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Booz SIAM Presentation on Alternative Powertrains


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Presentation delivered by Bill Russo at the 51st annual convention of the Society of Indian Automobile Manufacturers in New Delhi, India on September 7th, 2011

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Booz SIAM Presentation on Alternative Powertrains

  1. 1. Booz & Company New Delhi, September 2011 Discussion DocumentAlternative Powertrains andChallenges for Next DecadeSIAM Annual General MeetingThis document is confidential and is intended solely forthe use and information of the client to whom it is addressed.
  2. 2. Alternative Powertrains: Global Developments and ChallengesInsights from the Indian Hybrid / Electric Mobility StudyBooz & Company 1
  3. 3. When the automobile was introduced in late 1800’s, it was notreadily apparent which engine technology would prevail Steam vs. Electric 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
  4. 4. ICE prevailed over other technologies dues to its virtues speed,power, and range – courtesy of petroleum’s 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) Is the future going to be different?Note: ICE = Internal Combustion EngineSource: ANL, DOE, Sion, NRC, Booz & Company analysisBooz & Company 3
  5. 5. There are at least five drivers that may shift the balance in favor ofalternative fuels and powertrains Disruptive Forces And Regulatory Imperatives Disruptive Forces Petroleum Regulatory Imperatives Supply & Demand Global Fuel Powertrain Petroleum Climate Technology Technology Security Change Array of Potential Fuel- Current Feasible Powertrain Equilibrium Options Winners Petroleum-fueled ICEs Alternatives dependent Otherwise equivalent Gasoline for US upon emerging fuel and economics swayed by passenger transport powertrain technologies political action Diesel for commercial Comparisons based on Range of states well-to-wheel possible dependent on Roughly equal split of economics and GHG environmental and gasoline and diesel for production political forces European passenger carsBooz & Company 4
  6. 6. Among different technology trends, the reinvention of automotivepropulsion has been a key focus globally 1 Different Technology Trends Gasoline/ Diesel ICE Mercedes E-Class 2 Biofuel Mass Reduction via Light- ICE Weight Materials Chevy Tahoe E-85 2 CNG ICE Telematics and Sustainable Honda Civic GX 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 ClarityBooz & Company 5
  7. 7. 1 Gasoline/ Diesel ICESignificant fuel efficiency gains are expected through innovationsin ICE technologies by 2020 Technology Roadmap – Automotive Powertrains Key Technology Milestones 2010 2015 2020 Expected Fuel Efficiency Improvements by 2020 Downsizing Optimization Increases performance with smaller but higher performance engines Allows engines in the 0.8-1.4 L class to perform equivalent to much larger 10 – 15% engines, while allowing for significantly improved fuel economy Direct injection and Dual Clutch Technology With direct injection, high pressure fuel is injected inside the combustion chamber leading to more efficient fuel utilization The dual clutch allows seamless shifting between gears due to staggered 12 – 20% ICE arrangement of gears increasing efficiency Rolling Resistance Optimization Airflow management and optimization impacts fuel efficiency without the 0.5 – 5% need any major aerodynamic modifications Weight Reduction Decreases strain on the engine by replacing and re-engineering heavier parts with light weight materials 5 – 10% Every 10% of weight reduced from the average new car or light truck can cut fuel consumption by 5-10%Source: Argonne National Laboratory, Automotive OEM press releases, Booz Allen Hamilton Technology Center, Booz & CompanyBooz & CompanyDATEJune 2011 6
  8. 8. 2 Biofuel/ CNG ICEBiofuel and CNG are gaining momentum due to favorableeconomics and small modifications required for ICE vehicles Transport Energy Consumption for Biofuels1 (2010, 2020F) Trends Share Second generation (not based on edible crops) 4% biofuels are beginning to reach commercial stage ~3% 3% Prices of cellulosic bio-fuel is expected to come ~2% down from ~0.9 $/l to ~0.5 $/l by 2020 making it 2% cheaper than first generation biofuels Biofuel 1% Favorable economics of CNG based vehicles have driven their demand in Pakistan, Argentina, Brazil, 0% Iran and India (~8.2M CNG vehicles in 2009) 2010 2020F Transport Energy Consumption for CNG1,2 Share (2010, 2020F) Challenges 4% Distribution of ethanol is difficult as it is more 3% corrosive than gasoline Modification of vehicles is required to make them 2% compatible with high blend of ethanol ~1.3% ~1.0% 1% Bio-diesels can be unstable, have poor cold CNG weather performance and have variable quality 0% 2010 2020F CNG vehicles can be more expensive than ICEs1 Includes all modes of transportation vehicles, have lower engine efficiency and range2 Includes negligible share of LPG as wellSource: IEA, World Energy Outlook 2010, Renewable Fuels Association; USDA Gain Report; FO Licht; World Watch; IEA, Mobility Report, Booz & Company analysis
  9. 9. 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 analysisJune 2011 8
  10. 10. 4 Hydrogen Fuel Cell VehiclesUnless several technical challenges are not solved, fuel cellpowertrains will trail behind cost of ICE and EV technologies Technology Roadmap – Fuel Cell Powertrains Key Technology Milestones Expected Cost Reduction Range (in €/kWh ~100 kW powertrain) 2010 2015 2020 2025 3,500 Longevity Improvement H2 Storage Cost Reduction Gravity dependence! Lower cost carbon fiber tanks Improved operating hour life Higher compression storage, thus 3,000 Optimizing for close to 5000 hr ICE standard greater range Manufacturing Cold Start Improvement 2,500 80-85% Membranes with higher tolerance of moisture extremes (wet or cost reduction dry) 2,000 Extended system lifetime Fuel Cell Stack Cost Reductions (Pt Reduction, catalyst) Fuel Cell 1,500 Improved current density through material advances creates more power per fuel cell stack, thus reducing the total number of stacks and requisite platinum Non-Platinum/ catalyst 1,000 Nano-structured Nanoscale catalyst development and non-platinum catalysts Platinum Catalyst Significantly reduced system cost 500 H2 Fueling Infrastructure Build out of hydrogen fueling stations and distribution ICE Performance Level networks (or decentral production) 0 Build out of major hydrogen manufacturing plants 2000 2005 2010 2015 2020 2025 (renewable based or hydrocarbon)Source: US Department of Energy, Booz Allen Hamilton Technology Center, Booz & CompanyBooz & CompanyJune 2010 9
  11. 11. While OEMs are currently researching different powertraintechnologies, they are getting more active on electric mobility OEM Development Activities on Various Powertrains ICE Electric Mobility Ethanol Bio-Diesel Hybrid EV Fuel Cell 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 Daimler GM Honda Nissan Market intro 2010 Toyota Leader VW Ford Global Leader Regional Regional Success of Had difficulties Promising application – focus Toyota in the 90s; technology; must have if induced focus OEMs are again will take time global on hybrid showing interest to be presence by other commercial OEMs 1 = Not active/little information 3 = Very active/strong focus1 FCV = Fuel Cell VehicleSource: OEM Interviews, literature search, Booz & Company analysis 2 = Somewhat activeBooz & Company 10
  12. 12. Among electric mobility solutions, OEMs are focusing ondevelopment of full hybrids and full battery electric 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 & 3 13 Mercury Milan Hybrid Small” ” 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 2 6 3 4 & Sport” ” Toyota Prius Plug-in Hybrid Plug-in Chevrolet Volt SUV 6 1 1 10 Hybrids Mercedes S500 Plug-in-Hybrid MPV 1 2 Nissan Leaf LCV 1 1 Battery Renault Fluence Z.E 29 Electric Ford Focus BEV. Total 6 25 10 29Source: Just-Auto, Booz & Company 11
  13. 13. 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 Capabilities powertrain vehicles? 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 be Change managed most effectively? Engineering? Sales & Marketing? ManagementBooz & Company 12
  14. 14. Solutions for the “mobility revolution” require a new “eco- ”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 scalable solutions for future makers/suppliers to develop green transportation new business model for future green carsBooz & Company 13
  15. 15. TFor EVs, there will be changes in OEM manufacturing footprint,and new suppliers will play a role in the 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 PT Infrastructure PT ICE to EV Batteries E-Motor Cables & System EV System Integration Components Auto OEMs Third-Party EV OEMs Depend on Powertrain 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 analysisBooz & Company 14
  16. 16. 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 analysisBooz & Company 15
  17. 17. RGlobally, economies have been pushing the xEV agenda byleveraging different policy levers E-Mobility Models: Comparison of Select Countries Lever US China Japan France R&D Supply Side Demand-side Incentives Infrastructure Incentives in form of Equal incentives for all Incentives for HEVs Incentives for HEVs subsidy and exemption xEV technologies <50% compared to phased out from road and annual PHEVs / BEVs HEV / PHEV / BEV Incentives for PHEVs tax Incentives and BEVs based on Maximum for BEVs battery size followed by PHEVs and HEVs Proposed Investment >$5 B > $20 B >$1.7 B >3.5 BNote: Japan s investment is from 1998-2014 ’Source: Literature Research, Booz & Company analysisBooz & Company 16
  18. 18. RComparing with mature markets, China stands out as a significantopportunity and seems more ready to introduce EV Key Forces in China Chinese government is driven China Passenger ownership per by greater environmental Government Market Is a Consumer capita in China suggest a very pressure and energy Support Significant Acceptance low penetration of vehicles consumption Opportunity Consumer habit in China is still The government started in the forming process due to stronger incentives to promote relatively short driving history cleaner technologies in Thus consumer acceptance to automobile industry Mass Production EV is comparatively high than China’s automobile industry has Environment mature markets (e.g. US with lagged behind foreign OEMs in approx. 20-year driving history) the ICE era Meanwhile, the switch cost is Emergence of EV provides China possesses ample resources to expected to be low great opportunity for China to achieve low cost production catch up Established battery manufacturers with Readiness for EV large-scale capacity; supply lithium battery to cell phone/laptop industry Mature Market ChinaSource: Booz & Company analysisBooz & Company 17
  19. 19. Alternative Powertrains: Global Developments and ChallengesInsights from the Indian Hybrid / Electric Mobility StudyBooz & Company 18
  20. 20. The total potential for xEVs in India could be 5 – 7 M units in newvehicle sales by 2020, based on extensive research and analysis Inputs Used to Develop xEV Potential for India 1 Potential for xEVs – 2020 Fuel Security Impact Potential for Vehicle / Technology Segment xEVs (M Units) 5 2 BEV 2W 3.5 – 5 Global Stakeholder Perspectives Inputs HEV Vehicles (4W, Bus, LCV) 1.3 – 1.5 Potential for Other BEV Vehicles (3W, 4W, 0.2 – 0.5 xEVs in India Bus, LCV) Total 5–7 4 3 Price 1 Consumer Performance Research EvolutionSource: Booz & Company analysisBooz & Company 19
  21. 21. About 2 - 2.5 MT of liquid fuel savings are expected to accrue from2W, 4W, LCVs, buses and 3W; with highest contribution from 2W Potential xEV Vehicle Sales and Liquid Fuel Savings 2W 4W Bus LCV 3W New Vehicle Sales in 2020 (‘000 Units) ‘ HEV / PHEV - 1,275 2 120 - Total vehicles: 6–7M BEV 4,800 170-320 0.3-0.7 30-50 20-30 Fuel Savings due to xEVs (Million Tonnes of Liquid Fuel) Total oil Fuel Savings 1.4 0.4 – 0.65 0.16 – 0.19 0.09 – 0.16 0.06 – 0.09 savings: 2.2 – 2.5 MTNote: Liquid fuel = petrol / dieselSource: Industry Interviews, SIAM, Booz & Company analysisBooz & Company 20
  22. 22. To realize this potential, the Government and the Industry need to support a clear roadmap… ILLUSTRATIVE Potential Roadmap for Hybridization / Electrification “Self- Sustaining” Economic returns for industry “Economically No / limited subsidies Viable” required henceforth Viable solution for consumers at an 3 Local Manufacturing CapabilityxEV acceptable pricePenetration point “Tipping Point” 2 Technology and Application Development/ Acquisition 1 Creating Consumer Acceptability “Infeasible” 4 Infrastructure 2011 2015 Time 2017-18 2020 Source: Booz & Company analysis Booz & Company 21
  23. 23. …which will require Government and stakeholder interventions Potential Policy Choices for Driving xEV Demand Demand side interventions are those which could help in the Demand Side generation of initial demand for hybrid / electric vehicles Supply side interventions would include those that encourage Supply Side OEMs and suppliers to manufacture hybrid / electric vehicles in India Research and Technology development programs would be useful to Development develop low cost and optimal solutions for India Infrastructure Infrastructure support would include programs to build electric Support charging points as well as power infrastructureBooz & Company 22
  24. 24. These suggested interventions will be examined by the NBEM and NCEM, which will outline the policy for xEVs in India Apex body of Ministers, leaders from industry National Council for Electric Mobility & academia NCEM Secretary level with all National Board for Electric stakeholders NBEM Mobility Industry and Technology Expert body to assist National Advisory Board NBEM & NCEM NABBooz & Company 23