. Some of these trends, which are discussed in this article, deal with the changing dynamics of markets, products, employees, and customers, while others focus on changes in organizational structures, business models, and the value chain.
Four automotive trends will have a particularly powerful impact on the lubricants industry.

Selected trends that will impact the lubricants business


Some of the trends that will significantly shape the automotive industry by 2025 will also naturally impact the lubricants business, predicts Roland Berger Strategy Consultants. These automotive trends will have an impact across a lubricant company's marketing plan, affecting where the lubricant is consumed, the types of products sold, the distribution channels that are important, and approaches to product promotions.

ALWAYS ONLINE, ALWAYS CONNECTED

presents the most exciting range of opportunities for the lubricants industry, says Roland Berger Strategy Consultans, with nearly limitless promotional opportunities. These include real-time oil monitoring from the streaming of operating data that could provide users with diagnostic information on their vehicles, marketing opportunities that might present themselves for Do-It-For-Me outlets and communication with the driver regarding service scheduling.

SHIFT TO ASIA

is one trend with which lubricant suppliers are familiar, having already seen the impact of increased sales of lubricants in Asia. As OEMs move production capacity eastward to be closer to growing markets, OESs will follow to be closer to where cars will be manufactured, purchased, and ultimately serviced, and so moves the lubricant required to make the vehicles. In addition, as vehicle sales grow in Asian markets, so too will the consumption of automotive lubricants required to operate the vehicles.

ELECTRIFICATION AND HYBRIDIZATION

bring increasing opportunities for lubricant suppliers on both the technical and marketing fronts. As high-tech, fuel-saving technologies continue to evolve in traditional engines, so does the demand by auto makers for specially formulated lubricants. In addition, the growing share of quieter running electric and hybrid vehicles increases the interest in quiet-running lubricants, particularly greases. Hybrid vehicles utilizing continuous variable transmission (CVT) systems also require unique fluids. From a marketing perspective, there is an opportunity to position specific products at a premium price level to hybrid owners, who may more readily understand the total life-cycle cost of the product.

SMALL IS BEAUTIFUL

reminds us of Castrol's old ads in North America, touting the fact that Castrol oil was "designed for smaller engines." Even as the lubricants industry tries to create industry-wide specifications, RBSC sees opportunities for more segmentation, looking to fashion new categories with specific customer value and to create new product, promotion, and even channel opportunities.

In conclusion, our research has identified five global megatrends through 2025. These winds of change that will blow across the world will have an impact on all industries, with the automotive and lubricants industries being no exception. We believe that these megatrends will then drive key changes in the automotive industry, which, in turn, will ultimately influence the lubricants industry.

In our opinion, four automotive trends in particular – ALWAYS ONLINE, ALWAYS CONNECTED; SHIFT TO ASIA; ELECTRIFICATION AND HYBRIDIZATION; and SMALL IS BEAUTIFUL – will have a particularly powerful impact on the lubricants industry. This will create opportunities for lubricant marketers who are able to anticipate a shift in location, who can create the right new products, who are positioned in the correct channels, and who are able to take advantage of new promotional tools.
A special thanks to Yiqun Bai and Rebecca Peredo who contributed to this article.
Feb 26, 2013
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