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The Role of Light Weight Materials in China's EV Ecosystem
 

The Role of Light Weight Materials in China's EV Ecosystem

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A presentation delivered by Bill Russo at AutoPlastCon in Shanghai on February 28, 2012. Adapted from the paper "The Circuitous Path the Electrification of China's Automotive Industry", with a ...

A presentation delivered by Bill Russo at AutoPlastCon in Shanghai on February 28, 2012. Adapted from the paper "The Circuitous Path the Electrification of China's Automotive Industry", with a strong emphasis on the importance of light-weight materials for green transportation solutions.

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    The Role of Light Weight Materials in China's EV Ecosystem The Role of Light Weight Materials in China's EV Ecosystem Presentation Transcript

    • Booz & Company February 2012The Circuitous Path to Electrificationof China’s Automotive IndustryThe Role of Light-Weight Materials in the Green Mobility EcosystemPresented at AutoPlastCON 2012Shanghai, ChinaFebruary 28, 2012Bill Russo (罗威)
    • When the automobile was introduced in late 1800’s, it was notreadily apparent which engine technology would prevail Electric vs. Steam vs. Internal Combustion Steam Car Electric Car Gasoline-Powered Car (Nicolas Joseph Cugnot 1769) (Robert Anderson, 1839) (Carl Benz, 1886) At the end of 19th century, electrics outsold all other types of cars 2
    • ICE was victorious primarily due to its virtues of speed, power, andrange – courtesy of petroleum’s exceptionally high energy density Competitive Advantages By Powertrain Energy Density Of Petroleum Vs. Other Fuels Energy Available (Mega Criteria Electric Steam ICE Joules per Liter) 40 Clean, free of smoke/odor  X X 36.0 Quiet   X 35 32.0 Reliable, durable  X  30 Simple, easy to maintain  X X Easy to drive and control  X  25 Free of vibration   X 5x 20 Instant starting  X  15 Speed X   Acceleration    10 7.0 Power X   5.0 5 Range, distance X X  1.0 Infrastructure X X  0 Li-Ion Hydrogen Natural Gas Gasoline Diesel Battery (10K psi) (3K psi) Will this time be different?Note: ICE = Internal Combustion EngineSource: ANL, DOE, Sion, NRC, Booz & Company analysis 3
    • 1. A Changing World2. The Battle For Dominance Of The 21st Century Global Auto Industry3. China’s Next Revolution: “Leapfrog” To New Energy Vehicles4. Speed Bump: The Challenge of Reinventing Mobility5. The Alternate Route: Towards a New Ecosystem for Green Mobility 4
    • The distribution of global wealth has been historically skewedtowards mature markets Emerging and Mature Markets Emerging Markets Mature Markets Population Distribution in Emerging & Mature GDP Contribution by Emerging and Mature Markets Markets (2010; Total = 6,809 MM) (2010; Total = $62 Tn) Mature markets Emerging 17% markets Mature 31% markets Emerging markets 69% 83%Source: Global Insight; Booz & Company analysis 5
    • Over the past twenty years, China has achieved stunning economicgrowth Key Shifts Shanghai §  Shift of global centers of gravity for some industries 20 Years Ago Now –  e.g., China is now the largest automotive market and producer in the world, and India is among fastest growing countries §  “Must Consider” gaming dynamics for some others –  e.g., China and other emerging market are low cost souring countries for most international manufacturers §  Breeding ground for innovations driven by market demand and/or local competition –  e.g., Coke does more product innovations in China than any other markets except Japan §  Emergence of real wealth (HNWI’s and middle class) and Shenzhen grand-scale urbanization 20 Years Ago Now –  e.g., China soon to become the world’s largest luxury goods market §  Huge infrastructure still ongoing –  US$300 billion plan to build a nationwide high-speed rail network by 2025 §  Increasing prominence of local companies on a global scale –  Resources, capabilities, market positions, etc. §  Significant capital flow to China, in particular private equity funds 6
    • The world has entered a new era since 2008, with more than half ofhuman population living in urban areas Global Urban Population China’s Urban Population Mil. 2000-2050 Mil. 1980-2020 People Forecast People Forecast10,000 1,500 8,000 Rural 1,200 Rural 6,000 900 4,000 600 70.0% Urban 58% Urban 2,000 300 47% 52% 46.7% 49.5% 50.7% 36% 26% 19% 0 0 2000 2007 2008 2050E 1980 1990 2000 2009 2015E 2020E §  More than half of the global population live in urban §  At start of reform era, more than 80% of China’s area since 2008 population was in rural areas §  Majority of China’s population will reside in urban areas by 2015 §  Creation of urban middle class fuels demand for personal mobilitySource: National Bureau of Statistics, UN, Booz & Company 7
    • 1. A Changing World2. The Battle For Dominance Of The 21st Century Global Auto Industry3. China’s Next Revolution: “Leapfrog” To New Energy Vehicles4. Speed Bump: The Challenge of Reinventing Mobility5. The Alternate Route: Towards a New Ecosystem for Green Mobility 8
    • For the Global Auto market, Asia pacific represents the greatestopportunity for growth… Eastern Europe Western Europe Growth thru 2020: 2,835K NAFTA Growth thru 2020: 1,527K CAGR (2010-2020): 6% Asia Pacific Growth thru 2020: 5,528K CAGR (2010-2020):1% Growth thru 2020: 12,626K CAGR (2010-2020):4% CAGR (2010-2020): 5% Africa/Middle East Growth thru 2020:1,264K = Area Reflects Size Of 2009 Actual PV Sales Latin America CAGR (2010-2020):4% Growth thru 2020: 2,899K = Area Reflects Size Of 2020 Forecasted PV Sales CAGR (2010-2020): 6% ’000 Units Market 2010 PV 2015 PV 2020 PV Asia Pacific 22,212 30,350 34,838 NAFTA 11,545 16,877 17,073 Western Europe 12,776 14,133 14,302 Eastern Europe 3,261 5,035 6,095 Latin America 4,030 5,570 6,929 Africa/Middle East 2,946 3,783 4,211Source: Global Insight Data 9
    • …within Asia pacific, the greatest growth opportunity is China China: Growth thru 2020: 8,653K CAGR (2010-2020): 6% Japan: = Area Reflects Size Of 2009 Actual PV Sales Japan Mongolia Growth thru 2020: -457K North Korea CAGR (2010-2020): -1% = Area Reflects Size Of 2020 Forecasted PV Sales China South Korea India Pakistan Nepal South Korea: Bhutan Bangladesh Myanmar Taiwan Growth thru 2020: 110K CAGR (2010-2020): 1% Laos ’000 Units Vietnam Taiwan: Cambodia Market 2010 PV 2015 PV 2020 PV Growth thru 2020: 79K India: Philippines Thailand CAGR (2010-2020): 2% China 11,462 17,296 20,115 Growth thru 2020: 2,621K CAGR (2010-2020): 8% Malaysia Japan 4,254 4,075 3,797 ASEAN: Growth thru 2020: 1,074K India 2,240 3,700 4,862 CAGR (2010-2020): 5% Indonesia ASEAN* 1,634 2,185 2,709 South Korea 1,302 1,407 1,412 Australia 807 1,020 1,117 Australia Australia: Taiwan 299 337 378 Growth thru 2020: 310K CAGR (2010-2020): 3% New Zealand 63 82 87 New Zealand Rest of Asia Pacific 152 247 328 Total 22,212 30,350 34,838Note: ASEAN figures include top 5 ASEAN member countries, including Thailand, Malaysia, Indonesia, Singapore, and Philippines Rest of Asia-Pacific includes Hong Kong and PakistanSource: Global Insight Data 10
    • China has only recently entered the accelerated growth phasetypical of emerging markets… Canada 600 Australia Discussion Germany The S- U.K. §  A country’s threshold of 500 curve mobility lies near US U.S. $10,000 GDP per capita Poland (PPP), whereCars per 1,000 People 400 Malaysia automobile ownership accelerates Russia 300 Argentina §  China is at the early Mexico taking-off stage of the S- curve Brazil 200 Turkey §  Due to enormous Thailand growth potential, China 100 is likely to be a “game- Iran changer” for the global China Indonesia auto industry 0 India 1,000 10,000 100,000 China GDP Per Capita (Logarithmic Scale)Note: Each line of symbols represents a 19-year progression for one country, from 1990 through 2008, GDP Per Capita is in Purchasing Power Parity (PPP)Source: Booz & Company analysis 11
    • …and China’s continued economic development will stimulateauto industry growth for the foreseeable future China Passenger Vehicle Installed Base (PARC) Key Drivers Forecast (2009-2030) §  Car ownership in China is powered by the 600 Increase in Car growing economy – the upside is High Forecast substantial Ownership Base Forecast 500Passenger Vehicle PARC (million units) Low Forecast 480 §  Government has been continuously 400 410 Government’s guiding and supporting the industry’s Support to Auto development across manufacturing and Industry distribution 330 300 §  China’s financial system is less exposed China and GDP growth is still very fixed 200 Economy’s investment driven, thus is less vulnerable Resilience to recent financial turbulence impact 100 §  Highway network development provides Infrastructure foundation for more motor vehicle-based 0 Development based transportation 2009 2014 2019 2024 2029 §  China is investing in infrastructure to support alternative propulsionNote: Passenger vehicles contain sedans, MPVs and SUVsSource: Global Insight 2010, OPEC, DGS Report, Booz & Company analysis 12
    • 1. A Changing World2. The Battle For Dominance Of The 21st Century Global Auto Industry3. China’s Next Revolution: “Leapfrog” To New Energy Vehicles4. Speed Bump: The Challenge of Reinventing Mobility5. The Alternate Route: Towards a New Ecosystem for Green Mobility 13
    • With increasing pressure from air pollution, oil consumption andcongestion, China is compelled to reinvent propulsion technologies China to Reinvent Propulsion Technologies Air Pollution §  Beijing, Xi’an, Shenyang, Shanghai and Guangzhou have been listed among the Top 10 cities with the worst air pollution. The massive growth of the automotive market only adds to the problem §  The rapid growth of the automotive market worsens the problem. For example, Beijing’s automobile industry contributed 73% of the overall pollution problem in 2003 Energy Consumption §  China imports two-thirds of its oil, and its ever-increasing thirst has had a dramatic impact on global energy prices §  The gasoline and diesel consumption has accounted for half of the total consumption of petroleum products Traffic Congestion §  In the light of the current rate of development and gas consumption level, China will have over 150 million vehicles and petroleum consumption will exceed 250 million tons in 2020 For alternative propulsion technologies such as clean diesel, hybrid and electric vehicles, China does not lead the technological developmentSource: Synergistics; Booz & Company analysis 14
    • As the leading automotive market, China has the opportunity todrive the standards and architecture for the global auto industry Shanghai: A Lean, Green Detroit “… In acquiring a stake in BYD, Buffett broke a couple of his own rules. "I dont know a thing about cellphones or batteries," he admits. "And I dont know how cars work." But, he adds, "Charlie Munger and Dave Sokol are smart guys, and they do understand it. And theres no question that whats been accomplished since 1995 at BYD is extraordinary…”Source: Literature research 15
    • Comparing with mature markets, China stands out as asignificant opportunity and seems more ready to introduce EV Key Forces in China Driven by greater environmental §  Passenger ownership per pressure and energy Government Consumer capita in China suggest a very consumption, China China low penetration of vehicles in Support Acceptance government has stronger Market Is a China incentive to promote cleaner Significant §  Consumer habit in China is still technologies in automobile Opportunity in the forming process due to industry relatively short driving history Meanwhile, China’s automobile §  Thus consumer acceptance to industry has lagged behind EV is comparatively high than foreign leaders under internal mature markets (e.g. US with Mass Production combustion engine era, and approx. 20-year driving history) Environment the emergence of EV provides §  Meanwhile, the switching cost is a great opportunity for China to expected to be low catch up Readiness for EV §  China possesses ample resources to achieve low cost production Mature Market §  Established battery manufacturers with China large-scale capacity, especially supply lithium battery to cell phone/laptopSource: Booz & Company analysis industry 16
    • Since 2001, EV has been a key part of development agenda, thishas helped propel EV’s technical development to-date 10th Five-Year-Plan 11th Five-Year-Plan 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 National science development program (863): “National science development program (863)”: key electric vehicle projects key energy efficient and alternative energy vehicle projects Car: more prototypes developed by OEMs and Car: small scale production and export overseas universities BEV Bus: demonstration on Beijing city bus line Infrastructure: State Grid considering charge station construction Car: Local OEM released HEV launch plan Car: prototype developed HEV Bus: 400,000km demonstration in Wuhan Bus: HEV and PHEV listed on the government product agenda bulletin Demonstration: UNDP in Shanghai and Beijing Car: prototype developed in Tongji University FCEV Bus: prototype developed in Tsinghua University Infrastructure: 2 filling stations in Shanghai and Beijing Government initiatives led the development More OEMs involved in EV initiatives of a number of EV project More efforts in commercialization EVsNote: BEV = Battery-powered Electric Vehicles; HEV = Hybrid Electric Vehicles; PHEV = Plug-in Hybrid Electric Vehicles; FCEV = Fuel Cell Electric VehiclesSource: Synergistics Limited analysis 17
    • In the “12-5” period, China has committed to developing sevenemerging industries 12-5 Plan Strategy Highlight Drivers for the Trend §  Continue to increase value added §  China’s leading industries, such as steel §  Eliminate outdated capacity industry and petrochemical industry, consume Leading §  Develop advanced equipment Energy a larger amount of energy per unit of GDP, Industries manufacturing industry Consumption whose growth will not be sustainable with the limited reserve of energy §  Increase government support to §  China has very limited reserve of natural develop the 7 emerging industries* resources such as ore, oil, etc, which motivates Seven Lack of the Chinese government to cultivate industries of strategic significance Emerging Natural that are less natural resource consuming Industries §  GDP contribution of the 7 industries Resources should increase to 8% by 2015 from the current 2% §  Cultivate the culture industry to be a §  With China’s labor cost rising, Chinese industries leading industry have been losing edge in international competition Producer Services §  Implication: the share of value added Increasing §  It is necessary for China to transform its industry Industry of GDP by the culture industry needs Labor Cost structure to make it more technology and to double from the current 2.5% to innovation-driven 5%Note: 7 strategic emerging industries include energy efficiency & environmental protection, new generation information technology, bio-technology, high-end equipment manufacturing, alternative energy, new materials, electric vehicleSource: China 12-5 plan; Literature research; Booz & Company analysis 18
    • Summary of China 12th Five-Year Plan, the Energy Saving andNew Energy Vehicles Development plan (2011-2020) proposal Policies Summary Implication §  Government will push core technology OEM §  Improving energy efficiency, environmental protection and transfer from international brands to Innovation safety technologies; indigenous brands through approval of new JV and capacities §  Revised Policy on Development of Automotive §  Promote cross-regional M&As Increase Industry might be released this year. Industry §  To form 2 to 3 super big automotive groups with production §  SAIC, FAW, Dongfeng and Chang’An will be Concentration capacity with over 3 million units encouraged to conduct more takeovers MIIT, NDRC, MOST and MOF are key regulatory authorities §  Government Funding: 100 billion yuan •  MOST supports development of electric vehicles as priority, ($15.28 billion) New-Energy pure EV for buses and mini cars and hybrid and plug-in hybrid Vehicles power auto for medium size vehicles •  MIIT supports development of energy saving vehicles (including hybrid power vehicles) and new energy vehicles (including pure EV and plug-in hybrid power vehicles) §  Encourage the development of self-owned brands §  Domestic self-owned brands to reach 50% Industry Upgrading §  Enhance R&D capability for whole vehicles and key modules/ §  Over 10% self-owned brands to export parts §  More tax break and incentives for electric Consumption §  Encourage the purchase of energy saving vehicles car makers and buyers are expected Stimulus §  Differentiated incentives for hybrid and electric car buyers are releasedSource: China 12-5 plan; Literature research; Booz & Company analysis 19
    • China government has established their medium-term targets forNEVs, and planned around 5~10Mn PARC by 2020 Electric vehicles in Chinese central government’s Alternative-energy vehicles 12th five-year plan (2011-15) development plan (2011-20) Highlights Highlights §  No. of electric vehicles on the road: 1Mn by 2015 §  Financials: Chinese central government to provide §  Production capacity of vehicle batteries: 10Bn 100Bn RMB for the next 10 years in developing WH. Cost of vehicle batteries should halve due to alternative-energy electric vehicles increased production scale §  Number of electric vehicles on the road: 5~10Mn by 2020. Equivalent to 20% of all private passenger Guidelines vehicles §  R&D: continue the country’s 3-by-3 R&D framework §  Production capacity of BEV: 1Mn a year by 2020 and increase its pace in EV commercialization §  Infrastructure: increase the network of EV charging Program coverage stations §  R&D and technical developments §  Technical standards: set Chinas own EV standards §  Development of core EV components as well as participating in setting international §  Commercialization, demonstration and roll-out pilot standards programs §  Expand the use of EV in the public transport §  Establish network of charging stations in public sector places (such as car parks) §  Increase technical collaborations between EV stakeholders §  Develop technical and R&D talentsSource: Literature research, Booz & Company analysis 20
    • 1. A Changing World2. The Battle For Dominance Of The 21st Century Global Auto Industry3. China’s Next Revolution: “Leapfrog” To New Energy Vehicles4. Speed Bump: The Challenge of Reinventing Mobility5. The Alternate Route: Towards a New Ecosystem for Green Mobility 21
    • The road to the new automotive world order will be challengingand will require significant transitions from today’s status quo Key Challenges §  How can OEMs build up the new structures and capabilities required to develop alternative powertrain vehicles?Capabilities §  Who should the OEMs partner with in order to build and improve these capabilities? §  Where and how do OEMs find the suppliers for new technologies? How will these relationships be different from relationships with current suppliers?Suppliers §  How can the supply chain be aligned to meet the needs of the new supplier landscape? §  How will infrastructure supply (e.g. electric charging stations) be built up? §  What changes are in store for the current manufacturing structure and how can they beChange managed most effectively? Engineering? Sales & Marketing?Management 22
    • Among different technology trends, sustainable mobility and massreduction have been a key focus globally and in China 1 Different Technology Trends Gasoline/ Diesel ICE Mercedes E-Class 2 ü Mass Reduction via Light- Biofuel ICE Weight Materials Chevy Tahoe E-85 2 CNG ICE Telematics and ü Sustainable Mercedes E-Class Blue-Tec Infotainment Mobility: the 3 Conventional Reinvention of Hybrid Automotive Toyota Prius Propulsion Enhanced Safety & 3 Plug-in Comfort Hybrid Chevrolet Volt 3 “Glocalization”: Global Electric Vehicle Products Adapted to Local Requirements i-MiEV 4 Hydrogen Fuel Cell xEVs - Covered in detail Vehicles Honda FCX Clarity 23
    • 3 Hybrid/ Electric VehiclesxEVs are becoming popular as they provide higher fuel efficiencyby using electric motor to supplement/ replace engine power Comparison between Different Powertrain Technologies Internal Hybrid Electric Plug-In Hybrid Extended Range Electric Vehicle Combustion Vehicle Electric Vehicle Electric Vehicles (EV) Engine (ICE) (HEV) (PHEV) (ER-EV) Car Model Honda Toyota Ford Chevrolet Tesla Civic Prius Escape Volt Roadster Petrol usage: Petrol usage: Petrol usage: Petrol usage: Petrol usage: Powered entirely by Engine powers car Petrol generator Petrol generator None petrol, diesel, CNG or when additional power recharges battery when recharges battery when biofuels, other than a is required charge is low charge is low Technology battery for starting Electricity usage: Electricity usage: Electricity usage: Electricity usage: Electricity usage: Generated by Battery with mains runs Battery with mains or Runs entirely on None regenerative braking, the vehicle alone or to generator charge runs electricity from mains supplements engine supplement the vehicle alone charge powerFuel Efficiency savings 0% 5 - 40% 1 5 - 50% 1 35 – 60% 1 100% Electrification Petrol / Diesel Electricity1) Depends on xEV battery sizeSource: Official car websites, Booz & Company analysis 24
    • The focus of OEMs is clearly on full hybrids and full batteryelectric vehicles Number of Electric Models Launched Number of Electric Models Launched By Technology, 2009-2013 By Technology and Segment 2009-2013 Main Models Mild Full Plug-in Battery Type of Vehicle Hybrids Hybrids Hybrids Electric §  BMW ActiveHybrid 5 SeriesMild Hybrids 6 §  Chery A5 Mild Hybrid A&B– “Mini & Small” 3 13 §  Mercury Milan Hybrid C – “Middle” 2 3 3 7 §  Toyota Prius III Full Hybrids 25 §  Ford Fusion Hybrid D – “Large” 1 5 2 1 §  Mercedes E400 Hybrid E&F “Luxury & Sport” 2 6 3 4 §  Toyota Prius Plug-in Hybrid SUV 6 1 1 Plug-in 10 §  Chevrolet Volt Hybrids §  Mercedes S500 Plug-in-Hybrid MPV 1 2 §  Nissan Leaf LCV 1 1 Battery 29 §  Renault Fluence Z.E Electric Total 6 25 10 29 §  Ford Focus BEV.Source: Just-Auto, Booz & Company 25
    • The potential for xEVs is tied to cost of ownership for a powertrain 5 Year Total Cost of Ownership Discussion of Component Measured in USD Thousands, Year = 2010 $27.4 §  Fuel cost represents mix of vehicle efficiency, driving patterns and fuel prices $6.5 Fuel Cost §  In the example, fuel cost assumes a fuel price of $3.00 per gallon, annual mileage of 12,500 and blended mpg of 25.4 §  Maintenance expense includes oil, filters, brake pads, and $3.4 Maintenance Cost other wear items replaced at regular intervals §  Fixed cost includes initial purchase price minus the residual value of the vehicle at end of life (in this example - 5 year life cycle) §  Residual values are adjusted based on vehicle miles $17.5 Fixed Cost (net of depreciation) Midsize Gas ICE (12,500 miles / year) 26
    • After considering the key decision factors, xEVs are not economical today, as the initial costs far outweigh operating cost savings U.S. MIDSIZE CAR EXAMPLE 2010 Total Cost of Ownership (5 Years) 5 Year TCO 12,500 Miles Per Year, $3.00/gallon fuel, Battery Cost/kWh = $750, No Range Anxiety Adj for BEV($ in Thousands) Electricity Fuel Maintenance Fixed Cost (net of depreciation) 50 48.6 1.7 Pattern holds true for 2.0 China and Europe 40 (where diesel beats gas) 36.1 1.0 1.5 2.2 30 28.1 29.0 27.4 4.9 6.5 5.9 3.0 44.9 20 3.4 3.4 31.4 10 18.8 21.1 17.5 0 Gas Diesel Hybrid PHEV 40 BEV 100 Sources: Booz & Company market model 27
    • However, in ten years, the gap between ICE and xEVs will close considerably U.S. MIDSIZE CAR EXAMPLE 2020 Total Cost of Ownership (5 Years) 5 Year TCO 12,500 Miles Per Year, $3.00/gallon fuel, Battery Cost/kWh = $340 - $460, No Range Anxiety Adj for BEV($ in Thousands) Electricity Fuel Maintenance Fixed Cost (net of depreciation) 50 Pattern holds true for 40 China and Europe 30.8 32.0 30 1.0 1.7 27.2 27.9 28.0 1.4 2.0 2.2 5.3 4.5 5.9 3.4 3.0 20 3.4 26.2 28.3 10 19.2 20.4 17.9 0 Gas Diesel Hybrid PHEV 40 BEV 100 Sources: Booz & Company market model 28
    • In the interim, a number of technologies will achieve incrementalimpact on efficiency improvement in ICE Technology for Improved Fuel Economy and Reduced CO2 Emissions Fuel Efficiency Gain* Incremental Cost Per Car (%) (€) Engine Downsizing (with Turbo or Supercharger) 13% 300 Direct Injection/Lean Burn 12% 400 ü Light Weighting 10% 500 Stop Start with Regenerative Braking 7% 550 Dual Clutch Transmission 7% 1,400 Variable Valve Actuation 6% 300 Electric Steering 5% 100 Reduced Mechanical Friction 4% 50 Electric Power Hydraulic Steering 4% 50 Stop Start 4% 200 Low Rolling Resistance Tires 3% 100 Aerodynamics 2% N/A* Fuel efficiency gains are calculated as the individual technology impact to fuel efficiency immediately after it is applied to a base engine using state-of-the-art technologySource: King Review, Deutsche Bank, NHTSA, Booz & Company analysis 29
    • Having said that, hybrid powertrains are expected to gain onlyabout 10% market share by 2020 - diesel & gasoline will stillremain leading technologies Sales forecast for PVs that use various technologies 2000-2050 Forecast, millionSource: IEA, Booz & Company analysis 30
    • Steel accounts for more than 50% of the weight of an average passenger car Materials in a Passenger Car Major Steel Applications in a Car (By % of total weight) Others Glass 8% Rubber 4% 3%Aluminium 6% Plastics 11% 56% Steel 12% Iron Source: SMMT, Corus, Booz & Company analysis 31
    • A “leapfrog” of propulsion technology to electrical power willrequire concurrent innovation in auto design Evolution from Horse Power to Electric Power Example of an Electric Powered Skateboard Mechanical Electrical power power power HorseSource: Reinventing the Automobile, Booz & Company analysis 32
    • Future electric vehicles will be both internally and externallydifferent from current ICE vehicles Internal External ICE Vehicle Electric Vehicle §  Power-trains of electric vehicles are §  Future electric vehicles will have completely different from that of ICE vehicles smaller size and lighter weightSource: Reinventing the Automobile, Booz & Company analysis 33
    • Different electric-drive vehicles will meet different transportationneeds Characteristics of Electric-drive systems Electric-drive Vehicles for Different Transportation Needs Battery- Extended- Fuel-cell High load electric range electric electric vehicle vehicle vehicle Vehicle size ≤Small ≤Compact ≤Family Hours Refueling time Hours (battery Minutes Duty cycle charging) Range 100+ 300+ 300-400 (miles) Vehicle 0~40 miles 0 0 emissions daily Diverse/ Diverse/ Diverse/ Energy source Petroleum with Light load petroleum free petroleum free range extender Already Already Refueling available at Must be available at infrastructure home and deployed home City Intra-urban Highway-cycle Highway station Stop and Go Drive cycle ContinuousSource: Reinventing the Automobile, Booz & Company analysis 34
    • 1. A Changing World2. The Battle For Dominance Of The 21st Century Global Auto Industry3. China’s Path To Electrification4. Speed Bump: The Challenge of Reinventing Mobility5. The Alternate Route: Towards a New Ecosystem for Green Mobility 35
    • For automakers, “green mobility” optimization problems lie in thebalance of the cost, weight and function Key Drivers New features/functions Safety Customer Requirements Fuel efficiency Cost Price Performance/durability Safety Regulatory Emissions control Requirements Re-cycling Material Noise control Selection Optimization Competitive performance Triangle OEM/Supplier Manufacturing costs Weight Function Requirements Manufacturing criteria(1) Investment 36
    • Solutions for the “green mobility revolution” require a neweco-system of collaborative partnerships 3 Dimensions of the New Eco-system Regulatory Innovation Frontier (Government) §  New policies (including subsidy policy) to support the commercialization of green transportation technologies Technical Innovation Frontier Business Innovation Frontier (Auto Industry) (Cross Industry/Value Chain) §  Partnerships among key §  Partnerships between other players to deliver deep, industries and auto makers/ scalable solutions for future suppliers to develop new green transportation business model for future green cars 37
    • TThere will be changes in OEM manufacturing footprint, and newsuppliers will play a role in the new EV powertrain value chain Dynamic Changes for OEMs and Suppliers New Supplier Segmentation in the EV Powertrain Value Chain Powertrain Development Power Train Integration Market changes from ICE to PT Infrastructure EV PT Batteries E-Motor Cables & System EV System Integration Components Auto OEMs Third-Party EV Depend OEMs Powertrain on E.g. Suppliers Utilities §  Traditional in-house Standard industry ICE production Tier 1 capabilities Suppliers New Supplier Base Non-auto Suppliers 1.  OEMs’ assets previously bound in ICE manufacturing facilities will be diversified Supplier 2.  New suppliers that do not have a role in Concentration the past will come into play High Concentration Low Concentration Key Supplier Research/Minor SupplierSource: Interviews, Booz & Company analysis 38
    • TIn EV manufacturing, light weight material technology is a keyenabler for the migration from ICE to EV … Key Components in EV Ecosystem Description Discontinuities 1 §  Different integration challenges §  Outsource for manufacturing Vehicle §  Challenge in in-house focus of Assembler & §  Integration and assembly production Developer §  Brand refocus and new service requirements §  Charging System §  New Powertrain components with 2 §  EV Battery with BMS completely different technologies Powertrain §  Inverter §  Electrification of other components §  Electric Motor §  Consolidation of cell manufacturers §  Transmission 3 §  Structure Optimization §  Acceleration of lightweight §  Lightweight technologies for new development of vehicle body Vehicle Body materials §  Connection & Joining Technologies 4 §  Bottom plate §  Much simpler to design and §  Suspension produce, compared with ICE Chassis vehicles §  Wheels §  … 39
    • T… and partnerships are essential deliver breakthroughPowertrain and Vehicle Body innovation Vehicle assembly and development: §  Established OEM brands exist: new entrants will have extreme difficulties to establish trusted brands with consumer §  Highly sophisticated engineering capabilities required for vehicle development on a continuing basis: most vehicle assembly does not add much value without vehicle development 1 st Powertrain Revealing the biggest “discontinuity” driven by the technology migration from ICE to EV Holding the most value of vehicle Vehicle Body 2 nd EV needs for new lighter and stronger materials to replace relatively heavy steel body of conventional vehicles However, currently available technologies cost is too high; thus the key challenge would be to develop economical materials for vehicle body Chassis Not too difficult (even much simpler) to design and produce, compared with ICE vehicles Not much value-added 40
    • 3 Vehicle Body T EV requires new lighter and stronger materials to replace relatively heavy steel body of conventional vehicles Light Vehicles by powertrain technology1) Vehicle Lightweight Technology Alternatives In mn vehicles, CAGR in % 2010-2025 EV HEV ICE Realization of smaller flexible vehicle CAGR 48% 19% 2% 102,5 Structure concepts with comfort and safety of 3,9 Optimization 92,9 large cars 2,6 12% Provide enhanced modularity for the total 84,2 10% body structure 4% 0,6 66,2 64,1 Lightweight or multi material design and Lightweight in EV and Hybrid 1% 0,0 1% 0,0 application can help to achieve weight EV applications is Lightweight expected to increase reduction Materials quickly Downsizing of all possible vehicle 84% equipment in order to save weight 95% 88% X-by-wire systems without mechanical 99% 99% backup to optimize package and weight Support new flexible body concepts to adapt vehicles to market and society Connection & requirements Joining 2008 2010 2015 2020 2025 Technologies Efficient multi-material joining technologies to adopt the usage of different materials for structural vehicle Crisis impact EV Hybrids ICE applications in one vehicle 1) Light vehicle means “Manufacturing of passenger cars & light commercial vehicles (< 6T), as well as parts Wholesale & repair not included”. Rounding effects may occur Source: Booz & Company analysis 41
    • 3 Vehicle Body T Generally we see four major material groups in the field of light weight materials… Overview Lightweight Materials in Structural Applications Current Application Future Application Light Weight Material Product Characteristics Areas Areas High Strength §  High Toughness, high yield strength §  Body structure §  Vehicle chassis Steel §  High stiffness, critical for automotive uses §  Frontend beam §  Structural components/ §  Achieves a fatigue limit, good for long-term design §  Already increased crash components -30-35% without ongoing inspections penetration §  Seats, interior components Aluminum §  Carbon fiber woven tows in a resin matrix §  Space Frame §  Pure chassis elements §  Highest stiffness, yield strength, lowest mass §  Stringer §  Interior decorative -40% §  Crash characteristics tend to destroy chassis §  Gearbox crossbeam components components, making it very difficult to repair outside OEM factory.. Magnesium §  Very low weight, but low relative stiffness and yield §  Engine block, mounts §  Vehicle chassis strength §  Valve covers §  Further engine block usage -15-20% §  Potential flamabiltiy issues and creep in high §  Steering column brackets §  Transmission case temperature applications, 630 ° C flashpoint is low §  Seat frames relative to steel Carbon Fiber §  Moderate yield strength, lower toughness, but much §  Vehicle chassis §  Chassis Reinforced lower mass Polymer §  Aerodynamic surfaces, §  Interior structural (CFRP) §  Low to moderate stiffness on a mass basis to steel sporting equipment components §  No fatigue limit, so structures must be over designed §  Super premium sports -50% or expensive regular inspection must be performed oriented automobiles -x% Up to x% weight efficiency compared to conventional steel in automotive Source: Booz Allen Hamilton Technology Center, Booz & Company 42
    • 3 Vehicle Body T … and their applications in vehicle development and manufacturing Weight Reduction Latest Production Example Body Difficult to Implement Porsche Cayenne Aston Martin DB9 Porsche Carrerra GT Aluminum Frame Enzo Ferrari Metal/Carbon Fiber Porsche Cayenne (HSS/ Aluminum/High Strength Steel Carbon Fiber Composite Engineered Plastic 1 Piece Aluminum) (HSS) Materials Injection Molded Chassis §  2011 Porsche Cayenne S has achieved §  Chassis is 25% of vehicle curb weight §  Fast cure time resins will allow practical §  Polymer molding and flow improvements a 180 kg (8%) weight reduction, with a §  Aluminum can reduce vehicle weight high volume manufacturing of will allow entire vehicle chassis to be 2.065 kg empty weight by ~40% (2kg steel chassis replaced composites for ~50% chassis weight constructed from engineering plastics §  Chassis – 66 kg (Aluminum, HSS, low by 1kg aluminum for equal stiffness savings §  Crash safety issues will be solved with Features speed transfer gearbox elimination) and deflection) §  Advances in carbon fiber manufacturing more innovative structural design possible §  Doors – 39 kg (new manufacturing §  High strength steel can reduce chassis will reduce energy requirements (mainly with plastics versus metal stampings process, aluminum, HSS) weight by approximately 30-35% pyrolysis, eliminate oxygen, nitrogen §  Harnesses – 10 kg (40-50% greater strength per weight) and hydrogen) and subsequent high material cost §  Some mass reduction achieved through §  Costs still not likely to be competitive §  Reparability is very difficult outside §  Reparability infrastructure would need to elimination of low speed off-road with low carbon steel = “good enough” OEM factory develop Disadvantages capability §  Cost is the most significant barrier §  Crash resistance qualification would be challenging Preferred §  Optimized for on-road driving §  VW Up! Lite uses high strength steel §  Premium class §  Emerging markets Applications performance and fuel efficiency (and aluminum combination) §  Energy enthusiast class Source: Booz & Company analysis 43
    • 3 Vehicle Body T In addition, plastic-based, petro-chemical materials are continually finding new uses in both exterior and interior automotive parts Overview Plastic-based Materials for Automotive applications Light Weight Material Product Characteristics Current Application Areas OEM Producer Nylon §  Improved modulus, strength, §  Automotive parts (e.g. timingbelt §  Toyota §  GE Plastic, Bayer, nanocomp heat distort temperature, cover, door panel, engine cover, Honeywell Polymer, osites §  Mistubushi barrier properties barrier, fuel line) RTP Company, Toyota, §  GM §  Reductions in vehicle weight Ube, Unitika Polyolefin §  Stiffer, stronger, less brittle, §  Step-assist for GMC Safari §  GM §  Basell, Blackhawk nanocomp more easily recycled, Automotive, Plastics osites §  Chevrolet Astro vans improved flame retardancy Inc, General Motors, §  Heavy-duty electrical enclosure §  Reductions in vehicle weight Gitto Global Corporation, Southern Clay Products Forte §  Improved temperature §  Automotive furniture appliance §  GM §  Noble Polymer nanocomp resistance and stiffness, very (ex: seatbacks, center console) osites §  Honda good impact properties §  Reductions in vehicle weight Plastic-based nanocomposites are gaining acceptance in automotive applications such as Body Panels and Bumper Fascias with the strength, thermal stability, light weight and cost-effective features Source: Expert interview, web search, Booz & Company 44
    • 3 Vehicle Body T CFRP is a promising material for EV in terms of light and strength; however, its manufacturing cost is expected to remain high Expected Lightweight Material Cost Reduction Range CFRP is light and strong €/kg (in €/kg) Excellent performance in weight reduction: 18 –  Weight reduce by 50%+ 16 –  Oil efficiency raise by 40%+ 14 CFRP Excellence energy absorbing capabilities (e.g. application to F1) 12 Honeycomb 10 Example Magnesium 8 Aluminum Tesla “Roadster” 6 4 High Strength Steel 2 Promoted in 2008, manufactured by Tesla 0 CFRP adopted in vehicle body and interior 2010 2012 2014 2016 2018 2020 2022 2024 2026 decoration, deducted weight to approx. to 1,000 kg (normally avg. weight for passenger vehicle 1,800~2,000 kg) Carbon Fiber Composite Outstanding performance: Fragmented use of carbon fiber due to –  <4 seconds from 0 to 60miles/hour - Remaining cost ineffectiveness - Limited processability (low volume series high –  Duration distance: >200 miles (322km) performance cars) Very expensive: US$ 109,000 - Low side crash/ passenger crash safety performance Source: Booz Allen Hamilton Technology Center; literature research; Booz & Company 45
    • 3 Vehicle Body T Moreover, industry is highly concentrated in few global players with leading technologies that leaves limited chance for new comers PAN-based Small Tow Segmentation (by output, estimated) 35% Toray Toho Mitsubishi Rayon CFRP Segmentation PAN-based CFRP Segmentation 24% The Others (by output, estimated) (by output, estimated) 23% Top 3 manufacturers 18% 73% accounted for 77% 10% 90% PAN-based Large Tow Segmentation 27% (by output - estimated) AKZO-Fortafil PAN-based Small Tow CF 15% SGL Pitch-based Large Tow CF 41% Zoltek 21% The Others Top 4 manufacturers 22% accounted for 88% Source: Literature research; Booz & Company analysis 46
    • BIn addition, the development of EV industry requires partnershipacross the value chain Key Stakeholders of the EV Industry After-Market R&D Sourcing Assembly Distribution Retail Services Auto Part OEM R&D VM Distributor Dealership Consumer Battery OEM Product Flow Cooperation or Battery Leasing & Contract Utility Recharging Collaborative partnerships with emerging players will ultimately drive the green revolutionSource: Booz & Company analysis 47
    • BCoda’s network of partnerships is an example of a new businessmodel for collaborative EV development Collaboration Model The Co-Op Model: Case 1 §  Partners in Powertrain System –  Coda formed a Joint Venture with Lishen Power Battery called Lio Energy Systems to develop batery systems exclusively for Coda Lio Energy –  Motor technology from UQM, a U.S. based Systems manufacturer of electric motors, generators and controllers §  Partners in Vehicle Platform –  Entered a letter of intent with Great Wall Motor, a fast-growing Chinese automaker, to supply advanced electric powertrains and jointly develop BEVs that will be sold Hafei worldwide. –  Current EV models sold in U.S. are based on gasoline-powered vehicle from Hafei Motor, a Global partnerships to develop EV models for sale worldwide subsidiary of stated-owned Changan Group, China’s fourth largest auto group.Source: Synergistics Limited analysis 48
    • BBetter Place is challenging the fundamental economics of EVownership by offering a battery leasing and service model Collaboration Model The Co-Op Model: Case 2 §  Business Model –  Customers enter into contracts to purchase driving distance. The initial cost of an electric vehicle may also be subsidized by the ongoing per-distance revenue contract. The goal is to enable electric cars to sell for less than the price of the average gasoline car sold in the US. §  Cooperation Model –  The Israeli government will provide tax incentives to customers, Renault will supply the electric vehicles, and Project Better Place OEM Partnersips Government partnerships will construct and operate an Electric Recharge Grid across the entire country. Electric vehicles will be available for Infrastructure to be deployed on a country-by-country basis, beginning with Israel and Denmark customers in 2011.Source: Synergistics Limited analysis 49
    • BHertz is teaming up with GE Energy and BYD to expand itspresence in the China market leveraging EV partnerships Collaboration Model The Co-Op Model: Case 3 §  Cooperation Model –  Rental giant Hertz Global Holdings announced it will team up with GE Energy and BYD Auto to expand its electric-vehicle leasing business into China. –  The intention is to capitalize on Chinas still- nascent EV market, though high cost and weak infrastructure remain the biggest hurdles to popularizing the technology. –  Hertz will offer EV leasing to consumers and companies in Shanghai, Shenzhen and Beijing, initially using E6 electric crossovers made by BYD, with GE helping to build up an initial network of 770 charging stations. Private sector collaboration to jointly address infrastructure challenge with support from governmentSource: Synergistics Limited analysis 50
    • RThe central government is playing a key role in shaping industrydevelopment Official China at Work SASAC Vehicle Manufactures Electric Vehicles Market Battery Utilities Manufacturers CompaniesNote: SASAC: State-owned Assets Supervision and Administration Commission of the State CouncilSource: Booz & Company analysis 51
    • Conclusions: An auto revolution requires a new eco-system ofcollaborative partnerships Trends Implications§  The global economic center of gravity §  The Green Mobility revolution requires new “eco- has shifted to the East, and China has system” of collaborative partnerships become the battleground for 21st Century –  Regulatory frontier: proactive government auto industry dominance interventions to develop policies and deploy infrastructure for green cars§  Population, environmental, and –  Technical frontier: partner among economical problems are urging ”Green automakers and new class of xEV suppliers to Mobility” innovations, which will deliver deep, scalable green mobility solutions dramatically change the auto industry –  Business frontier: partner across value chain among OEMs, utility companies, distributors,§  China, with desire for a sustainable service and infrastructure providers to develop new business model growth and strong government support, is striving to lead this green mobility §  Be fully aware of China’s leadership in the future auto industry and find opportunities to get revolution involved in its new EV eco-system development A mobility revolution requires a new “eco-system” of collaborative partnerships 52
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