Powertrain 2020

Powertrain 2020A PERSPECTIVE FOR CHINA

1081013_PT2020_Challenges_Opportunities_Shenyang.pptxSHENYANG, October 31st, 2008

Di l iDisclaimer

> The conclusions and recommendations in this document are based on market knowledge of Roland Berger Strategy Consultants or drawn from information knowledge of Roland Berger Strategy Consultants or drawn from information and data gathered through desk research and interviews

> Interviews reflect the opinions of experts at individual companies and do not > Interviews reflect the opinions of experts at individual companies and do not necessarily reflect the official opinion of the interviewee's organization

> The statements made by Roland Berger Strategy Consultants are based on > The statements made by Roland Berger Strategy Consultants are based on assumptions held to be accurate on the basis of the information available

> Roland Berger Strategy Consultants assumes no liability for the correctness > Roland Berger Strategy Consultants assumes no liability for the correctness of the information and statements made within this document as well as for actions undertaken upon this document

2081013_PT2020_Challenges_Opportunities_Shenyang.pptx

> The document is for personal use only and not to be disclosed to third parties

INDEXINDEX

A. Tougher Regulations – Scarce Resources: The industry is forced to decrease emissions and fuel consumptionThe industry is forced to decrease emissions and fuel consumption

B. Powertrain Challenges:OEMs need to work on a broad technology portfolioOEMs need to work on a broad technology portfolio

C. Electric Vehicles:Open issues likely to be mastered EVs could gain a significant market shareOpen issues likely to be mastered – EVs could gain a significant market share

D. Opportunities for the Chinese Automotive Industry

© 2008 Roland Berger Strategy Consultants GmbH 3081013_PT2020_Challenges_Opportunities_Shenyang.pptx

A. Tougher Regulations – Scarce Resources: The automotive industry is forced to decrease emissions and fuel consumption


Th t ti i d t i f d t d i i d The automotive industry is forced to decrease emissions and fuel consumption

Legislative plans in major car growth regions

The EU will introduce tough CO2emission targets that need to be met by OEM car fleets in the near future

12 3

y

The US plan a China needs to slow down the growth of oil 2 3 4The US plan a

significant reduction of fleet fuel consumption and requires a share of

down the growth of oil consumption and regu-lates fuel consumption

zero-emission vehicles (ZEV) in California

Japan will probably apply i il li it t th EU

5081013_PT2020_Challenges_Opportunities_Shenyang.pptxSource: Roland Berger

similar limits to the EU

Th EU ill i t d t h CO i i t t th t d t The EU will introduce tough CO2 emission targets that need to be met by OEM car fleets in the near future

EU CO2 EMISSION TARGETS (g/km) STATUS QUO

170180190200 > European commission requires to

reduce CO2 emission to 130 g/km until 20121) (comparable to 5.2 l

li 4 8 l di l)

2008 2012 2020185

130140150160170 gasoline, 4.8 l diesel)

> Target 2020: 95 g/km(4.0 l gasoline, 3.6 l diesel)

161152

130

90100110120130

> Individual OEM targets based on vehicle weight, penalties if not reached between 15-90 EUR/g95

7080

1995

1998

2001

2004

2007

2010

2013

2016

2019

2022

2025

> CO2 tax for consumers planned, EUR 2-EUR 7 per g/year (over a certain limit)

6081013_PT2020_Challenges_Opportunities_Shenyang.pptxSource: ACEA; press, European Parliament, Roland Berger research1) Additional 10 g/km by improvements of tires, HVAC, use of biofuels, etc.

N l ll t EU d t CO t ti d l iti Nearly all western EU mandate CO2 taxation and several cities implemented a congestion tax

COMMENTS

Stockholm

Bergen

Oslo

> Nearly all western EU countries adopted tax relief to promote the purchase of low Stockholm

L dManchesterDurhan

Edinburghpollution vehicles

> Several cities in Italy, France, UK and Scandinavia also

Milan

Paris

London UK and Scandinavia also adopted city congestion tax

> In most major German cities pollution free "green" zones

Bologna

Rome

pollution free green zones rather than real congestion charges are implemented1)


Country adopting CO2 tax reduction City adopting congestion tax 1) Obligatory environmental badge is available in three colors which describes the category to which the car is allocated together with the restrictions

I Chi A t ti b k d i f t t l d il In China, Automotive becomes a key driver for total crude oil consumption and is facing increasing demand pressure

Crude oil consumption in China [tons m]47580 500

T t l d il ti

320347

38060

70

350

400

450

57.0

Total crude oil consumptionAutomotive crude oil consumptionPercentage of automotive oil consumption in total

161197 211 228

249

320

167

256

30

40

50

200

250

30036.8

44.0

34.433.328.5

147 161

1240 48 65

83110 128

167

10

20

30

50

100

150

20022.720.3

7.57.5

11 120 0

50

2020E2010E20062005200320011999199719951993

9081013_PT2020_Challenges_Opportunities_Shenyang.pptxSource: China energy yearbook; China statistic bureau; Roland Berger

National energy security is threatened as automotive crude oil consumption is growing

C tl f l i h i d t dil f l t Consequently, fuel price has increased steadily – fuel accounts for more than 50% of costs of driving a passenger car

FUEL PRICE IN CHINA [RMB/TON] SHARE OF FUEL COSTS ON TOTAL COSTS (PASSENGER CAR)

7805

7500

8000 Gasoline 100% 100% 100% 100% 100%

6930

55096000

6500

7000

7500

Diesel

Other Costs

4022

47455047

4049

4642

5401 5509

4500

5000

5500

3627

40224049

3000

3500

4000

2004 2005 2006 2007 2007

Fuel Costs

10081013_PT2020_Challenges_Opportunities_Shenyang.pptxSource: FAW, Roland Berger

2004 2005 2006 2007 2008

N l ti li it f l tiNew regulations limit fuel consumption

RATIONALE/EXPECTED DEVELOPMENT

l/100 km g CO2/100 km (gasoline)

Fuel consumption limits China (phase II from January 2008)

> Weight-dependent fuel consumption limits to reduce oil consumption:> 2004: 120 m tons oil import >40% (6%

DEVELOPMENT

13

14

15 375

333

309 > 2004: 120 m tons oil, import >40% (6% of total import)

> 2020: >600 m tons oil (~ USA 2006)> Adaptation of Western standards in

mid-term (China IV stage emission 10

11

12 285

262

238

Vehicles with either - ATM or

- 3 or more seats/row

mid term (China IV stage emission standard equals EURO IV, to be introduced in Bejing in early 2008, nationwide in 2010)

> "The state will guide and encourage the 8

9

10 238

214

190Vehicles with manual transmission g g

development of clean and fuel efficient vehicles with small displacement, lead consumers to buy and use low energy consumption, low pollution, small

6

7 167

143

750 k

g

865 k

g

980 k

g

090 k

g

205 k

g

320 k

g

430 k

g

540 k

g66

0 kg

770 k

g

880 k

g

000 k

g

110 k

g

280 k

g

510 k

g

110 k

g

11081013_PT2020_Challenges_Opportunities_Shenyang.pptxSource: CATARC; SEPA; Roland Berger

displacement, new energy and new power vehicles"

≤ ≤ ≤

≤1,

≤1,

≤1,

≤1,4

≤1,

≤1,

≤1,

≤1,

≤2,

≤2,

≤2,

≤2,

≤2,

Th l i t d d ti t ill h il i fl The newly introduced consumption tax will heavily influence sales and pricing of cars with large engine displacements

Consumption tax rate in China as of Sept. 1st, 2008

E i ( 3) B f Aft C t t E l f VW M d lEngine (cm3) Before 09/2008

After 09/2008

Cost to consumer(Aug. 2008 = 100)1)

≤ 1,000 3% 1% 98

Example of VW Model

–

1 500-2 000 5% 5% 100

1,000-1,500 3% 3% 100

Jetta Bora Golf Sagitar Magotan

Polo 1.4

1,500-2,000 5% 5% 100

2,000-2,500 9% 9% 100

Jetta, Bora, Golf, Sagitar, Magotan, …

–

2,500-3,000 12% 12% 100

3,000-4,000 15% 25% 113

–

Phaeton, Touareg, Magotan 3.2


≥ 4,000 20% 40% 1251) Assuming that import cost is usually overseas ex-factory price plus shipping price excl. insurance rate, 5% inspection fee and dealership mark-up; tax increased passed through

Phaeton 4.2/6.0, Touareg 4.2/6.0

NO d PM i i li it ill i R l t t d l NOx and PM emission limits will increase – Relevant today only for Diesel engines, but in future also for gasoline

COMMENTSDiesel emissions standards for passenger carsParticulate matter [g/km]0 16

> NOx is relevant for both diesel and gasoline, PMrelevant currently for

0.16

0.14

0.12Euro 2(1996)

1998

ydiesel engines only

> European, American and Japanese emission stan-d d ill i h

0.08

0.10

(1996)

Euro 3(2000)

2001Japan

dards will converge in the near future

> As a result, heavy invest-ments will be needed in

0.04

0 02

0.06(2000)

Euro 4 (2005)

20042004 2003 USA (CARB)

LSA (EPA)

ments will be needed in exhaust aftertreatmentand new technologies to optimize the combustion NOx [g/km]

0.90.80.7

0.02

0.000.60.40.30.20.1 0.50.0

Euro 61)

Euro 4 (2005)

Euro 5 (2008)200720072007

Japan

13081013_PT2020_Challenges_Opportunities_Shenyang.pptxSource: EPA; CARB; EU Commission; JAMA; Roland Berger

1) ProposedNote: EPA = Environmental Protection Agency; CARB = California Air Resources Board

processNOx [g/km]Euro 61)

(2014)2001Japan

I i k t i i t d d ill f th ti ht In emerging markets, emission standards will further tighten too, the "gap" to European standards will narrow down

Introduction of emission standards for passenger cars in selected growth marketsCOMMENTS2000 2005 2010 2015

> Standards are based on European regulations – introduction with significant time lag

CHINAEuro 1 Euro 2 Euro 3 Euro 4 Euro 5 g g

> Stricter regulations in urban areas

> Indian "Bharat stages" are also based on European regulations

Euro 1 Euro 2 Euro 3 Euro 4Euro 6

Euro 5

INDIAbased on European regulations

> Introduction starts in Delhi1) first, then spreads throughout the countryEuro 1 Euro 2 Euro 3 Euro 4

> Introduction of European regula-tions is planned with a time lag of approx. 3-4 years

RUSSIAEuro 2 Euro 3 Euro 4 Euro 5

14081013_PT2020_Challenges_Opportunities_Shenyang.pptxSource: Dieselnet; Roland Berger1) And selected major cities/industrial areas

Introduction Expected introduction Regional distribution after introduction – capital city, industrial regions, entire country

M iti ill l j l i f t l ti 45 iti Megacities will play a major role in future regulations – 45 cities attended second C40 Large Cities Climate Summit in May 2007

COPENHAGENCity of Cyclists – over 36% of the city's population cycling to work every day

COLORADOSmartTrips website: Reduces drive-alone

NEW YORK CITY (PlaNYC)Extensive environmental approach including e.g. waiving of NYCs sales population cycling to work every day

SEOULCar-free days have redu-ced CO2 emissions by 10% annually

Reduces drive alone trips and increases biking, walking and public transit in specific city area

including e.g. waiving of NYCs sales tax on cleanest, most efficient vehicles and introduction of congestion charges

MEXICO CITYReplaced 3 000

10% annually

BEIJINGVehicles with high emis-sions are only allowed to

p y

Replaced 3,000 taxis with more fuel efficient models

sions are only allowed to take certain roads within the city (emission level marked through labels)

CURITIBA (Brazil)Roadway "arteries" in which traffic is more fuel-efficient and bordered by plantings that both

C40 Large Cities Summit objectives:> Drive down carbon emissions> Accelerate action on climate change

15081013_PT2020_Challenges_Opportunities_Shenyang.pptxSource: C40 Large Cities Climate Summit; Roland Berger

combat carbon emissions and increase biodiversity

> Accelerate action on climate change> Next meeting planned in Seoul, 2009

I th Sh h i i d t ti k h b lIn the Shanghai area, six demonstration parks have been plan-ned with over 1,000 electric vehicles in pilot operation by 2010

COMMENTSSHANGHAI ELECTRIC VEHICLE DEMO AREA

> Shanghai EXPO will 100% adopt zero emission vehicles not only inside the EXPO park but also in the surrounding areas

> A temporary EXPO electric vehicle

Long-term Temporary Chongming Eco Island

Total Bus Car Mini EV100 30 - 70Jiading International Auto City > A temporary EXPO electric vehicle

demonstration park will be established with 160 cars and 340 buses in operation by 2010

> 5 long-term demo parks have also been Pudong Demo Area

Total Bus Car Mini EV

J ad g te at o a uto C tyTotal Bus Car Mini EV100 60 - 40

planned in order to meet the requirement of programs like the establishment of ChongmingEco Island and Jiading International Auto City

100 50 - 50Downtown Demo Area


100 50 - 50EXPO Demo Area

Total Bus Car Mini EVInside 320 160 40 120

Outside 180 180 - - > Over 1 000 electric vehicles will be showcased

Jinshan Hybrid Demo Area


> Over 1,000 electric vehicles will be showcased in Shanghai– Started in 2008– Multistaged pilot with increasing number of

vehicles

16081013_PT2020_Challenges_Opportunities_Shenyang.pptxSource: SCEC; Roland BergerNote: Buses and cars refer to hybrid or fuel cell vehicles, while mini EV refers to pure battery-driven vehicles

100 - 100 - vehicles

B. Powertrain Challenges: OEMs need to work on a broad technology portfolio


Gl b l OEM ill f b th ti i i th i t l Global OEMs will focus on both optimizing the internal combustion engine and on long-range electrical propulsion

Technology focus and priorities

Integrated

…

N EN

GINE

+ stop-start

+ boost, short E-Drive

ghybrid

+ plug-in

OMBU

STIO

N

"Conventional" ICE

+ stop startrecuperation E-Drive with ICE

range extender

CO

ICE

EV with Fuel Cell rangePure EV

18081013_PT2020_Challenges_Opportunities_Shenyang.pptxSource: Volkswagen, Roland BergerELECTRICAL PROPULSION

Fuel Cell rangeextender

Pure EV

With t h l i il bl i t ti i i iWith technologies available in next generation engines, signi-ficant reductions of CO2 and fuel consumptions are possible

CO2/fuel reduction potential of selected technologiesLEVER TECHNOLOGY SAVING POTENTIAL [%]

0 12107531Thermodynamicefficiency

Variable valve timing/lift2 4 6 8 9 11

Direct injection Stratified charge (lean burn/compl. strategies)Mechanicalfriction

Cylinder deactivation

Reduced engine friction1)

Downsizing

j g ( g )

yOptimized cooling circuit2)

Weight reductionStart-stop

30% BiW (~9% vehicle weight)With regenerative braking

Calibrationof all powertrainsystems

Dual-clutch transmissionOptimized gearbox ratios

Electrically assisted steering

19081013_PT2020_Challenges_Opportunities_Shenyang.pptxSource: TNO; IEEP; Roland Berger1) e.g., new cylinder construction, use of roller rocking lever, reduction of moving mass 2) Incl. electric water pump

Range possible CO2 savings Additional CO2 savings potential

systems

V i l t f h b id t i i L t ith Various layouts of hybrid powertrains are in use – Layouts with E-Motors close to the axle allow pure electrical driving

Examples of powertrain layouts used (front-wheel)

Serial hybrid

EVPower split hybrid

Secondary electric axle

Belt starter/ generator

Crankshaft starter/ generator

Parallel hybrid

Starter and generator

2)

1) 3)

4) 2) 2)

1)

FOCUS – ELECTRIC DRIVING POSSIBLE/PLUG-IN

20081013_PT2020_Challenges_Opportunities_Shenyang.pptxSource: Roland Berger analysis1) Generator 2) Starter 3) Belt starter/generator 4) ISG

ICE Gearbox Clutch E-motor

T h i l l ti d fi d b f ti lit d l t Technical solutions are defined by functionality and layouts –complexity requires clear strategy to allow economies of scale

Starter and generator

Belt starter/ generator

Crankshaft starter/ generator

Parallel hybrid Power split hybrid

Secondary e-axle

Serial hybrid E-Drive

Functionality

Layout

Mercedes S400BlueHybrid

BMW start stop

Smart mdhCitröen G3start-stop

> Start-stop

> Start-stop> Recuperation> Boost

Mercedes ML450BlueHybridToyota Prius

Lexus RX 400HAudi HelioProject (A1)

Toyota Prius

Porsche Cayenne hybrid

> Start-stop> Recuperation> Boost> E-Drive (short)1)

> Plug-in Mercedes

GM Volt

y(next generation)

g> Start-stop> Recuperation> Boost> E-Drive (medium)1)

> Plug-inR t d

S-Class plug-in

Tesla Roadster4)

> Range extender> Recuperation> E-Drive (long)3)

> Pure E-Drive> Recuperation

21081013_PT2020_Challenges_Opportunities_Shenyang.pptxSource: Roland Berger analysis1) Up to 3 hours 2) Up to 50 hours 3) More than 50 hours 4) Recuperation

Other denotations MICRO MILD MILD/ STRONG

FULL HYBRID ELECT. SEC. AXLE

EV WITH RANGE EXT.

EV

Mild d f ll h b id ill b d li ti i ll Mild and full hybrids will see a broader application especially with larger vehicles, combined with downsized engines

CO2 emission1) [g/km] per vehicle by weight

130 EU Objective 2012

kg

130

95

EU Objective 2012

EU Objective 2020

22081013_PT2020_Challenges_Opportunities_Shenyang.pptxSource: IAV; Roland Berger1) CO2 emissions according to NEDC

Off-RoadLarge carsSUV

Medium Compact

Small cars

kg

H b id hi l ith hi h l t i ill h i ifi t Hybrid vehicles with high electric range will have a significant advantages in certification

REDUCED FUEL CONSUMPTION OF HYBRIDS

CERTIFICATION POSSIBILITIES

-5-10%

tione

l Hyb

rid

Certifiedemissions/

fuel consumption

Add: Delta inbattery charge

Emissions inNEDC due to

ICE drive

Emissions in NEDC due to E-Motor drive -10-

12%

Conv

ent

Drive NEDC w/ battery charged w/ battery 15 26%

Fuel consumption

Optimized operating point

Start Stop Fuel consumption of br

id

Drive NEDC w/ battery charged … w/ battery discharged

Weighted25 km/(25 km+E-RW)

-15-26%

consumption Hybrid

operating point and energy

regenerating

consumption of ICE

Emissions in NEDC due to


Certifiedemissions/


Plug

-in-H

yb WeightedE-RW/(25 km+E-RW)


NEDC due to E-Motor drive

NEDC due toICE drive

emissions/fuel consumption

NEDC due toICE drive

E-RW: Electric range

Source: European commission for economy (rule 101)

C Electric Vehicles:C. Electric Vehicles:Open issues likely to be mastered – EVs can gain a significant market share


O i b bl b t d EV ill t lik l Open issues can probably be mastered – EVs will most likely gain a significant market share

OPEN ISSUES MARKET SHARE EV IN % OF NEW CAR SALES

“The future drives Electric”-Scenario, WESTERN EUROPE, 2020

100%

Battery power/energy/safety/cost

E M t l / t 90%80%70%

ICEInfrastructure availability

E-Motor supply/cost

60%50%40%30%

ICE

Business case for> Customer

30%20%10%

0%22%

PHEV

EV

> OEM> Utility


0% 2010 2015 2020Vehicle offerings

Source: Roland Berger

U til 2020 Li I b tt i ill id i ifi t d i i Until 2020, Li-Ion batteries will provide a significant driving range with lower costs

Overview of the EVs driving range evolution (" The future drives Electric“ scenario)

EV RANGE EVOLUTION FROM TODAY TO 2020 (km) MAIN ASSUMPTIONSEV RANGE EVOLUTION FROM TODAY TO 2020 – (km) MAIN ASSUMPTIONS

> Consumption1): 12.5 kWh/100 km400

> Vehicle GVW2): 1,100 kg

> Battery capacity by 2010: 200 kg

100

200

300

20 kWh> Battery weight: 200 kg –

kept constant over the years

Ni-MH today Li-Ion 2010 Li-Ion 2015 Li-Ion 2020Energy density

0

100

years> Battery and vehicle impro-

vements over time considered – (battery DoD

60 100 125 180

12 20 25 36

Energy density (Wh/kg)Battery capacity (kWh)

26081013_PT2020_Challenges_Opportunities_Shenyang.pptxSource: Interviews with key battery suppliers, Roland Berger analysis1) Without auxiliary system consumption (e.g. HVAC); average city cycle speed of 25 km/h 2) Driver included

considered (battery DoD, vehicle air drag coefficient)Battery costs

(EUR/kWh) 400 300 200250

M i b tt li h diff t t h l i l h Main battery suppliers have different technological approaches to achieve development targets

Overview of major Li-Ion material compositions and selected suppliers

KEY DEVELOPMENT Li-metal polymer

KEY DEVELOPMENT TARGETS

> Energy density

OLYT

E Li-Ion polymer

(gel)

> Life cycle> Safety> Costs

ELEC

TRO

Li-Ion

(gel)> Fast charging

capability

Manganoxid Iron phosphate

Manganese spinel

Cobalt

Li Ion

27081013_PT2020_Challenges_Opportunities_Shenyang.pptxSource: CARB, interviews with Key Battery Suppliers, Roland Berger

CATHODE

phosphate spinel

Diff t H b id PHEV d EV t i f d Different Hybrid, PHEV and EV powertrain performance needs favor different E-Motor layouts

Sinus field machines and potential automotive applicationsPermanent ener-gized synchro-

Internally perma-nent energized

Magnetic reluctance

Synchronreluctance

Asynchronous machinegized synchro

nous machinenent energized machine

reluctance machine

reluctance machine

machine

PRO> Power to weight ratio> Efficiency at low speed and at high load

> Design and cost> Efficiency> Power to weight

> Very simple design> Very low cost

> Design and cost> Efficiency through-

out entire speed PRO Power to weight ratio

out entire speed and load spectrum

> Simple control

> Complex control> Low efficiency at max. speed

> Complex control> Maturity

> Very low power density

> Power to weight ratio

Potential application

> Hybrid drive> For long distance applications only with

> In discussion > None > Long distance drive for electric vehicles

CONLow efficiency at max. speed

> High cost> Complex safeguarding

Maturity density ratio


application > For long distance applications only with transmission possible

for electric vehicles

Copper coil Solenoids

Source: Roland Berger expert interviews

S li b i f E M t f l t i d i i i li it d Supplier basis for E-Motors for pure electric driving is limited –Inhouse production can be an interesting alternative

Sources for E-Drive motorsHigh > Licensing dedicated automotive concepts of small

Fit f

HighINHOUSE INDUSTRIALIZATION of existing expert concepts

Licensing dedicated automotive concepts of small E-Motor experts

> Inhouse industrialization with opportunity to benefit from scale effects and low-costs

Fit of existing concepts for E-Drive

Partnering with AUTOMOTIVE E/E SUPPLIER

> e.g. Bosch, Continental> Limited product offers for E-Drive applications> E-Motor competencies and resources currently

needed for Hybrid projects applica-tions

needed for Hybrid projects

Leverage NON AUTOMOTIVE > Large E-motor experience form train and machine

tool applications> D di t d t ti d t d t b

Low

B f Low Good

Leverage NON AUTOMOTIVE E-Motor SUPPLIER base > Dedicated automotive products need to be

developed> Chinese supply base large and could be

competitive


Base for industrialization


A h i i f t t i i it f t A charging infrastructure is a prerequisite for customer accep-tance – Various utilities work on it in different countries

Key EV charging infrastructure components

AT HOME AT PUBLIC SPACES AT WORK

Charging station at home Charging stations at public Charging stations at work g g g g pspaces

g gand other non-public places


"Sense of infinity" for EV infrastructure needed from the very beginning!

Utilities are evaluating where to position along the E-Mobility value chain – several utilities in Europe have OEM-partnerships

Generation Grid Retail1) Recharge grid Add-on services

E-MOBILITY VALUE CHAIN

> Offer of recharge infrastructure in public places

> P i f

> Special tariffs> Vehicle to grid> Battery services/

l i

Utility core business – power generation & supply> Additional electricity demand by customers charging electric

vehicles, e.g. at home > Premium for access to infrastructure

> Call/billing for E Mobility

leasing> Product bundles

including car offers

vehicles, e.g. at home> Additional turnover in generation, grid fees and retail – without any

change in business model

E-Mobility

PASSIVE APPROACH ACTIVE APPROACHFocusing on core business and hoping for fair market shares Approach new market with new business in generation, grid & retail model to tap potential

? Upside potentialat some riskDefined return at low risk


at some risk

To be evaluated1) Without add-on services

Lif l t f EV ld b l th f ith Life cycle costs of EVs could become lower than of cars with an ICE1) – Especially if taxes are taken into account

ICE/EV life cycle cost comparison in 2010/2020

LIFE CYCLE COST IN GERMANY [EUR] KEY ASSUMPTIONSLIFE CYCLE COST IN GERMANY [EUR] KEY ASSUMPTIONS

> NPV perspective over 12 years> Discount rate of 6%

Mil f 180 000 k+6%

-20%

> Mileage of 180,000 km> Vehicle purchase price remains constant (ICE and

EV similarly expensive, without battery)> Gasoline and electricity price with 6% CAGR

47,705

38,6045,663

38,226

+6%

40,887

y> Subsidies and CO2 taxes not taken into account

12 000 6 000Battery costs [EUR]

2010 202017,660

3 344

26,761

3 344

10,142

4,484

6,000

5,624

12,00012,0006.514.51.60

6,0005.514.52.90

Battery costs [EUR]ICE consumption [l/100 km]EV electricity consumption [kWh/100 km]Gasoline price [EUR/l]

003,344 3,344

17,60017,600

6,000

17,600

ConsumptionVATBatteryV hi l

17,600

32081013_PT2020_Challenges_Opportunities_Shenyang.pptxSource: Center for Global Energy Studies, Roland Berger analysis1) internal combustion engine

0.23 0.41Electricity price [EUR/kWh]EV 2010ICE 2010 EV 2020

Vehicle

ICE 2020

O 20 EV/PHEV d l f l di OEM d Over 20 EV/PHEV models from leading OEMs and newcomers are expected to enter the market until 2012

Overview of EV/PHEV global offering – 2008 to 201220122011201020092008

Mitsubishi iMiEV

SubaruR1e

Think City Nissan Cube Smart EV'Tata Nano ToyotaIQ, EV?

VWUP, EV?

Mercedes A-class EV?

Nice CarsZero

Tata Indica

A0, A AND B SEGMENTC D

XS 500 Tesla Whitestar?

e6F3e; F3DMF6DM

C, D SEGMENT AND SUV

GM VoltOpel E-Flex

GM Saturn Vue?

ZAP X Prius Plug-in

G


FiskerAutomotive

Tesla Roadster

SEGMENT

Source: Press, Roland Berger

B 2020 ll t bli h d OEM d l t f l ill h By 2020 all established OEMs and a lot of new players will have entered the EV market in the EU

EU: Overview of estimated electric vehicle market penetration

2016-20202011-20152008-2010 2016-20202011-20152008-2010FIRST-MOVER WAVE

Limited volume of"a new type of EVs"

Positive marketresponse and

volume ramp up

Second-generationEVs at competitive

t d i dMitsubishiMiEV

"SECOND"-

New PriusPlug-in

OpelE-Flex

Tesla

Nissan"Citycar"

Miles

volume ramp-up costs and improvedperformance

All major playersMOVER WAVE

MBEV

VW NSF BMWEV V Cit

Whitestar

… Renault"Cit "

XS 500 "Second" moversbenefit strongly

from the first wave

All major playersenter the EV market

BROAD MARKET PENE-

EV EV-Vers. Citycar "Citycar"

Chinese and all other playersenter the market with comp. EVs


PENETRATION

BYD Miles2. Gen

Ford? …

P li i ti t h i ifi t h f ld PHEV PRELIMINARY

Preliminary estimates show a significant share of sold PHEVs and EVs in a likely scenario

Share of powertrain type [% of sold cars]Western Europe Japan

3.2

19 12.7

0.8

5.10.9

4.2

19.1

2015 2020 2015 2020

US China

3.3

1.10.8

2.1

1.2

2.2

7.4


Downsized mobility PHEV EV The Future Drives Electric PHEV EV

2.1 2.22015 2020 2015 2020


D. Opportunities for the Chinese Automotive IndustryD. Opportunities for the Chinese Automotive Industry


M j hi t i l d t f i b t OEM f littl l Major historical advantages of incumbent OEMs are of little value since electric vehicles have specific business characteristics

Advantage incumbent OEMs vs. "new players"R&D Production Marketing Sales After Sales

IncumbentOEM

R&D

New skills

Production

Starts as

Marketing

Fit to

Sales

Focus

After Sales

Changing OEM advantage

New skills needed> Electrochemistry/

battery technology

Starts as "niche"> Flexible low-scale

manufacturing

Fit to brand?> Current brand

positioning/image

Focus metropolises> Network size/

location

Changing services> Staff qualification>

?> E-motor design> Energy mana-

gement> ...

> Low-cost footprint> ...

> Heritage, customer expectations

> Pricing/cannibali-zation

> "Flagship" stores, partnerships

> ...

> ...

> Complete vehicle design capabilities

> Quality and supply chain management capabilities

> ...

> Marketing budget > Financial services > Network infra-structure


> ...capabilities

> ... > ... > ... > ...

N l f i k t l th i New players from emerging markets can leverage their low-cost structures

COST STRUCTURE AVERAGE CAR IN WESTERN EUROPE (OEM + Tiers)

EMERGING MARKET PLAYERSEUROPE (OEM + Tiers)

Material By leveraging factor 10 lower personnel costs costs can be

10%7%

OthersDepreciation & amortization

personnel costs, costs can be driven down to less than 50%

4%

3%3%3%

Depreciation & amortizationAdministration & marketingLogisticsR&D

70%R&D

38081013_PT2020_Challenges_Opportunities_Shenyang.pptxSource: Roland Berger study "The Next Wave: Emerging Market Innovation – Threats and Opportunities"

Total personnel costs

F Chi i h l d f ll l d Famous Chinese companies have already successfully leveraged their cost advantages to conquer established markets

Successful strategies of famous Chinese companiesHIGH-TECH AT LOW-COST VARIETY AT LOW-COST SPECIALITY AT LOW-COSTDawning Information Industry:Supercomputers, Servers

BYD: Rechargeable batteries (Li-ion)

Shinco: Portable DVD players and navigation systems

1990: 1995: 1994: 1990: Spin-Off from UniversityFirst Sales to Government

1993:Fi b il f

1995: Japanese companies global market share >90% - market entry through NiCad with own low-cost equipment and highly flexible, manual labor

1994: Video Compact Discs seen as niche market, low investments of established players, Shinco entering with own special technology with error correction capabilities1997First own supercomputer built from

components available in market ( clustering standard chips)

2001:

1998:Contracts with Phillips and VTech (cordless phone market leader)

2000:

1997:11 m. VCD players sold in China, reducing costs by 80%Establishing US-R&D center1999:2001:

2,000 supercomputers sold, Low-end server I220 launched

2007:

2000:Entering Li-ion, local equipment and high vertical integration.Motorola allocates 30% of purchasing

2008:

1999:DVD player with error correction – 28% in China, 120$ cheaper 2007:Shinco global #1 in portable DVD players,


2007:"Dawning 4000" ranked #7 globally

2008:BYD global #1 in Li-ion batteries expanding in portable GPS navigation

systems

Source: Zheng/Williamson: "Dragons at your door"; Roland Berger

M k t t id d " " b t bli h d OEM Market segments considered as "non-core" by established OEMs might be the "loose bricks in the walls" to enter these markets

Specialty at low-cost

"LOW-END" segments:Ultra-Low-Cost Cars

"PERIPHERAL" markets:Denmark, Israel, Norway, …

SUCCESS IN EUROPEAN

CORECOREMARKETS

"NICHE" t "NICHE" segments: Electric vehicles

High-Tech Variety


at low-cost at low-cost

Chi OEM h ld f d i l d d fi Chinese OEMs should move forward aggressively and define an hybrid and electric vehicle strategy also targeted for export

Understand opportunities both in China and in “developed” countries (e g Understand opportunities both in China and in developed countries (e.g. UK, France, Portugal, Scandinavia, Israel, …): market development, taxes/subsidies, …

Develop product and technology strategy, define focus of own p p gy gy,competences and consider partnerships/acquisitions to get technology access especially in hybrid/electric drivetrains

Define and realize export strategy –


starting from low-end and niche-segments and peripheral markets


Chi l b d t dd k f t t Chinese supply base needs to address key success factors to thrive in the changing powertrain landscape

Understand functions and interfaces of relevant components in the context Understand functions and interfaces of relevant components in the context of complete powertrain – Deliver best components

Cost innovation to benefit from growth opportunities -g ppLeverage better cost structure

Define own strategy to achieve economies of scale –


Consider partnerships/acquisitions to get technology access especially


Pl t t f f th i f tiPlease contact us for further information

Dr. Wolfgang BernhartPARTNERStuttgart Office

Jun ShenPARTNERShanghai OfficeStuttgart Office Shanghai Office

Loeffelstrasse 4670597 Stuttgart, Germany

1515 Nanjing West RoadShanghai 200040, China

Bus.: +49 (711) 3275-7421Mobile: +49 (160) 7447421E-mail: [email protected]

Bus.: +86 (21) 52986677-874Mobile: +86 (1350) 1762216E-mail: [email protected]


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