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Infineum Trends
Industry Drivers

Climate change, fuel economy, emissions

legislation, globalisation, and the rise of
new markets have all created changes and
opportunities in our industry. The future
that is emerging looks very different from
our pre-recession world – and it’s likely to
take us all some time to adapt.

Uncertainty and caution have been the

themes in recent Trends presentations.
This year’s theme is ‘The Opportunities of None of these targets are easy to meet Globally, governments are also
Change’ and we hope to explore some of and they will drive changes in both continuing pressure to reduce emissions
the growth opportunities building on the vehicles and power trains around the of other pollutants through the use of
initial signs of recovery we saw last year. globe. OEMs will need to do some very more efficient engines and
creative juggling of product mix to aftertreatment technologies. They are
Undoubtedly, the biggest driver for maximise fuel economy and profitability also looking to improve the security of
change is the environmental legislation – something we are already seeing with their energy supplies through increased
arising from concerns about climate the emergence of the smaller car use of indigenous fuels and sustainable
change. Last year climate talks took place premium sector. biofuels.
in Mexico, and over 190 countries
adopted the Cancun Agreement, setting In the USA the Environmental Protection
the stage for ongoing negotiations on Agency celebrated the 40th anniversary
greenhouse gas reductions. of the Clean Air Act Amendments, under
which the EPA has gradually introduced
While several positive steps were taken – more and more stringent tailpipe
including a way to help developing nations, emission standards. Having already
recognition that some in-place targets reduced on-road emissions by over 90%,
must change and a framework to limit the scope is widening to now address
deforestation; neither a mechanism for pollution from a wide range of non-road
deeper cuts nor agreement on the legal sources.
status of any new global limits were agreed.
CO2 reduction legislation will affect almost If you believe the mainstream consumer
Whatever the outcome of that political all forms of transport in the not so distant media our new found environmental
wrangle, governments around the world future and present new challenges to fluid conscience means all of us will soon be
are introducing and tightening both CO2 formulators. OEMs will be looking for driving plug in electric, hydrogen or fuel
emissions limits and fuel economy every possible way to improve fuel cell vehicles. However, Infineum and
targets. As an example, the USA fuel economy and reduce CO2. No doubt they many other informed commentators
economy target for passenger vehicles will be expecting even more help from the believe the internal combustion engine
increases from about 25 mpg to 35 mpg fluids we supply. However, this improved will continue to be the powertrain of
by 2020. In Europe already tight CO2 fuel economy cannot come at the choice for the foreseeable future.
emissions targets of 140g/km will be expense of either engine protection or oil
reduced to 95g/km by the same date. drain interval!

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In a competitive industry that is always One growing market that is presenting low torque vehicles. However, it is the
governed by cost, it is simply more cost significant opportunity is China. Reports conventional planetary automatic – with
effective to improve conventional from the IMF indicate that in 2010 it an increasing numbers of forward gears
gasoline or diesel engines than it is to overtook Japan to become the world’s – that will continue as the dominant
move to alternative technologies. second-largest economy. auto-shifting technology.

The cost of hybrid vehicles is really quite Vehicle sales topped 18 million in 2010 –
significant compared with the environ- up 32% on the previous year. Some
mental benefits they deliver, while plug-ins 90% of last year’s economic growth was
and fuel cell vehicles depend on a carbon- driven by domestic demand, and GM
neutral energy source for any significant reported more vehicle sales in China than
environmental benefits to be achieved. in the USA. Some industry analysts
Without very significant government suggest that there could be 125 million
incentives or taxation, product cost will vehicles on China’s roads by 2020. China
rule and powertrain developments will be is a huge market and most OEMs are
evolutionary, not revolutionary. Although looking to increase sales in the region.
the powertrain picture to 2030 is far from This changing market offers opportu-
clear we think the internal combustion nities for fuel and lubricant suppliers. Historically, automatic transmissions used
engine will have a major part to play. a torque convertor and had three or four
Recognising this growing demand, global speeds – with just a handful having five.
However, as alternative power systems automakers are investing in production In North America, DEXRON® and
enter even as niche markets, they may facilities through out Asia. MERCON® fluids represented more than
bring new challenges. two-thirds of ATF volume and were
Trends 2011 looks at how Global changes typically formulated in Group I base
In the short term we see an assortment and industry challenges are impacting stocks to provide the high viscosity
of advanced internal combustion engine specifications, formulations and required.
powertrains, along with the emergence developments and aims to share Infineum’s
of a variety of hybrids and a few electric views on some of the key issues. The need for improved low temperature
vehicles. operability led to specifications which cut
Brookfield Viscosity by more than 60%.
In the medium term, electrification is Power Transmissions At the same time, requirements for
likely to take a bigger role, but advanced better fluid durability led to tougher
engines, either alone, or deployed in hybrid oxidation tests and essentially eliminated
vehicles will remain dominant in the mix. Group I base stocks from ATF
applications.
The long term trends are difficult to call. As
the demand for personal mobility continues OEMs began to look at how to minimise
and fossil fuels are replaced by alternatives losses by reducing the viscosity of
it is likely the number of electric and fuel transmission fluids. A number of low
cell vehicles will grow, but such growth viscosity fluids followed and today there
must be accompanied by fundamental are more than half a dozen low viscosity
changes in the energy supply sector. fluids in the marketplace, along with a
myriad of high viscosity fluids – making
Internal combustion engines will see Improved fuel economy, to meet tough life more complicated for service centres
downsizing, lean operation, alternative CO2 targets in Europe and escalating and lube shops.
fuel use, valve train complexity, turbo CAFE Standards in the USA, is the key
boosting, the use of new materials and driver for changes in transmissions. It is Today, there are at least ten OEMs that
improvements in emissions controls. increasingly important that both each produce over a million automatics a
Automatic transmissions will have six, transmissions and their fluids help improve year. Most make multiple transmission
seven or more gears and some regions fuel economy – while simultaneously models – each being slightly different in
will use DCT and CVT technology. enhancing other performance attributes. design, size, torque capacity and each
using different materials for gears and
Some of the technologies that started in Several alternative transmission clutches. To optimise performance, fluids
passenger cars, such as hybrid drives and technologies are currently in use, and are specified to provide exacting
exhaust aftertreatment, will expand to there is no consensus about which is the performance requirements. The net result
other vehicles segments. These changes best. DCT growth is expected in Europe is that ATF’s must be pretty much OEM-
provide opportunities for the and China, where the existing manufac- specific – or even transmission specific!
development of innovative and turing infrastructure makes production The ATF service fill business, once based
advantaged lubricants and fuels. easier. CVT are more popular with on bulk economics, is quickly becoming a
Japanese and Chinese OEMs for small business of expensive small volume fluids.

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Just when you thought it couldn’t get any

more complex today’s ATFs must have
lower viscosities to reduce fuel consumption
– while at the same time maintaining
protection for gears and bearings despite
the lower lubricant film thickness.

In an attempt to reduce complexity almost

every major ATF marketer offers a Multi-
Vehicle fluid of some sort. However, most
are formulated to meet high viscosity ATF
requirements. Today’s market is clearly
ready for a low viscosity multivehicle ATF to
reduce complexity and provide the required
fuel economy and hardware protection.

Looking to the future, demands to

reduce fuel consumption and improve
efficiency will increase.

OEMs will continue to increase the number

of gears and transmission components will
continue to get lighter and smaller. With
smaller sump sizes, containing less fluid, towards GF-5, which started last least 2015, but replacement parts for
new fuel-efficient transmissions will have October, is progressing. Top tier, high many of the current engine tests may run
higher operating temperatures adding mileage and other SM licensed products out before then. Also, it is not clear that
extra stress to the ATF. account for another 30% of the market. all ILSAC members are committed to
future test or standard developments.
The question that remains is just how low SAE 5W-20 and 5W-30 viscosity grades
can the viscosity of future fluids go? account for almost two thirds of this Industry is already behind on developing
Whatever the answer, the desire for market, and SAE 0W-20 for Honda and replacement tests to evaluate key oil
improved fuel economy must be carefully Toyota and have reached measurable properties. In addition to replacements
balanced with the need to deliver the volumes. Responding to requests from for existing performance parameters,
excellent hardware protection. some Japanese OEMs, the SAE EOVC several new issues may require new test
(Engine Oil Viscosity) Task Force is developments.
working to define even lower viscosity
PCMO (Passenger Car Motor Oils) new grades for addition to SAE J300. While most OEMs are expected to specify
However, much work remains before ILSAC GF-5, GM has taken a different
these new grades are finalised. path. GM produces vehicles in 37
countries, and had previously set
In Europe, December 2010 was the last lubricant specifications on a country or
date for oil marketers to upgrade regional basis. Last year it introduced its
products to meet ACEA 08 requirements. new global engine oil specifications for
ACEA also released some minor gasoline and light-duty diesel engines,
upgrades which become mandatory which will replace all previous specifi-
December 2012. New chemical limits cations.
drive a split between the A/B and C
sequences, and TBN limits were added to GM charges fees for approvals, and this
A3/B4. Hardware and fuel issues may has both caused concerns with some oil
Once again, the improved fuel economy limit availability of some tests and cause marketers and added uncertainty
and reduced CO2 emissions are the main delays in approval programs. regarding market penetration. Our
drivers of change for passenger cars. As industry experts shared varying
legislation is introduced across the world This plot of light duty engine testing over comments and view points regarding
and penalties for non-compliance the last decade represents over $1B in dexos™. As of early 2011, the estimated
increase, OEMs are looking for every 2011 money, with GF-5 alone costing North American market volumes for
possible saving. over $100M. dexos licensed and unlicensed products
were almost evenly split.
ILSAC GF-4 and GF-5 quality oils As with any new category development,
comprise some 60% of the North viewpoints differ regarding its success.
American PCMO market, and the move ILSAC GF-5 is expected to last until at

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Heavy Duty Engine Oils API DEOAP met in March 2011 to begin CO2 emissions and improve fuel
planning for this possibility. EMA economy. In the US, the EPA and NHTSA
members are not yet ready to make a have proposed harmonised limits which
formal new category request, but they will phase in from 2014 through 2018.
expect to develop a request by year end.
Several potential areas for improvement Europe is expected to impose new
were noted. They did note that CJ-4 targets later this decade. Infineum does
testing can be supported through 2015. not believe these changes will drive
‘breakthrough’ technology into the
With rising fuel prices, HD truck fuel market. However, there will be
economy and the potential contribution increased emphasis on ‘known’
of lubricants is rapidly gaining interest. technologies which are already
recognised by the EPA ‘Smartway’
As we predicted last year, 2010 was a Reduced HTHS viscosity is a powerful program.
recovery year for the heavy duty vehicle lever to improve fuel economy. However,
market. However, the rate of recovery OEM concerns about increased wear For well into the future, the four stroke
has surprised most industry observers have forced an HTHS limit of 3.5 cP cycle compression ignition engine will
with sales bouncing from a low of minimum into CJ-4 as well as many remain the power system of choice for
1.4MM units in 2009 to 2.4MM units in other global specifications. commercial vehicles, with some
2010, matching the previous high in penetration of hybrid drives for stop
2007. Changing HTHS limits will require and go service. Biodiesel usage will vary
universal support from Global engine with local mandates and taxation
builders, and that may be difficult to policies, and natural gas usage may
achieve. In addition, comments from API develop in market niches where the
staff suggest that concern over distribution infrastructure either exists or
backward compatibility could force a is installed.
change in category rather than a
‘supplement’. Individual OEMs may be
willing to make changes to allow the China Market
use of lower viscosity oils, and these
changes could represent opportunities
for oil marketers.

API CJ-4 oils were developed to protect In Europe, the ACEA HD requirements
2007 and newer engines and their were updated late last year, but the
emission control systems. Volvo Trucks changes were relatively minor.
developed their own global oil specifi-
cation using the CJ-4 tests as its core. We concentrate on oils for engines with
advanced aftertreatment systems, but
Starting last year, NOx limits were almost half of last year’s global truck
reduced for all on-highway diesel engines production was not so equipped! China
sold in the USA. Most engine manufac- is one market where this is true, and With China’s economy now holding the
turers are using SCR with DEF as their engine builders there are reluctant to number two slot globally, it seemed
primary NOx control technology. move to higher quality lubricants. appropriate to move China to a stand
However, Navistar continues its use of alone segment in Trends 2011. China’s
heavy EGR and advanced combustion The Chinese commercial vehicle market population is over 1.3 billion people
controls. The use of SCR, EGR and DPF is dominated by local producers. making it the most populous nation in
seems to be the global standard for However, these companies currently the world. One of every five people on
emission control in markets with strict cannot compete in markets with earth live in China, and if everyone lined
limits. advanced emission control requirements. up to walk past you in single file the
Recognising the importance of the line would never end.
While API CJ-4 oils are performing well, Chinese market, both Cummins and
several of the engine tests used to define Daimler have formed JVs with local In 2009 the global economic downturn
the category have experienced issues companies, and this could allow the reduced foreign demand for Chinese
with both fuel and hardware. Chinese OEMs access to advanced exports for the first time in many years
technologies and enhance their future but China rebounded quickly outper-
While there is general agreement that global competitiveness. forming all other major economies. Last
there is no short term need for a new HD year China’s GDP grew to just over $6B
category, there is a potential need In the more sophisticated markets there US – a year on year change of just over
around the middle of this decade. The will be continuing pressure to reduce 10% after correcting for inflation.

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Beyond China, Brazil, Russia, India and

Korea present significant new opportu-
nities to vehicle OEMs and to lubricant
and fuels suppliers – but they also bring
a set of unique challenges and a certain
level of uncertainty.

We’ll start with a look at Brazil, a

country with a population of over 200
million – the 5th largest in the world,
behind China, India, the US and
Indonesia.
China’s vehicle population hit 74MM last However, hybrid cars have not caught
year, and it is estimated to reach 125MM on. Passenger car fuel economy The onset of the global financial crisis
by 2020. standards move to phase III in 2012, but hit Brazil late in 2008, and the country
SAE 15W-40 viscosity oils still hold most experienced two quarters of recession.
Still, car ownership per 1000 people is of the market – presenting an However, Brazil was one of the first
low compared to other markets – opportunity for the use of lower viscosity emerging markets to begin a recovery.
indicating the probability of even more oils to improve fuel economy. HD fuel Consumer and investor confidence
growth. economy standards are under revived and GDP growth of over 7%,
development. was reported in 2010.
With these additional vehicles come the
challenges of increased congestion and Pollution and energy security concerns Vehicle sales in Brazil hit an all time
pollution in major cities. In Beijing for have prompted the Chinese Government high in 2010 – up almost 12% on the
example – a city that covers a similar to focus its attention on new energy and previous year – surpassing Germany to
area to Las Vegas but has a population clean-energy cars. The current five year become the fourth largest car market in
over six and a half times larger – the plan makes the development of new- the world.
municipal government announced that it energy cars a top priority for the auto
will take steps to limit car ownership. industry. To meet the target of one Although diesel fuels with sulphur levels
Total vehicle sales and production hit million new-energy vehicles by 2015 of 1800 and 500ppm are still in use –
some 18MM units in 2010, truck China plans to invest more than 100 50ppm sulphur fuel is now available for
production rose almost 30% to just billion yuan – or 15 billion dollars – over urban transport fleets in selected cities,
under 4MM units. the next decade and make China the and 10ppm will be available from 2013.
world leader in green car production. There is concern that the availability of
Last year the Chinese government varying sulphur level fuels may lead to
implemented Euro IV emission limits for confusion and misuse.
Passenger and Commercial vehicles Emerging Economies
nationwide. This provides an opportunity Biofuels usage has been promoted for
for oil marketers to promote high quality, some 40 years, and ethanol use in
long-drain lubricants to meet the needs gasoline grades is currently E25 and
of the advanced hardware technologies E100. B5 has been mandated since
of Euro IV vehicles. January 2010, and requirements will rise
gradually to B10 by 2015. These
The government has concerns about the changes in fuel quality present new
energy sector’s ability to support opportunities for both auto and truck
continued economic growth. Fuel prices makers and fuel marketers. In addition,
have risen since market changes 2008, upcoming changes in emissions limits
and fuel economy is becoming an will impact both light and heavy duty
important consideration for car buyers. hardware, fuels and lubricants.

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Russia up both by plans to move to Euro V be merged into the National Electric
emissions standards and the increasing Vehicle Policy that is currently being
use of foreign vehicles requiring higher formulated.
quality lubricants.
Korea

India

Our next look is at Russia. At over 17

million square miles Russia is the largest
country in the world. Although it is 1.8
times the size of the US its population of
just over 139 million means it has less For a relatively small country Korea’s
than half the number of people. capital city, Seoul, at over 10 million is
From Russia we move to a country one one of the most populated cities in the
In the last 10 years the country has had a third the size of the US, but which has world!
higher GDP growth than other European the second largest population in the
countries, the USA, and Brazil although world – India. Last year, the Indian With the global economic downturn in
not as strong as China and India. Being economy grew by more than 8% – late 2008, Korean GDP growth slowed,
largely dependent on crude oil, gas and largely from strong domestic demand. but by the third quarter of 2009, the
raw material exports, the Russian economy began to recover, and last year
economy was battered by the recession. The Society of Indian Automobile growth exceeded 6%.
With crude and gas prices soaring, the manufacturers – SIAM for short – reports
economy is now recovering and the that local vehicle production grew almost Korean emissions standards are based on
outlook is that GDP growth will remain 33% last year to over 17 million units European specifications and many
strong. with most going to export markets. vehicles now have to meet Euro V limits.
However, rising disposable incomes, the Both gasoline and diesel fuel have come
Russia ranks 10th in the world for launch of new models and a robust under new specifications with limits on a
passenger car sales and in 2010 sales of economy are driving more customers into number of chemical and performance
new passenger cars and light commercial showrooms, and industry analysts attributes. A Fleet Average System or FAS
vehicles in Russia rose by 30%. Foreign suggest India will become the fourth covering CO2 limits, similar to the US
brands account for over 60% of the new largest auto market in the world, CAFE standards was introduced in
sales market. With a relatively low car overtaking Europe, by 2015. January 2009. It allows OEMs to produce
density compared with developed cars with various emission levels and
economies – there is clearly significant India expects to benefit from a period of bank and trade credits as long as their
growth potential in the future. High direct foreign investment as over two average emissions meet FAS limits.
import duties and bureaucracy make billion dollars a year comes in over a
local manufacturing attractive and the sustained period to enable auto Korea has had a biodiesel mandate,
most major players either have or are manufacturers to set-up more new starting at 0.5% since 2006. Last year
building their own plants in Russia. plants. the blending ratio was increased to 2%
as part of the government’s aim to have
Despite the recession, Russia is the In spite of this significant growth in alternative energy sources contribute up
largest truck market in Europe. However, passenger car production, current to 5% of the nation’s energy demand by
high import duties – currently running at production in India is still dominated by 2011. It is also working to increase the
25% – and slow replacement of the two wheelers – predominantly quality of Biodiesel to meet the European
vehicle fleet mean foreign brands have a motorcycles. In 2009 India was the EN14214 standard.
much lower market penetration. second largest motorcycle producer in
Asia at just under 10 million units.
Russia is the fourth largest global
lubricant market, with future growth The Indian government is also supporting
expected to be significant as the vehicle the introduction of alternative energy
population builds. However lubricant with a 20% subsidy for two and four
quality is fairly low and almost all high wheel Electric Vehicle makers on the ex- LINK
quality lubes are imports from the west. factory prices of their vehicles. In the www.infineum.com
The quality of lubricants is being driven future, the Electric vehicle incentive will

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