As electric vehicles (EVs) increasingly penetrate the automotive market, they will disrupt well-established parts of the internal combustion engine (ICE) value chain, from engine parts to maintenance practices.
One often-overlooked element of this shift involves fluids: the engine oils, gear oils, and transmission fluids that ICE vehicles consume in copious quantities will no longer be required for battery electric vehicles (BEVs). In contrast, EV fluids used in BEVs consist mainly of driveline fluids and coolants—the focus of this article.1
We expect a major increase in the number of EVs on the road by 2035. The car parc is expected to rise from 30 million BEVs, HEVs, and PHEVs in 2020 to approximately 400 million in 2035 at a CAGR of about 20 percent.
This will lead to a significant increase in EV fluid consumption. However, it will not offset the decline in lubricants (or ICE fluid demand), both because of the relative numbers of each type of vehicle in use and the EV’s less fluid-hungry design (Exhibit 1).
For example, a BEV uses two to three times less fluid than an ICE vehicle. While the consumption of pure driveline fluids is on a comparable level (four to 12 liters), a BEV needs only about ten to 20 liters of coolants over its lifetime, as compared to 20 to 80 liters for an ICE vehicle. A BEV also does not require any engine oil; an ICE vehicle requires 50 to 90 liters over the lifetime of the car.
Modeling EV dielectric coolant demand
As the EV market grows, expect a shakeout regarding the use of alternative types of coolants. We sense a clear need for standardized technologies in the driveline, which can help limit supplier business risk when investing in the development of this type of EV fluid. In contrast, there are still varying opinions on which type of coolant will be the predominant one used to cool the battery, inverter or other power electronics, and electric motor.
Two technologies with different use cases currently compete here: aqueous and dielectric (Exhibit 2). Aqueous or water-glycol coolants are commoditized with gross margins of less than €0.5 per liter. They offer “good enough” performance and find use in most EVs on the street right now. Dielectric coolants offer a higher cooling performance and safety profile and have higher gross margins of €2 to €3 per liter.
Depending on the adoption level of each type of coolant, we see different potential scenarios for the EV fluids market:
- Scenario 1: Only sports car and performance vehicle OEMs will use dielectric coolants due to their superior performance and technological characteristics.
- Scenario 2: In addition to sports and performance vehicles, premium car OEMs might adopt dielectric cooling to avoid reputational risk and as part of their safety value proposition.
- Scenario 3: The third scenario involves mass-market cars, and our aggressive forecast predicts more than 50 percent of these vehicles could use dielectric coolant. In general, mass-market car OEMs view aqueous coolant as technologically sufficient because they can isolate the batteries well enough from the coolant to avoid any interference in case of an accident. However, as extra safety precautions, some mass-market cars could still adopt dielectric coolants.
As more EVs, HEVs, and PHEVs enter the vehicle population, they will slowly begin to change the automotive fluids market.
As for most currently available BEVs across geographies, aqueous coolants are good enough and the cheaper option—though cost pressure is likely to increase over the coming years in the race for an EV mass market. We believe the first two scenarios in Exhibit 2 are the most likely to occur.
As more EVs, HEVs, and PHEVs enter the vehicle population, they will slowly begin to change the automotive fluids market. Companies vying for a share of this new margin pool need to understand how automakers view the market and work to create greater standardization across fluid categories.