Automobiles & Components Auto, Auto Parts, Industrial

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

13 April 2017 Asia Pacific/Japan Equity Research

Automobiles & Components

Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sector

The Credit Suisse Connections Series leverages our exceptional breadth of macro and micro research to deliver incisive cross-sector and cross-border thematic insights for our clients.

Research Analysts Masahiro Akita 81 3 4550 7361

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Koji Takahashi 81 3 4550 7884

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Hideyuki Maekawa 81 3 4550 9723

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Akinori Kanemoto 81 3 4550 7363

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Yoshiyasu Takemura 81 3 4550 7358

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Takuma Tsuji 81 3 4550 9815

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CONNECTIONS SERIES

Automotive technology insights: Electrification, Automation, Informatization: Vol.4 Electrification update Figure 1: Auto electrification market coming into its own

Source: Continental Automotive GmbH

■ Summary: We note an ever-increasing need for electrification in the auto sector since the publication of our first Connection Series report, Automotive technology insights: Electrification, Automation, Informatization: Vol.1 Electrification in 2014. Automakers are moving rapidly to shift resources toward electrification technology due partly to issues such as the need to meet near- and medium-term environmental regulations and Volkswagen’s emissions scandal. With the market actually coming into its own recently, we renew our focus on auto electrification technology and provide an update on the latest trends.

■ Key points: Having reviewed our outlook for the auto electrification market, we forecast the market to reach ¥35tn by 2030. Our outlook also points to a 31% weighting for electrified vehicles by 2030. As for market growth factors, we focus on (1) the adoption of 48V systems, particularly by automakers from Europe and the US, (2) stepped-up PHEV/EV launches by automakers including from Japan, and (3) potential electrification of auxiliary devices in tandem with the increase in voltage used in vehicles. We regard the present as a good opportunity to ride the auto electrification wave and lock-in value-added in both auto and non-auto sectors.

■ Auto electrification stocks under our coverage: Auto: Toyota Motor (7203), Nissan Motor (7201), Honda Motor (7267) Auto parts: Denso (6902), Aisin Seiki (7259), GS Yuasa (6674) Industrial electronics: Hitachi (6501) Electronic components: Nidec (6594), Murata Mfg. (6981), Rohm (6963) Consumer electronics: Panasonic (6752)

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13 April 2017

Auto, Auto Parts, Industrial & Consumer Electronics, Electronic Components Sector 2

Table of contents Electrification, automation, and informatization 3

Automotive technology trends mainly in three fields ................................................ 3

Renewing focus on electrification technology 4

Auto electrification market coming into its own ........................................................ 4

Ideal approach for engine load reduction and linear control .................................... 5

HEVs, PHEVs, EVs, and FCEVs take pride of place among technologies to reduce

engine loading .......................................................................................................... 8

Environmental regulations drive auto technology trends ......................................... 9

Auto electrification market outlook ......................................................................... 13

Electrification market trends (1): 48V systems seen as stopgap ahead of 2021

CO2 regulations...................................................................................................... 17

Electrification market trends (2): Full-fledged launch of PHEVs, EVs starting ....... 20

Electrification market trends (3): A good outlook for electrification as it spreads to

auxiliary equipment ................................................................................................ 23

Increase in electronics bodes well for Japan’s tech sector .................................... 27

Electrified vehicle developments by automaker 30

Valuations growing as electrified vehicle model launches speed up ..................... 30

Toyota Motor .......................................................................................................... 33

Nissan Motor .......................................................................................................... 36

Honda Motor ........................................................................................................... 38

Other Japanese automakers .................................................................................. 40

Overseas automakers ............................................................................................ 42

Electrification supply chain trend 45

Denso ..................................................................................................................... 45

Aisin Seiki ............................................................................................................... 46

Hitachi ..................................................................................................................... 49

Nidec ...................................................................................................................... 49

Murata Manufacturing ............................................................................................ 53

Rohm ...................................................................................................................... 58

Panasonic ............................................................................................................... 62

GS Yuasa ............................................................................................................... 62

13 April 2017


Electrification, automation, and informatization Automotive technology trends mainly in three fields Cross-sector report series on electronics, automation, and informatization Trends in automotive technology are increasingly focused on the three areas of electrification, automation, and informatization as offering ways to boost environmental performance and enhance user safety and comfort. In addition to researching these three areas, we are conducting cross-sector research aimed at highlighting the important trends within automotive supply chains, while also focusing on specific individual stocks in sectors such as industrial electronics, electronic components, and consumer electronics that are playing critical roles in automotive technology. This—the fourth report in a series of cross-sector Connections reports that examine sectors relating to the three growth areas of electrification, automation, and informatization as they are applied in the automotive field—follows our initial offering, Automotive technology insights: Electrification, Automation, Informatization: Vol.1 Electrification, which focused on electrification technologies, and our second report, Automotive technology insights: Electrification, Automation, Informatization: Vol.2 Automation, which focused on automation technologies, and Automotive technology insights: Electrification, Automation, Informatization: Vol.3 Informatization. In this installment, we update the latest trend toward Electrification.

Delivering increased environmental performance, safety, and comfort A typical vehicle consists of 20,000 to 30,000 parts, all of which are designed to deliver the environmental performance, safety, and comfort demanded either by users or automakers. The evolution of automobiles can be viewed in terms of the continuous improvement of the various systems and modules that make up the powertrain, drivetrain, brake and chassis, and body (exterior and interior) of the vehicle to deliver increased levels of satisfaction for these three elements.

Non-automotive sector supplying high-value-added products in three fields In automotive supply chains, it is the value added to specific parts, systems, and modules that is exerting the major influence on technical trends. The key value creators and drivers of these trends are the companies capable of supplying parts, systems and modules vital to the increasing use of electronics, automation, and informatization by automakers. As the value added via these three trends grows, industrial electronics, electronic components, and consumer electronics players within other non-automotive sectors are seeing their scope of operations increasingly spread out into the automotive sphere. This is almost self-evident, given the increasing adoption of computers, sensors, and electric motors in passenger vehicles. We see players outside of the automotive sector leading some of the shift in auto-related technical value creation, which in turn should generate increasing growth potential for such companies from auto-related operations.



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Renewing focus on electrification technology Auto electrification market coming into its own We provide an update on the latest trends in the area of auto electrification in a follow up to Vol.1 of this series We note an ever-increasing need for electrification in the auto sector since the publication of our first Connection Series report, Automotive technology insights: Electrification, Automation, Informatization: Vol.1 Electrification in 2014. With the rollout of ZEV regulations in California in 2018 and the EU’s 2021 CO2 emissions regulations, moves toward stricter environmental regulations continue to gain momentum in key markets. As highlighted by China’s NEV policy, the need for compliance with environmental regulations is also growing in the emerging markets. In addition to meeting near- and medium-term environmental regulations, issues such as Volkswagen’s emissions scandal have prompted not only Japanese automakers but also those from the EU and the US to rapidly shift resources toward auto electrification. With the market actually coming into its own recently, we think it is worth renewing our focus on auto electrification technology.

Figure 2: Auto electrification market coming into its own

Source: Continental Automotive GmbH

Focusing on switch to 48V systems, full-fledged launches of PHEVs, EVs, electrification of auxiliary equipment Having revised our electrification market forecasts we expect the market to expand to around ¥35tn in 2030. We think electrified vehicles will account for 31% of all cars on the road in that year. Among the factors supporting electrification market expansion, we are focusing on (1) adoption of 48V systems, especially by European and US carmakers, (2) full-fledged launches of PHEVs and EVs, including by Japanese carmakers, and (3) electrification of auxiliary equipment due to the adoption of higher-voltage electrical systems in automobiles. Systems that use 48V are mild hybrid systems that use 48V power supplies. Adoption of 48V systems by carmakers, especially European and US companies, has suddenly taken off ahead of achievement of the 2021 CO2 emission target in Europe of 95g/km. In parallel, carmakers, including Japanese companies, have started



13 April 2017


to ramp up PHEV and EV launches, which is a radical way of meeting the target. Typical recent examples with regard to Japanese makers include the launch of the remodeled Toyota Prius PHV and the company's announcement that it will set up an EV business planning department. In terms of the impact of this on supply chains, we note the trend toward electrification of secondary auxiliary equipment due to the shift to higher voltage systems. As such systems generate surplus power, we see substantial scope to replace actuators that have to date depended on engine power with electric actuators, with which linear control is possible. We see golden opportunities for auto and non–auto sector companies to tap added value by riding the electrification wave.

Ideal approach for engine load reduction and linear control Key applications are powertrain electrification, X-by-Wire, and boosting efficiency of auxiliary systems Electrification of automotive parts, systems and modules is proving relentless. In broad terms, the advantages are linear control and reduction of engine load. Engine load reduction is a way of mitigating dependence on the energy produced by the engine. In this area, electronic components are being used to replace traditional hydraulic or other mechanical systems. The most developed systems for engine load reduction can be found in the powertrains used in HEV/EV/FCEV vehicles, 48V systems categorized in mild-hybrids, or idling stop systems (ISS).

Linear control of motorized systems is also growing in importance as demand increases for parts, systems and modules with more advanced specifications. The prime example of this is “X-by-Wire” applications that use electrical signals to control the throttle, brakes or steering. Other linear control applications include using the technology to boost the efficiency of various types of auxiliary components. Converting pumps, air-conditioning compressors and other auxiliary parts from mechanical to electronic control not only saves the energy produced by the engine for use in the drivetrain, but also enables more efficient control. This enhances environmental performance as well as safety and comfort, which we think implies that this trend is likely to persist.

Data confirm expansion of market for electronic components We can track the long-term trends in automotive technology using the shipment value data published by the Japan Auto Parts Industries Association (JAPIA). The trend toward more use of electronic components can be seen between FY3/90 and FY3/15 by the increasing contribution of electronics to overall auto parts shipment value. Accounting for just 6% of auto parts shipments by value in FY3/90, electronics had grown to 13% by FY3/15. Note that the other sector registering significant growth is drivetrain and steering components. Body components are the sector that has lost out most noticeably.

We believe the gap in value-added between auto parts suppliers is due largely to the type of components they handle or technology domain to which their system belongs. Furthermore, amid the transformation in auto technology trends, there could also be a change in the value-added accepted by automakers in a specific technology domain. The increasingly limited scope to tack on additional costs to the sales price means automakers could discontinue technology that they see as contributing little in the way of value-added or cost reductions associated with such technology. Resulting in conclusion in which, suppliers’ topline/profit growth would be determined by whether they belong in the specific technology domain with growth or already mature market, regardless of auto or non-auto sector, and by their intensity of involvement with adding values to their products.

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Figure 3: Weight of auto electronics expanded considerably over the past 25 years

Source: JAPIA, Credit Suisse

Growth of electronic parts market linked to structural shift in auto production costs The growth of the market for electronic components has been linked to a structural shift in automotives’ manufacturing costs. According to data published by METI and Toyota, electronics accounted for 10–15% of the production cost of small gasoline-powered cars such as the Corolla in 2007, and 20–30% of luxury models such as the Crown. For hybrids such as the Prius, the equivalent figure in 2007 was approximately 50%. The average ratio for the cost of electronics to the total manufacturing cost for passenger cars was around 20–30% in 2007, but this figure is estimated to have increased to about 40% by 2015. Given that some 70% of the total vehicle production cost is attributable to parts and materials, this implies that electronic components have already become the main player. This is consistent with the rising proportion of electronics within auto parts shipment values.

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Figure 4: Electronic components generate a rising proportion of auto manufacturing costs

Source: METI, Toyota Motor, Credit Suisse

Historical overview of automotive electronics Now growing rapidly, the market for electronics used in automotive applications originated in the 1960s with the introduction of limited electronic parts such as lights, starters, alternators, voltage regulators and igniters. The 1970s saw the passage of the Muskie Act in the US to control exhaust emissions; fresh demand for greater fuel efficiency in response to the twin oil shocks; and the introduction of more electronics in the engine field as computing power increased. Adoption of electronic technologies started to take off in the 1980s and 1990s with the development of innovative advances such as electronically controlled automatic transmissions, anti-lock braking systems (ABS), electronically controlled suspension, electronic power steering, airbags, electric windows, and powered seating controls. These technologies were aimed at enhancing the basic vehicular functions of moving, steering and braking, as well as improving the safety and comfort of users. Since 2000, we have seen acceleration in the introduction of automotive electronics, led by the development of HEV (hybrids), EV (pure-electric vehicles), PHEV (plug-in hybrids), and FCEV (fuel cell electric vehicles).

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Figure 5: Automotive electronics/motorization technology progress

Source: JSAE, Credit Suisse

HEVs, PHEVs, EVs, and FCEVs take pride of place among technologies to reduce engine loading Electrification of powertrains critical if environmental standards are to be met We think automakers must redouble their commitment to technological development supporting improved fuel efficiency, keeping as a yardstick the EU’s 95g/km average CO2 emission target for 2021. To lower fuel consumption and achieve greater fuel efficiency, we think automakers will need to take a multi-pronged approach. In our view the main approaches are likely to be "improving internal combustion engines," "improving energy efficiency,” “reducing the engine weight,” and “reducing the engine load.” Reducing the engine load is primarily a means of curbing the vehicle’s reliance on energy produced by the engine; for the most part, we think this will be achieved by electrifying systems that have traditionally been mechanical (often hydraulic). Among technologies geared toward reducing the engine’s load, powertrain electrification—delivering eco-friendly cars such as HEVs, EVs (including PHEVs), and FCEVs—is likely to retain pride of place for the time being. We believe powertrain electrification is critical if automakers are to remain compliant with environmental regulations.

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Figure 6: Key technology areas involved in fuel efficiency

Source: JSAE, Credit Suisse

Environmental regulations drive auto technology trends Emissions regulations and CO2/fuel-efficiency regulations Environmental regulations tend to exert a significant influence on auto technology trends and can be broadly divided into two categories: (1) emissions regulations aimed at reducing nitrogen oxides (NOx) and particulate matter (PM) as seen in Euro regulations, tier regulations in the US, and Post New Long-term Emission Regulations in Japan, and (2) CO2 emissions/fuel-efficiency regulations as seen in Europe’s EC 443/2009 and Japan’s fuel-efficiency standards based on the Energy Savings Act. Emissions regulations are intended for reducing NOx, HC, CO, and PM in auto emissions, a by-product of internal combustion in autos. Japan, Europe, and the US lean toward tighter emissions regulations, and China and other emerging economies are following.

With the rollout of Euro 3 regulations in Europe, Tier 2 regulations in the US, and the new short-term emissions requirements in Japan, emissions regulations have grown increasingly stringent since 2000. Euro regulations, which consist of six levels up to Euro 6, require pollutants to be effectively reduced to less than half of the permitted levels of 2000. Regulations have also been tightened in the US with MY2017 autos coming under EPA’s Tier 3; in California, the California Air Resources Board (CARB) has introduced LEV III regulations starting with MY2015 autos. After starting with the new short-term emissions requirements in 2009, Japan moved to the new long-term emissions regulations and eventually to the Post New Long-Term Emission Regulations. Faced with alarming levels of air pollution, China put emissions IV regulations in force at the national level starting 2011 and has also introduced the new Beijing V emissions standard for the capital city.

In CO2/fuel-efficiency regulations, the EU's CO2 emissions targets have emerged as leading indicators—Europe aims to reduce CO2 from 130g/km in 2015 to 95g/km in 2021, and in addition to setting its 2025 CO2 emissions target at 68–78g/km, it will also seek to keep CO2 emissions reductions at similar levels in 2030 and beyond. Japan has also

13 April 2017


lowered its CO2 emissions target from 136g/km in FY2015 to 114g/km in FY2020 and is likely to take them further. In the US, CO2 emissions targets will be reduced from 132g/km for MY2017 autos to 89g/km for MY2025 autos. CO2 emissions targets are also expected to turn more stringent in China, with targets of 100g/km or lower from 2025.

Figure 7: Emissions regulations in key markets

Source: Nikkei Automotive, Credit Suisse

Figure 8: CO2/fuel-efficiency regulations in key markets

Source: Nikkei Automotive, Credit Suisse

Stricter regulations; WLTP for comprehensive procedure, RDE for real driving conditions

HC/THC NMHC NMOG NOx HC+NOx NMOG+ NOx CO PM PN HCHO

mg/km mg/km mg/km mg/km mg/km mg/km g/km mg/km 10^11 count/km mg/km

Gasoline 50 50 1.15 5.00Diesel 24 80 0.63 5.00Gasoline 100 50 1.15 5.00Diesel 24 150 0.63 5.00Gasoline 55.9 43.5 2.61 6.22 11.2Diesel 55.9 43.5 2.61 6.22 11.2Gasoline 99.9 2.61 1.86 2.5Diesel 99.9 2.61 1.86 2.5Gsoline 55.9 43.5 2.61 6.22 11.2Diesel 55.9 43.5 2.61 6.22 11.2Gasoline 99.9 2.61 1.86 2.5Diesel 99.9 2.61 1.86 2.5Gasoline 100 68 60 1.00 5.00Diesel 180 230 0.50 5.00Gasoline 100 68 60 1.00 4.5Diesel 180 230 0.50 4.5Gasoline 100 68 60 1.00 4.5 6Diesel 80 170 0.50 4.5 6Gasoline 100 68 60 1.00 4.5 6Diesel 80 170 0.50 4.5 6Gasoline 100 80 1.00Diesel 250 0.50 25.00Gasoline 100 68 60 1.00 4.5 6Diesel 180 0.50 4.5 6

Beijing V 02/2013 NEDC Gasoline 100 68 60 1.00 4.5Beijin VI 12/2017 FTP-75 Gasoline 43.5 1.06 1.86 2.5

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Environmental regulations such as emissions and CO2/fuel-efficiency regulations tend to vary by country. Each country has established its own measures for checking compliance to these regulations and has separate test procedures for measuring vehicles’ environmental performance. For example, test procedures include the New European Driving Cycle (NEDC) in Europe, JC08 in Japan, and FTP-75 in the US. Automakers are forced to bear an enormous burden in development man-hours and costs to meet regulations and test procedures in each market, and we believe this was one of the key impetus for the recent VW diesel scandal. However, we already see moves, particularly in Europe and Japan, toward the introduction of the Worldwide harmonized Light Vehicles Test Procedure (WLTP), which aims to reduce the burden of automakers through the establishment of uniform test procedures worldwide.

WLTP aims to be a comprehensive test procedure that can be used across the globe as it incorporates driving conditions in individual countries or markets. Another salient point of WLTP versus previous test procedures is its easily enforceable standards that mimic real driving conditions. The Working Party on Pollution and Energy (GRPE), a part of the United Nations Economic Commission for Europe, took the lead in establishing specifics for the Worldwide-harmonized Light-duty Test Cycle (WLTC), the specific test mode of WLTP. Europe, Japan, US, China, India, and South Korea are currently considering its adoption. WLTC is due for rollout in Europe starting September 2017 and during 2018 in Japan.

Furthermore, an introduction of RDE (Real Driving Emissions) is in preparation, aiming to capture the so-called “off-cycle mode” outside the previously used testing cycles. RDE involves using vehicles fitted with PEMS (portable emissions measurement system) devices to measure environmental performance under actual driving conditions. Relative to the conventional bench testing approach, RDE on-road vehicle testing results in a dramatic increase in the number of variables involved in the testing process. In turn, this makes it far more difficult to develop defeat devices that could rig such tests. The EU has taken the lead in developing the RDE concept, which is expected to be incorporated into the Euro 6d-TEMP emissions standard that is due to be implemented in September 2017 at the same time as the Euro 6c emissions regulations. In Japan, the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) and the Ministry of the Environment (MOE) plan to consider revising the emissions testing methodology for diesel-powered vehicles based on an RDE feasibility study, using statistical sampling to compare on-road test results against the data produced by the conventional bench testing approach.

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Figure 9: Study/adoption schedules for WLTP and RDE in various markets

Source: ICCT, Nikkei Automotive, Credit Suisse

Figure 10: WLTC and legacy testing regimes in various markets

Source: EU, EPA, MLIT, Credit Suisse

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JC08 Japan Curb weight+ 110kg 8.172km 1204sec 81.6km/h 24.4km/h 29.70% 75%

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Curb weight+ 100kg 11.017km 1180sec 120.0km/h 33.6km/h 24.00% 0%

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Curb weight + 136kg (300lbs) 17.760km 1874sec 91.20km 34.09km 19.00% 57%

WLTCCurb weight+ 100kg + 15% of payload capacity

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Auto electrification market outlook Auto electrification market likely to reach ¥35tn by 2030 We update our outlook for the auto electrification market. We forecast the market to reach ¥35tn in 2030. We expect progress in powertrain electrification spurred by stricter environmental regulations to drive growth in the auto electrification market. In addition to growth in core components such as motors and batteries as a result of the higher penetration of various types of electric vehicles—including HEVs, PHEVs, EVs, and FCEVs—we also look at secondary effects including greater electrification in auxiliary equipment due to greater voltage and electric capacitance per vehicle. Using CO2 regulatory guidelines in various markets, we forecast volume trends for legacy autos with internal combustion engines (ICE), 48V HEVs (mild-hybrid autos using 48V electric power), full-hybrid vehicles (HEV), plug-in hybrid vehicles (PHEV), electric vehicles (EV), and fuel cell electric vehicles (FCEV). We include legacy integrated starter generator (ISG) systems running on 12V electric power as an HEV. We calculate the potential market size in 2030 based on estimated electric unit price per vehicle in each of the above categories.

Our outlook shows the market share held by electrified vehicles’ (48V HEV, HEV, PHEV, EV, and FCEV) rising to 31% in 2030. By type, we see growth in 48V HEV mild hybrids heading into 2020 and forecast market growth for EV and PHEV as stricter regulations come into force heading towards 2030. We see a growing need for 48V HEVs as the most efficient means for attaining the EU’s 2021 emission guideline (CO2 95g/km). We also anticipate a boost in the electrification of auxiliary equipment in conjunction with the jump in automotive battery voltage from 12V to 48V. Assuming the EU’s CO2 emission guideline is lowered to 60g/km heading towards 2030, we think it will be difficult to meet regulatory requirements just through expansion of 48V HEVs. We accordingly foresee greater impetus for the adoption of PHEVs and EVs after reasonable progress in 48V HEVs. In light of the above, we anticipate demand growth for high-value-added electric components including high-output motors and batteries.

Figure 11: Auto electrification market to reach ¥35tn in 2030; proportion of electrified vehicles likely to reach 31%

Source: IHS, Marklines, LMC Automotive, Credit Suisse estimates

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Figure 12: Global volume outlook for electrified vehicles

Figure 13: Electrified vehicle ratio and fleet-average CO2 emissions

Source: IHS, Marklines, LMC Automotive, Credit Suisse estimates Source: IHS, Marklines, LMC Automotive, Credit Suisse estimates

Spotlight on HEV in the Japanese auto electrification market Among developed nations, the Japanese auto market probably boasts the best fleet average CO2 emission levels at present, which we attributable to a predominately high ratio of mini-vehicles and HEV in the Japanese market. Another factor contributing to Japan’s favorable fleet average CO2 emissions is the prevalence of mild hybrids among mini-vehicles, where we see a notably high use of ISG systems running on 12V. Japan’s fleet average CO2 emissions, derived from the fuel efficiency in each passenger vehicle category (weighted average CO2 emission for the entire vehicle sales volume) is estimated at around 109g/km. However, Japan’s CO2 target was 137g/km in 2015 and is set to 114g/km for 2020. We think targets at this the level, which appear rather lax compared with those in the EU, can be easily met with the model mix currently available in the market. Thus, while Japan continues to see a high ratio of mini-vehicles and HEVs, there appears to be little incentive for it to pursue extreme levels of auto electrification. We estimate that the proportion of electrified vehicles in Japan will rise to 49% in 2030, but expect HEVs including mild hybrids using legacy 12V ISG systems to account for a full 42% of the total.

Figure 14: Hybrid vehicles accounting for almost all of Japan’s electrified

Figure 15: Japanese market ahead of CO2 guidelines due to a high HEV/mini-vehicle ratio


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North American CO2 emission guidelines to tighten in stages coinciding with ZEV regulations; large models to take large proportion of market with PHEV/EV Due in part to the popularity of pickup trucks, the North American market has a predominately high ratio of large vehicles over other developed nations, but it is also estimated to have highest fleet average CO2 emission levels. In the North American market, D segment and above (excluding electrified vehicles) represent nearly half of all new sales. Auto electrification remains at modest levels, accounting for just a few percent. The CO2 regulatory value in the US was 150g/km (CO2 equivalent) in 2015, in line with the market’s skew toward large vehicles. However, given plans to tighten carbon emissions to 93g/km by 2025 in the US, emission regulations in this market could turn stricter than those in Japan. Furthermore, the state of California plans to expand Zero Emission Vehicle (ZEV) regulations to cover almost all automakers after 2018. The regulation will make it mandatory for automakers have a certain proportion of unit sales in ZEVs or purchase carbon credits to offset the shortfall. Only EVs and FCEVs with zero tailpipe pollution qualify as ZEV, but as it may be difficult to meet the standard through these vehicles alone, we see a likelihood of PHEV being added to the ZEV list. Still, legacy HEVs do not qualify as ZEVs. We think this situation will inevitably lead to growth in PHEV and EV weightings over time. While certain issues remain such as electrification of the popular pickup trucks, we expect a sustained growth in auto electrification centered on PHEVs and EVs.

Figure 16: Compliance with ZEV regulations could lead to PHEV/EV growth

Figure 17: North American fleet-averageCO2 emissions and regulatory guidelines


With the strictest CO2 regulations, EU should see gradual growth in 48V and PHEV The EU, which has the strictest CO2 regulations globally, has set the average CO2 emissions target at 95g/km. While the market leads others in the adoption of electrified vehicles such as PHEVs and EVs, we also note progress in the development of 48V HEVs (mild hybrids using 48V electric power) to replace the existing ICE-based vehicles for attaining the region’s 2021 CO2 regulatory value. The region apparently lags in full hybrid vehicles such as those rolled out by Toyota and Honda, but we believe the objective here is to rollout 48V HEVs, a less expensive option, as a bridge strategy until 2021 regulations take effect rather than matching Japan on the technology side. While 48V HEV’s improvement in fuel efficiency ratios is lower than that of full hybrids, the technology is likely to gain focus as an effective method for achieving regulatory compliance as it keeps down additional costs at less than half. However, Europe is considering a CO2 regulatory guideline of 60g/km by 2030. We believe it will be difficult to meet the regulatory norm in

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the long term with a 48V HEV-centered approach. Accordingly, we think Europe will look to meet its 2021 CO2 regulatory value by promoting 48V HEV adoption and also significantly stepping up PHEV/EV adoption heading towards 2030. Substantial similarities with 48V HEVs and a relatively easy switch-over process should also speed up expansion of PHEVs. We forecast electric vehicles in Europe to expand to 71% of the market in 2030. We see 48V HEV’s market share rising to 30% by 2025, but anticipate PHEV/EV growth to pick up thereafter. In 2030, the market share of PHEVs and EVs should reach 20% and 10%, respectively.

Figure 18: Anticipate growth in 48V HEVs through 2025 followed by a switch to PHEVs

Figure 19: The EU aims to meet the world’s strictest CO2 regulatory levels by promoting auto electrification


NEV sales boost pushes EV market growth in China China, which recently became the world’s largest auto market, is considering the introduction of New Energy Vehicle (NEV) regulations by 2018. The regulation defines low-emission and hybrid vehicles as “energy-efficient vehicles” and PHEV/EV/FCEV as “NEV” and looks to promote their spread in China. The NEV regulation resembles California’s ZEV regulation in that it enables trading of carbon credits for attaining regulatory compliance. Also, the Chinese government has announced a cumulative production target of 5mn NEVs by 2020. We anticipate growth centered on PHEVs and EVs in tandem with the introduction of NEV regulation. We also expect China to follow in the EU’s footsteps by tightening its CO2 regulatory value from 160g/km in 2015 to 116g/km in 2020 and then making it increasingly stricter thereafter. With automakers such as Volkswagen/Audi, which also promote the expansion of 48V HEVs in their home market, enjoying substantial presence in the Chinese market, we also note plans to launch 48V HEVs in China in order to meet the fleet average CO2 emission targets. In parallel with PHEV/EV growth, we also see prospects for 48V HEV market development in China with the introduction of NEV regulation.

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Figure 20: EV growth likely in China following the introduction of NEV regulation

Figure 21: CO2 regulatory guidelines to gain momentum after 2020


Electrification market trends (1): 48V systems seen as stopgap ahead of 2021 CO2 regulations Likely to be developed as high-cost-performance electrification option Development of 48V systems is getting off the ground in Europe, ahead of the 2021 CO2 emissions target of 95g/km coming into force. Such systems feature 48V power sources in addition to the 12V batteries previously fitted in automobiles. This makes it possible to improve performance and fuel economy by allotting spare power to engine assist motors, auxiliary equipment, and the like. Although the improvement in fuel economy is not as great as in HEVs and PHEVs, which have power sources of 200V or higher, 48V systems have attracted attention for their low additional costs. Since they use a voltage below the hazardous level of 60V, fitting them and ensuring their safety is easy. The pace at which cars with such systems are launched will likely pick up ahead of the 2021 fuel efficiency regulations coming into force. Renault, Audi, and other automakers have already commercialized 48V systems in Europe. Other makers (Daimler, BMW, Groupe PSA, and Ford) are due to launch models featuring 48V systems in 2017. We understand automakers are considering also launching models with 48V systems in the Chinese and North American markets. We expect 3.78mn vehicles to have 48V systems in 2021, rising to 8.60mn in 2025.

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Figure 22: 48V greatly improves fuel economy in small/midsize cars

Figure 23: Higher voltage enables electrification of auxiliary equipment

Source: Science & Technology, Credit Suisse estimates Source: Company Data, Science & Technology, Credit Suisse estimates

48V systems offer additional benefits besides better fuel economy, driving performance due to ISG Although individual 48V systems vary from maker to maker, they all basically comprise a 48V battery, a 48V integrated starter generator (ISG), a DC-DC converter, and an inverter. When the vehicle decelerates, power generated by the alternator is stored in the battery. When it accelerates, the starter motor assists the engine. In contrast to full hybrid systems, 48V systems are simple, requiring only the addition of a relatively small capacity battery and converter, and replacement of the starter motor with an ISG. By using an ISG, 48V systems offer other additional benefits than better fuel economy and driving performance. For one, fitting a high-voltage 48V battery generates surplus power making it possible to electrify auxiliary equipment that previously depended on engine power. Mechanical actuators that previously operated via connection with the engine (air conditioner compressors, turbochargers, water pumps, can oil pumps) can be fully electrified, which also helps reduce loss of engine output. In addition, we believe adoption of systems associated with driving performance (electric stabilizers, large-model electric power steering systems, and active suspension), which was difficult with predecessor 12V systems, will likely increase. Demand should therefore increase for electronic parts (motors and passive components) and for high-value-added automotive semiconductors compatible with high-voltage systems.

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Figure 24: 48V system configuration

Source: Science & Technology, Credit Suisse

Trend toward higher-voltage systems likely to continue as 48V systems alone cannot keep pace with environmental regulations in the long term The structure of 48V systems resembles mild hybrid systems (130V). However, they are far superior in cost performance. Compared to other vehicles with the same performance engine, full hybrid systems improve fuel economy by around 40%. Use of a 48V system achieves an improvement of only around 15%. However, the additional cost can be kept down to around one-third that of a full hybrid system. Such systems are therefore expected to be rolled out in small and mid-size cars, where the demand is for low prices. However, while it is easy to equip a vehicle with a 48V system and such systems boast high cost performance, there is a view that the maximum improvement in fuel economy of 15% will not be sufficient to meet environmental regulations from 2025. For this reason, 48V systems are being seen as a bridging measure ahead of 2021 regulations. To meet even tighter environmental standards a shift is expected toward higher-voltage electrified cars (PHEVs, EVs), favoring PHEVs, which have many structural similarities but do not require the major powertrain changes needed in full hybrid systems.

48V systems developed mainly by European and US makers, but Japanese suppliers should also benefit from the movement toward higher voltage European and US mega-suppliers (Bosch, Continental, Delphi, Schaeffler, and Valeo) are developing 48V systems. Japanese manufacturers are strongly associated with full hybrid systems, but have not adopted a clear stance on the adoption of 48V systems. In 2001, Toyota Motor (7203) launched the Crown Hybrid featuring a 42V power supply in the Japanese market. However, sales missed expectations and in due course full hybrid cars such as the Prius and Aqua took over the primary role. We see little demand for a shift to 48V in the Japanese market given its high proportion of HEVs and mini-vehicles and its maintenance of high average levels of fuel economy. However, we think some Japanese

DC-DCConverter

Inverter

48V Driven ProductsElectric Turbo/Super ChargerElectric CompressorABS (Antilock Brake System)Large EPS (Electric Power Steering)Eletric Stabilizer, etc

12V Driven UnitsLampsSmall EPS (Electric Power Steering)Power WindowWiper MotorsCluster Panels, etc

12V Battery

48V Battery

Integrated Starter Generator (48V E-Motor/ Alternator)

Torque Assist

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suppliers will likely benefit from higher value-added and growth in the ratio of vehicles fitted with 48V systems arising from the shift to higher voltage systems in the global market. As discussed later, growth in the number of motors used will likely impact manufacturers such as Nidec (6594), while Denso (6902) and Aisin Seiki (7259), which make electrical auxiliary equipment, should feel an impact as well.

Electrification market trends (2): Full-fledged launch of PHEVs, EVs starting Stricter CO2 standards effective from 2021 should spur growth in PHEV/EV demand The auto industry developed 48V systems as a bridge to meet the EU’s CO2 standards scheduled to take effect in 2021. More radical electrified vehicle innovations will be needed to comply with even stricter environmental standards expected to be imposed in the future. Electrified vehicles (i.e., 48V HEVs, HEVs, PHEVs, EVs and FCEVs) currently account for an estimated 4% share of the global automobile market. One reason for their low share, besides the cost of equipping vehicles with electric power units, is that recharging infrastructure (for, e.g., EVs, FCEVs) is not yet adequately available. With CO2 standards slated to continue to be progressively tightened beyond the 2021 target, we expect demand for PHEVs, currently the most fuel-efficient vehicles, and EVs, which will likely benefit from government incentives, to grow sharply from 2021. We forecast global unit-demand for PHEVs at 2.5mn in 2021 and 9.8mn in 2030, up from a mere 210,000 in 2015. For EVs, our corresponding 2021 and 2030 forecasts are 2.7mn and 7.89mn, respectively, up from 290,000 in 2015.

Automakers rushing to roll out PHEVs, the most fuel-efficient ICE vehicles PHEVs are hybrid vehicles that are equipped with both internal combustion engines (ICE) and electric powertrains and can recharge their batteries from an external power source. PHEVs are equipped with larger batteries and have a much greater all-electric range than HEVs. Meanwhile, their ICEs enable PHEVs to circumvent EVs’ continuous driving range limitations. Fuel efficiency conversion methods for PHEVs differ internationally, but PHEVs are currently considered the most fuel efficient ICE-equipped vehicles. Being more marketable than EVs, which are dependent solely on external power sources and have continuous-driving-range limitations, PHEVs will likely grow in prevalence. In this report, PHEVs include extended-range EVs equipped with ICEs used exclusively for recharging to extend driving range.

Automakers are expediting development of PHEV models in preparation for future tightening of CO2 standards. Japanese automakers, particularly Toyota and Honda, have been expanding their HEV model lines. Recently, however, they have started to place priority on PHEVs also. Toyota’s new Prius PHV has a maximum all-electric range of 68.2km, a drastic improvement from its predecessor’s 26.4km range. Its HEV-mode fuel efficiency is 37.2km/l, better than the smaller Toyota Aqua (a.k.a. Prius c) HEV’s 33.8km/l. Under the US’s combined fuel economy standard, the new Prius PHV is rated at 56km per gasoline liter equivalent. Honda announced that it will roll out a CR-V PHEV around November 2017 in conjunction with the CR-V’s upcoming full model change. In the SUV space, Mitsubishi Motors (7211)’ Outlander PHEV has an all-electric range of 60km and an impressive HEV-mode fuel efficiency of 19.2km/l. Among US automakers, GM offers the Volt, an extended-range EV. The Volt has an all-electric range of 53mi (approx. 85km) and maximum driving range of about 420mi (approx. 672km) on a full tank of gas, both of which are vastly better than the original Volt’s corresponding specs. European automakers also are starting to focus on PHEV models. While they seem to be laggards in developing

13 April 2017


the full hybrid systems in which Toyota and Honda Excel, they apparently aim to make up for lost time by accelerating development of PHEVs, which pose less of a challenge than full hybrids.

US/European automakers are focusing on PHEVs in response to fuel efficiency conversion formulas Formulas used to calculate PHEV fuel consumption differ internationally, partly reflecting that PHEVs do not consume any fuel when used for short-distance driving. In Japan, PHEVs’ combined fuel efficiency was previously calculated by multiplying their conventional fuel efficiency by a coefficient that adjusts for the battery-powered share of distance driven. This method was abandoned in 2014. The original Prius PHV’s HEV-mode fuel efficiency was 31.6km/l (JC08 mode) but its combined fuel efficiency was an astounding 61.0km/l. As PHEV models became more varied (e.g., extended-range EVs), combined fuel efficiency was likewise abandoned because it no longer accurately reflected all PHEVs’ actual fuel efficiency. Currently, PHEVs in Japan have both EV- and HEV-mode fuel efficiency ratings. In Europe, by contrast, PHEVs’ improvement in fuel efficiency over ICE-equipped vehicles is calculated by multiplying conventional ICE-equipped vehicles’ CO2 emissions by a CO2-reduction coefficient, using the formula F = (De + Dav)/Dav, where F is the CO2-reduction coefficient, De is the vehicle’s all-electric range and Dav is the average distance between battery recharges (Dav is statutorily set at 25km). For example, assume that Mercedes-Benz hypothetically develops a PHEV version of a full-sized S-class sedan with CO2 emissions of 180g/km. Given an all-electric range (De) of 40km, the PHEV model’s CO2-reduction coefficient would be 2.6, which would yield a CO2 emissions rating of 69g/km, well below Europe’s 2021 CO2 emissions limit of 95g/km. From this example, it is readily apparent that this CO2 emissions formula is one reason why European automakers are focusing on PHEVs. In the US, PHEVs’ fuel efficiency is calculated by a formula similar to Japan’s old combined fuel efficiency formula. The US formulas is based on an EV-mode utility rate. In European and North American markets, PHEVs are advantageous to automakers in terms of compliance with CO2 emission standards. The PHEV market segment should continue to grow rapidly.

EVs boast zero emissions but have limitations EVs are vehicles powered solely by electric motors and with no internal combustion engine or power source other than an external charger. We define them narrowly in this report as pure electric vehicles, meaning that we exclude plug-in hybrids (PHEVs) and other variations. EVs available at present include the mass-market Nissan Leaf and Tesla Model X and Model S. EVs’ exclusive reliance on electric power means that they generate no exhaust emissions, but it also limits their driving range and requires long charging times. The Leaf has a 30kWh battery, and while it takes just 30 minutes to charge to 80% of full capacity using a 50kW fast charger (the largest widely available in Japan at present), its range is just 280km even on a full charge. The Tesla Model X ups this to 414km on the back of a 90kWh battery, but the battery is exceptionally pricey and requires triple the charging time of the Leaf’s. Another impediment to EV penetration has been the fact that charging infrastructure remains a work in progress worldwide. There were around 190,000 public charging stations globally as of 2015 (ICCT estimate), and while this was around triple the number in 2013, just 27,000 or so of these have fast chargers. As all of this suggests, EVs are currently well suited to frequent short-distance driving in cities but remain slightly too inflexible to accommodate a broader range of usage environments.

China a possible game changer near term; longer-term demand hinges on performance and government policy The fact that EVs generate zero emissions has governments worldwide offering generous subsidies for EV buyers. Japan and other developed countries offer subsidies for the required charging systems, and EVs also have the highest purchase subsidies of any

13 April 2017


clean energy vehicle—including ¥330,000 for the Leaf in Japan, or around 10% of the total price. China, now the world's largest EV market, pays around ¥1mn per vehicle and plans to continue this policy through 2020. This has us expecting continued growth in the market through 2020 centered on China, but we think demand could shift toward PHEVs from 2021 as Chinese subsidies taper off and in view of their ease-of-use and compatibility with conventional internal combustion vehicles. That said, we do see a possibility of EV sales continuing to rise sharply depending on where vehicle performance and government subsidies go from here. Battery makers are working to improve battery efficiency and are also making steady improvements in charging time. Chademo, an organization working to promote fast-charging standards for EVs, revised its charger standards in March 2017 to allow commercialization of fast chargers of up to 150kW, triple the current level. Standardization efforts aimed at accommodating larger capacity batteries are also in progress worldwide beginning with Europe's combined standards.

Figure 25: Buildout of fast-charger stations a work in progress

Figure 26: Number of charging stations up sharply in China

Source: ICCT, Credit Suisse Source: ICCT, Credit Suisse

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Figure 27: Major models for electrified vehicles

Source: Company data, Credit Suisse estimates

Electrification market trends (3): A good outlook for electrification as it spreads to auxiliary equipment Shift to higher voltages not only for primary motors

With reliance on electric motor power increasing as automakers strive to achieve compliance with environmental regulations, we think electrification of automotive components will likely accelerate due to expansion of the supporting battery capacity. As power supply voltages rise from 12V to 48V and then to 200–270V for HEVs and 300–400V for PHEVs, the added value of auto batteries that support this will naturally increase, but in tandem with this expanding capacity, the rise in voltage should also promote electrification of auxiliary equipment. Engine peripherals that used to depend on engine power can be electrified and this re-allocation of spare power is opening up possibilities for components that formerly could not be handled by 12V power supplies but now can.

Electrification Type

Brand Model Engine Main Motor (ISG) Peak Output

Official Fuel Economy EV Driving Range

Battery Capacity

Audi SQ7 4.0L Turbodiesel - 7.2L/100km - 0.47kWh

Daimler S-Class 2.0L I4 Gasoline 15kW TBA - 0.9kWh

Ford Focus 1.5L Turbodiesel 10kW 88g/km (CO2) - 0.5kWh

Renault Scenic 1.5L Turbodiesel 10kW 92g/km (CO2) - 0.5kWh

Chevloret Malibu Hybrid 1.8L I4 Gasoline 55kW 46mpg - 1.5kWh

Honda Fit 1.5L I4 Gasoline 22kW 36.4km/L - 0.86kWh

Hyundai Ioniq Hybrid 1.6L I4 Gasoline 32kW 58mpg - 1.6kWh

Toyota Prius 1.8L I4 Gasoline 53kW 40.8km/L - 0.75kWh

BYD Tang 2.0L I4 Gasoline 110kW x 2 117mpg 100km 18.4kWh

Chevloret Volt 1.5L I4 Gasoline 110kW x 2 42mpg 85km 18.5kWh

Mitsubishi Oulander 2.0L I4 Gasoline 60kW x 2 19.2km/L (in HV only) 60km 12.0kWh

Toyota Prius PHV 1.8L I4 Gasoline 53kW + 23kW 37.2km/L (in HV only) 68km 8.8kWh

BMW i3 (94Ah) N/A 125kW - 190km 33.0kWh

BYD e6 N/A 90kW - 300km 61.4kWh

Nissan Leaf N/A 80kW - 280km 30kWh

Tesla Model S (85kWh) N/A 310kW - 480km 85kWh

Daimler B-Fuel Cell N/A 100kW - 385km 3.7kg @700 bar

Honda Clarity Fuel Cell N/A 130kW - 750km 141L

Hyundai Tucson FCEV N/A 100kW - 424km 140L

Toyota Mirai N/A 113kW - 650km 122L

*FCEV listed in terms of hydrogen tank for capacity, and max driving range with full tank.*Fuel economy listed per the regional regulated value and testing mode.*Includes some models being before launch, using the preliminary figures from the automakers

48V System

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Substantial scope for electrification of engine and driving components

Engines are surrounded by numerous components—including oil pumps, water pumps, exhaust gas recirculation (EGR) valves associated with engine air intakes and exhausts, variable valve timing (VVT) units, turbochargers, and A/C compressors—that mediate engine power or are driven by oil pressure or other means generated by engine power. Because these components are connected to the engine they cause loss of engine power, and because they depend on engine turnover they cannot be easily turned on and off. Using electric motors to run these parts enables efficient control and reduces the load on the engine, thereby enabling automakers to boost fuel economy.

An automotive oil pump is an actuator that generates powertrain lubrication, cooling, or pneumatic pressure to drive other auxiliary components. By making these electrically driven, it becomes possible to control them without relying on engine rpms and also to use idling stop systems, all of which can sharply improve fuel efficiency. Electrification has similar benefits for water pumps, including for use in cooling the inverters required in an electrified vehicle. Electrification of exhaust gas recirculation (EGR), variable valve timing (VVT), and turbo/superchargers can further improve the fuel efficiency of an internal combustion engine. In particular, electric turbochargers join integrated starter generators (ISG) as a key component for 48V systems. Conventional turbochargers are driven by engine exhaust (superchargers rely on the engine's crankshaft), but an electric turbocharger uses a motor to rotate the compressor. This reduces turbo lag and exhaust pressure loss caused by fluctuations in exhaust gas energy and improves the engine’s responsiveness. This allows engine down-sizing and down-speeding and makes a major contribution to improved fuel efficiency. The bottleneck in electrifying these components has been the amount of voltage required, but this now looks set to be remedied with the development of high-voltage vehicles. Higher voltages could also facilitate electrification of automotive air-conditioning compressors in support of reduced engine loads.

We also believe there is still substantial scope for electrification of suspension systems to improve driving performance. More cars are being fitted with electric power steering systems (EPS), but we still room for growth as the global installment of EPS is roughly at 60%. Fuel efficiency could see 2–4% improvement by electrifying the power steering, which in the past was driven by hydraulics generated from engines. As voltages rise, more cars will include such features as electric driving brakes and parking brakes, electrically controlled suspensions, electric active stabilizers, and electric four-wheel drive. We expect these systems to improve vehicle range, to assist stable driving, and to contribute indirectly to improved fuel economy. Stabilizers act as anti-rolling, or anti-swaying system while cars in turns or on unstable roads. With electrification, the stabilizers be controlled by motors and reduction gears instead of the rigidity of the physical stabilizer bars, in terms give more flexibility and smooth control for vehicle stability. By adopting power supplies with higher voltage above 48V, the electrified active stabilizers could see more usage in larger vehicles. Electric 4WD system, notably installed on new Toyota Prius, equips an independent driving motor on vehicle’s rear axle. Traditional 4WDs used power transfer unit (or transfer case) to split the output force from transmission to front and rear axles, whereas the electric 4WD units generates its own force to avoid any engine loss to establish 4WD. Along with the active stabilizer, both units require higher electrical loads, however we anticipate higher installation as the overall vehicle power source becomes higher.

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Expecting electrification of auxiliary equipment to lead to a large increase in the number of motors

We expect a large increase in the number of motors in use due to electrification of auxiliary equipment. We estimate that cars today have around 45 motors on average (excluding the primary motor). Low-price vehicles have around 25, while electrified cars and high-class vehicles can have over 130. The difference is thus substantial. Electric motors are already used for basic functions such as starting the engine, locking doors, and operating windscreen wipers. However, use of electric motors for the functions mentioned above including in engine-related and driving components, is still rare. We think the shift to higher voltage systems will push accelerated use of motors in these components. Motors used in engine and driving-related parts need to be powerful. As this area covers mid- to large-capacity motors, we believe high-price-band motors are likely to see increased use overall. We forecast the market for vehicle equipped motors, excluding the main driving unit, would grow from ¥3.5tn in 2015 to ¥5.5tn in 2020, and ¥10tn in 2030. The average installation of the motors per vehicle is forecasted to grow from 44 pieces in 2015 to 79 pieces in 2030.

Figure 28: Substantial scope for electrification of engine/driving components

Source: Credit Suisse

Figure 29: Major scope for electrification of engine/running components

Figure 30: Electrification of engine/running components sharply improves fuel efficiency

Note: Motors shipment price basis Source: Marklines, IHS, Credit Suisse estimates

Source: ICCT, Credit Suisse estimates

Fuel Efficiency:Improve

Engine-loss

Fuel Efficiency:Idling Stop

Specificallydemanded for

HEV/EV

ImproveDriveability

Safety andOthers

Valvetrain EGR e-EGR x

Valvetrain Variable Valve Timing e-VVT x

Valvetrain Valve Lifter Control e-Valve Control x

Valvetrain Turbocharger Electric Turbo x x

Powertrain Water Pump Electric Water Pump x x

Powertrain Engine Oil Pump Electric Oil Pump x x x

Drivetrain Transmission Oil Pump Electric Oil Pump x x x

Drivetrain 4WD (Transfer/PTU) E-4WD Unit x x x

Chassis/Brakes Power Steering EPS x x

Chassis/Brakes Steering Lock E-Steering Lock x

Chassis/Brakes Vacuum Pump Electric Vacuum Pump x x

Chassis/Brakes Brakes Regenerative Brakes x

Chassis/Brakes Parking Brakes Electronic Parking Brake x

Chassis/Brakes Rear Steering Active Rear Steering x x

Chassis/Brakes Stabilizer Electronic Active Stabilizer x x

Auxiliary AC Compressor Electronic Compressor x x

Advantages from Electrification

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Battery performance being improved to increase vehicle voltage We expect increased vehicle electrification (48V HEV, HEV, PHEV, EV) to drive steady growth in demand for the high-output batteries that power these vehicles. The amount of battery capacity required by electrified vehicles varies widely, from 0.25kWh for 48V HEVs to 100kWh for EVs, but the global market for next-generation automotive batteries totaled upward of 37GWh as of 2016. We expect this to reach 167GWH in 2020 and 255GWH in 2025 in tandem with increased vehicle electrification. Battery prices per kWh very widely but currently average around ¥20,000 by our estimate.

At present, electrified vehicles generally use either nickel-metal hydride (NiMH) or lithium-ion (Li-ion) batteries. Li-ion batteries account for the majority due to their superiority in terms of charge capacity and charge/discharge current, but battery makers are working to develop everything from new basic materials to new basic technologies in an effort to improve EVs’ driving range and charge performance. A key issue is the need for higher capacity batteries to enable longer driving distances. With onboard space limited, battery makers are looking into materials with higher energy density as they race to develop higher-performance batteries. Increased EV penetration also hinges on battery costs being reduced. Battery makers aim to lower the average cost per kWh from ¥20,000 ($160–$240) at present to less than $150.

Growth in the number of electrified vehicles also implies coming economies of scale for the battery makers. However, the market for automotive Li-ion batteries has become substantially more crowded in recent years, making for an exceptionally competitive operating environment. The number of suppliers rose from just seven in 2010 to over 20 in 2015. The leaders are currently Panasonic (which supplies Tesla), Toyota’s Primearth EV Energy (PEVE), Nissan’s Automotive Energy Supply Corporation (AESC), and EV maker BYD, which makes its own batteries in house. We think this reflects current market shares and battery capacities for electrified vehicles and see potential for changes as automakers launch more such models.

Figure 31: Outlook for automotive battery market Figure 32: Number of competitors in automotive battery market

Source: Marklines, IHS, LMC Automotive, Credit Suisse estimates Source: Company data, SNE Research, Credit Suisse estimates

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13 April 2017


Figure 33: Market shares for automotive Li-ion batteries

Source: Company data, SNE Research, Credit Suisse estimates

Increase in electronics bodes well for Japan’s tech sector Steady growth in Japan tech sector’s automotive sales weighting Figure 34 shows automotive sales weighting trends at key names in Japan's tech sector. The combined automotive sales weighting of 31 electronic component and semiconductor makers has already surpassed 20% and is rising by around 1ppt each year. We also note sustained growth of over 15% over the past three years. Particularly in electronic components, Japanese manufacturers command the lion’s share of the global market and are well positioned to derive maximum benefit from auto electrification as well as automation and informatization.

32%

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Auto LiB volume market share (2015)Panasonic

PEVE

BYD

AESC

LG Chem

S.SDI

GS Yuasa

SK Innov

Lishen

Wanxiang

ATL

Others

33%

32%

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6%

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Auto LiB volume market share (2010)

Panasonic

AESC(Nissan)

LG Chem

GS Yuasa

PEVE

A123

Others

13 April 2017


Figure 34: Japan tech sector: Automotive-related sales and weightings at major companies

Source: Company data, Credit Suisse

Acceleration in topline growth Figure 34 shows long-term trends in automotive-related sales and weightings at a smaller number (18) of Japanese electronic component and semiconductor makers. Due to growth in smartphone-related sales in FY13–15, growth in automotive sales weightings slowed slightly, although sales growth accelerated. Combined sales at the 18 companies has grown by 10% per year on average over the past 10 years, versus 14% per year over the past five years.

Average(FY12) (FY13) (FY14) (FY15) (FY12) (FY13) (FY14) (FY15) (FY13) (FY14) (FY15) FY13-15 (FY12) (FY13) (FY14) (FY15)

Electronic component/Semiconductor4062 Ibiden 285,946 310,268 318,072 314,119 68,500 89,300 89,800 95,519 30% 1% 6% 12% 24% 29% 28% 30%

5334 NGK Spark Plug 302,798 329,758 347,636 383,272 221,695 282,434 305,194 339,640 27% 8% 11% 16% 73% 86% 88% 89%

6594 NIDEC 709,270 875,109 1,028,385 1,178,290 86,670 115,193 197,002 271,331 33% 71% 38% 47% 12% 13% 19% 23%

6592 Mabuchi Motor (CY base) 85,254 108,401 122,544 143,143 49,000 66,200 78,748 96,369 35% 19% 22% 25% 57% 61% 64% 67%

6479 Minebea 282,409 371,543 500,676 609,814 31,065 48,301 60,081 67,080 55% 24% 12% 31% 11% 13% 12% 11%

6971 Kyocera 1,280,054 1,447,369 1,526,536 1,479,627 130,000 150,000 160,000 170,000 15% 7% 6% 9% 10% 10% 10% 11%

6770 ALPS (Component) 268,085 338,811 389,120 434,072 140,012 168,451 208,400 247,505 20% 24% 19% 21% 52% 50% 54% 57%

6981 Murata 681,021 846,716 1,043,542 1,210,841 102,037 120,176 144,255 152,830 18% 20% 6% 15% 15% 14% 14% 13%

6762 TDK 851,675 984,525 1,082,560 1,152,255 139,800 170,323 186,200 192,427 22% 9% 3% 11% 16% 17% 17% 17%

6976 Taiyo Yuden (*) 192,903 208,222 227,095 240,385 8,150 11,800 13,137 16,827 45% 11% 28% 28% 4% 6% 6% 7%

6996 Nichicon 90,813 104,689 107,294 109,815 17,650 19,891 20,386 19,767 13% 2% -3% 4% 19% 19% 19% 18%

6997 Nippon Chemicon 92,959 113,962 123,365 118,414 16,733 23,932 27,140 30,788 43% 13% 13% 23% 18% 21% 22% 26%

6779 Nippon Denpa Kogyo 50,623 50,774 47,730 44,850 15,930 17,493 17,416 18,000 10% 0% 3% 4% 31% 34% 36% 40%

6962 Daishinku 32,856 33,788 31,076 32,182 6,637 8,515 8,701 8,947 28% 2% 3% 11% 20% 25% 28% 28%

6999 KOA 38,962 44,895 46,595 45,462 11,900 14,700 15,800 16,900 24% 7% 7% 13% 31% 33% 34% 37%

6806 Hirose 95,938 124,987 125,726 120,284 13,640 17,814 18,817 21,651 31% 6% 15% 17% 14% 14% 15% 18%

6807 Japan Aviation Elec 129,600 159,771 191,155 179,494 37,600 52,500 60,400 68,400 40% 15% 13% 23% 29% 33% 32% 38%

6908 Iriso Elec 24,788 32,838 37,214 38,209 19,654 26,695 30,556 32,257 36% 14% 6% 19% 79% 81% 82% 84%

6978 SMK 54,475 65,796 66,230 77,206 10,689 18,252 19,341 17,882 71% 6% -8% 23% 20% 28% 29% 23%

6826 Honda Tsushin Kogyo 13,842 14,824 16,639 17,119 2,076 3,261 4,493 5,820 57% 38% 30% 41% 15% 22% 27% 34%

6767 Mitsumi Electric 152,098 157,360 153,045 163,562 16,000 21,600 26,200 33,000 35% 21% 26% 27% 11% 14% 17% 20%

6800 Yokowo 29,215 32,970 34,414 39,998 16,811 20,761 23,648 28,761 23% 14% 22% 20% 58% 63% 69% 72%

6787 CMK 72,677 71,031 73,730 73,098 44,700 48,800 48,500 50,000 9% -1% 3% 4% 62% 69% 66% 68%

6958 Meiko 60,709 79,231 90,895 95,287 28,100 38,100 44,539 45,738 36% 17% 3% 18% 46% 48% 49% 48%

6804 Hosiden 230,883 205,148 148,237 139,949 18,000 20,400 22,900 27,000 13% 12% 18% 14% 8% 10% 15% 19%

6794 Foster 143,542 167,640 189,124 190,928 36,887 50,798 59,516 65,039 38% 17% 9% 21% 26% 30% 31% 34%

6723 Renesas Electronics 785,764 833,011 791,074 693,289 252,685 303,805 323,100 321,700 20% 6% 0% 9% 32% 36% 41% 46%

6963 ROHM 292,410 331,087 362,772 352,397 76,000 87,700 98,700 100,800 15% 13% 2% 10% 26% 26% 27% 29%

6707 Sanken Electric 126,386 144,500 160,724 155,919 51,960 61,700 67,630 72,732 19% 10% 8% 12% 41% 43% 42% 47%

7915 Nissha Printing 89,427 110,922 118,775 119,222 6,571 8,500 11,900 18,200 29% 40% 53% 41% 7% 8% 10% 15%

6967 Shinko Electric (*) 127,241 140,412 142,815 143,453 4,500 5,000 5,500 6,000 11% 10% 9% 10% 4% 4% 4% 4%

7,674,623 8,840,358 9,644,795 10,095,955 1,681,652 2,092,395 2,398,000 2,658,908 24% 15% 11% 17% 22% 24% 25% 26%

6,817,794 7,861,521 8,589,967 8,964,492 1,251,445 1,552,210 1,794,606 1,976,244 24% 16% 10% 17% 18% 20% 21% 22%

Consumer Electronics/Display6752 Panasonic 7,303,045 7,736,541 7,715,037 7,553,717 1,000,000 1,200,000 1,300,000 1,300,000 20% 8% 0% 9% 14% 16% 17% 17%

6740 Japan Display 457,378 614,567 769,304 989,115 50,000 70,000 95,000 112,000 40% 36% 18% 31% 11% 11% 12% 11%

6753 Sharp 2,478,586 2,927,186 2,786,256 2,461,589 66,500 71,000 80,000 98,000 7% 13% 23% 14% 3% 2% 3% 4%

6773 Pioneer 451,841 498,051 501,676 449,630 312,568 348,075 355,591 351,293 11% 2% -1% 4% 69% 70% 71% 78%

6796 Clarion 177,288 191,368 198,627 216,227 158,391 159,029 150,730 168,200 0% -5% 12% 2% 89% 83% 76% 78%

6816 Alpine 222,309 285,884 294,560 273,056 163,202 216,505 231,640 220,299 33% 7% -5% 12% 73% 76% 79% 81%

6632 JVC Kenwood 306,580 316,343 285,010 292,195 100,548 124,770 120,745 138,540 24% -3% 15% 12% 33% 39% 42% 47%

Industrial Electronics6501 Hitachi - 9,666,446 9,774,930 10,034,305 - 892,426 936,934 1,001,192 - 5% 7% 6% - 9% 10% 10%

6503 Mitsubishi Electric 3,567,184 4,054,359 4,323,041 4,394,353 520,000 615,000 706,000 754,000 18% 15% 7% 13% 15% 15% 16% 17%

Total excluding NGK Spark Plug/Ibiden/Alps

Device maker Total

CompanyCode Automotive related Sales YoY % chg.Total Sales As a % of total

13 April 2017


Figure 35: Automotive-related sales and weightings at 18 major electronic parts makers


Auto electrification and the shift to a higher voltage should boost demand for passive components, motors, and semiconductors Growth in electrified vehicles including PHEVs/EVs (300–400V), full hybrids (200–270V), micro hybrids (130V systems), and 48V HEV systems for improved fuel efficiency should lead not just to higher-voltage main motors. Surplus power from higher voltage batteries should lead to electrification of auxiliary devices and higher-voltage drives for the system.

We expect this to lead to growth in the number of passive components and semiconductors as well as an increase in their value-added (high-voltage components tend to have a higher value-added), smaller motors (lower current capacity helps reduce the volume and weight of motors and generators), and growth in the number of components. The ability to operate under high temperatures also contributes to an additional devices' value.

UN regulation ECE-R100 (bylaw of battery type electric vehicle) specifies 48V for automotive systems as voltages above 60V are dangerous. However, when semiconductors and passive components are used in the drive unit, roughly double the specified voltage can be generated via counter electromotive force. We therefore anticipate growth in demand for products that can withstand voltages of up to 100V in 48V HEV systems (according to one theory 48V was chosen by automotive industry mainly because electronic devices that can withstand over 100V tend to cost more). We expect growth in high-voltage systems to lead to a significant increase in the unit price of semiconductors and passive components.

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¥ mn

Sanken ElectricROHMYokowoIriso ElecJapan Aviation ElecHiroseALPS (Component)KOANippon Denpa KogyoNippon ChemiconNichiconTDKMurataMinebeaMabuchi MotorNIDECNGK Spark PlugIbidenAs a % of total sales

13 April 2017


Electrified vehicle developments by automaker Valuations growing as electrified vehicle model launches speed up Competition among incumbents and new entrants starting to intensify Twenty years have elapsed since Toyota released its original Prius. Today, nearly every major automaker’s model lineup includes at least one HEV, PHEV, EV, FCEV and/or other electrified vehicle. With environmental standards becoming ever more stringent, electrified vehicle launches are accelerating, driven partly by electrified vehicles’ high degree of compatibility with automation and information technologies. This acceleration trend has been accompanied by valuation growth also. Japanese automakers have started to develop PHEVs and EVs in earnest while refining their existing HEV technologies. European and US automakers are in the process of revamping their ICE-centric model lineups through such means as adding 48V HEV models and launching electrified vehicle specialty brands. Meanwhile, upstart competitors are emerging, including Tesla, new entrants from other sectors and local Chinese automakers. Competition among incumbents and such upstarts is starting to intensify.

13 April 2017


Figure 36: Electrified vehicle model timeline (1)

Source: Company data, Marklines, Credit Suisse

BrandToyota ☆'97/10, Toyota Gen. 1 Prius launched

☆'01/6, Estima Hybrid launched ☆'01/8, Crown Mild Hybrid launched

☆'02/12, Toyota FCHV-4 launched ☆'03/7, Toyota Alphard Hybrid launched ☆'03/9, Toyota Gen. 2 Prius launched

☆'05/3, Lexus RX400h launched ☆'05/7, FCHV launched

☆'06/4, Lexus GS450h launched ☆'06/5, Toyota Camry Hybrid launched

☆'07/5, Toyota HEV accumulated sales reach 1 million units ☆'07/5, Lexus LS600h/LS600hL launched

☆'08/9, Toyota FCHV-adv launched ☆'09/5, Toyota Gen. 3 Prius launched ☆'09/7, Lexus HS250h launched ☆'09/8, Toyota HEV accumulated sales reach 2 million units ☆'09/12 Toyota SAI launched

☆'10/6, Toyota Auris Hybrid launched☆'11/1, Lexus CT200h launched ☆'11/2, Toyota HEV accumulated sales reach 3 million units ☆'11/5, Toyota Priusα launched ☆'11/12, Toyota Aqua launched

☆'12/1, Toyota Prius PHV launched ☆'12/3, Lexus GS450h launched ☆'12/4, Toyota HEV accumulated sales reach 4 million units ☆'12/5, Toyota Yaris Hybrid launched ☆'12/7, Lexus ES300h launched ☆'12/9, Toyota RAV4 EV launched ☆'12/12, Toyota eQ launched

☆'13/1, Toyota Crown Hybrid launched ☆'13/3, Toyota HEV accumulated sales reach 5 million units ☆'13/5, Lexus IS300h launched ☆'13/8, Toyota Corolla Hybrid launched ☆'13/10, Lexus GS300h launched ☆'13/12, Toyota HEV accumulated sales reach 6 million units

☆'14/1, Toyota Harrier Hybrid launched ☆'14/2, Toyota VOXY/ NOAH Hybrid launched ☆'14/7, Lexus NX300h launched ☆'14/10, Toyota HEV accumulated sales reach 7 million units ☆'14/10, Lexus RC300h launched ☆'14/10, Toyota Esquire Hybrid launched ☆'14/12, Toyota MIRAI FCV launched

☆'15/1, Toyota Alphard/ Vellfire Hybrid launched ☆'15/7, Toyota Sienta Hybrid launched ☆'15/8, Toyota HEV accumulated sales reach 8 million units ☆'15/10, Lexus RX450h launched ☆'15/11, Toyota RAV4 Hybrid launched ☆'15/12, Toyota Gen. 4 Prius launched

☆'16/3, Lexus HEV accumulated sales reach 1 million units ☆'16/4, Toyota Auris Hybrid launched ☆'16/5, Toyota HEV accumulated sales reach 9 million units ☆'16/6, Toyota New Estima Hybrid launched ☆'16/10, Lexus IS300/350h launched ☆'16/12, Toyota C-HR Hybrid launched

☆'17/1, Toyota Vitz Hybrid launched ☆'17/2, Toyota New Prius PHV launched ☆'17/3, Lexus LC500h launched ☆'17, Toyota New Priusα launch scheduled

Honda ☆'99/11, Honda Gen. 1 Insight launched ☆'01/12, Civic Hybrid launched

☆'02/12, Honda FCX launched (lease sales) ☆'04/12, Honda Accord Hybrid launched

☆'08/7, Honda FCX Clarity launched (lease sales)☆'09/2, Honda Gen. 2 Insight launched

☆'10/2, Honda CR-Z Hybrid launched ☆'10/10, Honda Gen. 1 Fit Hybrid launched

☆'11/6, Honda Fit Shuttle Hybrid launched ☆'11/10, Honda Freed Hybrid launched

☆'12/5, Acura ILX Hybrid launched ☆'12/7, Honda Fit EV launched (lease sales) ☆'12/10, Honda HEV accumulated sales reach 1 million units

☆'13/1, Honda Gen. 2 Accord Hybrid launched☆'13/1, Honda Accord Plug-In Hybrid launched ☆'13/9, Honda Gen. 2 Fit Hybrid launched ☆'13/12, Honda VEZEL Hybrid launched

☆'14/12, Honda Grace Hybrid launched ☆'15/2, Honda Legend Hybrid launched ☆'15/2, Honda JADE Hybrid launched ☆'15/5, Honda Shuttle Hybrid launched

☆'16/2, Honda Odyssey Hybrid launched ☆'16/3, Honda FCV Clarity Fuel Cell launched ☆'16/5, Honda New Accord Hybrid launched ☆'16/9, Honda New Freed/ Spike Hybrid launched ☆'16/11, Honda NOTE e-POWER launched

☆'17/2, Honda NSX Hybrid launchedNissan ☆'00/4, Nissan Tino Hybrid launched

☆'03/12, Nissan X-Trail FCEV launched (lease sales) ☆'06/10, Nissan Altima Hybrid launched

☆'10/11, Nissan Fuga Hybrid launched ☆'10/12, Nissan Leaf launched

☆'11/3, Infiniti M35h launched ☆'12/5, Nissan Cima Hybrid launched ☆'12/8, Nissan Serena S-Hybrid launched

☆'13/3, Nissan/Renault EV accumulated sales reach 100 thousand units ☆'13/10, Infiniti QX60 Hybrid launched

☆'14/7, Nissan e-NV200 launched ☆'15/5, Nissan X-TRAILHybrid launched ☆'15/8, Nissan Murano Hybrid launched

☆'16/8, Nissan New Serena S-Hybrid launched ☆'16/11, Nissan NOTE e-POWER launched

☆'17/8, Nissan Serena e-POWER scheduled ☆'17 summer, Infiniti Q60 Hybrid launched

Japanese Others ☆'10/4, Mitsubishi i-MiEV launched ☆'11/12, Mitsubishi MINICAB-MiEV launched

☆'12/7, Mitsubishi Dignity launched☆'13/1, Mitsubishi Outlander PHEV launched

☆'15/9, Mitsubishi New Outlander PHEV launched ☆'15/12, Mitsubishi Delica:D2 Mild Hybrid launched

☆'17/1, Mitsubishi Delica:D2 Parallel Hybrid launched

☆'09/7, Subaru Plug-In Stella launched (lease sales) ☆'13/6, Subaru XV Hybrid launched

☆'15/7, Subaru Impreza Sport Hybrid launched ☆'16/10, Subaru XV Hybrid tS launched

☆'07/3, Mazda Tribute Hybrid launched ☆'09/3, Mazda Premacy Hydrogen RE Hybrid launched (lease sales)

☆'12/10, Mazda Demio EV launched (lease sales) ☆'13/11, Mazda Axela Hybrid launched

☆'14/8, Mazda Flair Hybrid launched☆'02/11, Daihatsu Hijet Cargo Hybrid launched ☆'1738, Mazda New Flair Hybrid launched

☆'12/5, Daihatsu Altis launched ☆'13/6, Daihatsu Mebius launched

☆'03/1, Suzuki Twin Hybrid launched ☆'12/9, Suzuki Wagon R launched

☆'15/5, Suzuki Hustler Hybrid launched ☆'15/5, Suzuki Spacia Hybrid launched ☆'15/8, Suzuki Sorio mild Hybrid launched

☆'16/2, Suzuki Ignis Hybrid launched ☆'16/9, Suzuki Sorio Strong Hybrid launched ☆'16/11, Suzuki Sorio Strong Hybrid launched ☆'16/12, Suzuki Landy Hybrid launched

☆'17/1, Suzuki Swift mild Hybrid launched☆'17/2, Suzuki New Wagon R mild Hybrid launched

☆'03/11, Hino Dutro Hybrid launched☆'08/1, Hino RANGER Hybrid launched ☆'08/5, Hino S'elega Hybrid launched

☆'15/12, Hino Blue Ribbon Hybrid launched ☆'05/4, Isuzu Elf Diesel Hybrid launched ☆'12/8, Isuzu Elf Hybrid launched

☆'04/2, Mitsubishi Fuso Aero Star launched ☆'12/5, Mitsubishi Fuso CANTER Eco Hybrid launched

2016-2006 - 2010 2011 -20151996 - 2005

13 April 2017


Figure 37: Electrified vehicle model timeline (2)

Source: Company data, Marklines, Credit Suisse

BrandAmericans ☆'04/9, Ford Escape Hybrid launched

☆'05/9, Mercury Mariner Hybrid launched ☆'09/6, Mercury Milan Hybrid launched

☆'10/12, Ford Transit Connect Electric launched ☆'11/12, Ford Focus Electric launched

☆'12/9, Ford C-Max Hybrid launched ☆'12/10, Ford Fusion Hybrid launched ☆'12/11, Ford C-Max Energi launched ☆'12/12, Lincoln MKZ Hybrid launched

☆'13/2, Ford Fusion Energi launched ☆'17/4, FCA Pacifica Hybrid launched

☆'07/9, Chevrolet Tahoe Hybrid launched ☆'07/9, GMC Yukon Hybrid launched

☆'08/9, Cadillac Escalade Hybrid launched ☆'08/9, Chevrolet Silverado Hybrid launched ☆'08/9, GMC Sierra Hybrid launched

☆'09/9, GMC Yukon Denali XT Hybrid launched ☆'10/11, Chevrolet Gen.1 Volt launched

☆'12/3, Chevrolet Malibu ECO launched ☆'12/4, Chevrolet Impala ECO launched

☆'13/6, Chevrolet Spark EV launched ☆'08/5, Tesla Roadster launched ☆'13/12, Cadillac ELR launched (Buildout in '16/5)

☆'15/10, Chevrolet Gen.2 Volt launched ☆'16/12, Chevrolet Bolt EV launched

☆'12/6, Tesla Model S launched ☆'15/9, Tesla Model X launched

☆'17, Tesla Model 3 launch scheduled ☆'11/12, Fisker Karma launched

Europeans ☆'10/4, VW Touareg Hybrid launched ☆'11/12, Audi Q5 Hybrid launched

☆'12/3, Audi A6 Hybrid launched ☆'12/5, Audi A8 Hybrid launched ☆'12/10, VW Jetta Hybrid launched

☆'13/9, VW e-up! launched ☆'13/12, Audi A3 Sportback e-tron PHV launched

☆'14/2, VW e-Golf launched ☆'14/10, VW Golf GTE PHV launched

☆'15/4, Audi Q7 e-tron PHV launched ☆'15/10, VW Passat GTE PHV launched

☆'18, Audi Q6 e-tron launch scheduled ☆'10/5, Porsche Cayenne S Hybrid launched

☆'11/6, Porsche Panamera S Hybrid launched ☆'13/9, Porsche Panamera S E-Hybrid launched

☆'14/10, Porsche Cayenne S E-Hybrid launched ☆'17/3, Porsche Panamera Turbo S E-Hybrid launched

☆'09/6, Mercedes S400 Hybrid launched ☆'09/12, Mercedes ML450 Hybrid launched (lease sales)

☆'10/6, Mercedes B Class F-Cell launched ☆'10/12, Mercedes A Class E-Cell launched (lease sales) ☆'10/12, Mercedes Vito E-Cell launched (lease sales)

☆'12/6, Mercedes E300 BlueTEC Hybrid/E400 Hybrid launched ☆'13/6, Mercedes S550 PHV launched ☆'13/11, Mercedes S400 Hybrid launched

☆'14/4, Mercedes S300 BlueTEC Hybrid launched ☆'14/7, Mercedes B250e launched ☆'14/8, Mercedes S500e PHV launched ☆'14/8, Mercedes C300h Hybrid launched

☆'15/4, Mercedes C350e PHV launched ☆'16/3, Mercedes E350e PHV launched

☆'17/2, Mercedes GLC Coupe PHV launched ☆'12/10, Smart Fortwo Electric Drive launched

☆'13/5, Smart Gen.3 Fortwo Electric Drive launched ☆'14/12, Smart Gen.2 Forfour launched

☆'09/6, Mini E launched (lease sales) ☆'09/9, BMW ActiveHybrid X6 launched

☆'10/6, BMW ActiveHybrid 7/7L launched ☆'11/10, BMW Active E launched (lease sales)

☆'12/6, BMW ActiveHybrid 5 launched ☆'12/9, BMW ActiveHybrid 3 launched

☆'13/11, BMW i3 launched ☆'14/6, BMW i8 PHV launched

☆'15/9, BMW X5 Drive40e PHV launched☆'16/1, BMW 225xe Active Tourer PHV launched☆'16/1, BMW 330e PHV launched ☆'16/7, BMW 740e PHV launched

☆'17/2, Mini F60 PHV launched ☆'12/2, Opel Ampera launched

☆'11/3, Renault Fluence Z.E. launched ☆'11/10, Renault Kangoo Z.E. launched

☆'12/3, Renault Twizy launched ☆'12/12, Renault ZOE launched

☆'16/6, Renault Megane Hybrid launched ☆'10/12, Peugeot iOn launched

☆'13/5, Peugeot Partner Electric launched ☆'10/12, Citroen C-ZERO launched

☆'16/3, Citroen E-MEHARI launched ☆'11/9, Peugeot 3008 Hybrid4 launched

☆'12/6, Peugeot 508 Hybrid4 launched ☆'12/6, Citroen DS5 Hybrid4 launched

☆'13/5, Peugeot Partner Electric launched ☆'13/4, Fiat 500e launched

☆'12/12, Volvo V60 Plug-In Hybrid launched ☆'13, Volvo C30 Electric (lease sales)

☆'15/8, Volvo XC90 T8 PHV launched ☆'16, Volvo 7900 Electric ☆'16/12, Volvo V90/S90 PHV launched ☆'16/12, Ferrari LaFerrari Mild Hybrid launched

Others ☆'09/7, Hyundai Avante LPi Hybrid launched ☆'09/7, Kia Forte LPi Hybrid launched

☆'10/10, Hyundai i10 BlueOn launched (lease sales) ☆'11/4, Hyundai Sonata Hybrid launched ☆'11/5, Kia Optima/K5 Hybrid launched

☆'12/6, Kia Ray EV launched (lease sales) ☆'13/6, Hyundai ix35 Fuel Cell launched (lease sales) ☆'13/12, Hyundai Grandeur Hybrid launched ☆'13/12, Kia K7 Hybrid launched

☆'14/4, Kia Soul EV launched☆'15/1, Hyundai New Sonata Hybrid launched ☆'15/7, Hyundai Sonata PHV launched

☆'16/1, Hyundai IONIQ Hybrid launched ☆'16/3, Hyundai IONIQ Electric launched ☆'16/3, Hyundai Niro Hybrid launched ☆'16/7, Kia K5 PHV launched ☆'16/7, Kia Optima/K5 PHV launched ☆'16/11, Gen.2 Kia K7 Hybrid launched

☆'17/2, Hyundai IONIQ PHV launched ☆'17/2, Kia Niro PHV launched ☆'17/3, Hyundai Gen.2 Grendeur Hybrid launched

☆'08/12, BYD F3DM launched (lease sales) ☆'10/9, BYD K9 launched

☆'11/10, BYD e6 launched ☆'13/9, BYD Qin PHV launched

☆'14/1, BYD Qin Hybrid launched ☆'14/9, BYD DENZA launched

☆'15/1, BYD Tang PHV launched ☆'15/10, BYD Song PHV launched

☆'16/3, BYD Qin launched ☆'16/3, BYD e5 300 launched ☆'16/4, BYD Yuan PHV launched

☆'11/11, SAIC Roewe 750 Hybrid launched ☆'12/11, SAIC Roewe E50 launched

☆'13/11, SAIC Roewe e550 PHV launched ☆'15/3, SAIC Eado EV launched

☆'16/4, SAIC e950 PHV launched ☆'16/8, SAIC RX5 launched ☆'16/11, SAIC eRX5 PHV launched

☆'10/4,Dongfeng Nissan Succe A03 launched ☆'14/9,Dongfeng Nissan Venucia e30 launched

☆'11/12, Dongfeng Fengshen S30 BSG Hybrid launched ☆'15/3,Dongfeng Fengshen E30 launched

☆'16/1,Dongfeng Fengshen A60EV launched ☆'11/8, Beijing New Energy C30DB launched

☆'07/11, Chery New Energy A5 BSG launched (lease sales) ☆'11/4, Chery New Energy QQ3 EV launched

☆'14/11, Chery New Energy eQ launched ☆'16/7,Chery New Energy Arrizo 7e launched

☆'08/6, Changan New Energy Jie Xun Hybrid launched (lease sales) ☆'15/3, Changan New Energy Eado EV launched

☆'16/11, Changan New Energy Eado Hybrid launched ☆'16/11, Changan New Energy Benni launched

☆'14/8, FAW New Energy Besturn B50 launched ☆'14/8, FAW New Energy Oley launched ☆'14/8, FAW New Energy Weizhi V5 launched ☆'14/2, Brilliance Auto Zinoro 1E launched (lease sales)

☆'16/5, Brilliance Auto Zhonghua H230 launched ☆'15/12, GAC Trumpchi GA5 launched ☆'15/11, Geely Emgrand EV 300 launched

☆'08/1, Mahindra Reva REVAi ☆'13/3, Mahindra Reva e20 launched

☆'16/6, Mahindra eVerito launched

2016-2001 - 2005 2006 - 2010 2011 -2015

13 April 2017


Toyota Motor Cumulative global HEV sales of over 10mn units

Since launching the original Prius in 1997, Toyota has cumulatively sold over 10mn HEVs globally. It currently sells HEVs in 90 countries/regions and has a lineup of 33 HEV models ranging from subcompacts to full-sized Lexus models. The fourth-generation Prius, on the market since December 2015, has a fuel efficiency rating of 40km/l, more than 20% better than its predecessor. Toyota has newly converted the Prius to its TNGA (Toyota New Global Architecture) platform in the aim of adding value beyond environmental friendliness in dimensions such as drivability and design. In 2016, Toyota’s global HEV sales grew to 1,401,000 units, roughly 15% of its total unit sales. Toyota has set a long-term target of almost completely phasing out sales of solely ICE-powered vehicles by 2050 under its Toyota Environmental Challenge 2050. As Toyota adds PHEVs, EVs and FCEVs to its existing HEV lineup, electrified vehicles’ share of its sales should keep growing.

Toyota already has an FCEV, the Mirai, launched in late 2014 as an uber-eco-friendly car, but with the FCEV market is still in its infancy, Toyota has sold only several thousand Mirais to date. Toyota has made its entire FCEV-related patent portfolio available to prospective licensees royalty-free to promote FCEV development even among competitors. It is strategically placing priority on making allies in the aim of propagating its technology, cultivating the FCEV market and promoting the build-out of hydrogen stations and other infrastructure. Such a collaborative approach is becoming increasingly important in developing all kinds of next-generation technologies, not only FCEVs. Toyota will likely increasingly share its technologies not only with consolidated subsidiaries such as Daihatsu and Hino but also with alliance partners Subaru (7270), Mazda (7261) and BMW and even prospective alliance partner Suzuki (7269), in the aim of establishing its technologies as de facto standards.

Figure 38: Toyota’s fourth-generation Prius Figure 39: Newly differentiated second-generation Prius PHV

Source: Toyota Motor Source: Toyota Motor

13 April 2017


Toyota starting to ramp up PHEV/EV development

In the electrified vehicle space, Toyota appears to have hitherto been focused on developing HEVs and FCEVs in particular, but it has now apparently started to ramp up development of PHEVs and EVs also. It has one PHEV model, the Prius PHV, the second-generation version of which was released in February. The new Prius PHV’s all-electric range is 68.2km, 2.8 times farther than the first-generation model’s. Additionally, the new Prius PHV has a distinctive design to differentiate it from Prius HEVs, in contrast to the first-generation model, which was outwardly largely indistinguishable from the Prius HEV. Toyota’s intensified focus on developing PHEVs seems to be at least partly motivated by California’s tightening of its ZEV (Zero Emission Vehicle) regulations.

The ZEV regulations require ZEVs to account for a certain minimum share of automakers’ vehicle sales. Automakers that fall short of this minimum must pay fines or purchase credits from other automakers. From 2018, ZEVs will no longer include HEVs. Toyota must start selling PHEVs and/or EVs to supplement its credits earned from previous HEV sales. In 2015, Toyota had to buy ZEV credits for the first time ever because its HEV sales were dampened by low oil prices. Having jump-started the eco-friendly vehicle trend with its HEVs, Toyota will likely step up its efforts to expand its PHEV sales as the next chapter in its eco-friendly vehicle success story.

With environmental regulations becoming ever stricter throughout much of the world, Toyota plans to also develop EVs in addition to HEVs, PHEVs and FCEVs. Last November, Toyota announced it has established an in-house venture to spearhead EV development and EV strategy formulation under President Akio Toyoda’s direction. The venture will be staffed by personnel from Denso, Aisin Seiki and Toyota Industries (6201) in addition to Toyota Motor itself. Toyota apparently aims to harness its group-wide capabilities to develop EVs and start mass-producing them by 2020. Toyota is not standing idly by as European and US automakers shift their EV and/or PHEV development programs into high gear, upstarts like Tesla emerge and local Chinese automakers gain stature against a backdrop of NEV (new energy vehicle) incentives,

13 April 2017


Figure 40: Toyota’s electrified vehicle-related news flow


News News News

2015 Jan Toyota offers FCV patents free of charge to boost uptake and standardization in a move aimed at market creation

2016 “The next 100 years will be the era of eco-cars” — Toyota president discusses strategy, multiple systems, and global

2017 Jan Toyota: Launches next-generation taxi sales campaign focusing on five themes, including environment

Toyota and Hino’s fuel cell bus enters service in Aichi with three roundtrips per day

Toyota to launch Lexus LC500 FCV model by 2020 Toyota: Testing FCV in Dubai

Google could emerge as Toyota's biggest rival in five years; competition shifting without pause to more complex

Toyota Kaizen Digest: New Prius’ three-fold targets — exceeding 40kms/l, standardization of parts, and

Toyota: Building hydrogen fuel alliances with 13 partners to ensure FCV uptake

Toyota offers FCV patents free of charge to boost uptake and standardization – Critical to protect undisclosed

Toyota’s China strategy sees hybrid vehicles priced below gasoline cars

Sumitomo Metal Mining acquires additional Toyota stock; prospects for bolstering EV development

Toyota to increase Mirai production - Aims for a three-fold increase to 2,000 in 2016

Mar Toyota and other automakers hold trials for cutting CO2 from forklifts using fuel cells

Feb Toyota: Forms corporate alliance for next-generation vehicle development with Suzuki

Feb Resurgence of diesel passenger cars, Toyota to manufacture diesel SUV after eight-year hiatus

Toyota FCV uptake gains momentum: Full-fledged production in Aichi Prefecture and plans for a Lexus FCV

Toyota: Hybrid sales in Malaysia total 26,452 units over 2009–2016

Toyota, Nissan, and Honda to jointly support hydrogen station infrastructure development

Toyota seeks to maintain eco-friendly branding in the US: Unveils a new PHV in New York, expresses concerns on

Toyota: Global hybrid sales reach 10mn mark (cumulative over 20 years)

Mar Toyota’s hybrid sales reach 50%. Set to boost domestic sales as hybrids qualify for eco subsidies

Apr HV battery re-use: Growth in automotive applications, demand growth in Japan and the US

Toyota: Launch of 2nd version of Prius PHV (core of eco-car business) with enhanced environmental performance

Apr Toyota to launch EV in China under local branding via GTMC within 2015

Toyota to set up PHV R&D and production bases in China, its first attempt at local production, market launch likely in

Toyota: Recalls 1,500 Mirai vehicles due to faulty control device in hydrogen-powered system

Toyota to boost HVs to 30% of sales by 2020 to meet emissions regulations

May HV and environment-friendly vehicles drive auto market. Toyota’s global sales top 9mn units

Toyota: Outlines roadmap for commercialization of next-generation semiconductor material gallium nitride (GaN)

Automotive R&D at all-time high at Toyota and Mazda Toyota and JX consider a new company for the rollout of hydrogen stations across Japan. Move to boost FCV uptake

Toyota: Boost to US hydrogen-fuel infrastructure; financial collaboration in project with Shell to build fuel stations

May Start of Tokyo trials for the ultra-compact, three-wheel EV “i-ROAD.” Commercialization to start in July

Toyota and Honda launch global HV sales in FY15. The factor will likely determine overseas performance

Toyota: Introduces with Denso a new catalytic converter substrate that uses 20% less precious metal than in

Toyota teams up with Mazda for engines and eco technology, covering diesel engine development and low-

Jun Toyota develops the world’s first fuel cell system for sale to retail users

Toyota: Delivering fuel-cell buses to Tokyo bus operators, starting with Toei Bus next month

Jul Toyota, Nissan, and Honda to support hydrogen infrastructure development

Prius at the mercy of US regulations: Removing classification as an eco-friendly car in California could hurt

Collaboration regarding PHV charging equipment with Panasonic Shop

Protecting the connected car from hacking: Toyota affiliates & Fujitsu press ahead with encryption of

Prius PHV capable of driving 60km on electric power. Toyota unveils its new Prius model and aims to meet

Mar Hybrid Prius priced at ¥6.6mn in India, beyond the budget of most consumers, despite strong interest in eco-cars

Sep Toyota to step-up HV rollout in India Prius PHV equipped with higher capacity battery pack with twice the energy capacity of previous model

Toyota Tsusho and others develop solar-powered hydrogen production system; starting to apply it for fuel-

Toyota, Iwatani to test hydrogen supply chain along Tokyo Bay in Kanagawa Prefecture

Toyota to offer four types of battery packages for HVs depending on the model

Apr Toyota: Working with US, UK universities, other institutions to develop battery materials; using AI to

BMW and Toyota discuss ways to strengthen partnership Jul Panasonic solar panels adopted for Toyota PHV roof; capable of drive-battery charging

Toyota aims to consolidate Prius production in Japan, halts it in China

Toyota Mirai introduced to Australia

Park24 and Toyota to expand car share trials in Tokyo and increase number of single-seat, ultra-compact EVs

Aug Toyota seeks to develop integrated production system following efforts in China, and step up localization in

Oct Toyota aims to eliminate engine-based autos by 2050; will shift to FCVs and other technologies

Sep Toyota: Infrastructure-related collaboration, BMW’s FCV strategy, interview with environmental director in charge

Fuel cell Lexus model announced, poised for launch in 2020

Oct Toyota: Vice-president calls for over 50% HV sales weighting (by 2020 in Europe)

Fourth-generation Prius shows improved fuel efficiency to 40km/l

Fuel-cell vehicle R&D by Guangdong bus company, Toyota, others; ¥150bn investment in China

Toyota president reiterates diesel strategy and company’s unique strengths

Toyota: In-house battery development; targeting large capacity for PHVs by 2023

Toyota president promises to bring back “wow” factor to Toyota; unveils five "world-first" models including FCVs

Toyota: Plan to launch fuel-cell bus in 2017 starting with Japan, major step toward hydrogen-powered lifestyle

Nov Toyota focusing on ways to boost eco-car adoption in China

Panasonic to produce solar panels for Toyota vehicles

Dec Toyota steps up HV strategy in China; will launch a series of locally manufactured models

Nov Toyota: Plans EV mass production by 2020, to comply with national environmental regulations, and secure next

Mirai 2015 orders top 3,300 vehicles; Toyota calls for an eight-fold increase in sales

Toyota: OP down due to weak N.American model sales, pushed-back demand; Vice-president calls for system to Toyota: Underlines strength in China, EV/PHV launches are keyToyota: Next generation models to center on FCVs; EV development ongoingToyota: New EV-development organization; Three affiliates including Denso to participate; will draw up Toyota: Ramping up China development bases, mulling EV launchesToyota: Announces FCV tests/plan for independent EV launch in China, multifaceted strategy tailored to Toyota: Fuel-cell truck testing; with view to installation in large vehicles in USToyota: Accelerating HV launches in India; Delhi pollution worst in world; government tightening rules

Dec Toyota: President Akio Toyoda taking charge of internal EV ventureToyota: Calls for roughly 30% increase in EV developers by 2021Toyota affiliates establish EV development setup, foray into core EV parts under new organizationHybrid sales to top 10mn units; still key to Toyota’s environment-friendly brand, despite emergence of EVsFocus on EV, drive safety; Toyota Group likely to gain greater edge through January restructuring

DateDate Date

13 April 2017


Nissan Motor Expectating alliance EV platform integration and Leaf normal evolution Nissan Motor is considered among the leading automakers to be on the cutting edge of the EV market, and the company is promoting the normal evolution of the Leaf vehicle as a mainstay model. The current model, revised in December 2015, comes equipped with a 30kWh battery and cruising range of 280km, which is about 20% farther than under the previous model. Ongoing cost reductions have contributed to a gradual decline in selling prices, with the current model priced from ¥2.73mn. Global sales for the Leaf reached 200,000 vehicles in 2016. Nissan aims to achieve a domestic sales ratio for electric and plug-in hybrid vehicles in Japan of 50% by 2020, and within this figure it appears management has lifted its target for the EV sales ratio to 10%. The key to expanding EV sales appears to be narrowing the gap in costs with internal combustion engine vehicles, and we note that there is some potential for an EV platform integration in line with the alliance with Renault and now Mitsubishi. If specifications can be standardized for the motors, inverters and batteries procured by the three companies, we believe the same companies could see substantial cost improvements. The alliance offers not only the potential merits from the technologies fostered by Mitsubishi in the development of its Outlander PHEV model, but if both companies can increase sales in their respective PHEV models, it can also offer synergistic effects, such as the reduction of component procurement costs, through the augmented sales volume.

Figure 41: The normal evolution of the Nissan Leaf Figure 42: The integrated e-power powertrain

Source: Nissan Motor Source: Nissan Motor

The new face of electric vehicles: e-Power Favorable sales of Nissan’s Note e-Power, launched in 2016, attest to the market’s favorable reception of what the company bills as the new face of electric vehicles. The e-Power system combines the Leaf motor and an inverter with the engine, which is used a similar manner as in series hybrid vehicles (providing electric power to the motor) or as a range extender. In a sense, this represents an innovative development in EV for Nissan, which previously lagged behind in hybrid models, particularly in smaller vehicles. The e-Power battery is about one-twentieth the size of the 30kWh Leaf battery, with the efficient engine providing supplemental power. The Note e-Power gets 37km per liter, putting it in the top class for fuel efficiency among vehicles of similar size. Among Note vehicles sold in Japan, 70–80% are equipped with the e-Power system, with the vehicle securing the No.1 spot for registered sales in March 2017. Nissan appears focused on offering the e-Power system in the Serena minivan, which is selling favorably, thanks in part to the inclusion of the company’s ProPilot autonomous driving technology. The Serena model already comes equipped with a micro-hybrid system, but we believe the inclusion of the e-Power system could greatly improve the vehicle’s fuel efficiency.

13 April 2017


Figure 43: Nissan’s electrified vehicle-related news flow


News News News

2015 Jan Nissan launches two EVs, announces plans for hybrid version of Note hatchback in FY3/17

2016 Jan Nissan to produce next-generation EV fuel cells in UK 2017 Jan Nissan launching EV-only platform by 2020; could apply for several models

Nissan CEO Carlos Ghosn announces plans to revamp the Leaf EV at Detroit Auto Show

Feb Nissan, BMW strengthen alliance in charging station infrastructure

Mar Nissan, Yokohama resume EV car share trials

Feb Toyota, Nissan, and Honda agree on joint support project to develop hydrogen station infrastructure

Mar Nissan’s new Leaf has range of 280km Nissan NV200 to feature hydrogen fuel cell extender from Symbio

Mar Nissan announces plans for the successor to the Leaf and a mini-vehicle-based model from FY3/17 to retain the top

Nissan Leaf to feature Japanese-made fuel cells; new line in Japan to switch from US-made

Nissan and Daimler expand their alliance with a technological tie-up, global cross-supply, and capital

Apr Nissan to record EV drivers’ reactions

Jun Nissan reaches goal of cutting CO2 emissions by 20% (versus FY3/06 level) two years ahead of schedule

May Ghosn tweak’s Nissan’s EV strategy for China; lower-priced models a possibility

Nissan aims for vehicle life of 15 years, adds electric motor, autonomous driving

Nissan taking 34% stake in MMC; i-MiEV + Leaf possibilities; concerns about being left behind in EVs

Jul Toyota, Nissan, and Honda support joint development of hydrogen station infrastructure

Nissan partnering with MMC in fuel cell development; Ghosn helping restore credibility

Aug Nissan launches Murano hybrid; targeting China market Nissan sells stake in Calsonic Kansei to raise more than ¥100bn for next-generation tech

Eco-car ranges extend; Nissan model offers 300km on a full charge

Jun Nisan developing bio-fuel cells for EVs; 3x the range; first for use in commercial vans; aiming for sales by 2020

Sep Renault, Dongfeng produce EVs Jul Fuel-cell vehicles: Nissan’s shift to bio-ethanol having repercussions; could accelerate decline of hydrogen-based

Oct Nissan unveils first EV mini-vehicle at Tokyo Motor Show; smaller SUV also

Aug Nissan pulls out of automotive fuel cells, negotiating sale with Chinese companies; realigning eco-car products

Nissan, Mitsubishi Motors announce joint development plans, three new models with collision avoidance systems

Nissan’s bio-fuel cell eco cars; extended ranges without increased CO2

Nissan: Domestic sales weighting for EVs reaches 10% Sep Nissan: Best fuel efficiency among smaller autos; EV + power generation engine; close to 40km/l

Nissan aims to lift domestic sales weighting for EVs to 50% by 2020

BYD and Nissan supplying Uber with 50 vehicles for road testing in UK

Nissan and Kanematsu working on charging stations, EV trials in US by year-end

Nissan pushing smaller commercial vehicles in Europe; bigger lineup, new EV certification

Nissan opens urban trials of autonomous vehicles, aiming for commercialization in 2020

Oct Nissan’s Ghosn focusing on China market, moving up EV launches

Dec Nissan, Tesla launching new EVs in 2017 with 300km/charge as battery sizes increase

MMC and Nissan partner in eco cars and overseas markets; also working with Renault

Nissan developing new 2x capacity 60kW fuel cells for EVs Infiniti EV for China’s market; Nissan considering launch scheduleNissan’s Note features new hybrid technologies: Propulsion from electric motor alone

Nov Nissan plans low-priced EVs for China; aiming for ¥700,000-800,000Nissan and other automakers testing broader EV drive systems in USNissan Serena using e-Power hybrid system to lift fuel economy

Dec Nissan upgrades services for EVs: Unlimited use of fast charge stations for ¥2,000/monthRenault Nissan and MMC standardize EV platforms; pricing 20% below gasoline models to push take-up

DateDate Date

13 April 2017


Honda Motor Honda targets two-thirds of global sales from hybrids and zero-emissions vehicles by 2030 Since the launch of the Insight model in 1999, Honda Motor has been actively developing a wide range of electrified vehicles. Hybrid electric vehicles (HEVs) account for about half of domestic sales, with vehicle systems in each class including the two-motor Intelligent Multi-Mode Drive (i-MMD), the single-motor Intelligent Dual-Clutch Drive (i-DCD), and the three-motor Super Handling All-Wheel Drive (SH-AWD), which regulates torque sent to the left and right rear wheels and is featured in the new NSX model. In addition to the introduction of PHEV models, including the Accord, the company launched the Clarity Fuel Cell, a new FCEV, in March 2016. We believe Honda is likely to continue to aggressively introduce new models as management has indicated its aim to make fully two-thirds of its cars electrified in some way - including hybrids, plug-in hybrids, battery-electric, and hydrogen fuel-cell vehicles by 2030. We also believe the company is beginning to develop its next-stage platforms with an eye toward a heightened ratio of electrified vehicles over the medium- to long-term. According to recent news releases, the company is expected to announce at the April auto show in New York the 2017 launch in the US of the new Clarity Electric (EV) model and the new Clarity Plug-in Hybrid (PHEV) model. Both models appear to use a common platform also shared by the already Clarity Fuel Cell model, already available for sale.

Figure 44: Honda's NSX SH-AWD system Figure 45: Clarity Series models (FCEV, PHEV, EV)

Source: Honda Motor Source: Honda Motor

Strengthening tie-ups as the limits of individual effort approach Alongside the continued advancement and diversification of automotive technology, automakers are also forced to improve efficiency in development resources. Compared to its sales, R&D expenses at Honda are rather large, and it would appear that the company has reached the limit in regard to just how much it can bear. Amid such an environment, Honda is bolstering its tie-ups with other companies, including in the electric-power technologies. The company is already working with GM to develop the next-generation fuel cell system, with the two companies in January 2017 establishing a jointly held fuel cell production subsidiary in the US. The companies aim to launch fuel cell system production around 2020, with the next-generation platform being designed so that Honda can efficiently install the system. We believe the goal of introducing new models from 2020 is tied to expectations for FCEV costs reductions. In addition, Honda in February announced an agreement with Hitachi Automotive Systems to establish a joint venture company for the development, manufacture and sale of electric vehicle motors. While Honda has to date pursued motor development on its own, it appears the company aims to bolster its competitive advantage in motors forming the core of electric power technology, and generate scale merits and synergistic effects in technology though cooperation with the top tier supplier. The companies intend to establish the joint venture in July 2017, with motor production taking place in the US and China.

13 April 2017


Figure 46: Honda’s electrified vehicle-related news flow


News News News

2015 Apr Honda to shift assembly of Accord HV from US plant to Sayama plant in Japan

2016 Jan Honda inks agreement with UK-based Ceres Power to use Honda technology in developing household power-

2017 Jan Honda unveils concept car for ride-sharing market, utilizing AI to assist in safe driving

Honda eyes turnaround, overhauling quality checks in wake of recall, targeting new markets with three-motor

Honda and GM further expand alliance, incorporating self-driving technologies

CEO Takahiro Hachigo speaks at Detroit auto show, announces launch of new hybrids as part of electric push

Jul Toyota, Nissan, and Honda back hydrogen stations for fuel cells

Honda says next-generation PHVs and EVs for US market will have triple the driving range of currently available

Honda and Sekisui House to establish base for a hydrogen energy demonstration (and environmental education) in

Oct Honda to debut FCV with driving range of more than 700 km in March 2016

Honda's first mass-produced FCV to be available initially only for lease

Feb Honda, GM to invest c. $85mn (about ¥10bn) each in JV to produce hydrogen fuel cells in US, world's largest FCV

Honda unveils external power feeding device, compatible with other manufacturers' vehicles

Feb Honda to start making hybrid cars in China, to meet that country's increasingly stringent fuel economy regulations

Honda, Hitachi to make EV parts in US, China; aim to supply various customers rather than just manufacturing

CEO Takahiro Hachigo says Honda is considering greater cooperation with GM, in vehicle electrification, self-driving

Honda aims for new-energy vehicles to account for two-thirds of line-up

Honda partners with Hitachi in EV motors, looks at supplying various customers rather than just

Honda says FCV, EV and PHV variants will leverage common platform

Mar CEO Takahiro Hachigo says mass production technology is key for FCVs; company to develop own hydrogen station

Honda to manufacture EVs and PHVs for US market in Japan, while continuing to invest in US

Nov LIXIL and Honda unveil new-concept home that can be powered by FCV, also equipped with gas co-generation

CEO says Honda lags Toyota in mass-produced FCVs, but says technology underpinning new FCV could be used in

Honda, GM to design next-generation platform made more efficient by use of jointly developed fuel cell system

Honda to launch electric Super Cub as early as 2017, with double the driving range of currently available electric

Honda delivers first FCV to METI Mar Honda, Hitachi AMS to produce EV motors in US and China from 2019

Dec Honda says says it will release hybrid variants of all minivans

Apr Toward "hydrogen society," Honda unveils Smart Hydrogen Station (SHS), installable in one day, and also

Honda aims to have electrified powertrains in two-thirds of cars sold in Europe

May Honda installs compact hydrogen station at headquarters building in Tokyo

Honda, GM announce executive structure for new US fuel cell JV, plan to rotate positions of president and vice

Honda working with Mitsubishi Materials and others on centers for recycling materials recovered from junked HV

Honda uses New York International Auto Show to show case new PHV and EV sharing platform with FCV

Honda to progressively increase local production of HVs for China market

Honda, Japan Post eye development and establishment of social infrastructure via postal deliveries using electric

Contrast in Toyota and Honda's FY15 HV sales on overseas markets

Jun Amid greater uptake of HVs, Honda announces plans to scavenge reusable materials from discarded lithium-ion

Jul Honda and Daido Steel adopt HV motor magnet free of heavy rare earth elements, lowering procurement riskHonda and Akamatsu Denki demonstrate use of FVs and EVs as emergency power sources

Aug Honda redraws electrification roadmap, aims to develop next-generation platform in next five years Honda to triple hybrid motor production, expanding capacity for motors used in midsize and large hybrid autosHonda to increase hybrid motor production, plans for two-thirds of its cars to be green by 2030

Oct Honda unveils ultra-small EV prototype vehicle at CEATEC

Honda expands lineup in India with reintroduction of hybridsHonda looks to strengthen alliances, recognizing limits to going it alone

Nov Showa Shell subsidiary assists Honda in testing of hydrogen production through solar power

Dec Honda attends CES for first time in 10 years, unveils NeuV, a vehicle using AI to read driver's emotionsHonda announces renewed investment in China, planning new factory at ¥50bn cost

DateDate Date

13 April 2017


Other Japanese automakers Focus on synergistic effects at Mitsubishi from tie-up with Nissan. Subaru planning new PHEV models in 2018 Among the mid-tier manufacturers, Mitsubishi has been a leader in the development of electrified vehicles, but domestic sales have been adversely impacted by reports that the company inflated the fuel efficiency of its models, and the pace of sales growth for the mainstay Outlander PHEV model has slowed as a number of European countries have reduced applicable subsidies. We also note that the company cancelled plans to introduce a PHEV version of the Eclipse Cross, a new small SUV. However, with a model pipeline built on collaboration with Nissan waiting in the wings, we believe the company over the medium to long term could benefit from synergistic effects, including cost reductions on the joint procurement of components, as well as the integration of the EV platform with the larger company.

Mitsubishi at the Paris International Auto Show last year announced the Mitsubishi GT-PHEV Concept as a next-generation crossover SUV concept car, which indicates to us that the company’s product strategy remains focused on electrified vehicles. In contrast, Subaru’s development in HEV models has been confined to the Impreza and XV, and while it has appeared to date that the company has focused its efforts on enhanced added value improvements in internal combustion vehicles, we note that Subaru expects to launch new PHEV models in 2018 to comply with ZEV regulations in the US. While utilizing partner Toyota’s electrified vehicle technology, the company is also apparently developing a horizontally opposed boxed engine for inclusion in the new platform.

Mazda introducing EV models in 2018, Suzuki could benefit from access to Toyota technology It appears Mazda will be launch EV models in North America in the run up to 2019. We believe the company is developing a common platform for internal combustion and EV versions for the next-generation SkyActiv Gen 2. It also appears the company could introduce a range-extender PHEV equipped with a rotary engine from 2020. Cooperation with Toyota opens the possibility of collaboration in the areas of motor drive technologies and vehicle control. Suzuki has used—particularly in mini vehicles—S-Ene Charge, a mild hybrid system using ISG similar to the 48V system, with the hybrid system giving rise to this system used in compact vehicles requiring registration (i.e. non-minicars). While the response to next-generation technologies has been of some concern in the past, we believe that if heightened cooperation with Toyota can be achieved, the company could well benefit from access to the larger automaker’s technology in electrified vehicles.

13 April 2017


Figure 47: Other Japanese automaker’s electrified vehicle-related news flow


News News News

2015 Apr Mitsubishi: Launching Outlander PHEV in China, surveying PHV potential in Chinese market

2016 Jan Suzuki: Launches second compact HV SUV (Ignis) 2017 Jan Mazda: Targeting commercialization of range-extended EV that uses rotary engine for power generation

May Mazda: Attracting Toyota with engine technology; comprehensive alliance in broad fields, including

Mar Fuji Heavy: Standardizes chassis design for gasoline-powered vehicles through EVs, targeting growth on safety

Mitsubishi: Withdraws from luxury sedans to focus on SUVs and EVs

Jun Mitsubishi: New Outlander PHEV achieves 9% increase in fuel efficiency

Apr Suzuki: Application of air-cooling unit in two compact FCVs, targeting commercialization in 2020

Mazda: Adopts G-vectoring control (GVC) for EVs and PHVs

Subaru: HV2 model Impreza Sport poised for launch, increasing number of HV models to meet stricter fuel

May Mitsubishi: Nissan takes 34% stake; EV competition between i-Miev and Leaf could hinder cooperation

Feb Mitsubishi: HV version of Delica minivan

Aug Suzuki: Launch of new Solio, first non-minicar hybrid Development/joint purchasing with Nissan under CEO Carlos Ghosn supports restoration of confidence

Toyota and Suzuki: Formation of JV for development of next-generation vehicles

Suzuki: Restart with Environment theme meandering for six years, dissolution of alliance with VW, repurchase of

Mitsubishi: Operations/headcount cut due to impractical PHV design and falsified fuel economy data

Maruti Suzuki: Cumulative HV sales reach 100,000 vehicles

Oct Development of autonomous driving EV targeted for 2020 Fuji Heavy: CEO exploring expanded development cooperation with Toyota, joint vehicle development, and

Mar Suzuki: Three models of new Wagon R with standard engine, mild hybrid, and mild drive turbo

Pouring resources into Maruti Suzuki amid HV penetration in India

Fuji Heavy: Adopting new platform aimed at 2018 launch of PHV with electric motor-only range of 50km+

Suzuki: Test driving 19 fuel cell motorcycles in Shizuoka and other locations, targeting reduced environmental

Big Japanese makers to expand/upgrade compact hybrid vehicles; Suzuki to launch strategic vehicle Swift in 2016

Mitsubishi: Expect capable EV development under ex-Nissan VP Yamashita

Completion of prototype with increased fuel efficiency/autonomous driving capability, developing

Jun Mitsubishi: Launch of Outlander PHEV in North America in summer 2017

Fuji Heavy: Launch of XV PHV that meets environmental regulations

Aug Fuji Heavy: Commercialization of 4WD EV with US launch in 2021

Nov Mazda: Considering collaboration in electrification and connectivity

Sep Fuji Heavy: Launch of XV hybrid tS next month

Mazda: Launches two diesel models (CX-5 and Mazda6) in the US market

Mitsubishi: Debut of GT-PHEV concept PHV at Paris Motor Show

Mazda: Developing control technology for planned 2019 EV launch in the US

Suzuki: Debut in Europe of Ignis equipped with mild HV system

Mazda: Targeting EV launch in North America by 2019 to comply with zero emissions regulations

Oct Mitsubishi: Expanding EV sales to 200 next-generation Drive Stations by 2020

Mazda: Adopting common platform for internal combustion vehicles and EVs, second-generation Skyactiv technology

Mitsubishi: Collaboration with Nissan on eco-cars and overseas business and with Renault as well

Dec Mazda: Gasoline-powered car sales increase with launch of new CX-5, composition increases from 30% to 45%

Mitsubishi: Targeting ¥25bn in benefits from collaboration with Nissan

Maruti Suzuki collaborates with M&M (Mahindra and Mahindra) and Tata Motors on hybrid vehicles and EVs

Mitsubishi: Next-generation Drive Station stores attract 2.5x more customers than other outlets

Suzuki: Commercializing Burgman motorcycle powered by fuel cells, public road tests for compliance with new safety

Nov Suzuki: In China, restructuring operations, establishing head office, clarifying president's responsibility. Launching Maruti Suzuki: Developing inexpensive hybrid vehicles with SuzukiMitsubishi: Restructuring domestic electric vehicle business around Outlander PHEVSuzuki: Solio equipped with new hybrid system achieves 15% advance in fuel efficiency

Dec Suzuki: First full-fledged HV Solio offers fuel economy and unique running experience in hybrid test drivesNissan, Renault, and Mitsubishi standardize EV platforms, targeting 20% cost reduction to promote penetration in Suzuki: New Swift/establishment of mild hybrid platform

Date DateDate

13 April 2017


Overseas automakers European automakers rapidly shifting to electrification technologies, 48V systems while launching plug-in hybrids and electric vehicles Due to the emissions cheating scandal at Volkswagen, European automakers are now pushing electrification technologies instead of diesel engine technologies as the core thrust of their environmental strategy. Volkswagen, the main culprit in the vehicle scandal, has also declared a pivot in its technology strategy. At the Paris Motor Show 2016, Volkswagen unveiled a new electric vehicle concept called I.D., which apparently will be able to travel 600km on a single charge. Plans call for launching the model in 2020. The model uses the Modular Electric Drive (MEB) platform developed specifically for electric vehicles.

Volkswagen aims to launch more than 30 electric vehicle models by 2025, targeting sales volume of 2–3mn units or 20–25% of global sales. Group company Audi also aims for an electric vehicle sales ratio of about 25% in the US market by 2025, and plans to launch an electric SUV in 2018. Volkswagen has already brought to market the compact e-up! electric car and the e-Golf as a mainstream model based on the Golf. Volkswagen also offers plug-in hybrids such as the Golf GTE and the Passat GTE. The company is also focusing on 48V hybrid electric vehicles with plans to use a 48V electric architecture in the Golf VIII due out in 2019. The Audi SQ7, the flagship model of the Q7 series that came out in 2016, features a 48V system paired with a diesel engine.

Luxury brands pursuing electrification technologies without hesitation Other European luxury brand carmakers have been stepping up efforts to develop electrification technologies. Daimler has unveiled the concept EQ model for Mercedes-Benz, which is able to drive 500km on a single charge. In autumn last year, Daimler announced an electric vehicle strategy that aims to launch at least 10 electric vehicle models by 2025, but the company now expects to achieve this objective three years earlier in 2022. In Europe, CO2 regulations for 2021 call on automakers to reduce emissions to an average of 95g/km. With a relatively large weighting of luxury cars and large-sized vehicles, Daimler had high CO2 emissions of 123g/km in 2016. We believe this is one reason why the company needs to quickly increase its ratio of electric vehicles.

In 2017, Daimler plans to release a fuel-cell electric vehicle based on the Mercedes-Benz GLC SUV. The model has an Li-ion battery pack that can be recharged externally with plug-in technology, as an additional energy source given the slow development of hydrogen refueling infrastructure. Together with Nissan Motor and Ford Motor, Daimler is jointly developing key parts such as the fuel cell and fuel tank for fuel-cell electric vehicles. Daimler makes plug-in hybrids for the Mercedes-Benz C-Class, E-Class and S-Class models, and is likely to add plug-in hybrids to its other lineups. In 2017, Daimler plans to release models with 48V systems for the Mercedes-Benz S-Class model with six- and four-cylinder engines.

Meanwhile, BMW offers the BMW i series of electric vehicles and plug-in hybrids. After introducing the plug-in hybrid i8 Roadster in 2018, BMW plans to pivot towards the development of electric vehicles. It plans to launch an electric Mini model in 2019 and the electric X3 SUV in 2020. BMW will apparently make an organization-wide push toward the development of electric vehicles for all of its brands and models by creating a common platform for its electric and gasoline engine vehicles. BMW is also collaborating with Toyota Motor on the development of a fuel-cell electric vehicle, and last year it unveiled a prototype model based on the BMW 5 series that uses a fuel-cell stack made by Toyota motor. The model will evidently have a driving range of up to 700km. By 2020, BMW aims to launch a fuel-cell electric vehicle at a price point no more than 10% higher than a traditional gasoline engine vehicle.

13 April 2017


US automakers rushing to comply with stricter ZEV regulations, Tesla to launch Model 3 soon US automakers are moving quickly to launch electric vehicles ahead of the strengthening of zero emission vehicle (ZEV) regulations in California. In 2010, General Motors launched the plug-in hybrid Volt and last year it unveiled the Bolt EV, a new electric vehicle model. The Bolt EV can travel more than 200mi (about 322km) on a single charge, rivaling the range of well-known Tesla electric vehicle models while keeping prices at roughly $30,000 after tax breaks for electric vehicles. The Bolt EV was selected as the North American Car of the Year at the Detroit Motor Show in January.

In 2015, Ford Motor came up with a plan to invest $4.5bn in the development of electric vehicles through 2020 with the aim of achieving an electric vehicle sales ratio of 40%. In January 2017, Ford Motor announced plans to increase the number of its electric vehicle models from five currently to 18 models over the next five years. The company is apparently considering introducing hybrid electric and plug-in hybrid models for the F-150 full-size pickup truck and the Ford Mustang, as well as launching compact electric-only vehicle models. Moreover, Ford Motor has recently announced a target for raising its electric vehicle sales ratio to 70% in China by 2025.

Despite being a newcomer, Tesla Motor has established a strong presence in the electric vehicle market with the Model S sedan and the Model X SUV. In 2017, Tesla Motor plans to release its new Model 3 sedan with a sales price of about $35,000 and a driving range of 200 miles or more. It is surprising that customers have already placed reservations for 400,000 Model 3 sedans before the first vehicle is delivered. We expect strong sales of the less-expensive Model 3 to quickly put Tesla Motor within reach of its medium-term sales target of half a million vehicles. Tesla’s Gigafactory, a joint venture with Panasonic, began operating in January, and operating rates are likely to rise steadily following the launch of the Model 3.

13 April 2017


Figure 48: Overseas automaker’s electrified vehicle-related news flow


News News News

2015 Jan Audi to invest ¥3.4tn over five years, focus on new models, environmental technology in 2015–19

2016 Jan National Electric Vehicle Sweden (NEVS) acquires Saab; succession of EV orders in China

2017 Jan Hyundai Motors to start selling new fuel cell vehicle model in 2018

Car industry preparing to comply with US fuel economy standards, even if it means clashing with governments

Hyundai Motor launches new eco-cars; HV fuel economy beats Prius; also unveils PHV, EV

AI to link Ford vehicles to home electronics

GM unveils EV; could go on sale in 2017; competition likely to intensify

European carmakers shift to EVs, HVs; Volkswagen scandal creates headwind for diesel vehicles

European firms rushing to become EV compliant; focusing on businesses in electric power, recharging stations,

BMW, VW to collaborate on installing EV chargers in US Tesla boss Elon Musk aiming to realize cheap electricity via solar power and storage batteries; more US households

Hyundai Motors to invest ¥350bn in US over five years to promote research on autonomous driving

Hon Hai wants to move into autos: announces investment in EVs, dealer tie-ups, making autos a new source of

Audi unveils fuel-cell vehicle (FCV) concept car VW to start selling concept EV in 2020

Feb Hyundai cuts FCV price to ¥9mn Tesla led US EV sales last year, beating Nissan Ford Executive Chairman Bill Ford sees the power source for vehicles changing in 2–3 years

Audi buys FCV patents from Canadian company European carmakers take different path in HVs: focusing on boosting fuel economy, low cost, PHVs via mild hybrids

Tata Motors to start selling electric and hybrid buses

Apple plans to develop EV — aiming to escape from dependence on iPhone?

Feb European carmakers shift focus to high-class EVs; Volvo planning to launch EV with 500km range in 2019; Aston

Feb European automakers shifting to BEVs; diesel-technology development reaching limits owing to strict EU regulations

Mar Chief battery tech developer Peter Lamp says BMW mulling source of batteries for remodeled vehicles,

Mar Hyundai invests RMB 1.8bn in Chinese EV business Daimler to invest ¥1.2tn in EVs and launch over 10 models

Apr EV adoption accelerating in California due to support measures; subsidies aim for 1.5mn cars on the road by

Volvo speeds up electrification: plans to revamp platform, make adoption free, boost sales of EVs to 10% of global

VW establishes US subsidiary, considering investment of $2bn (around ¥225bn) in EV sales promotion

Daimler tech developers collaborating with Nissan, other carmakers, extending range of FCVs to 700km on a full

BMW's new strategy "Strategy NUMBER ONE > NEXT"; plans to expand business in services, including car sharing,

BMW promoting local production of PHVs in Thailand, sees them as more promising than EVs; shows reporters

Jun EVs likely to launch in China as soon as 2019; higher subsidies boost Volkswagen, Shanghai Auto

Apr China's BYD top EV seller in 2015; will second-place Tesla make cars in China?

BMW expanding PHEV lines

Hon Hai moves into smart EVs via JV with Tencent, China Harmony

Peugeot comeback; rebuilds management, plans to build plant in Southeast Asia, launch 34 models including EVs

Bosch's AI push—Sales reach new high in FY16, driven by auto-related products; company now focusing on

Jul BMW developing EVs with Singapore university Volvo aiming to boost EV sales to 1mn units by 2015 Mar Daimler invests in EV recharging station operator ChargePoint

Aug Volkswagen's EV strategy: focus on PHEVs Hyundai Group EV mass-production plans: "We plan to strengthen battery technology with LG Chem and SK"

German government commits ¥30bn to hydrogen fuel cell research

Apple to tie up with BMW in EV development? May Tesla aims to boost annual production to 1mn units (20x 2016 output) by 2020; plans to have parts mass-

SK Innovation (South Korea) to double EV battery manufacturing capacity

Sep European carmakers embark on hybrid development in bid to catch up with Toyota

Dongfeng and PSA agree to joint EV development in China Demand for hybrids soaring in Singapore, owing in part to higher registration taxes for additional vehicles

Apple speeds up EV development; 2019 launch in sight Jun Hon Hai steadily preparing for EV sales in 2017; poaches exec who helped Audi win 70% share in China

France's Valeo: Assessment abilities, auto parts, autonomous driving lead, technology group, investment

Oct Volkswagen focusing on mild HV; plans to reduce diesel emissions by use of urea

Daimler to sell fuel-cell vehicle (FCV) next year; plans to allocate half its total investment (¥840bn) to eco-cars

Company founded by former Tesla executives to operate battery plant in Northern Europe

Volkswagen shifts from diesel to electric in change of strategy

Volkswagen announces strategy: aiming for 25% EV weighting in 2025, shifting to focus on corporate efficiency

Tesla could deliver 2,000 Model 3s by year-end

PSA, Renault seeking to change eco-car strategy in view of fuel tax increase in France, revision of tax breaks on diesel

Jul Volkswagen North America CEO: aiming to produce EVs in North America by 2020

Taiwan's Hota Industrial Mfg. to expand production on strong demand from Tesla

Volvo to offer plug-in hybrid option on all models Tesla unveils 10-year plan and states intention to enter market for large commercial vehicles, "can produce EVs in

Tata Power-DDL: 1,000 EV recharging stations in 4–5 years, up from five currently

Recharging network expands to six northern European countries; participation by Hubject (founded by telcos and

Hyundai aims to launch next-generation FCV in 2018 VW, Tata Motors form alliance focusing on Indian operations; Tata in a hurry to bolster passenger car

LG Electronics to supply 11 components for GM's next-gen EV—including drive motors, battery packs, and

Aug GM to make PHV batteries in China BMW, Tesla, Taiwan Mobile form IoV alliance

Volvo integrates compact car design, shifts to plug-in hybrids

Daimler unveils electric Maybach concept with 500km range

Alliance with another company in battery cell technology to be formed by year-end: VW president

Continental to launch mild hybrid next year Tesla in lead in realizing 500km range; improves battery without changing size

French startup developing Nissan-based vehicle that uses both electric and hydrogen power; range is 500km (twice

LG in final talks to supply EV batteries to Tesla, breaking Panasonic's monopoly

Sep VW and mid-sized Chinese company to manufacture EVs Chevrolet Bolt EV driven from Seoul to Jeju without a recharge

ZF to set up electrification tech R&D base in Japan GM offers longest driving range in general-purpose EV: 383km for effectively less than $30,000

Thailand's BOI issues roadmap for EV development

Nov LG to supply EV parts (batteries, info-related) for GM Bolt due for launch next year

Apple & McLaren discussing acquisition/strategic investment: English-language newspapers

BMW to start small-scale production of fuel cell vehicles in 2021

Dec Auto parts industry readies for Apple's entry into EVs BMW debuts FCV: Uses Toyota-made fuel cell, to go on sale in 2020

Hybrid Kinetic Group unveils concept EV at Geneva International Motor Show; to be launched in China in 2019

Porsche (VW Group) takes on Tesla in high-class EVs; plans to invest ¥130bn to develop car with 500km range,

BMW introduces new-model EV: Driving range increased by 70%, to 390km

US automakers to launch six models in China in eco-car push

Ford to invest ¥540bn in EVs through 2020, strengthen development via concentrated investment

Oct VW planning new-model EV with maximum driving range of 600km

Thailand to promote investment in EVs, targeting plug-in vehicles and hybrids

Korean government plans to promote spread of hydrogen fuel-cell vehicles (FCVs) aiming for over 630,000 in 2030

BMW to introduce EV versions of all models BMW, Daimler adopt different strategies for taking on Tesla: BMW to use existing car bodies, Daimler to build its

In eco-car competition, makers seeing PHVs as realistic: Mitsubishi stays quiet while boosting fuel economy, BMW

Apple's EV plans at a crossroads: First task is to develop autonomous driving system

Tencent (China) takes 5% stake in Tesla to promote intracompany reforms

Daimler starts construction of Li-Ion battery plant: To go into operation in 2018

Mahindra to enter US, Chinese EV markets

Nov BMW to make EV versions of Mini, SUV in attempt to counter Daimler

Hyundai Motors fuel cell vehicle has 580km range

VW's division strategy through 2025 hinges on SUV, EV platforms

Daimler brings forward launch of more than 10 EV models to 2022 from 2025

Dec VW group, BMW, Daimler, Ford to jointly construct EV quick-charging stationsMaking push into fuel cell vehicles, Hyundai Motors triples driving range of SUV

DateDate Date

13 April 2017


Electrification supply chain trend Denso The core Toyota group supplier for the electrification technologies Denso has taken an all-hands approach to developing products for electric vehicles, in addition to its wide range of electronic control systems for internal combustion engines. We assume the company’s sales of parts for hybrid electric, plug-in hybrid and electric vehicles are poised to grow to ¥500bn by 2020, from ¥86.9bn in FY3/16. Its new medium-term plan calls for consolidated sales of ¥5tn in FY3/21, compared with ¥4.5tn in FY3/16. Management looks for earnings growth to be driven by electrical products, and expects sales of ADAS (Advanced Driver Assistance Systems)-related products to increase by ¥150bn. Denso offers a broad range of products in this field, including ECUs for hybrid electric vehicles, inverters, DC-DC converters, battery monitoring units, electrical current sensors, high-voltage batteries, and motor generators. Moreover, the company could become significantly involved in the electrification of auxiliary equipment such as electrical variable valve timing systems and electric compressors. We anticipate top-line growth as sales expand for electrical products from the increasing use of high-voltage systems in automobiles.

To date, Denso has mainly supplied its electrical products to Toyota Motor, but seeks to increase uptake at other automakers by developing products that meet their diverse needs for a systems supplier. Denso has won orders for inverters and other electrical products from Nissan Motor and Mazda Motor, and began developing batteries after gaining a foothold in Li-ion batteries that were employed in the Ene-Charge system of the previous Suzuki Wagon R model. The Suzuki Solio Hybrid, launched at end-2016, features a drive motor unit developed by Denso for fully hybrid systems. Denso can now offer all the key components used in electric vehicles—such as motors, batteries and inverters—and has reportedly been increasing its supply capacity as a systems provider. We understand that the bulk of its deliveries for electric vehicles are products for hybrid electric vehicles, and we are focusing on its development of products for electric vehicles with high-voltage specifications. Toward end-2016, Toyota Motor created the EV Business Planning Department as a new organization for in-house ventures, joined by three major group companies comprising Denso, Aisin Seiki and Toyota Industries. Toyota is pressing ahead with the development of electric vehicles as one option for meeting zero emission regulations in China and North America. In contrast to the story of hybrid electric and fuel-cell electric vehicles, major system suppliers will take center stage in this new endeavor and start development from scratch.

13 April 2017


Figure 49: Denso’s products for electric vehicles

Source: Denso

Figure 50: Suzuki contributes to development of hybrid electric vehicles Figure 51: PCU in the new Prius

Source: Suzuki Motor Source: Denso

Aisin Seiki Room for product electrification is wide-open; strengthening joint development with group companies Aisin Seiki is the world’s largest supplier of transmissions. The company has grown earnings by expanding sales of automatic transmissions to Toyota Motor and other automakers. In the automatic transmission business, however, the weighting of transmissions for hybrid electric vehicles has been on the rise, and advances are being made in the electrification of engine and drivetrain components, areas of strength for the company. Owing in part to Toyota Motor, the leader in the hybrid electric vehicle market, among external suppliers Aisin Seiki boasts the largest share of the global market for transmissions used in hybrid electric vehicles. Since its transmissions were put in the 2015 Prius models, the company has had a foothold for supplying a wider range of models,

Custom Lithium Ion Battery Integrated Starter Generator

13 April 2017


including the C-HR, thereby increasing the weighting of hybrid electric vehicle transmissions in total sales. Moreover, Aisin Seiki has been working on a transmission for single-motor hybrid electric vehicles, opening up the possibility of sales growth to automakers other than Toyota Motor. Its regenerative braking systems are also a key component of electric vehicles, and an area where demand should continue to strengthen.

Aisin Seiki has been electrifying a wide range of products, such as electric pumps among engine parts, as well as electric active stabilizers and electric 4WD units among drivetrain parts. In electric pumps, the company supplies electric oil pumps for cooling hybrid electric and electric vehicles, as well as inverters and electric water pumps for cooling engines. The electrification of parts allows the company to not only minimize opportunity loss, but also to contribute to the optimization of cooling mechanisms through the application of linear controls. Aisin Seiki currently holds a top global market share in electric water pumps, as well as in electric oil pump for ISS.

Their revenue from electric pumps in FY3/16 is estimated to be around ¥25bn, while we forecast this to expand to ¥60bn by FY3/20. The expansion of the electric pumps should be fueled by further electrification of main engine water pumps, as well as from growing numbers of ISS vehicles and electrified vehicles equipped with inverters. Its electric active stabilizers help stabilize vehicle attitude and improve steering stability by controlling roll. By integrating motors, speed reducers and stabilizers in the same axle, its electric active stabilizers are more responsive than traditional hydraulically controlled stabilizers. The company’s electric active stabilizers are primarily installed in luxury vehicles, and are likely to be used more widely as high-voltage systems become more prevalent.

Aisin Seiki began supplying electric 4WD units for the new 2016 Prius. Traditionally, 4WD units have a transfer unit that evenly distributes the force put on wheel shafts, which worsens fuel economy because the rotating force of the transmission was distributed across the front and rear wheels. With electric 4WD units, independent motor drive mechanisms are installed on each wheel shaft, eliminating the loss of power in traditional 4WD units. Electric 4WD units have helped improve the driving performance of the Prius, which had been criticized for poor handling in freezing cold regions due to a lack of 4WD.

In October 2016, Aisin Seiki launched four working groups to focus on product lines for the development of next-generation products. The company aims to generate synergies in development by assigning group companies to each working group and collaborating across the organization. The electrification working group is in charge of advancing the development of electrification technologies with major group companies including Aisin Seiki, Aisin AW, ADVICS, and Aisin AI. In February 2017, management announced the start of a virtual company system. In each business, group companies will be managed as a single company with the aim of bringing together the core technologies of each company and improving development efficiency. In the electrification domain, Aisin Seiki, which makes drivetrain parts and automatic transmissions for commercial vehicles; Aisin AW, which handles automatic transmissions for passenger cars; and Aisin AI, which supplies manual transmissions and transfer units (4WD); will work together to address the needs of future electric vehicles.

The electric 4WD unit in the new Prius was jointly developed in this way by group companies and may be regarded as a product symbolizing the combined capabilities of this organization. As we mentioned earlier, Aisin Seiki is one of the key suppliers in the EV Business Planning Department that Toyota Motor created late last year as a new organization for internal ventures. We thus believe Aisin Seiki will strengthen development of products for electric vehicles. Aisin Seiki has already made it known that it will spare no effort in developing drive units (motors, inverters and gear case integration units) for electric vehicles by 2020.

13 April 2017


Figure 52: Substantial room for electrification of products handled by Aisin Seiki

Source: Aisin Seiki (flame model picture), Credit Suisse (comments on each parts)

Figure 53: Aisin Seiki’s electric 4WD unit

Source: Aisin Seiki

Brakes

Electrification: ABS/ESC, regenerative brakes, e-parking brake, electric vacuum pumps

Transmission

Electrification: HEV Transmission, EV reduction gearbox, motors

Chassis

Electrification: e-active stabilizer, electric active rear steering systemPowertrain

Electrificaition: Electric oil pumps, electric water pumps

4WD

Electirification: e4WD units

13 April 2017


Hitachi Motor business collaboration with Honda should boost competitive advantage Hitachi Automotive Systems (AMS), a wholly owned Hitachi subsidiary that handles the group's automotive equipment business, supplies a wide range of products that cover automobiles' basic functions: driving, turning, and stopping. Sales of powertrain and electronics associated with electrification technology account for around 30% of sales. The company handles all components, including core EV parts (lithium-ion batteries, inverters, motors), having established a position as a system supplier in the electrification market as well as in the conventional parts arena. It has built a solid track record in motor supply starting with Nissan's Hypermini EV minivehicle, which Nissan Motor started to mass produce in 1999, and including the Toyota Harrier HEV (2005) and current Chevrolet Volt (2016). This is probably due to the high regard in which the market holds its production technology and motor performance (high efficiency, high power output, small, lightweight). In February, the company decided to collaborate with Honda in motor business and the two companies agreed to establish a joint venture. We think the company is aiming to boost is competitive advantage in motors, which are the heart of electrification technology. We anticipate synergy benefits including economies of scale due to higher supply to Honda and non-Honda customers and tapping motor technology Honda has accumulated to date. We gather the two companies aim to set up the JV in July and start making motors in China and the US in 2019.

Nidec Motor demand expanding as higher voltages raise battery capacity; market scale to reach ¥9tn in 2030 excluding main vehicle engines Higher voltages accelerating electrification of auxiliary machinery Compared with our first report on electrification, published almost three years ago on 16 July 2014, the potential for electric automotive motors has greatly expanded. The electrification of auxiliary systems, such as suspension systems, is now expected to accelerate as the installation of higher voltage batteries and other power supply systems increase available electric power. Figure 56 presents a list of automotive applications for electric motors. The electrification of auxiliary equipment used in power trains and chassis is now accelerating at faster pace than three years ago. We expect the electrification of systems in 48V HEVs to expand from the installation of integrated starter generators (ISG, which combine a large capacity motor with an alternator), DC–DC converters, and 48V inverters to electric compressors, turbochargers, water pumps, and oil pumps. In addition, we expect 12V systems will see greater installation of systems that enhance driving performance, such as the previously hard to install electric stabilizers, large electronic power steering (EPS) systems, and active suspensions.

https://plus.credit-suisse.com/researchplus/ravDocView?docid=C0yq6j

13 April 2017


Automotive-related motor market to expand to ¥9tn by 2030 We expect the number of motors installed per vehicle to expand from 40 in 2015 to more than 50 in 2020 and then be close to 80 in 2030. That amounts to average annual growth of about 4%. By application, we expect electric interior systems to increase just 2% a year but forecast installation of electric power trains will expand 7% a year and chassis systems an even higher 13% a year. On a value basis, we expect market scale to grow 4% a year for interior systems, 9% a year for power trains, and 15% a year for chassis-related systems. We forecast the overall automotive-related motor market will expand from ¥3.8tn in 2015 to ¥5.1tn in 2020 and then ¥9tn in 2030, for an average annual growth rate of 6%.

Figure 54: On-board electric motors per vehicle (excluding main vehicle engine)

Figure 55: Forecast growth of automotive motors market (value basis, excluding main vehicle engine)

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

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2015

2016

2017

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2019

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20E

2021

E20

22E

2023

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24E

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26E

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E20

28E

2029

E20

30E

units

Powertrain Chassis Interior

01,0002,0003,0004,0005,0006,0007,0008,0009,000

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13 April 2017


Figure 56: Automotive motor systems and installation status

Note: ×:never, △: sometimes, ○: frequently, ●&☆: almost every case Source: Credit Suisse

Min Max Comp Mid Lux Comp Mid Lux BDC BLCD Step

5 201 Starter 5000 - 5500 1 1 ● ● ● ● ● ● ☆2 Alternator 5500 - 6500 1 1 ● ● ● ● ● ● ☆ ☆3 Radiator cooling fan 1000 - 1400 1 2 ● ● ● ● ● ● ☆ ☆4 Fuel pump 1000 - 1300 1 1 ● ● ● ● ● ● ☆5 Electronic control throttle 900 - 1200 1 1 ● ● ● ● ● ● ☆ △6 Electronic EGR valve 900 - 1500 0 1 △ △ ○ X X △ ☆ ☆7 Variabel valve timing intelligent by electronic motor 1300 - 2500 0 1 X △ △ X X △ ☆ ☆8 Electric valve control 1500 - 2500 0 1 X X △ X X △ ☆9 Electric thermostat 1500 - 2500 0 1 X X △ X X △ ☆

10 Electric water pump for engine cooling 1500 - 2500 0 1 X △ △ X X X ☆11 Electric pump for turbo/EGR cooling 1500 - 2500 0 2 △ △ △ X X X ☆ ☆12 Electric pump for ISS (for AC) 1500 - 2500 0 1 X △ △ X X △ ☆ ☆13 Variable nozzle turbo motor (turbo vehicles) 1500 - 2500 0 1 △ △ △ X X X ☆14 DCT/AMT (gear/clutch actuator) 1500 - 2500 0 4 △ △ △ △ △ X ☆ ☆15 T/M electric oil pump 1500 - 2500 0 1 △ △ △ X X X ☆

0 1516 Electronic control brake (ABS/ESC) 2500 3500 0 1 ● ● ● △ ○ ● ☆17 Electronic power steering (EPS) 1000 4000 0 1 ● ● ○ ○ ● ● ☆ ☆18 Electronic steering lock 100 300 0 1 ● ● ● △ ○ ● ☆19 Electric vacuum pump for brakes 2500 3500 0 1 △ △ △ X X X ☆ ☆20 Electronic control variable gear ratio steering 4000 5000 0 1 X X △ X X X ☆21 Electric brakes 2500 3500 0 1 △ △ △ X X X ☆22 Electronic parking brake 600 1000 0 2 △ △ ○ X △ △ ☆23 Electronic control suspension 1500 2200 0 4 X X △ X X X △ ☆24 ARS (active rear steering) system 2500 3500 0 1 X X △ X X X ☆ ☆25 Electronic active stabilizer 2500 3500 0 1 X X △ X X X ☆26 Electronic/Electronic control 4WD 9000 15000 0 1 X X △ X X X ☆

21 10027 Mirror 50 - 100 6 6 ● ● ● ● ● ● ☆28 Dorr lock 50 - 100 4 5 ● ● ● ● ● ● ☆29 Power window 500 - 800 4 4 ● ● ● ● ● ● ☆30 Wiper 700 - 1200 1 2 ● ● ● ● ● ● ☆31 Washer 100 - 200 1 2 ● ● ● ● ● ● ☆32 Meter 100 - 150 1 3 ● ● ● ● ● ● ☆33 Air conditioner blower 3000 - 6000 1 1 ● ● ● ● ● ● ☆ ☆34 Air conditioner damper 100 - 300 3 20 ● ● ● △ ○ ● ☆ ☆35 Air conditioner louver 100 - 300 0 4 X X △ X X X ☆36 Power sheet 700 - 1000 0 20 X ○ ● X △ ○ ☆37 Adjustable pedals 700 - 1000 0 1 X △ ○ X X △ ☆38 Easy closer (luggage, front & rear door) 250 - 500 0 5 ○ ○ ● X X △ ☆ ☆39 Auto front light leveling 250 - 350 0 2 △ ○ ○ X △ ○ ☆ ☆40 Adaptive front lighting system (AFS) 600 - 700 0 2 X △ △ X X △ ☆ ☆41 Front light cleaner 250 - 500 0 2 ○ ○ ● X X △ ☆42 Seat air conditioning system 700 - 1000 0 4 X X △ X X X ☆43 Air cleaning device 700 - 1000 0 1 X △ △ X X △ ☆44 Seatbelt height adjuster 250 - 500 0 2 X △ ○ X X △ ☆45 Electronic pretensioner 600 - 1000 0 2 X △ △ X X X ☆46 Active headrest 600 - 1000 0 2 X △ △ X X X ☆47 Electronic tilt steering, telescopic 650 - 1000 0 2 X △ ○ X X △ ☆48 Electric shades (rear, rear door) 700 - 1500 0 3 X X △ X X X ☆49 Sunroof 700 - 1500 0 2 X △ △ X X △ ☆50 Electric grille shutter 700 - 1500 0 1 X X △ X X X ☆51 Electric spoiler 700 - 1500 0 1 X X △ X X X ☆52 Electronic fuel rid opener 100 - 300 0 1 X X △ X X X ☆

26 135 ☆

5 10Main motor 30000 40000 1 3 ● ● ● ● ● ● ☆Electronic compressor for air conditioner 4000 7000 1 1 ● ● ● ● ● ● ☆Electronic water pump (Engine and A/C Cooling) 1500 2000 0 1 ○ ○ ● X ○ ● ☆Electronic water pump (inverter cooling) 1500 2000 1 2 ● ● ● ● ● ● ☆Electronic oil pump (motor cooling) 1500 2000 1 1 ● ● ● ● ● ● ☆Battery cooling fan browers 1500 2000 1 2 ● ● ● ● ● ● ☆ ☆

MotorAdoption rateDeveloped country Emerging coutry Adaptted motors

Price (¥)#s of motor per car

Power train

Interior/Exterior

Total

Chassis

HEV/PHEV/EV

13 April 2017


Nidec to see maximum demand boost in shift to electric-powered auxiliary devices We expect growth in electric-power steering (EPS) motors, and next-generation brake motors, as well as dual-clutch transmission (DCT) and other brushless DC motors, as the main drivers of Nidec’s motor business. The company had top market share for EPS motors in FY15 (20%, based on our estimates) and aims to raise this to 50% (35mn units) by FY20. Management plans to start shipments of next-generation brake applications from FY17, and increase volume to 5mn units in FY19 and 17–18mn in FY20. In EPS applications, we expect increased value-added and other benefits to stem from the shift to power-packs (where engine control units (ECU) are incorporated into the motor). In the area of water pumps, which are produced by Nidec GPM (acquired in FY14; has a solid business with European automakers), we expect the accelerated adoption of electric-powered devices for 48V HEV hybrid vehicles. Nidec has also positioned power trains as a priority area; it plans expansion in electric-powered actuators (for transfer cases, differential gears, and transmission gears) in the near term, and traction motors in the medium-term.

In the near term, constraints relating to development lead times and limited human resources are likely to hamper short-term growth. However, the shift to electric-powered chassis systems and auxiliary devices seems likely to accelerate, so we look for further transitioning to electric-powered systems and substantial growth in main motors and traction motors in 2020–25.

Figure 57: Nidec’s automotive business sales forecasts

Source: Company data, Credit Suisse estimate

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13 April 2017


Figure 58: Nidec’s auto motor shipment volume Figure 59: Nidec’s auto motor shipment value


Murata Manufacturing Awaiting in-vehicle business expansion, mainly in MLCC, for a post-smartphone, post-iPhone era. “Murata inside” now more common in automobiles Automotive sales share relatively small, but Murata is one of only a few highly profitable electronic component companies Amid favorable performance in non-automobile businesses, the automotive component sales ratio for Murata remains mired between 0% and roughly 15%. However, we note stable growth in the business, with an average annual growth rate between FY3/04 and FY3/16 of 11% (15% for MLCC alone). Moreover, the pace of growth appears to have accelerated since FY3/10. While sales and the sales ratio for the business are both lower than at Nidec, Kyocera, and TDK, the strength of the business’s organic growth (especially for MLCC) as well as its margins and profit contribution put the business in the top tier within the electronic components sector. On an OP basis, Murata’s automotive component business is on par with electronic components sector rival Nidec.

Figure 60: Murata: Automotive business sales and sales ratio trends

Figure 61: Murata: Sales breakdown for the automotive business (FY3/16)

Source: Company data, Credit Suisse Source: Company data, Credit Suisse estimates

0

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13 April 2017


Automotive MLCC showing an enhanced presence Figures 62–63 show sales trends by application for the four MLCC leaders (Murata, Taiyo Yuden, TDK, and SEMCO). On a combined basis, the four hold a global MLCC share of about 90%. Automotive MLCC has been the only application among the mainstay applications showing strong growth, with its share of the total MLCC market rising from just over 10% in 2010 to over 20% in 2016.

Figure 62: MLCC sales by application at the top four MLCC companies

Figure 63: MLCC sales ratios by application at the top four MLCC companies


Figures 64–65 provide a comparison of MLCC sales for telecom equipment (including smartphones) and automotive MLCC sales at the four leading MLCC companies. While smartphones have contributed to the MLCC market for telecom equipment by roughly doubling over the past seven years, sales in the market have remained generally flat in the more recent years. In contrast, the market for automotive MLCCs has shown stable growth. We note that the automotive MLCC market has expanded to reach a size about half that of the telecom MLCC market (equal to about 700–800mn handsets) and appears to have exceeded the size of the PC MLCC market.

Figure 64: Telecom MLCC sales at the top four MLCC companies

Figure 65: Automotive MLCC sales at the top four MLCC companies


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Murata

13 April 2017


MLCC ASP per vehicle is about 10x higher than ASP for smartphones Figures 66–67 show automotive sales and automotive MLCC average selling price (ASP) per vehicle over the long term. On a dollar basis, combined automotive MLCC sales for the four industry leaders (Murata, TDK, Taiyo Yuden, and SEMCO) showed strong growth among mainstay electronic devices, expanding by an average of 14% per year over the past fourteen years. The average MLCC ASP per vehicle also expanded sharply, rising by an average of 10% per year over the same period. This well exceeds average annual growth in automotive semiconductors of 7% between 2009, just after the start of the financial crisis, and 2017, as well as average annual growth in ASP per vehicle of 2% over the same period. While MLCC ASP per smartphone stands at about $1.40, the ASP for automotive MLCCs in use today is about 10x as high ($13.70) and is expected to continue to rise.

Figure 66: Automotive market size projection Figure 67: Projections for per-vehicle value of on-board MLCC


Figure 68: MLCC unit prices per smartphone (annual basis)

Figure 69: MLCC unit prices per smartphone (quarterly basis)


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13 April 2017


Murata’s share in automotive MLCC rises to almost 70%. “Murata inside” now common in automobiles Figures 70–71 show market shares for automotive MLCC and telecom equipment (including smartphones) MLCC for the four top MLCC companies. On a combined basis, the four leaders hold a global MLCC share of about 90%. Murata's share in telecom-use MLCCs has followed a recovery track after coming out of a trough in 2013 and appears to have again topped 50% in 2016. The company’s market share in automotive MLCCs stood at 45% in FY02 and topped 50% for the first time in FY08. After that, It rose by about 1–2pp each year. We estimate the company’s market share for Oct–Dec 2016 at 70%, with the average for FY16 as a whole at about 65%. Murata’s market share is continuing to improve driven by increased utilization and the benefits from lagging MLCC technology development at TDK, which was previously able to boast market share leadership.

Figure 70: Telecom equipment MLCC sales shares at the top four MLCC companies

Figure 71: Automotive MLCC sales shares at the top three MLCC companies


Awaiting expansion in automotive MLCC sales in post-smartphone, post-iPhone era We believe the growth rate for automotive MLCC sales is likely to accelerate alongside an expansion in the market for high-voltage electrified vehicles. In addition to the substantial number of MLCC units necessary for motor drive ECUs currently utilized in electrified vehicles, we believe the required number of MLCCs could increase as a result of a shift to high voltage (electrostatic capacity generally decreases as voltage increases, so more MLCC units are required).

Figure 72 provides Murata's estimates, provided by the company at an information meeting in December 2016, for the number of MLCCs used according per type of vehicle powertrain. Compared to pure internal combustion engine (ICE) models, the company estimates 1.3x more MLCC units in ISS models, 1.6x more units in micro HEV models, more than 4x more units in HEV/PHEV vehicles, and more than 5x more units in EV models. We believe the company could improve its unit price mix through increased use of MLCCs that can handle high temperature and high voltage.

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13 April 2017


Figure 72: MLCC unit use by type of combustion mechanism: Shift to electrified autos considerably expands MLCC demand


MLCC per a carPure ICE=1

• Powertrains will be increasingly electrified (by use of xEVtechnologies) to meet environmental regulations in major countries.

• There will be growing demand for components such as capacitors, inductors (coils) and timing devices that can operate at 125゜C

Engine Engine Engine Engine

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13 April 2017


Automotive MLCC likely to top smartphone MLCC in 2020–25 Figure 73 shows a calculation for automotive MLCC sales based on CAGRs of 10% and 14%. Given a slump in smartphone MLCC revenue (we expect revenue to remain flat despite a 2017 recovery due to higher prices for the iPhone8), we believe the market for automotive MLCCs could exceed that for telecom equipment MLCCs between 2020 and 2025.

Our estimates for the pace of growth in automotive MLCCs is based on past growth rates and does not include a sharp expansion in the number of MLCC units in use as electrified automobiles become more common. However, we note that growth could accelerate from 2025 as a result of a shift from 48V HEV models to PHEV models.

Based on that estimate, we forecast expansion of the automotive MLCC market will increase Murata’s marginal profit by ¥20-30bn by 2020, ¥60–100bn by 2025, and ¥120–230bn by 2030 (however, the impact on OP will likely be less because of the need for capex to expand capacity).

Figure 73: Market for automotive MLCCs could exceed market for smartphone MLCCs in 2020–2025


Rohm Targets annual growth of about 20% in Powertrain, but with little contribution from electrification; expecting SiC to take off after 2020 Stable CAGR of 8–9% in automotive business Figure 74 shows sales trends at Rohm by market. During FY3/08–12, sales to automakers stalled on account of the 2008 financial crisis, the Great East Japan Earthquake, and flooding in Thailand, but growth has been stable from a longer-term perspective. From FY3/04 through FY3/17, sales CAGR was 8% and sales per vehicle rose 4% (global automobile sales volume basis). Excluding years affected by one-time factors like those described above, the sales CAGR would have been 13% over the same period.

$ mn FY16E FY20E FY25E FY30EAuto MLCC CAGR+10% 1,260 1,844 2,970 4,783 vs FY3/16 100% 146% 236% 380%Auto MLCC CAGR+14% 1,260 2,127 4,096 7,886 vs FY3/17 100% 169% 325% 626%

Smartphone MLCC 2,751AV 778PC 1,246Others 417

Murata's Revenue contribution (Market share 70%) ($ mn)Auto MLCC CAGR+10% 882 1,291 2,079 3,348Auto MLCC CAGR+14% 882 1,489 2,867 5,521

Additional OP contribution ($ mn)Auto MLCC CAGR+10% 0 205 599 1,233Auto MLCC CAGR+14% 0 304 993 2,319

13 April 2017


From 2H FY3/15 through 1H FY3/17, sales flat-lined due to weaker sales of legacy audio products, but once this decline ran out of steam, sales returned to a growth trajectory of over 10% YoY in 2H FY3/17.

Breaking down the automotive business into analog/LSI and discrete/module products, the analog/LSI category represented 40% of sales in FY3/17 with discrete/module taking up 60%. By application, we estimate 60–70% of sales are related to audio, car navigation and infotainment systems. Recently, the sales weighting of audio/infotainment systems has declined to just over 50%, owing to weaker sales of legacy audio products and stronger sales of products related to body control/clusters and powertrains. We estimate roughly 70% of Rohm’s customers are Japanese companies, as before.

Figure 74: Sales by application: Automotive business expanding steadily


Figure 75: Rohm: Automotive business sales of car audio, car navigation, infotainment and other products (2016)

Figure 76: Rohm: Sales per vehicle (based on global automobile shipments)


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13 April 2017


Growth in automotive semiconductors strongest in discrete, then analog and MCU Figure 77 shows trends in market scale for MCUs, analog and discrete automotive semiconductors that are relevant to Rohm. During 2010–16, the CAGR was 10% for discrete products, 8% for analog products (total of analog, ASIC and ASSP), 3% for MCUs and 7% for automotive semiconductors overall. Excluding sensors for ADAS and some other products, growth rates for Rohm’s discrete and analog products have outpaced the market average.

Figure 77: Sales of automotive MCUs, analog and discrete products; sales per vehicle

Source: Company data, Gartner, Credit Suisse estimates

Targets 8–9% CAGR through FY3/20; expecting growth to pick up when full-scale adoption of SiC begins after 2020 At the results briefing held back in November 2016, Rohm unveiled sales forecasts for the automotive business, broken down as CAGR of 8% in the LSI business (analog business) and 9% in the discrete/module business through FY3/20 (we expect sales CAGR of over 10%, slightly higher than guidance). In the LSI business, Rohm targets CAGR of 3% for audio, 4% for infotainment, 3% for clusters, 18% for body control, 20% for powertrains, and 19% for ADAS applications. In discrete/modules, the company aims to expand sales of power discrete products related to powertrains.

In products related to electric vehicles, Rohm has been developing IGBTs for Japanese automakers and 48V-compatible products for the European market in the discrete/module business. In analog LSIs, the company is already mass producing power source ICs for engine control, power source ICs for EPS, intelligent power devices (IPDs), and insulated gate drivers. Automakers have decided to adopt its transmission and throttle controls. The company is also developing communications ICs (CAN) for powertrains and motor driver ICs for pumps and valves.

Automotive semiconductorRevenue$ mn CY2010 CY2011 CY2012 CY2013 CY2014 CY2015 CY2016

CAGR10->16

Automotive production (mn units) 72 75 79 83 85 87 91 4%

Automotive - MCU (1) 4,559 5,243 5,030 4,944 5,242 5,006 5,399 3% 8-bit 896 997 861 855 886 829 806 -2% 16-bit 1,062 1,173 1,050 958 1,054 908 1,028 -1% 32-bit 2,601 3,073 3,119 3,131 3,302 3,269 3,565 5%Per car ($) 63.5 69.8 63.4 59.9 61.4 57.3 59.0 -1%

Automotive - Analog 1,198 1,388 1,732 1,928 2,079 2,269 2,474 13%Automotive - ASSP 5,548 6,430 6,614 7,126 7,973 8,050 9,138 9%Automotive - ASIC 1,722 1,477 1,461 1,440 1,516 1,543 1,664 -1%Total analog (2) 8,468 9,295 9,807 10,494 11,568 11,862 13,276 8% Per car ($) 117.9 123.7 123.6 127.1 135.5 135.7 145.2 4%(2)/(1) (RHS) 1.86 1.77 1.95 2.12 2.21 2.37 2.46 -- yoy % chg. 9% -5% 10% 9% 4% 7% 4%

Small signal Diode 228 258 318 388 415Power diode 420 643 649 629 639Small signal transistor 351 435 483 483 502Power transistor 2,279 2,819 2,824 2,878 3,078Total discrete (3) 3,278 4,155 4,274 4,378 4,634 5,328 5,807 10% Per car ($) 45.7 55.3 53.9 53.0 54.3 61.0 63.5 6%(3)/(1) (RHS) 0.72 0.79 0.85 0.89 0.88 1.06 1.08 -- yoy % chg. 25% 10% 7% 4% 0% 20% 1%

Total Automotive Semi 22,587 24,886 25,073 26,719 29,985 30,068 33,010 7% yoy % chg. 42% 10% 1% 7% 12% 0% 10% -Per car $ 314.6 331.3 316.0 323.7 351.3 344.0 360.9 2% yoy % chg. 22% 5% -5% 2% 9% -2% 5% -

1,096955

4,7114,373 10%

9%

13 April 2017


From 2020, SiCs, where Rohm has taken the lead in development, are likely to begin replacing IGBTs, in our view. Rohm’s sales of IGBTs are smaller than at Infineon and Mitsubishi Electric, and we estimate the company’s market share is only 2–3%. However, Rohm has already begun mass producing IGBTs for automotive compressors, and plans to commence mass production of third-generation IGBT IPMs in 2017. Rohm has become a technology partner with Venturi Automobiles, which competes in the Formula One and Formula-E championship series and has used Rohm’s SiC-SBDs since 2016. From 2017, Venturi plans to use the full SiC-SBD/MOSFET module. Venturi is examining the use of Rohm’s SiC power devices for powertrains in a number of its models for 2020–25.

Figure 78: Rohm: Expanding portfolio of automotive LSI and discrete devices

Source: Company data, Gartner, Credit Suisse estimates

Mass production Projects expanding Mass production Mass production In development

Mass production Projects expanding Expanding volume Mass production Mass productionPower supply fpr electric power steering (EPS)

Mass production Projects expanding Expanding volume Adoption Mass production Expanding volumeTransmission

Mass production Projects expanding Mass production Adoption Mass production Expanding volumeThrottle control

Mass production Projects expanding Mass production In developmentTransmission IC (CAN) HEV, FV, FCB related

End Developed Adoption In development In developmentDriver for pump and valve

Mass production AdoptionHEV, FV, FCB related In development

Mass production In development Mass production Mass production Anti-lock brake system (ABS)IPD In development

Adoption In development Adoption Adoption Slip prevention/control (acceleration sensors, etc.)Audio system power supply Rechargable energy contol IC

Adoption Mass production Order increasing Adoption Mass productionHi-resolution audio coder Multiple input interface IC

Adoption Mass productionInsulated gate driver

Adoption Mass production

（40V~100V/~80A class）（600V/~47A class）

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Infortainment Body control Power train control Safety devices

Audio DSP Dot matrix driver

Seat fan motor driver

New series standard product (for power supply)

Thermal monitorLED headlight cooling fan

Ultra-low consumption 2MHz power IC Door and window control

Passive LED driver Transmission IC (CXPI)

AV differential signaling IC Multiple input interface IC

Backcamera video IC Transmission IC (LIN)

LED driver for head lamp Automotive camera (VGA)

Automotive camera (HD/FHD)

Backlight LED driver LED lamp cotrol

Panel system power supply

Clearance SONAR systems

Infortainment Body control Power train control Safety devices

Panel display driver Key less entry IC for Engine control Periphery monitoring systems

13 April 2017


Panasonic Rechargeable battery sales poised for growth, but higher fixed costs could delay profitability to FY3/19 We expect Panasonic's rechargeable battery business to expand as EVs begin taking off in earnest. In particular, we expect sales to accelerate in tandem with the ramp of Tesla’s Model 3, for which Panasonic is the sole battery supplier. The company makes cylindrical batteries for Tesla but is also seeing increased take-up of its rectangular batteries.

We look for rechargeable battery sales to expand from around ¥370bn in FY3/17 to around ¥610bn in FY3/19. We expect segment OP to come under pressure in FY3/17–18 from start-up costs and depreciation for the Gigafactory but anticipate a full-scale profit contribution from FY3/19. We model segment losses of ¥15bn in FY3/17 and ¥4bn in FY3/18 ahead of a ¥25bn profit in FY3/19.

Tesla’s Gigafactory (jointly owned by Panasonic) began operation in January, and Tesla expects Model 3 production to ramp from 1,000 vehicles/week beginning this July to 2,000/week in August, 4,000/week in September, 5,000/week by end-CY17, and 10,000/week (500,000/year) within CY18. Tesla is targeting production of 1mn vehicles annually by CY20, and we will be monitoring progress of the initial ramp and also any developments regarding medium-term investment.

Non-battery electrical components and power source systems also promising Panasonic also makes electronic components used in automotive electrical systems (power inductors, resistors, film capacitors, conductive polymer capacitors, varistors, thermistors) and power supply systems (inverters, chargers) and ECUs. While individual components carry little added value, Panasonic is focused on selling them as modules and systems, and we think this could combine with topline growth to drive up margins.

GS Yuasa Aiming for comeback via joint development with Germany's Bosch GS Yuasa (6674) sells 12V lead-acid car batteries and lithium-ion batteries (LiB) for HEVs and PHEVs. It is estimated to have the lion's share of the global automotive lead-acid battery market. However, it is developing next-generation LiB to accelerate development toward electrified automobiles. Group companies Blue Energy and Lithium Energy Japan are handling LiB development. Blue Energy has mainly won orders for LiB for Honda HEVs, Lithium Energy Japan for Mitsubishi Motors (7211) PHEVs. LiB sales totaled ¥39bn in FY3/16 (roughly 11% of consolidated sales). However, they made no contribution to earnings, the company booking operating losses of ¥0.6bn in that year. We expect a swing to profits of ¥0.8bn in FY3/18. However, we think further sales growth will be needed to increase profits from LiB. GS Yuasa is developing next-generation car batteries jointly with Germany's Bosch. The company's fourth medium-term plan, which started in FY3/17, positions LiB as a new business. The company is aiming to get on a steady growth track after ensuring profitability by improving mass-production efficiency. Working on development of high-performance batteries, we think future development with Bosch will be a strength. The company is engaged in R&D via joint development company Lithium Energy And Power (LEAP), aiming for a comeback via a high-performance battery it aims to launch in 2021. The company aims to double EV range via the battery, which is currently under development. The automotive LiB market is highly diversified with many competitors. However, we expect share gains via future development with Bosch.

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Companies Mentioned (Price as of 12-Apr-2017) A123 Systems (Unlisted) ADVICS (Unlisted) AESC (Unlisted) ATL (ATL.TN, TD2.94) Aisin AI (Unlisted) Aisin AW (Unlisted) Aisin Seiki (7259.T, ¥5,090) Audi AG (Unlisted) BENZ (BUNZI.RTS, $49.3496) BMW (BMWG.DE, €82.63) BYD (BY6A.DE, €11.43) Blue Energy Co., Ltd. (Unlisted) Bosch Ltd. (BOSH.BO, Rs23288.1) Continental (CONG.DE, €199.4) Daihatsu Motor (Unlisted) Daimler (DAIGn.DE, €66.64) Delphi Automotive Plc (DLPH.N, $74.91) Denso (6902.T, ¥4,677) Ford Motor Company (F.N, $11.28) Formula Automotive (Unlisted) GS Yuasa Corp (6674.T, ¥489) General Motors Company. (GM.N, $33.92) Hino Motors (7205.T, ¥1,264) Hitachi (6501.T, ¥580) Honda Motor (7267.T, ¥3,131) Infineon Technologies AG (IFXGn.DE, €18.52) Kyocera (6971.T, ¥5,954) LG Chem Ltd. (051910.KS, W282,000) Lithium Energy Japan (Unlisted) Mazda Motor (7261.T, ¥1,493) Mitsubishi Electric (6503.T, ¥1,506) Mitsubishi Motors (7211.T, ¥653) Murata Manufacturing (6981.T, ¥14,655) Nidec (6594.T, ¥9,903) Nissan Motor (7201.T, ¥1,009) PEVE (Unlisted) Panasonic (6752.T, ¥1,246) ROHM (6963.T, ¥7,120) Renault (RENA.F, €79.21) SDI (SDIS.L, 24.75p) SK Innovation (096770.KS, W163,000) Schaeffler (SHA_p.DE, €15.645) Semco Energy (SEN.N^K07) Subaru Corporation (7270.T, ¥3,924) Suzuki Motor (7269.T, ¥4,480) TDK (6762.T, ¥6,610) Taiyo Yuden (6976.T, ¥1,245) Tesla Motors Inc. (TSLA.OQ, $308.71) Tianjin Lishen Battery (Unlisted) Toyota Industries (6201.T, ¥5,150) Toyota Motor (7203.T, ¥5,798) Valeo (VLOF.PA, €60.32) Venturi (Unlisted) Volkswagen (VOWG.DE, €137.65) Wanxiang Doneed (600371.SS, Rmb14.74) psa peugeot citroen (Unlisted)

Disclosure Appendix Analyst Certification Masahiro Akita, Koji Takahashi, Hideyuki Maekawa, Akinori Kanemoto, Mika Nishimura, Yoshiyasu Takemura and Takuma Tsuji each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities As of December 10, 2012 Analysts’ stock rating are defined as follows: Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months. Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months. Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months. *Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, the expected total return (ETR) calculation includes 12-month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform where an ETR less than or equal to 5%. A Neutral may be assigned

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