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Toronto future directions - 2015
- 1. © 2015 The Lubrizol Corporation, all rights reserved.1
Agenda
Welcome Paul Sampson
Keynote Speaker Alex Sammut
Base Oil Trends Patrick Mosier
Driveline Ping Zhu
Engine Oils Keith Corkwell
1
- 2. © 2015 The Lubrizol Corporation, all rights reserved.© 2015 The Lubrizol Corporation, all rights reserved.
Era of Efficiency:
Trends & Implications
Lubrizol Future Directions – Toronto Ontario
April 23, 2015
- 3. © 2015 The Lubrizol Corporation, all rights reserved.3
Agenda
• Era of Efficiency
• Industry Trends
• New Testing
• Lubricant Response
- 4. © 2015 The Lubrizol Corporation, all rights reserved.4
It’s more than achieving efficiency; it’s about maximizing it
• Gain improvements in efficiency
in production and transportation
• Efficiency gain to help to reduce
CO2 emission into the
atmosphere
• Today’s efficiency requires
continuous yearly improvements
not single event regulatory
compliance
• All partners of the transportation
supply chain must work together
to deliver efficiency
The Era of Efficiency
© 2015 The Lubrizol Corporation, all rights reserved.
- 5. © 2015 The Lubrizol Corporation, all rights reserved.5
Legislation creates opportunity to extract value from new product offerings
Efficiency Driving New Insights and Products
Products &
differentiation
Value
proposition
Opportunities
- 6. © 2015 The Lubrizol Corporation, all rights reserved.6
Industry Trends
- 7. © 2015 The Lubrizol Corporation, all rights reserved.7
The entire industry must do its part to help meet the drive to efficiency
Passenger Car Regulatory Trends
EUChina CanadaU.S.
80
100
120
140
160
180
200
220
1991 1996 2001 2006 2011 2016 2021 2026
CO2 / Fuel Consumption
Passenger Car
gCO2/km
- 8. © 2015 The Lubrizol Corporation, all rights reserved.
8
Emission regulations drive unique hardware and lubricant additive performance
Global Emission Complexity Heavy Duty Truck
*Brazil P7 aligns with Euro V. US EPA 201 aligns with Euro VI
Information base upon Integer Research Limited, http://www.integer-
research.com/contact/#sthash.LckJJzRz.dpuf 47%
53%
2012
3%
35%
56%
6%
2021
0
2000000
4000000
6000000
8000000 CHINA EMISSIONS IN USE TRUCKS
China - Euro II
China - Euro III
China - Euro IV
China - Euro V
China - Euro VI
Euro I
Euro II
Euro III
Euro IV
Euro V
Euro VI
US 2010
- 9. © 2015 The Lubrizol Corporation, all rights reserved.9
OEMs are addressing the drive to efficiency in many ways
Global Hardware and Fuel Trends
2010 2015 2020 2025
HCCIGDI and lean burn GDI
Car dieselization
Variable displacement lubricant pump
Emissions – SCR / DPF/ GPF
Low viscosity lubricants
Exhaust energy recovery – truck
Increased use of roller element bearings
CVT DCT and increased number of gears
Aerodynamic improvements – fairing and tail on trailers
Weight reductions – aluminum and composites
Hybridization
Stop start in non hybrids
City bus series full hybrids
Car Plug-in hybrids
All electric vehicle
Liquefied natural gas / natural gas
More bio-fuels
Low sulfur gasoline
Hydrogen
Electric lubricant pumps
Hydraulic variable timing Mechanical/electric variable timing
Turbo charging High temperature turbo
FuelHybridVehiclePowertrain
Source: Lubrizol & Ricardo
roadmaps and
technology planning
Efficiency
Emissions
Systems
Protection
Durability
Evolution
+ +
- 10. © 2015 The Lubrizol Corporation, all rights reserved.10
Modern engines are smaller, more powerful, lower emissions
Passenger Car Evolution
Engine 4.0L V-6 PFI (RWD) 2.0L I-4 TGDI
(FWD)
50% smaller engine
Power 145 HP/220 ft-lbs 240 HP / 270 ft-lbs 65 % more power
Transmission 4 Speed Automatic 6 Speed Automatic 50% more gears
Curb weight 4060 lbs 4557 lbs 12% heavier
0-60 mph (sec) 10.8 (AWD V-6) 6.0 sec (AWD V-6) 44% faster
Interior Volume 104.9 ft3 172.7 ft3 65% larger
Fuel Economy 15/20/16 mpg 20/28/23 mpg 43% more fuel efficient
“Biggest change since carburation to Port Fuel Injection”
20141991
- 11. © 2015 The Lubrizol Corporation, all rights reserved.11
The economic impact can be significant
Thinner Viscosity Benefits
What is the Benefit:
• Commercial and environmental
concerns about fuel economy
• A 1% saving on fuel economy for
a 250 truck fleet equals over
$160,000 annually
• For OEM fleet a 1% saving could
mean the difference in paying
thousands of dollars per vehicle
in credits or fines
• Developing tools which can
quantify the financial benefit from
efficient lubricant
- 12. © 2015 The Lubrizol Corporation, all rights reserved.12
Lubricant Part in Overall Efficiency
*Source = Tribology International (Global energy consumption due to friction – Kenneth Holmberg) Chart shows
HD efficiency as an average across all truck and bus fleets.
The small impact of lubricant efficiency is increasingly important
0
10
20
30
40
50
60
70
80
90
100
HD Efficiency*
Fuel
Energy
Mechanical
Work
50%
Exhaust
30%
Cooling
20%
Aero/Rolling
losses
24%
Engine 9%
Trans 7%
Braking
9%
Aux 4%
- 13. © 2015 The Lubrizol Corporation, all rights reserved.13
New Testing
- 14. © 2015 The Lubrizol Corporation, all rights reserved.14
Lubricant efficiency measurements that are understood by the customer
• Field testing needs to
precisely measure
lubricant efficiency
• New bench tests that
are more relevant to
modern engine and
transmission hardware
Measuring the Value of Efficiency
- 15. © 2015 The Lubrizol Corporation, all rights reserved.15
Testing beyond specification to deliver quantifiable efficiency gains
• Fully instrumented heavy
duty engine that
measure BSFC testing
on over the road
efficiency
• Driveline real world drive
cycle evaluated on
motorized rigs
Improved Fuel Economy Testing
- 16. © 2015 The Lubrizol Corporation, all rights reserved.16
Better testing leads to improved insights
• New OEM hardware is
changing how we
screen and evaluate
new chemistry and
formulation
• Unique surface and
contacts demand new
methods beyond
traditional tribological
testing
Updating Traditional Bench Testing
- 17. © 2015 The Lubrizol Corporation, all rights reserved.17
Insights Lead to New Understanding
SAAS Layer Technology:
• Produce thick protective films on
powertrain hardware
• Advanced analytical methods now
allow visualization of
macro layer composite
additive systems
- 18. © 2015 The Lubrizol Corporation, all rights reserved.18
Lubricant Response
- 19. © 2015 The Lubrizol Corporation, all rights reserved.19
ACEA 10
TIMELINE
CI-4 PlusCI-4 (PC-9)
ACEA 02
JASO DH-1
DH-2/DL-1-2005
GF-4
ACEA 04
CJ-4 (PC-10)
Update JASO
DH2
GF-5
ACEA 06 ACEA 08
PC-11
Japan 2004 Japan 2010
EURO IV EURO V EURO VI
USA 2000 USA 2007 USA 2010
LUBRICANTSPECIFICATIONSEMISSIONREGULATIONS
N American
PCMO
Japanese
Diesel
European
PCMO & Diesel
N American
Diesel
Lubricant Specifications Evolve in Response to Emission Regulations
GF-6
2002 2004 2006 2008 2010 2012 2014 20162003 2005 2007 2009 2011 2013 2015 2017
ACEA 15
Update JASO
DH2
Japan GHG/FE
USA GHG/FE
Emission Age to Efficiency Age
Emission Age Efficiency Age
ACEA 17
- 20. © 2015 The Lubrizol Corporation, all rights reserved.20
Maintaining a quality lubricant portfolio is increasingly complex for the overall industry
Significant Upgrade to Lubricant Specification
• Specifications are coming
thicker and faster:
– Numerous major industry
lubricant upgrades are
forthcoming
ACEA 2014 F Series
PC-11 A&B
GF-6 A&B
• Increased need for application
specific drivetrain, transmission
and axle lubricants
- 21. © 2015 The Lubrizol Corporation, all rights reserved.21
Introduction of Low Ash CJ-4 Lubricants
Lubricant requirements change as a result
of market and hardware changes
2007
• EPA regulates lower
particulate emissions
from heavy duty diesel
trucks
Market Changes
• Engine manufacturer
add diesel particulate
filter to on highway
trucks
Hardware Changes
• New low sulfur fuel
is required by DPF
equipped vehicles
• New lower ash
additives developed
• Cross industry coordinated change to have hardware, fuel, and lubricant changes
available to support the industry
• Lubricant additives were changed to support the ash limit yet maintain the wear and
cleanliness performance of previous formulations
- 22. Efficiency is Unique for Each Application
Engine Oils:
It means advanced protection and
reduced friction, while
maintaining integrity of smaller,
hotter, more demanding engines
that consume less fuel and
produce less CO2
Industrial:
It means equipment running
longer, faster and more
effectively. This added
productivity—even
in more demanding
environments for lubricants—
means more customer profit.
Driveline:
It means delivering more
power as a function of energy
exerted, and delivering more
torque while reducing fuel
consumption, CO2
and transmission wear.
Fuels:
It means technology that
enables flexibility in use of
increasing complex fuel options
while still optimizing engine
performance.
© 2014 The Lubrizol Corporation, all rights reserved.
- 23. © 2015 The Lubrizol Corporation, all rights reserved.23
Efficiency demands continuous yearly improvement
Era of Efficiency Legislative Demands
- 24. © 2015 The Lubrizol Corporation, all rights reserved.24
Macro Trend: “Thinner” lubes reduce frictional losses, but…
• Engine lubricants are moving, 5W-30
(passenger car) and SAE 15W-40
(Heavy Duty) to 0W-20 and 0W-16
and 10W-30 and 5W-30
• Gear oils that traditionally have been
85W-140 now use 75W-85
• By moving lubricants to thinner
viscosity, churning and pumping
loses are minimized
How Lubricants are Delivering Efficiency
Whiskey
75W
85W
90
- 25. © 2015 The Lubrizol Corporation, all rights reserved.25
Lubricants are required to protect in all regions of operation
Understanding the Challenge
- 26. © 2015 The Lubrizol Corporation, all rights reserved.26
Maintaining lubricant physical properties are key
Fluid Protection
• Lubricant physical
properties are critical
• Additives work to maintain
viscosity
• Disperse soot and
sludge
• Reduce oxidation
• Prevent shear
• Maintain flow when
cold
- 27. © 2015 The Lubrizol Corporation, all rights reserved.27
Lubricant must focus on Surface Protection and limit friction increase
Surface and Compression Protection
• With increased load, lower
speeds and thinner
viscosity, surfaces of the
moving parts begin to
interact
• Without a lubricant film,
additives must react and
form on the surfaces to
protect
- 28. © 2015 The Lubrizol Corporation, all rights reserved.28
Era of Efficiency is moving our focus to surface and compression protection
Era of Efficiency
• Thinner lubricants
• Efficient drivetrains
• Downsizing
• Downspeeding
• GDI
• Turbo
• More gears
- 29. © 2015 The Lubrizol Corporation, all rights reserved.29
As oils get thinner friction increases occur sooner
Impact of Viscosity Bench Testing
Viscosity decreasing
Friction
Speed
- 30. © 2015 The Lubrizol Corporation, all rights reserved.
30
Simply lowering viscosity without other changes will not work
Thinner Lubricants Increase Wear in Engine Test
• Industry testing shows cam wear
increases with thinner lubricants
• Small amounts of cam wear reduces
valve lift, airflow, and engine output
• Engine wear and decreased
performance can negate the benefits
of lower viscosity:
– More repair cost
– Lower torque, less work, decreased
fuel efficiency
- 31. © 2015 The Lubrizol Corporation, all rights reserved.31
Where Do Additives Deliver Performance?
- 32. © 2015 The Lubrizol Corporation, all rights reserved.32
Additive technology can return lubricant performance
Preventing Friction Gain
Friction
Speed
- 33. © 2015 The Lubrizol Corporation, all rights reserved.33
Lubricant additives provide complete protection
Era of Efficiency testing
has led to new
formulations:
• Protect surfaces in thinner
lubricants
• Main fluid flow in high soot
tests
• Reduced fuel consumption
Delivering Complete Protection
ReducedWear
- 34. © 2015 The Lubrizol Corporation, all rights reserved.34
Lubricant technology enables efficiency gains for future market needs
• Efficiency performance mandates continue to
affect the entire industry
• Engine designs are smaller and more
powerful; thus, thinner lubricants with robust
additive chemistries are needed to cope with
efficiency demands
• Surface Activated Additive Systems (SAAS)
Technology provide new levels of protection,
particularly in the challenging boundary
lubrication regime
• Proposed ILSAC GF-6 oils will need to be
designed to help improve engine fuel efficiency
while still delivering on overall engine durability
Summary
- 35. © 2015 The Lubrizol Corporation, all rights reserved.
Working together, achieving great things
When your company and ours combine energies, great things can happen.
You bring ideas, challenges and opportunities. We’ll bring powerful additive and
market expertise, unmatched testing capabilities, integrated global supply and
an independent approach to help you differentiate and succeed.
- 36. © 2015The Lubrizol Corporation, all rights reserved.© 2015The Lubrizol Corporation, all rights reserved.
The Outlook for Base Oils
Lubrizol Future Directions – Toronto, Ontario
April 23, 2015
- 37. © 2015The Lubrizol Corporation, all rights reserved.2
Overview
• Global lubricant and base oil demand
• Supply drivers
• New supply
• Supply / demand balance
• Conclusions
- 39. © 2015The Lubrizol Corporation, all rights reserved.4
-10
-8
-6
-4
-2
0
2
4
6
8
10
20
22
24
26
28
30
32
34
36
38
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Lube Demand (MT) Lube Demand Change (%) GDP Change (%)
Lube demand tracks GDP (average 4% offset)
GDP vs. Lubricants Growth
Source: Fuchs Petrolube SE; 19th ICIS World Base Oils and Lubricants Conference, February 19, 2015
- 40. © 2015The Lubrizol Corporation, all rights reserved.5
Global Lubricant Demand Forecast
• IMF’s five year forecast with “4.0% lubes gap”
• Model predicts:
– Continued flat to modest expansion
– Base oil demand tracks with modest lubricant growth
• Or a more optimistic outlook:
– Annual growth more like ‘boom / bubble’ years (2004-07)
Averaged 0.8% annually
No dramatic economic downturn
*Source: IMF World Economic Outlook
Actual Projections
Global 2012 2013 2014 2015 2016 2017 2018 2019
GDP Growth (%) 3.4 3.3 3.3 3.8* 4.0* 4.1* 4.0* 4.0*
Lube Growth (%) -0.5 1.0 0.5 -0.1 0.1 0.2 0.1 0.1
- 41. © 2015The Lubrizol Corporation, all rights reserved.6
Canada /US Lubricant Demand
• Five year forecast for Canada / US projection
• Observed:
– Continued moderate decline in 2013-14
• Expect:
– Slower rate of decline thereafter
Sources: IMF World Economic Outlook October 2012 w/January 2013 update
GDP-Lubes Gap from SBA Consulting LLC
Actual Projections
Canada / US 2013 2014 2015 2016 2017 2018 2019
Canada GDP 21.0 2.3 2.4 2.4 2.2 2.1 2.0
US GDP 2.2 2.2 3.1 3.0 3.0 2.7 2.6
Canada Lube
Growth (%)
-1.5 -1.2 -1.1 -1.1 -1.3 -1.3 -1.4
US Lube
Growth (%)
-1.6 -1.6 -0.7 -0.8 -0.9 -0.9 -1.1
- 42. © 2015The Lubrizol Corporation, all rights reserved.7
7,200
7,400
7,600
7,800
8,000
8,200
8,400
8,600
2014 2015 2016 2017 2018 2019
Lubricant Demand Base Oil Demand
Project ~240 ktpa decline in base oil demand by 2019
North American Lube & Base Oil Projection
Thousandtonsperannum(ktpa)
- 44. © 2015The Lubrizol Corporation, all rights reserved.9
Product mix continues to upgrade
Base oil demand is not driven by lubricant business needs
• Primary / long term drivers:
• The technology paradox Highest quality / lowest cost of production
• Legislation Clean fuels, re-refined mandates, ODI mandates
• Secondary / near term drivers:
• Refinery upgrading Heavier crude slates and greater diesel
optimization output
• Refinery viability Reduced crude oil demand in the Atlantic Basin
• Refinery divestments Ownership changes and differing
strategic outlooks
Base Oil Drivers
- 45. © 2015The Lubrizol Corporation, all rights reserved.10
Base Oil Capacity and Expansion
• Group I base oil capacity remains dominant globally
• North America remains dominant Group II producer
• Group III production concentrated in Asia
• All future expansions / re-fits dedicated to Group II / III
Source: Arthur D. Little; 2015 ICIS Conference
- 46. © 2015The Lubrizol Corporation, all rights reserved.11
• Observed
– Global base oil production has leveled off
• Expect…
– Very modest increase in sustainable capacity
– Maintain 8,000 mtpa “buffer”
Global Base Oil Supply / Demand
2014 2015 2016 2017 2018 2019
Nameplate Capacity (mtpa) 48,862 48,835 48,852 48,862 48,884 48,875
Sustainable Capacity 42,658 42,822 42,980 43,023 43,125 43,173
Global Lube Demand 36,385 36,367 36,419 36,479 36,533 36,586
Global Base Oil Demand 34,850 34,840 34,900 34,950 35,000 35,050
Source: SBA Consulting
- 47. © 2015The Lubrizol Corporation, all rights reserved.12
• Total nameplate base oil capacity virtually unchanged
– Expect continued reduction in global Group I capacity
– Significant introduction of Group II capacity
– Slow down in Group III expansion
Base Oil Group Supply
2014 2015 2016 2017 2018 2019 5-Yr Change
Group I
(mtpa)
21,304 17,951 15,540 14,962 13,407 12,461 (8,843)
Group II 16,575 18,712 21,095 21,407 22,517 23,475 6,900
Group III 5,601 6,316 6,295 6,575 6,557 6,542 941
PAO 568 536 533 528 514 508 (60)
Naphthenic 4,814 5,319 5,389 5,389 5,889 5,889 1,075
Totals 48,862 48,835 48,852 48,862 48,884 48,875 48,862
- 48. © 2015The Lubrizol Corporation, all rights reserved.13
North America Supply Balance
Group I Group II Group III* PAO Napht’ic Total
2014
Nameplate 3,115 7,789 99 294 2,508 13,804
Sustainable† 2,617 7,010 90 290 2,207 12,214
2019
Nameplate 1,890 9,176 421 256 2,508 14,251
Sustainable† 1,588 8,258 379 250 2,207 12,682
demand overhang
8,160 4,054
demand overhang
7824 4,858
† Based on stream day factors: 84% Group I, 90% Groups II/III, 88% naphthenics
* Excludes Group III imports
* Excludes Group III imports
33%
60%
Significant over-capacity in US/Canada without export of Group II
Source: SBA Consulting
- 49. © 2015The Lubrizol Corporation, all rights reserved.14
New Base Oil Supply
• Outcomes
– Growing oversupply
Project delays / cancellations?
Probable, but most in process will proceed
– ‘Technology paradox’
New capacity lower cost / higher margin than displaced
capacity
Additional projects are likely in the post-2015 period
– Re-refining – legislatively driven
Override supply/demand issues governing virgin base oils
- 50. © 2015The Lubrizol Corporation, all rights reserved.15
New Base Oil Supply (cont.)
• Outcomes
– Higher OEM specifications / global platforms
Increasing requirement for higher quality base oils
By 2020 large majority of on-highway automotive lubricants
globally will be formulated with Group II and Group III base
oils
– Fuel technology pull
Market upgrade drives refining strategy
- 51. © 2015The Lubrizol Corporation, all rights reserved.16
Base Oil Supply / Demand
The likely outcomes
- 52. © 2015The Lubrizol Corporation, all rights reserved.17
Group I Demand
• Demand for cost effective base oils
– Technical drivers for Group I still in play (MD, off-highway)
– Group I not necessarily most cost effective
– Group II increasingly competitive
Regional cost effectiveness
New Group II / III capacity increases downward pressure on
cost
• Group I production not purely cost driven
– Regional / economics
– Security of supply
- 53. © 2015The Lubrizol Corporation, all rights reserved.18
Impact of Over Supply
• Group I base oil production impacted
– Technology limitations
Crude oil availability– specific feedstocks required
Compatibility with fuel production optimization
Outsized impact: only 8-12% yield on crude
– Low value co-products
Yields of distillate aromatic extract (DAE) and bitumen can be larger than
base oil
Typically valued at High Sulfur Furnace Oil (HSFO)
– Contracting market / demand for Group I quality
Latest PCMO and HDDEO are predominantly Group II / III formulated
Nearly fully displaced from North American automotive engine oils
Other regions, declining with the replacement of the on-road fleet
– Victim of the ‘technology paradox’
Large cost of production disadvantage versus many higher quality Group II
and Group III base oils
- 54. © 2015The Lubrizol Corporation, all rights reserved.19
Impact of Over Supply
• Group II base oil impact
– Cost advantage over Group I not universal
Applies mainly to lube hydrocracking operations
Derived from higher value byproducts, scale and lower opex
– Some retrofit operations with Group I type costs
Same co-products, similar opex still requires lube crudes
Some retrofit capacity subject to reduced utilization or even closure
Most used in-house and to supply contract customers
– Re-refined Group II has an entirely different cost structure and
varies widely by location and waste oil collection area
• Group III supply unbalanced in the near term
– Demand increasing but not keeping up with supply
– New capacity increasing at a reduced rate
– Limited formulation ‘overlap’ with Group I and II
Operation at reduced levels forced
- 55. © 2015The Lubrizol Corporation, all rights reserved.20
Global Base Oil Pool Composition
Continued migration away from Group I …..
Group I
51%
Group II
28%
Group III
11%
PAO
1%
Naphthenic
9%
2012
Group I
44%
Group II
34%
Group III
11%
PAO
1%
Naphthenic
10%
2014
Group I
26%
Group II
48%
Group III
13%
PAO
1%
Naphthenic
12%
2019 (proj)
Source: SBA Consulting
- 56. © 2015The Lubrizol Corporation, all rights reserved.21
North American Base Oil Trends
• Group I outlook
– Global surplus pressure on all base oils margins in near to
medium term
– North America vulnerability of Group I producers limited
Structural differences from other regions
– Few large players w/broad geographic separation
– Low cost natural gas provides NA refiners fuel opex advantage
Access to low cost crudes; $13-24/bbl less than Brent
ExxonMobil strongly advantaged in scale, integration
benefits, retrofit options, global supply network
– Lubricant technical drivers already integrated
– N. American market has adjusted and stabilized
- 57. © 2015The Lubrizol Corporation, all rights reserved.22
North American Base Oil Trends
• Group II outlook
– Global gains at Group I expense
Group II satisfies most Group I technical demand often with cost
savings
Growing market outside of NA for non-fuel economy automotive engine
oils
Gains from Group I closures/reduced utilization
– North America is Group II dominant market
Further penetration not expected unless/until Group I capacity closes
Volume losses to Group III
– Move towards fuel economy HDDEO
– Turnover of the car parc
Greater 4 cSt Group II+ ameliorates potential losses
– Most NA growth from exports to Group II deficit areas
Chevron (Pascagoula) volume targets European and SA markets
– Many specifications more cost effective with Group II/III blends than all
Group III
- 58. © 2015The Lubrizol Corporation, all rights reserved.23
North American Base Oil Trends
• Group III outlook
– Sustainable global capacity expected to add 15-20% by 2019
Increase from 5.6 mtpa to 6.6 mtpa
Asia and ME remain dominant supply areas
Europe improved self sufficiency with new capacity in Spain
(SK/Repsol)
– Global demand to continue increase
– Capacity ‘overhang’ likely over the medium term
Some producers at reduced throughput but remain economically
viable
No closures expected
– NA to increasingly rely on imports from the Middle East and Asia
NA demand (including Mexico) forecast to grow
No significant ‘virgin’ Group III capacity on the horizon;
– Some re-refiners/biolube producers targeting GpIII quality
Imports to rise with growth in demand
– Could exceed 1.5 mtpa by 2017
- 59. © 2015The Lubrizol Corporation, all rights reserved.24
API Group Supply By Region - 2019
-
2,000
4,000
6,000
8,000
10,000
12,000
N. America S. America Europe ME & Africa Asia Pacific
Group I Group II Group III
milliontonsperannum
- 61. © 2015The Lubrizol Corporation, all rights reserved.26
Opportunities prevail in the emerging markets and for advanced, high specification and
eco lubricants
• The outlook for lubricants
– Lubricants are an operating cost and their demand has a
strong correlation to global GDP
– Based on IMF projections
Weak to modest growth in global lubricant demand
– Assumes no major OECD fiscal issues
Primary growth in the emerging economies
– OECD demand to continue its modest decline
Canadian and US demand continues modest rate of decline
– Totaling up to ~5% for the 5 year period
Conclusions
- 62. © 2015The Lubrizol Corporation, all rights reserved.27
Conclusions
• The outlook for base oils
– Little change in base oil demand;
– Drivers continue to be mainly external to the lubricants business
‘Technology paradox’ & clean fuels investment having greatest impact
Fuel refining/capacity/technology/demand sets the stage
– Impact of $40/bbl crude oil
– Additional global capacity expected
9 mtpa of Group II/III and naphthenics
New Group II capacity
Capacity creep - mostly Group II/III
Some Group I Group II upgrades
– By 2019, Group I is projected at ¼ of the global base oil pool, down
from 51% in 2012
– Expect significant reduction of high cost capacity to close or operate
at reduced levels
Predominantly Group I, but also some high cost Group II
Group III to likely operate at reduced utilization - none likely to close
North America impact minimized due to its structural advantages
- 63. © 2015The Lubrizol Corporation, all rights reserved.28
Conclusions – Implications for Lubes
– Demand for thinner oils
Moving from GP I to II / III
– Improved volatility
– Improved fuel economy
– Seal compatibility
– Product compatibility
Global increase in utilization of higher quality basestocks
- 64. © 2015The Lubrizol Corporation, all rights reserved.
Working together, achieving great things
When your company and ours combine energies, great things can happen.
You bring ideas, challenges and opportunities. We’ll bring powerful additive and
market expertise, unmatched testing capabilities, integrated global supply and
an independent approach to help you differentiate and succeed.
- 65. © 2015 The Lubrizol Corporation, all rights reserved.© 2015 The Lubrizol Corporation, all rights reserved.
Driveline Drivers and Trends:
North America
Lubrizol Future Directions – Toronto Ontario
April 23, 2015
- 66. © 2015 The Lubrizol Corporation, all rights reserved.2
Agenda
• Scope:
– Automotive gear oils
– Automatic transmission fluids
• Market drivers
• Hardware trend
• Lubricant requirements and trends
• Lubricant development and validation for
efficiency
- 67. © 2015 The Lubrizol Corporation, all rights reserved.3
Market Drivers and Hardware Trends
- 68. © 2015 The Lubrizol Corporation, all rights reserved.4
Driveline Lubricant Drivers
Fuel
Economy
Emission
regulations
Global
Environmental
/ Chemical
regulations
Durability /
Uptime
Global
Availability /
Supply
reliability
Performance
/Safety
Extended
“filled-for-life”
Drain interval
- 69. © 2015 The Lubrizol Corporation, all rights reserved.5
Driveline Hardware Trends
• Increased transmission design options:
– Automatic and manual: 6 to 9 (10) speed
– CVT (Continuously Variable Transmission): belt, chain
– DCT (Dual Clutch Transmission): dry, wet
– Automated manual
• Greater use of AWD / FWD, limited slip devices
• Electrification:
– Hybrids
– eDrive
• Diversified materials and surface finish:
– Friction materials
– Synchronizer materials
– Seals
• Increased power density / reduced oil sump:
– Higher operating temperature
- 70. © 2015 The Lubrizol Corporation, all rights reserved.6
Market Trends of ATF
* Copyright “ZF Friedrichshafen AG”
Unprecedented era in automatic transmission design options
Fuel Efficiency Drives New Transmission Design
2002
6-Speed
Conventional
(AT)
Mid 1990’s
Belt & Chain Drive
(CVT)
1940’s -
Present
Conventional
(AT)
2004
Dual Clutch
Transmission
(DCT)
2007
ZF 8-Speed
Conventional
(AT)*
2011-2014
9 (10) Speed
Conventional
(AT)*
• Moving towards automation (no longer a simple question of manual vs. automatic)
• Resulted in fragmented market in both hardware and lubricants
• Higher lubricant technical investment
– Test development
– Fluid development
• Pace of change are increasing / development cycle are shortened
- 71. © 2015 The Lubrizol Corporation, all rights reserved.7
New Transmission Designs are Growing Share
of Global Production
- 72. © 2015 The Lubrizol Corporation, all rights reserved.8
North American Light Vehicle
Transmission Forecast
Observations:
• Conventional stepped automatic will remain the transmission of choice with speeds
increasing from 6 to 8 and even higher
• Loss of share from ATs to CVTs, thanks to significant push from Honda and Nissan
• DCTs may not grow as much as expected due to reduced momentum at Ford, though
potential for growth from imports “e.g. VW Group”
Source: IHS January 2014
7.4%
71.3%
18.5%
2.7%
2020 NA Production Forecast
MT AT CVT DCT
8.7%
78.3%
9.6%
3.5%
2013 Production
MT AT CVT DCT
- 73. © 2015 The Lubrizol Corporation, all rights reserved.9
Asian and US Brands Dominate
North American Sales
• Chrysler classed as North America even though now officially ‘FCA’
• Subaru parent company is Fuji Heavy
• North American sales exclude Mexico
Total vehicles: 18,350,875
~ 80% AT type transmission
Parent Origin Market Share
North America 45%
Asia 46%
Europe 9%
Passenger Car and Light Truck Sales 2014
Source: IHS January 2015
- 74. © 2015 The Lubrizol Corporation, all rights reserved.10
North America Vehicle Parc 2013
Brand Origin % of market
North America 59%
Asia 34%
Europe 7%
Source: Polk 2013
Passenger Car and Light Truck Sales 2014
• Total vehicles 249,418,837
• Average vehicle age 11.4 year
- 75. © 2015 The Lubrizol Corporation, all rights reserved.11
European DCT Production
• North America there are an estimated 2M DCT vehicles
• DCT’s are split 50 / 50 wet / dry clutch
• Dry DCTs are exclusive to Ford
- 76. © 2015 The Lubrizol Corporation, all rights reserved.12
North American Wet DCT Production Data
Including imports total wet DCT vehicle population in NA is
estimated to be ~1 million vehicles*
*Lubrizol 2013
** IHS 2013
**
- 77. © 2015 The Lubrizol Corporation, all rights reserved.13
There is a growing market for a multi-vehicle CVTF in North America
• CVTs have been in the North American market for many years
• CVT production in North America is forecast to double between 2013 and 2020
Continuously Variable Transmissions
Manufacturer CVT Start Year
Honda 1996
General Motors 2002
Volkswagen/Audi 2002
Nissan 2003
Mitsubishi 2003
Ford 2005
Chrysler/Dodge 2007
Subaru 2010
Source: Motor Information Services: ChekChart
- 78. © 2015 The Lubrizol Corporation, all rights reserved.14
CVT Specifications
Vehicle / CVT Fluid CVT Type
Audi/VW (TL 52180; G 052 180; G 052 516) Chain
Ford (CFT30/WSS-M2C933-A/Motorcraft XT-7-QCFT, MERCON C) Chain
Subaru (i-CVTF, Lineartronic CVTF, K0425Y0710, CV-30) Chain
BMW 8322 0 136 376 / 8322 0 429 154 (EZL 799A) Belt
Daihatsu Amix CVTF-DC, Daihatsu Amix CVTF-DFE* Belt
Dodge / Jeep (NS-2, CVTF+4/MOPAR CVT 4) Belt
Ford (CVT23) Belt
GM/Saturn (DEX-CVT, CVTF I-Green2*) Belt
Honda (HMMF, HCF-2) Belt
Hyundai / Kia (SP-CVT 1) Belt
Mazda CVTF 3320 Belt
Mercedes Benz CVT28/MB-Approval 236.20 Belt
Mini Cooper (EZL 799A/ ZF CVT V1) Belt
Mitsubishi DiaQueen (CVTF-J1, CVTF-J4*) Belt
Nissan (NS-1, NS-2, NS-3*) Belt
Punch (EZL 799A) Belt
Shell Green 1V Belt
Subaru e-CVTF Belt
Suzuki (CVTF 3320, TC, NS-2, CVTF Green 1, CVTF Green 2*) Belt
Toyota/Lexus (TC, FE*) Belt
• Hybrid CVTs usually use an
‘E-CVT’, this is not a
traditional CVT
• It uses a wet start clutch and
does not have a belt / chain
• OEMs (Toyota, Ford, Honda)
usually recommend their low
viscosity ATF in these
applications
* Low viscosity
- 79. © 2015 The Lubrizol Corporation, all rights reserved.15
North American Light Vehicle AWD
4.85%
95.15%
2001
AWD are projected to continue to grow
11.92%
88.08%
2006
24.95%
75.05%
2011
FWD/ RWD
AWD
Source: CSM Automotive, 2012
- 80. © 2015 The Lubrizol Corporation, all rights reserved.16
FWD continue to grow market share
54.68%
45.32%
2001
North American Production FWD vs. RWD
57.06%
42.94%
2006
67.28%
32.72%
2011
Source: CSM Automotive, 2012
RWD
FWD
- 81. © 2015 The Lubrizol Corporation, all rights reserved.17
Growth in Class 5 and 8, Class 4 shrunk considerably
Heavy Duty 10 Year Sales Trend
Class 4
12%
Class 5
9%
Class 6
16%
Class 7
20%
Class 8
43%
2003
Class 4
3%
Class 5
17%
Class 6
13%
Class 7
14%
Class 8
53%
2013
Source: ATA Trends 2014, pg. 30
- 82. © 2015 The Lubrizol Corporation, all rights reserved.18
Ford
13.6%
Freightliner
34.0%
Hino
2.3%
International
15.4%
Isuzu
3.5%
Kenworth
9.3%
Mack
5.0%
Mitsubishi
Fuso
0.6%
Peterbilt
9.1%
UD Trucks
0.1%
Volvo Truck
6.3%
Western Star
0.9%
By Brand
Heavy Duty Truck Sales
Source: ATA Trends 2014, pg. 32
- 83. © 2015 The Lubrizol Corporation, all rights reserved.19
Daimler
38.2%
Navistar
14.4%
PACCAR
27.4%
Volvo
20.0%
By OEM
Freightliner
36.6%
International
14.4%
Kenworth
14.0%
Peterbilt
13.4%
Mack
8.8%
Volvo Truck
11.2%
Western Star
1.6%
By Brand
Class 8 Commercial Vehicle OEM Market Share
Source: ATA Trends 2014, pg. 31
- 84. © 2015 The Lubrizol Corporation, all rights reserved.20
Commercial Vehicle Transmission Market Share
47%
35%
5%
13%
Class 4-8 Truck Transmission Market Share 2010
Allison
Eaton
OEM
Other
Source: Frost & Sullivan
- 85. © 2015 The Lubrizol Corporation, all rights reserved.21
Commercial Vehicle Axle Market Share
39%
37%
24%
Class 6-8 Truck Axle Market Share 2011
Dana
Meritor
Other
Source: 2008 | Frost & Sullivan’s Strategic Analysis of the North American Class 6-8 Truck OE Ride
Systems Markets
- 86. © 2015 The Lubrizol Corporation, all rights reserved.22
Driveline Lubricant Trend
- 87. © 2015 The Lubrizol Corporation, all rights reserved.23
Driveline Market Trend - Lubricant
• Extended drain interval
• Average vehicle age increasing
• Lower viscosity for efficiency
• Improved durability
– Better wear protection
– Better thermal / oxidative stability
– Improved anti-shudder performance
• Friction performance
– Application specific
– ATF, CVT, DCT, MT, LS, AWD
• Increasing use of group II, III, and synthetic
– Additive compatibility
– Seal compatibility
• Dedicated driveline fluids - complexity
– ATF; CVTF; DCTF; MTF; Axle fluids
- 88. © 2015 The Lubrizol Corporation, all rights reserved.24
North American Gear Oil Market
69%
15%
16%
Commercial Gear Oil by Country
United States
Canada
Mexico
91%
9%
Conventional vs. Synthetic
Conventional
Synthetic
58%
28%
5%
9%
Commercial Gear Oil by Viscosity
80W-90
85W-140
Other Conventional
Synthetic
68%
32%
Commercial Vs. Consumer
Commercial
Consumer
Source: Kline LubesNet Database 2013
- 89. © 2015 The Lubrizol Corporation, all rights reserved.25
Driven by end-user needs for rationalization
Unlicensed ATFs Dominate Service Fill Market
Source: Estimated by Lubrizol 2014
- 90. © 2015 The Lubrizol Corporation, all rights reserved.26
Increased
Operating
Temperatures
Lower Oil
Level’s
Increased
Power Density
Improved
Aerodynamics
Reduced Air
Flow and
Cooling
Noise
Shielding
Changes in
Equipment
Design
Equipment Design Change Increases
Operating Temperature
Desired lubricants:
• Better thermal stability
• Reduce break-in temperature
• Reduce operating temperature
- 91. © 2015 The Lubrizol Corporation, all rights reserved.27
Extended Drain Intervals – Gear Oils
0 100 200 300 400 500 600
ZF
Volvo
Scania
Renault
MAN
Iveco
Eaton
Daimler
DAF
Drain interval, 000’s of km
1990 / 1995 2008
OEMs are extending oil drain intervals - a worldwide fact:
• Passenger vehicles manual transition and axle are filled-for-life
• Commercial vehicle manual transmissions and axles require oil drain intervals
• Driving force is extended warranty in competitive market
• Use of mineral base oils will move to Group III or synthetic
Increasing lubricant durability
Increasing oil drain intervals
- 92. © 2015 The Lubrizol Corporation, all rights reserved.28
‘Fill-for-Life’ Increasingly Common for ATF
2014
Rank
Make / Model Year Recommend Inspect
Interval Miles
Recommended Change
Miles
1 Ford F-Series (F150 data) 2014 15,000 150,000
2 Chevrolet Silverado 2014* 97,500
3 Dodge Ram Pickup 2014 Every 10,000 miles (8HP)* 60,000 (non 8HP)
4 Toyota Camry 2014* 30,000; 60,000; 90,000; and
120,000
5 Honda Accord 2014*** 15,000 30,000; 60,000; 90,000; and
120,000
6 Toyota Corolla/Matrix 2014* 30,000; 60,000; 90,000;
120,000; 150,000 (CVT)
7 Nissan Altima 2014* Every 10,000 miles to
150,000 miles (CVT)
8 Honda CR-V 2014* 120,000
9 Ford Fusion (4 cyl) 150,000
10 Ford Escape 150,000
* Source: AllData
** 60,000 miles for Cube, Murano, Altima, Altima Coupe, Maxima, Rogue, Sentra, and Versa CVT fluid. Automatic transmission fluid for 370Z is
maintenance free.
*** Recent Honda models use an in-dash system- Honda does not publish maintenance intervals for these. This information is from
www.driverside.com
Sales data source: goodcarbadcar.net
Top Selling Models 2014
- 93. © 2015 The Lubrizol Corporation, all rights reserved.29
New hardware design requires dedicated axle and MT fluid technology
Gear Oil Technology Evolution
Manual transmission fluid
1960
SAE 90
Sulfur Phosphorus
API GL-5
1991
SAE 80W-90
1995
SAE 75W-90
2012
SAE 75W-85
Mineral Based
Axle Lubes
Wide Span
Multi Grade
Fuel Efficient
Dedicated Axle Fluids
1960
SAE 90
Sulfur Phosphorus
API GL-4
1991
SAE 80W-90
1995
SAE 75W-80
2009
SAE 75W-80
Total Driveline
Fluid
Dedicated MTF
Gen I
Dedicated MTF
Gen II
Axle fluid
KV@100C: 13.5-18.5 cSt 11.0-13.5 cSt
KV@100C: 13.5-18.5 cSt 13.5-18.5 cSt 11.0-13.5 cSt 11.0-13.5 cSt <7cSt
Dedicated MTF
PC
- 94. © 2015 The Lubrizol Corporation, all rights reserved.30
OEMs are increasingly using lower viscosity fluids to realize further efficiency improvement
Fuel Efficiency Drives Fluid Viscosity Lower
Automotive Gear Oils
* Source Lubrizol
Conventional
7.0-8.0 cSt
Low Viscosity
5.5-6.2 cSt
Ultra-low
viscosity
4.5cSt
Automatic Transmission Fluids
ATF+4, T-IV, Dex III / Merc,
LT 71141, MERCON® V, Z1, SP-III,
LA2634, Matic-J, N402, G 052 162,
etc.
DEXRON® -VI, MERCON® LV,
MERCON® SP, WS, DW-1,
Matic-S, SP-IV, M-1375.4, G 055
005, etc.
MB 236.15
SAE 140
SAE 90
SAE 80
SAE 75W140
SAE 75W90
SAE75W90
FuelConsumption
SAE 75W85
SAE75W80
SAE 75W80
SAE75W, 5-7cSt
Axle
MTF
Emerging market, moving to
lower viscosity
Leading global OEM, pushing for super
low viscosity
Lower viscosity
- 95. © 2015 The Lubrizol Corporation, all rights reserved.31
Balancing Demands
• OEMs and end users are demanding improved fuel economy
– Reduce vehicle operating costs
– Reduced legislative penalties
– Reduce environmental impact
• Hardware design/materials now more complex
• However, component durability is essential
A balanced approach is needed
Fuel Economy without Compromise Durability
- 96. © 2015 The Lubrizol Corporation, all rights reserved.32
• OEMs and end users are demanding improved fuel economy
– Reduce vehicle operating costs
– Reduced legislative penalties
– Reduce environmental impact
• Hardware design/materials now more complex
• However, component durability is essential
Maximize Fuel
Economy
Hardware
Durability
A balanced approach is needed
Fuel Economy without Compromise Durability
Balancing Demands
- 97. © 2015 The Lubrizol Corporation, all rights reserved.33
Fluids need to be tailored for hardware / OEM to achieve optimum performance
Unique Fluid Performance for AT, CVT and DCT
Stepped Automatic
Transmission
Continuously Variable
Transmission
Dual Clutch
Transmission
• Stable shift clutch friction across multiple materials
• Strong anti-shudder torque converter durability
• Emphasis on anti-wear with increased gear ratios along
with lower viscosity
• Pump efficiency and reduced aeration with lower viscosity
• High metal to metal friction
• Strong antifoam performance
• Shear stable viscosity modifier
• Strong anti-wear for belt/chain
• Strong anti-wear for gear wear
• Strong anti-shudder durability
• Synchronizer friction stability
- 98. © 2015 The Lubrizol Corporation, all rights reserved.34
How to balance the needs continue to be a challenge
Market Trends of Driveline Lubricants
Hardware diversification
requires the use of dedicated
fluid which leads to complexity
and fragmentation in driveline
lubricant market
End Users and oil marketers are
looking for simplified product
lines to meet a wide range of
OEM AT applications and for
supply reliability, BCP, and cost
management
- 99. © 2015 The Lubrizol Corporation, all rights reserved.35
Driveline Lubricant Development
Durability and Efficiency
- 100. © 2015 The Lubrizol Corporation, all rights reserved.36
Durability Testing and Validation
Component Level Evaluation (Non-
Standard)
• Wheel hub testing
• Stationary axle testing
• Gear durability
• Bearing wear and life
Laboratory Simulation Testing
• Baker grade simulation
• Full transmission and axle
durability
Vehicle Testing
• Chassis dyno testing
• Davis Dam / Baker Grade, etc.
• Field testing
Standard Testing
• Lab testing
• Industry ASTM/ L- bench tests
• Friction test
- 101. © 2015 The Lubrizol Corporation, all rights reserved.37
Efficiency Testing and Validation
Laboratory Simulation Testing
• Axle and transmission efficiency
• Baker grade simulation
• AT spin loss
Vehicle Testing
• Chassis dyno testing
• Baker grade
• Vehicle mpg validation
Laboratory Testing
• Viscometric
• Reological
• Tribological
• Thermal testing
(viscosity•speed)
load
Coefficientoffriction
Log
(Viscosity)
tempera
ture
VM
o
C
- 102. © 2015 The Lubrizol Corporation, all rights reserved.38
Testing Strategies for Gear Oil Development
Fundamental Fluid
Properties
Viscosity
Viscosity Index (VI)
Low Temperature Behavior
Traction
Film Thickness under
Pressure (Optical EHD)
Shear Stability (KRL)
Dyno Performance
Electric Driven
Engine-Fired
Staged FTP-75/NEDC Sim
Road Course Sim
Staged High Torque
Durability Simulation
Material Compatibility
Bearing Durability
Thermal Stability
Ultimate
Proof-of-
Performance:
Field Testing
EfficiencyDurability
- 103. © 2015 The Lubrizol Corporation, all rights reserved.39
Additive system, performance polymers and quality base oil work together
Lubrizol Commercial Vehicle Efficiency Test Rig
Axle Efficiency @ 60° C
- 104. © 2015 The Lubrizol Corporation, all rights reserved.40
0.00
0.02
0.04
0.06
0.08
0.10
-2 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36
IronConcentration(%)
Test Duration (h)
New Additive Development for Improved Durability
More durable tribofilm
for AW 2 and 3
Antiwear 1
Antiwear 3
Antiwear 2
- 105. © 2015 The Lubrizol Corporation, all rights reserved.41
Specially designed viscosity modifier can significantly reduce operating temperature
VM – Operating Temperature Performance
SAE 75W90
Viscosity modifier system 1
SAE 75W90
Viscosity modifier system 2
- 106. © 2015 The Lubrizol Corporation, all rights reserved.42
New viscosity modifier is designed to have better cleanliness than PAO100
VM – Oxidative Stability
Meridian® PAO100
- 107. © 2015 The Lubrizol Corporation, all rights reserved.43
Friction Modification is Specific for Each Application
AT CVT DCT MT
Axle –
Limited
Slip
All-Wheel Drive
Components
Shifting
Clutches and
Torque
Converter
Clutch
Belt/
Chain
and
Pulley
Torque
Converter
Clutch or
Launch
Clutch
Wet Start
(Launch
Clutch)
Synchron-
izers
Synchron-
izers
Limited Slip
Device
Some examples:
• Transfer case
• Torque
Vectoring
• Coupling
Materials
Composite
(Paper)
material-on-
steel Friction
Steel on
Steel
Composite
(Paper)
material-on-
steel
Friction
Composite
(Paper)
material-on-
steel Friction
Molybden-
um,
carbon
fiber,
bronze
Molybden-
um,
carbon
fiber,
sintered
bronze
Composite
(Variety)
material-
on-steel
Friction
Variety –
depends on
specific
component
Performance
Stable clutch
friction across
multiple
materials as
well as strong
anti-shudder
durability
Stable
friction
between
the belt
or chain
and the
pulley
Stable
clutch
friction
across
multiple
materials
Stable clutch
friction across
multiple
materials as
well as strong
anti-shudder
durability
Smooth
gear
engage-
ment, low
wear rate
Smooth
gear
engage-
ment, low
wear rate
Stable
friction, low
NVH,
Friction
durability
Depends on the
component
Low viscosity –
low drag torque
on disconnect
system (e.g.
coupling)
- 108. © 2015 The Lubrizol Corporation, all rights reserved.44
Summary
• Moving to automated manual or automatic transmission
• Increasing use of “filled-for-life” lubricants
• Fuel efficiency drives hardware design changes:
– More options: CVT, DCT, etc.
– AT: more speed: 6 to 8 to 9 (10) speed
• Market fragmentation in both hardware and lubricants
• Driveline lubricants are moving to lower viscosity
• Need stronger additives / chemistry / formulation to provide protection at
lower viscosity
• Friction plays a key role in delivering shift quality and driver experience
• Friction modification is application specific
• Increasing investment in testing and fluid development for tailored
performance
- 109. © 2015 The Lubrizol Corporation, all rights reserved.
Working together, achieving great things
When your company and ours combine energies, great things can happen.
You bring ideas, challenges and opportunities. We’ll bring powerful additive and
market expertise, unmatched testing capabilities, integrated global supply and
an independent approach to help you differentiate and succeed.
- 110. © 2015 The Lubrizol Corporation, all rights reserved.© 2015 The Lubrizol Corporation, all rights reserved.
The Move to Lower Viscosity Engine Oils
Lessons from Social Science
April 23, 2015
Lubrizol Future Directions – Toronto, Ontario
- 111. © 2015 The Lubrizol Corporation, all rights reserved.2
Agenda
• New Engine Oil Categories:
– GF-6
– PC-11
• Recent Engine Oil Viscosity Changes
• The Social Science of Adoption and
Diffusion
Viscosity changes – understanding and predicting
- 112. © 2015 The Lubrizol Corporation, all rights reserved.3
Lubricant is one piece of the puzzle that can help bridge the gap
• 54.5 mpg is
the new goal
• The lubricant
industry must
do its part to
help meet this
goal
CAFE Changes – Driving GF-6
C. Richardson. SAE Fuels and Lubricants Open Forum, April 16, 2013.
- 113. © 2015 The Lubrizol Corporation, all rights reserved.4
Lubricants enables next generation hardware and fuel economy
• Direct contributor to
CAFE improvements
• Enables the use of
GDI / TDGI
GF-6A Performance Comparison
- 114. © 2015 The Lubrizol Corporation, all rights reserved.5
GF-6 is a major upgrade on fuel economy
ILSAC Fuel Economy (FE) Evolution Over Time
*Except GF-6B (xW-16)
FE Improvement
FE Durability
- 115. © 2015 The Lubrizol Corporation, all rights reserved.6
Era of Efficiency Driving to PC-11
FuelEconomy2016
- 116. © 2015 The Lubrizol Corporation, all rights reserved.7
• New category (1/1/2016) split by HTHS:
– High HTHS – Backwards compatible to replace CJ-4
– Low HTHS – Fuel Economy grade for new engines
• Key drivers:
– Fuel efficiency and green house gas emissions
– Bio-diesel fuel
– Oil foaming concerns
– Higher engine operating temperatures
– Oil shear down
The fragmentation of the US market continues and grows
What Is PC-11?
- 117. © 2015 The Lubrizol Corporation, all rights reserved.8
New Viscosity Grades
High HTHS Low HTHS
15W-40
10W-40
5W-40
10W-30 10W-30
5W-30 5W-30
High HTHS Low HTHS
15W-40
10W-40
5W-40
10W-30 10W-30
5W-30 5W-30
High HTHS
15W-40
10W-40
5W-40
10W-30
PC-11 UniversalPC-11 DieselCJ-4CI-4 Plus
High HTHS
15W-40
• More viscosity grade choices for marketers
• Universal oil phosphorus waiver not available for PC-11:
– Forces reformulation
– Challenging in T13 and wear tests
• Creates market fragmentation
- 118. © 2015 The Lubrizol Corporation, all rights reserved.9
European On Highway
HD Market
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2004 2005 2006 2007 2008 2009 2010 2011
5W-20
5W-30
10W-30
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2008 2009 2010 2011 2012 2013 2014 2015
5W-30
10W-30
10W-40
15W-40
20W-50
US PCMO
Market
Viscosity changes follow a pattern
Recent Engine Oil Viscosity Changes
- 119. © 2015 The Lubrizol Corporation, all rights reserved.10
North American HD Market Viscosity Changes
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 2013 2016
0W-40
5W-30
5W-40
10W-30
15W-40
MarketShare
North American HD market changing
- 120. © 2015 The Lubrizol Corporation, all rights reserved.11
Learnings From Behavioral Science
• Prediction adoption rates of new technology,
is not new:
– Clothes dryers
– Diesel locomotives
– VCRs
– Cell phones
• What can this work teach us about engine oil changes:
– Timing of market changes
– Who to target with new products
A greater understanding of the market advances your business
- 121. © 2015 The Lubrizol Corporation, all rights reserved.12
Key Behavioral Research Findings – Rogers
Everett Rogers' Diffusion of Innovations:
• Relative advantage
– How big of a change is it?
• Compatibility
– Does it work with my existing
systems?
• Complexity
– Is it difficult to implement?
• Trial-ability
– Can I give it a try?
• Observability
– Can I see the benefit?
Does it apply to engine oils?
- 122. © 2015 The Lubrizol Corporation, all rights reserved.13
HD Engine Oil Example
2010
2.5%
Innovators
13.5%
Early Adopters
34%
Early Majority
34%
Late Majority
16%
Lagards
10W-30
- 123. © 2015 The Lubrizol Corporation, all rights reserved.14
2016
2.5%
Innovators
13.5%
Early Adopters
34%
Early Majority
34%
Late Majority
16%
Lagards
10W-30
5W-30
HD Engine Oil Example
- 124. © 2015 The Lubrizol Corporation, all rights reserved.15
2020
2.5%
Innovators
13.5%
Early Adopters
34%
Early Majority
34%
Late Majority
16%
Lagards
10W-30
5W-30
HD Engine Oil Example
- 125. © 2015 The Lubrizol Corporation, all rights reserved.16
0
5
10
15
20
25
0 5 10 15
New adopters Imitators Innovators
Key Behavioral Research Findings – Bass
Frank Bass "A new product growth
model for consumer durables" in 1969
• p the “coefficient of innovation”
• Q the “the coefficient of imitation”
Building mathematical models to predict markets
First-time Use
Year
-
- 126. © 2015 The Lubrizol Corporation, all rights reserved.17
2010 2016 2020
10W-30 10W-30 10W-30 5W-305W-30
HD Engine Oil Example
- 127. © 2015 The Lubrizol Corporation, all rights reserved.18
Malcolm Gladwell “The Tipping Point”
• The law of the few – connectors:
– Who can help spread your message?
– “Connected” people with wide-spread
connections
– Influencers
6 Degrees from Kevin Bacon
• The stickiness factor:
– How infectious is your message?
– How memorable is your message?
Sesame Street and Blues Clues
• The power of context:
– Catch your audience at the right time and in the
right mood
The Good Samaritan
What are your messages?
Key Behavioral Research Findings – Gladwell
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Implications for Engine Oil Marketers
Overall business strategy implications
• Know your markets and your position in them:
– Whether you are an industry leader, fast follower, or general
marketer, you need to understand where a market currently stands
and where it is going.
• Level of diffusion depends on product:
– 5W-30 – Innovators
– 10W-30 – Early majority?
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Implications for Engine Oil Marketers – Part 2
Product marketing and sales implications
If you are marketing products early in
the adoption process, consider:
• Where are you in the process
– Innovators, early adopters, majority, laggards
• Rogers
– Relative advantage, compatibility, complexity,
trial-ability, observability
• Bass
– Innovation, imitation
• Gladwell
– Connectors, stickiness, context
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Working together, achieving great things
When your company and ours combine energies, great things can happen.
You bring ideas, challenges and opportunities. We’ll bring powerful additive and
market expertise, unmatched testing capabilities, integrated global supply and
an independent approach to help you differentiate and succeed.