Consumer interest remains strong, with a Boston Consulting Group survey revealing that 38% of U.S. consumers intend for their next vehicle to be an EV, while an additional 27% are considering one in the future. These figures suggest a solid foundation for continued market expansion. 

OEM Strategies 

The response from OEMs to this evolving market has been varied, reflecting the uncertainty and regional differences in EV adoption. 

Some major players are recalibrating their strategies. Ford and General Motors announced delays to their EV expansion plans. In Europe, Volvo is looking to transfer some of its stake in EV company Polestar, while Volkswagen Group has expressed doubts about the viability of its battery manufacturing unit, PowerCo. Mercedes-Benz has also reported disappointment with its EV sales figures, and Audi may shut down its plant in Brussels. Porsche has been disappointed by slow sales, Lamborghini is getting cold feet, and the list goes on. 

Market leader Tesla is feeling the pressure of increased competition and potentially softening demand. The company has been adjusting its pricing strategy to maintain sales momentum. 

However, it’s not all retrenchment. Chinese manufacturer BYD is pushing forward aggressively, recently announcing a U.S. $1 billion investment to build an EV production line in Turkey. This move comes in the wake of new European Union tariffs on inexpensive imported Chinese EVs. 

Pricing Pressures and Discounts 

One of the most visible signs of market adjustment is the increasing prevalence of discounts on EVs. In a surprising development, several Chevrolet dealers across the U.S. are offering substantial price cuts on the Silverado EV, an all-electric pickup truck. Discounts of up to $12,500 have been reported, primarily on the Work Truck trim variant. 

This aggressive pricing strategy reflects both the changing landscape of federal tax credits and a cooling EV market. It also underscores the challenges faced by automakers as they try to balance production volumes with consumer demand and profitability. 

The trend toward more affordable EVs is not limited to discounts. The average price of a new EV has fallen significantly over the past two years. In May 2024, the average price stood at $56,371, a 15% decrease from two years earlier. This price reduction could help stimulate demand, especially among more price-sensitive consumers. 

Ambitious Targets and Potential Pushback 

Governments worldwide are maintaining aggressive targets for EV adoption as part of broader decarbonization efforts. The U.S. Environmental Protection Agency has proposed that two-thirds of new vehicles sold in the U.S. be EVs by 2035, a dramatic increase from the current 8% market share. Canada, the U.K. and the EU set even more ambitious goals, aiming for all passenger vehicle sales to be zero-emissions by 2035.  

However, these targets are increasingly viewed as overly aggressive by many in the industry, particularly when applied to light and commercial vehicles. This disconnect between regulatory ambition and market realities could lead to future policy adjustments. 

In Europe, there are signs of potential flexibility. The European Commission is reportedly considering lower tariffs on electric vehicles made in China and imported by German automakers Volkswagen and BMW. This move, if implemented, could help these companies maintain competitiveness in the crucial Chinese market while potentially opening the door for more affordable EVs in Europe. 

Impact on Lubricant Companies 

For lubricant manufacturers, particularly those specializing in metalworking fluids and engine oils, the shifting EV landscape presents both challenges and opportunities. 

The rise of EVs has long been seen as a threat to traditional automotive lubricant blenders. Electric motors require significantly less lubricant than internal combustion engines, potentially shrinking the market for motor oils and other automotive lubricants. However, the current market dynamics suggest that this transition may be more gradual than expected, giving companies more time to adapt their product portfolios and business strategies. 

MWF manufacturers face a more complex situation. On one hand, the continued growth of EV production, albeit at a slower pace, means ongoing demand for fluids used in manufacturing processes. The increasing affordability of EVs could even lead to higher production volumes in the medium term, potentially benefiting MWF suppliers. 

However, the globalization of EV production and the potential for increased imports from countries like China could be damaging. If a significant portion of EVs sold in markets like Europe and North America are manufactured overseas, it could reduce demand for locally produced MWF. 

Consider Germany. Demand for automotive lubricants in the country is already shrinking, and an increase in the number of EVs entering the market will likely accelerate this decline. If a substantial number of these vehicles are made overseas, European MWF suppliers could be particularly hard hit. 

Another factor is that the volume of MWF needed to produce EV parts is far less. Without the complex combustion engine blocks, MWF makers could see drastically reduced volume demand globally. 

The Battery Conundrum 

The EV battery sector, a crucial component of the overall market, is also showing signs of reassessment. Northvolt AB, a Swedish battery manufacturer, has indicated it may slow its battery projects. This follows a broader trend of industry reassessments as the transition to electric cars has cooled. 

For lubricant companies, the pace of battery production is significant. While batteries themselves don’t require traditional lubricants, their manufacturing processes do utilize MWF. Any slowdown in battery production could have ripple effects throughout the supply chain. 

Regional Variations 

While some markets show signs of cooling, China’s EV segment appears to be gaining speed. Chinese carmakers Geely, Nio and Huawei-backed Aito reported record deliveries of EVs for June 2024. Huawei and Li Auto are emerging as leaders among newer players, although BYD and Tesla still maintain a near-duopoly in the world’s largest EV market. 

This continued strength in China could have significant implications for global lubricant suppliers. Companies with a strong presence in China may be better positioned to weather potential slowdowns in other regions. Additionally, the growing expertise of Chinese manufacturers could lead to increased competition in the global market for automotive and industrial lubricants. 

Navigating Uncertainty 

The EV market is not collapsing but is evolving in ways that may require strategic adjustments. 

For MWF manufacturers, the key will be flexibility and diversification. While the automotive sector remains a crucial market, exploring opportunities in other industries that require precision manufacturing could help offset potential declines in demand. 

Lubricant companies may also need to invest in research and development to create products specifically tailored to EV manufacturing processes. As automakers continue to refine their production methods, there may be opportunities for innovative lubricants that can improve efficiency or reduce costs. 

Additionally, the trend toward more affordable EVs could present opportunities for lubricant companies to develop cost-effective solutions that help manufacturers meet pricing targets without sacrificing quality or performance. 

While the EV market is undoubtedly facing challenges and uncertainties, it continues to grow and evolve. For lubricant companies, success will depend on an ability to adapt to these changing dynamics, innovate in response to new manufacturing processes, and potentially explore new markets beyond the automotive sector.   

Simon Johns is an editor with Lubes’n’Greases. Contact him at Simon@LubesnGreases.com.