conductivity help manage heat efficiently, protecting batteries and power electronics.
In the EV era, fluid development is a collaborative process. OEMs play a pivotal role in co-developing specialised fluids with suppliers, ensuring that formulations meet exacting performance and safety standards. Their approval processes and technical validations are critical, as these fluids directly impact battery life, thermal efficiency, and drivetrain reliability. As a result, strategic partnerships and OEM endorsements have become key competitive differentiators, shaping market access and brand credibility in this fast-evolving segment.
Regional base oil demand map Electrification is reshaping lubricant demand worldwide, but the pace and impact vary by region.
North America: EV penetration remains slower, though stricter state-level regulations are accelerating change. ICE lubricant demand will decline modestly in the near term, with long-term contractions being inevitable. Refinery rationalisations have already cut Group I capacity, raising the question: Will Group II supply have to explore market opportunities outside the region?
Europe: Rapid EV adoption is driving a steep decline in ICE fluids. Sustainability dominates the agenda, with a growing emphasis on re-refined base oils as OEMs and suppliers push toward carbon-neutral solutions.
China: Leading global EV adoption, China witnesses heavy investments in high-quality base oils refiners and re-refiners. Yet, perception challenges persist. The country could emerge as a swing market for EV fluid demand, influencing global supply dynamics.
India and emerging markets: ICE demand stays robust in the short to mid-term, positioning these regions as the last stronghold for conventional base oils, though Group I is gradually losing ground. EV penetration remains slow due to infrastructure and affordability constraints.
Supply-side implications As lubricant demand patterns evolve, the supply side is undergoing its own transformation. Refinery closures, capacity realignments, and the rise of re-refining and synthetics, among other changes, will redefine availability, cost structures, and competitive positioning across global markets. • Refinery closures: Aging Group I plants are shutting down, accelerating the industry’s pivot toward Group II and Group III base oils. This structural shift reflects both declining demand for conventional lubricants and tightening environmental regulations.
• New capacities: Although Asia and the Middle East continue to add Group II and III capacities, concerns over long-term profitability persist. Overcapacity risks and fluctuating regional demand could pose challenges to maintaining margins.
• Re-refining: Sustainability is driving momentum for re-refining as a viable source of Group II/III base oils. Europe and North America are expected to lead adoption, supported by circular economy goals and OEM endorsements.
• Synthetic surge: EV-driven requirements for dielectric, thermal management, and e-transmission fluids are fueling growth in PAO, PAG, and esters. These synthetics offer superior thermal stability and electrical insulation; however, their high costs remain a barrier, limiting widespread adoption in cost-sensitive markets.
Share of API groups in regional base oils supply, 2024
Source: Kline’s Basestock Intelligence Center
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LUBE MAGAZINE NO.191 FEBRUARY 2026
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