Timeline on the Fast Lube Business: A White Paper

by Scotti Lee, Ph. D.
NOLN Contributing Writer

The automotive industry is moving as quickly as it can to be “green.” The industry is using “green” views on climate change to sell new electronic vehicles.

Al Gore states that, “20 percent of CO2 is attributable to deforestation.” That is more than ALL of the world’s cars and trucks combined. With this in mind, I started asking several large firms that supply fast lube businesses what their future plans are.

I found that most of them were starting, or had started many years ago, to divert some of their business interests away from combustion engines, both gas and diesel. Why? The answer is simple. Each year we see more technology developed: hybrids, dual gas/electric and pure plug-in electric vehicles. (Side note: A company just purchased the former GM plant in Newport, Delaware, to produce plug-in hybrid-electric cars by 2010. I do not know who will purchase them, however, since the starting price is $40,000, with the top model having a price of approximately $80,000.) Hydrogen vehicles are in the testing stages; the next big step is to create the infrastructure across the country to fuel these vehicles.

So where are these large firms going? They told me they will continue to supply the fast lube industry until the end, though each year will show a reduced pace of supply as demand fades. However, they are purchasing and developing other manufacturers in such fields as electronics, batteries, motors and other related and non-related products.

We in the fast lube industry should begin looking for ways to service these new products. My rough guess is that the fast lube industry will service combustion engines for a long time. However, the decline is coming — and faster than we think. I believe as we move away from combustion engines we will move into the electronic stage of maintenance. This could involve batteries, motors, PC boards, recharging electric vehicles and refueling hydrogen units. These vehicles will still need tires, wiper blades, A/C charging, etc.

The timeline that I am about to present is not mine. It was compiled from groups that are in our field that have been asked by their companies’ boards of directors to give them a timeline to switch directions or purchase other businesses. By 2030, combustion engines will be in a major decline. This does not mean that all OEMs will stop production of the combustion engine; however, if you look at what is produced in 2010 and what will be produced in 2030, there will be a big gap in combustion engines versus electric.

Therefore, the fast lube industry and the Automotive Oil Change Association should start to do some long-term thinking and planning to help guide members toward the future of their businesses. This is NOT a game in which we can play catch-up during the last year.

While I began this paper looking for information from business leaders and vendors within the fast lube marketplace, I have since found other corroborating data from university studies that confirm the 2030 date. These academic studies came from several universities and general information supplied by several agencies within the U.S. government.

I have reviewed both study methods, and I have seen the results. Bottom line: I am not overly impressed. I will present my findings in three parts: general information, bad news and good news.

1. General information — Fully electric vehicles will have 46 percent of the market by 2030. The estimated heritage fleet turnover is 15 to 20 years. It is estimated that by 2030 there will be 151 million electric vehicles on the road. With all of the electric plug-in vehicles, it is estimated that the United States will have to increase our electric power production an additional 190 to 350 megawatts by 2030. To make the electric program work, the federal government will have to spend $328 billion over the next two decades to build the infrastructure. This money will only cover large cities, and it will begin in the western part of the United States. By 2030, the United States will use 3.7 million fewer barrels of oil each day.

2. Bad news — The cost of servicing electric vehicles will be expensive. There will be two types of service. The first type is charging stations, and the second is what is called switchable batteries. Why are these two types of services important? Almost all electric vehicles will use lithium-ion batteries. Beginning in 2012, mass-produced electric vehicles will be using switchable batteries. Hybrid-electric vehicles will begin to decline in 2019. Will the fast lube industry be ready to meet the demand for one of these types of services?

3. Good news — Electric vehicles will have a drivable range of less than 200 miles. The electric charge will also depend on what equipment is used on board that vehicle (e.g. lights, heat, A/C, radio, wipers, etc.). By this timeframe, the OEMs will be using electric brakes, electric power steering and larger onboard computers. All of these items put a large electrical drain on the battery system, thereby reducing the driving range even further. Therefore, when the customer gets to their destination, they are going to need one or the other type of service: a battery recharge or switch. Customers may not charge their vehicles at home because home charging units will cost approximately $2,000 per unit. To operate an electric vehicle for 100 miles, a battery’s energy must be at least 24 kwh (kilowatt-hours). A lithium-ion battery costs $500 per kwh, or $12,000 for 100 miles.

So far the fast lube business can, besides doing oil changes, move into a very profitable business of charging vehicles/batteries or switching batteries. The batteries are easy to unplug; some will be water cooled, as well. Note that the weight of each battery can exceed 1,000 pounds.

Another potential service for the fast lube industry can be battery sales. Lithium-ion batteries degrade quickly when charged to 100 percent capacity or completely discharged.

What is the cost to operate an electric vehicle? So far, it stands at approximately 10 cents per mile. The basic cost to set up an infrastructure is $300 million per 100,000 electric vehicles. Therefore, small cities and towns will have to depend on fast lube stations for service.

Most families will have to have at least two vehicles. One will be a full plug-in electric vehicle, and the other some type of hybrid. Perhaps by that time the OEMs may have combustion engines that can match electrics in terms of emissions.

My advice is to think creatively. You might be shocked by what new business opportunities are out there.

SCOTTI LEE is operator of Oil Change Express in New Castle, Delaware. He may be reached at 302.324.1900.