© 2010 J.D. Power and Associates,The McGraw-Hill Companies, Inc.All Rights Reserved.

June 22 2010Stuttgart

Al BedwellSenior Manager

al.bedwelll@jdpa.com

Europe’s LV Powertrain SectorEvolution or Revolution?

Engine Expo 2010

2© 2010 J.D. Power and Associates,The McGraw-Hill Companies, Inc.All Rights Reserved.

Outline• Recap on CO2 Targets

– Recent progress

• Outlook for the diesel market• Developments in the gasoline sector

– Boosting, DI– Power & Torque

• Light vehicle transmissions• Vehicle electrification

– Hybrid– Battery electric vehicles

• Summary of roadmap to long-term CO2 targets• Conclusions

3© 2010 J.D. Power and Associates,The McGraw-Hill Companies, Inc.All Rights Reserved.

CO2 Targets – A Long-Term ChallengeACEA-EU25 CO2 Passenger Car Targets

• 2008 voluntary target was missed by 13.5gm/km• 130gm/km = 15.3% reduction on 2008, 95gm/km = 38.1% reduction

90100110120130140150160170180190

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

CO

2 gm

/km

Actual (ACEA) 2009 Estimate (JDPA)

165-170

140

95

diesel boomrecent

longterm

best

6575

80100

% compliance toavoid fines

130 (vehicle)

120 (other)

‘eco-cars’,downsizing,stop-start..

4© 2010 J.D. Power and Associates,The McGraw-Hill Companies, Inc.All Rights Reserved.

32%

34%

36%

38%

40%

42%

44%

46%

Sha

re o

f N

ew C

ar S

ales

(%

)

2007

2008

2009

2010

2011

2012

West Europe Small Car Mix

Influence of the Market on 2009 CO2 Reduction

RecordSmall Car

Share

5© 2010 J.D. Power and Associates,The McGraw-Hill Companies, Inc.All Rights Reserved.

Diesel Market – Collapse in 2009, Recovery 2010?

25

30

35

40

45

50

Shar

e of

New

Car

Sal

es

(%)

Jan-

08Fe

b-08

Mar

-08

Apr

-08

May

-08

Jun-

08Ju

l-08

Aug

-08

Sep-

08O

ct-0

8N

ov-0

8D

ec-0

8Ja

n-09

Feb-

09M

ar-0

9A

pr-0

9M

ay-0

9Ju

n-09

Jul-0

9A

ug-0

9Se

p-09

Oct

-09

Nov

-09

Dec

-09

Jan-

10Fe

b-10

Mar

-10

Apr

-10

Germany Diesel Car Market

ScrappageIntro

Car TaxReform

DieselRecovery

ScrappageEnds

6© 2010 J.D. Power and Associates,The McGraw-Hill Companies, Inc.All Rights Reserved.

25

30

35

40

45

50

55

Sh

are

of

Ne

w C

ar

Sa

les

(%

)

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Q1

2010

2011

2012

2013

2014

2015

2016

2017

West Europe Diesel Car Market

Long Term Diesel Decline?

But Diesel Volumes will Recover and Remain RobustYear 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Diesel Share (%) 53.4 52.7 45.8 48.9 48.6 48.2 47.4 46.3 45.3 43.7 41.8Diesel Sales (mn units) 7.9 7.1 6.3 6.1 6.1 6.4 6.7 6.8 6.9 6.8 6.6

Why the Fall?• Better gasoline

engines

• Increasingdiesel fuel price

• EU6• Electrification• Other Fuels

7© 2010 J.D. Power and Associates,The McGraw-Hill Companies, Inc.All Rights Reserved.

Update on the Gasoline Sector

3.0TN54, N55

1.8TEA8883.0SEA837

1.0T, 1.2T 1.4TS, 1.6T?EA111/211VW Group1.4T, 1.6THR1.2TD Series0.9T, 1.2TS SeriesRen-Niss

1.0T, 1.2TEB0/EB2PSA1.6TFamily One1.0, 1.4TFamily ZeroOpel1.6T, 2.0TEcoBoost1.0TFoxFord1.8TFamily B

1.4TFIRE0.9TSGEFiat

3.5, 4.7TM276, M2781.8TM271 EVO

1.6TM270Daimler

2.0TN2X

1.5T, 1.6TN38, N18BMW

DetailEngine FamilyGroup

0

1

2

3

4

5

6

7

8

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Boo

sted

vol

(mn

units

)

05101520253035404550

Boo

sted

sha

re (%

)

Volume Share 2

• Gasoline boosting: 20% now, 46% by 2017

– Two thirds of all LV engines will be boosted

• Gasoline DI: 14% now, 50%+ by 2017

• Weighted average CC: 1.7L now, 1.5L 2017• Weighted average cylinders: fewer than 4 by 2017

Boosting of Europe Gasoline LV Build

Key Gasoline Sector FE Technologies

Source: J.D.Power European Engine & Transmission Forecast

8© 2010 J.D. Power and Associates,The McGraw-Hill Companies, Inc.All Rights Reserved.

Gasoline Engine PerformancePositive Outlook for Gasoline:• Gasoline will re-assert power

advantage over diesel as boostingimproves specific outputs

• Diesel sector output will beconstrained by emissionsrequirements and cost of furtherdevelopment

• 2001-2017 growth in power:– Gasoline 21%– Diesel 24%

• ‘Driveability’ of gasoline sector willimprove substantially this decade

• Diesel retains significant torqueadvantage, but average values willnot increase much more

• Gasoline will narrow the FE gap,but diesel maintains an advantageof circa 20% in like-for-likeperformance

Weighted Average Engine Power - Europe LV Assembly

9095

100105110

115120125130

2001

2003

2005

2007

2009

2011

2013

2015

2017

Engi

ne P

ower

(PS)

Gasoline Diesel

Weighted Average Engine Torque - Europe LV Assembly

150

170

190

210

230

250

270

290

2001

2003

2005

2007

2009

2011

2013

2015

2017

Engi

ne T

orqu

e (N

m)

Gasoline Diesel

9© 2010 J.D. Power and Associates,The McGraw-Hill Companies, Inc.All Rights Reserved.

Trends in Transmission Type

Transmission Fitment to European LV Assembly

0%

2%

4%

6%

8%

10%

12%

14%

2007 2009 2011 2013 2015 201765%

70%

75%

80%

85%

AT AMT CVT DCT Unknown MT (RHS)

• Major change is the increase indemand for DCTs

• Near-manual efficiency butlower cost than planetary auto

• Will impact most on the MTsector

• Premium sector will stick withAT for ultimate comfort

• AMT will be used for gasolinemedium and small cars

• CVT restricted to Japanesebrands

• Number of speeds will grow inAT sector – up to 9 speeds by2020

• MT sector to be dominated by6-speed

• Auto (all types) 18% in 2009,27% in 2017

Source: J.D.Power European Engine & Transmission Forecast

10© 2010 J.D. Power and Associates,The McGraw-Hill Companies, Inc.All Rights Reserved.

Vehicle Electrification

Now• 1mn global hybrid vehicle sales in 2010 (100k in Europe)• Equivalent to 2.0% of global car sales• 10.5% share in Japan, 2.8% in US, 0.7% in Europe• Toyota Prius became best selling car in Japan in 2009• 40% increase in global hybrid demand in 2009, 25% expected 2010

Looking ahead…• Regulators pushing hard for low carbon solutions• Europe EV build – circa 150k by 2015 (OEMs say more)• EV incentives, subsidies, bonuses: €15bn globally over 5 years• Over 130 hybrid / EV models identified for Europe by 2020• Oil price is trending up again

11© 2010 J.D. Power and Associates,The McGraw-Hill Companies, Inc.All Rights Reserved.

EVs• Big subsidies & cheap fuel = ownership cost similar to alternatives?

• Fuel costs are less than 20% of gasoline equivalent

• Zero powertrain maintenance

• High residual values anticipated – better leasing costs

• Good launch performance

• Range - less of a problem than thought?

• Growth dictated by charging point availability

• Lack of common charging standards a barrier at present

• In some markets, electricity generation may come under strain

• EVs only make sense if using ‘clean’ fuel

• Track record of EV projects is not good

• Will it be ‘different this time’?

12© 2010 J.D. Power and Associates,The McGraw-Hill Companies, Inc.All Rights Reserved.

EV Incentives – Europe Big 5Stimulus / Target Country Action

France 100k 2011/2012Germany 1mn by 2020Italy No targets announcedSpain 1mn hybrid / EV (of which 250k plug-in) by 2014UK London: 100k 'soon'

France Up to !5kGermany Exempt from road tax for 5 yearsItaly !3.5KSpain Up to !6kUK Up to !5k

France !1.5bnGermany !500mnItaly No specific package announcedSpain !590mn to 2012UK !290mn (from 2011)

France Government to buy 50k EVs, mostly Renault and PSAGermany Research incentivesItaly Has 'Plans to support'Spain No specific package announcedUK !810mn loan to UK OEMs

France 500k in 3 yearsGermany Local projects onlyItaly Local schemesSpain No target; Part of !590mn fund usedUK !23mn for 4 regional pilots; London: target 25k by 2015

Infrastructure Target

EV Target

Sales Incentive

Support Package

Help for OEMs

13© 2010 J.D. Power and Associates,The McGraw-Hill Companies, Inc.All Rights Reserved.

Hybrids

• 75k sales in Europe in 2009, circa 100k expected 2010

• 70% full hybrid, 30% mild hybrid

• Incentives are there, but lower than for EVs

• Choice of 7 mainstream models in 2009, up to 75 by 2015

• Full hybrids likely to dominate due to greater FE

• Reasons for purchase differ according to segment:– FE for non-premium midsize cars– Performance for premium and SUV segment

• 2011 will bring the diesel hybrid

• Plug-in versions to follow when hybrids are established

• But let’s not forget the conventional diesel sector

14© 2010 J.D. Power and Associates,The McGraw-Hill Companies, Inc.All Rights Reserved.

0% 10% 20% 30% 40% 50% 60% 70%

OtherAWD/4WD CapabilityEnvironmental Impact

Better WarrantyHigh Resale Value

Passenger CapacityDealer Was Convenient/Liked Dealer in my Area

Advanced Technology of VehicleLow Maintenance Costs

PerformanceLike Image the Vehicle Portrays

Boot SpaceQuality of Workmanship

Low price or Payment/Ability to Obtain FinancingThe "Deal"

Exterior StylingSafety

Fuel ConsumptionInterior Comfort

Reliability/Durability

France Germany UK

Reasons for Vehicle Purchase

*

Most Important Factors in Owners’ Choice of Specific Make/Model – 2009 Survey

Source: J.D.Power 2009 European Vehicle Ownership Satisfaction Studies (VOSS). Annual survey of owners of vehicles after an average of two years ofownership.

*

15© 2010 J.D. Power and Associates,The McGraw-Hill Companies, Inc.All Rights Reserved.

European Hybrid / EV Market Evolution

0

200

400

600

800

1,000

1,200

2008 2010 2012 2014 2016 2018 2020

Sale

s ('0

00s)

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

EV Volume Hybrid Volume EV Share Hybrid Share

Hybrid / EV Outlook• 1.7mn sales by 2020• 8.5mn hybrid / EV on the road• Hybrids will dominate for many years• EV growth likely to accelerate post-2020

MHEV14%

FHEV37%

PHEV8%

EREV4%

BEV37%

FCEV0%

Hybrid / EV Market by Type 2020

• Plug-in will lagconventional hybrid

• Range extenders goodidea, but limitedinvestment so far

• Gasoline hybrid maynot give sufficient FEgain to compete withdiesel

• Fuel cell as rangeextender may emergecirca 2017

16© 2010 J.D. Power and Associates,The McGraw-Hill Companies, Inc.All Rights Reserved.

Segment Distribution

• By 2020 midsize hybrids will dominate as the technology spreads into mainstream cars• SUVs are strong candidates for hybridisation and volumes will grow• EV numbers are low at present, market is dominated by a few city cars and Sports cars• Moving forward, small cars will come to dominate the sector over this period

0%

20%

40%

60%

80%

100%

2010 2020

Small Midsize Large Sports SUV Other

Hybrid EV

0%

20%

40%

60%

80%

100%

2010 2020

Small Midsize Large Sports Other

17© 2010 J.D. Power and Associates,The McGraw-Hill Companies, Inc.All Rights Reserved.

Premium, non-Premium MixHybrid EV

• Early hybrid growth will be in the large car and SUV segments, mostly premium• As hybrids become more mainstream, non-premium will grow faster• Many current EVs are premium sports cars• Market will quickly move to small, mostly non-premium conventional cars

0%

20%

40%

60%

80%

100%

2008 2010 2012 2014 2016 2018 2020

Premium Non-premium All premium

0%

20%

40%

60%

80%

100%

2008 2010 2012 2014 2016 2018 2020

Premium Non-Premium All Premium

18© 2010 J.D. Power and Associates,The McGraw-Hill Companies, Inc.All Rights Reserved.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Fisker

PSA

Mitsu

Think!

Tesla

Daimler R-N

OEM Distribution•

050100150200250300350

R-N

VW PSA GM BM

W

Mitsubishi

Daimler

Ford

Toyota

FiatOther

EV 2010 EV 2020

0.0

10.0

20.0

30.0

40.0

50.0

60.0

Toyota Honda Daimler VW BMW

0

50

100

150200

250

300

350

Toyota VW

HondaPSA

DaimlerBMWFordGeely

HyundaiR-N Ot

her

Hybrid 2010 Hybrid 2020

Thou

sand

sTh

ousa

nds

19© 2010 J.D. Power and Associates,The McGraw-Hill Companies, Inc.All Rights Reserved.

Inputs to CO2 Reduction 2008 to 2020

CO2 reduction from 153.5gm/km (2008) to 95gm/km (expected 2020 target)

IC measures (gasoline)

IC measures (diesel)stop-start

'eco' measures

biofuels

BEV

EREV

HEVLPG/CNG

other

segment shifts

transmission

lightweighting

Contribution byCategory:

• IC optimisation 33%

• Vehicle 26%• Electrification 14%

• Market 14%

• Fuels 10%

• Other 3%

20© 2010 J.D. Power and Associates,The McGraw-Hill Companies, Inc.All Rights Reserved.

90

100

110

120

130

140

150

160

170

180

190

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

CO2

gm/k

m

Actual (ACEA) 2009 Estimate (JDPA)

CO2 Phase-Down - Key Powertrain Steps

165-170

140

95

130

120

ACEA-EU CO2 Targets

SequentialMPFI

Diesel IC / VehicleOptimisation

PTElectrification

Cheap Oil, PoliticalDeadlock

CO2 Reduction• Pre-1998, gasoline sector was key

• Diesel boom 1998 – 2004

• Focus has now shifted from diesel

• Little progress 2004-2006

• Current focus is on PToptimisation, esp. gasoline

• And vehicle measures

• PT electrification will play a biggerpart post-2017

• EREV & BEV likely long-termwinners (post 2020)

21© 2010 J.D. Power and Associates,The McGraw-Hill Companies, Inc.All Rights Reserved.

Conclusions

• 2009’s big drop in fleet CO2 will be hard to repeat in 2010

• Diesel has peaked but remains vital for CO2 conformity

• DI & turbocharging are moving from diesel to gasoline (fast)

• Despite exciting changes, IC architecture evolves slowly

• Transmissions: Auto will gain the upper hand by 2025

• Europe’s electrified powertrain market: 1.7mn cars by 2020– Hybrids will dominate until at least 2020

– Plug-ins (mostly BEV) will grow fastest after 2020

• It’s evolution not revolution, but the pace is hotting up!

22© 2010 J.D. Power and Associates,The McGraw-Hill Companies, Inc.All Rights Reserved.

Accurate Real-Time Forecasting and MarketIntelligence Service