Diesel controversy –Temporary shock or paradigm shift in ... · ≙ 15.1 km/l ≙ 20.3km/l ≙ 2.07 MJ/km ≙ 182 g/mi ≙ 1.82 MJ/km ≙ 253 g/mi 1) Average weight-dependent CO

Impact of the diesel controversy on OEMs and suppliers

Frankfurt, October 2015

Diesel controversy –Temporary shock or paradigm shift in powertrain?

2 Roland Berger_Automotive_Diesel_Final_141015.pptx

> European OEMs have utilized the fuel-efficient diesel powertrain as a key lever to reduce corporate fleet CO2 emissions, especially in the EU due to 2020/21 CO2 vehicle emission targets. These targets are basically impossible to reach without diesel

> We therefore expect diesel to remain a key pillar in OEMs' powertrain strategies, especially in Europe

> The current debate about diesel will, however, further drive innovations in combustion1) and after-treatment of diesel due to increasing regulatory requirements and standards, and will enforce test cycle implementation aiming to reflect Real Driving Emissions (RDE)

> In order to fulfill RDE regulations, diesel will become cleaner (with emission levels similar to gasoline engines), but also more expensive

> The resulting cost increase will accelerate the substitution process from diesel to smaller gasoline engines, especially in lower vehicle segments. Diesel will still remain dominant in the upper vehicle segments but total diesel share in Europe will decline in the coming years

> OEMs therefore have to further accelerate alternative powertrain solutions. Suppliers have the opportunity to implement innovative solutions for the further control of diesel RDE, and should also step up their preparations for alternative powertrains

Executive summary

Source: Roland Berger

1) Such as homogeneous combustion and HCCI


In the global core passenger car markets, the diesel powertrain is mainly a European phenomenon with more than 50% of new sales

Source: IHS; press research; Roland Berger

New sales of passenger cars, 2014 [m units]

Europe = EU-28

97%

3%

Gasoline incl. alternatives Diesel

13.8 47%

53%

12.5

99%

< 1%

18.1

100% 2.8

52% 48% 2.6

98%

2% 4.7


Emission regulations increase pressure on automotive OEMs to improve CO2 emissions, fuel efficiency and exhaust gas emissions

CO2 emissions/fuel consumption Toxic exhaust gas emissions (NOx, PM, HC)

Assessment of CO2 emissions/fuel consumption and toxic gas emission regulations

> Corporate CO2 emissions target [g/km]

> Fuel efficiency targets [km/l]

> Inovar – Auto energy efficiency increases [MJ/km]

> Potential4) corporate CO2 emissions targets [g/km]

> Add. potential fleet xEV target share

> CAFE2) [g/mi] > Additional ZEV

regulation CARB

-25%

2025

68-78

2021

951)

2013

127

2025

tbd

2020

105

2013

154

-32%

95

-31%

2020

117

2013

169

2025 2020

tbd

-13%

2025

166

2013

145

89

-28%

2025 2013

157

2020

113

≙ 15.1 km/l

≙ 20.3km/l

≙ 2.07 MJ/km

≙ 1.82 MJ/km ≙ 182 g/mi

≙ 253 g/mi

1) Average weight-dependent CO2 emissions target 2) Only for passenger cars 3) End customer pull for low CO2 emission/low fuel consumption powertrain and/or alternative powertrains 4) No decision made yet 5) Euro 6c test cycle WLTC: to be confirmed

1 2

tbd tbd tbd

> 2014: Euro 6b emission standard

> 2017: Euro 6c with implementation of RDE5), additionally WLTP

> Tier II Standards

> Low Emission Vehicle Program (LEV2, LEV3)

> 2009: post new long-term standards JC08 mode cycle

Source: Press research; Center for Climate and Energy Solutions; Roland Berger

5 Roland Berger_Automotive_Diesel_Final_141015.pptx Source: EEA; Roland Berger

CO2 emissions by segment/body type in EU-28, 2014

Diesel powertrain utilizes its better CO2/fuel efficiency compared to gasoline especially in the upper vehicle segments

Avg. CO2

emissions1) [g/km]

A B C D E Mini cars Small cars Medium cars Large cars Executive cars

226

157136128111

148131118109106

-35%

-17% -4% -15% -14%

Gasoline Diesel

Diesel share of total sales

0.4% 12.2% 24.8% 11.1% 4.3%

∑ 53%

1) Based on comparison of performance peer groups

1 CO2 emissions/fuel consumption

Segment


Diesel efficiency improvements will be the main lever to reduce fleet emissions for European OEMs to reach 95 g/km target in 2020/2021

EU volume OEM1) fleet avg. CO2 emission reduction levers until 2020/2021 [g/km]

> Regarding reduction of fleet average CO2 emissions, diesel efficiency improvement is a key lever to reach the target from the CO2 emission regulations in 2020/2021

> A gap of 12 g/km could not be closed with other powertrain technologies if diesel were to be abandoned

> Therefore, the improvement of diesel efficiency has to be a key pillar of the OEM's CO2 reduction strategy

1 CO2 emissions/fuel consumption

Source: EEA; Roland Berger

Altern.

propulsion

94

-3

Gasoline1) Diesel

-2

Vehicle Vehicle

power/fuel

-2

2012 fleet

average

Road load

-12

132

-1

-8

-1

2020/

2021

-1

Segment

shift

Altern. fuel

-9

Trans-

mission

1) Exemplary OEM 2) Including CNG/LPG engine technology improvements

Powertrain efficiency improvement

Weight Aero Tires

Vehicle FE

technol.

Changes of vehicle power and propulsion

Market- driven

Portfolio changes

Efficiency improvements


As of today, the road transport sector is the largest source of NOx emissions in Europe – Diesel is a major contributor

NOx emissions by sector in EU-28, 2013 [%]

Source: EEA; Bosch; Roland Berger

0,1%2,6%2,8%

6,8%

12,2%

15,1%

21,0%

Waste Industrial

processes &

product use

Agriculture Non-road

transport

Energy use

in industry

Commercial,

institutional &

households

Energy

production &

distribution

8.2 m tons

2 Toxic exhaust gas emissions

Approx. 10% diesel

passenger car contribution1)

Road

transport

39.4%

1) In Germany, as of 2012


The diesel's NOx and PM limits have approached the level of gasoline but also lead to increases in emission control costs

Toxic emission limits1) of diesel vs. gasoline passenger cars NEDC [g/km]

Source: ICCT; Roland Berger

NOx limits

PM limits

1) All emission limits as tested in New European Drive Cycle (NEDC) 2) Only for diesel 3) For a 2.0 liter diesel engine in 2010

0.060

0.180

0.060

0.080

0.250

0.080

0.500

0.150

0.0045

0.02502)

0.0502)

0.005

Gasoline Diesel

Same PM limits for gasoline and diesel

2 Toxic exhaust gas emissions

Emission control techn. costs3)

[USD/vehicle] ~520

~1,630

~1,082

~675

Euro 6 Euro 3 Euro 4 Euro 5


Nevertheless, the discrepancy between real emissions and EU limits for diesel cars has substantially increased since 2000

NOx emissions: Diesel passenger cars NEDC [g/km]

Source: ICCT; Delphi; Roland Berger

Measured on road Cycle limit

Toxic exhaust gas emissions 2

Euro 6c (2017)

> Implementation of new Real Driving Emission tests (RDE) is expected

> Reducing the RDE of the diesel powertrain becomes a challenge for OEMs and suppliers

> Manufacturers will need to find solutions for good CO2

efficiency, low real NOx

emissions and good driving experience

Euro 3 (2000) Euro 4 (2005)

Euro 5 (2009) Euro 6 (2014)

x 4

0.8

0.18

x 8 0.6

0.08

x 2 1.0

0.5

x 3 0.8

0.25


The 2025 outlook for diesel – Decrease of diesel share in nearly all major automotive markets is expected

Source: Diesel Technology Forum; press research; Roland Berger

> Chinese government is heavily promoting the development of battery electric vehicles (BEV)

> Diesel engines will not play any role in China for passenger cars

> Diesel engines are only relevant for trucks

> Customer interest in diesel in the US market will decline due to the recent controversy; diesel fuel price remains higher than gasoline

> Main local car makers will focus on efficient gasoline engines and electrification

> Diesel will only be offered in some niche market segments

> Ban of diesel engine passenger cars in place

> Fierce competition with ethanol/flex fuel (local production)

> No uptake of diesel engines in passenger cars expected

> Strong focus of Japanese OEMs in alternative powertrain technologies (i.e. hybrid and electric vehicles)

> Government subsidies for alternative powertrains

> No major share of diesel engines in passenger cars expected

> Diesel fuel has a price advantage even without subsidies

> Sales of diesel-fuelled cars expected to keep on rising

> European OEMs will still focus on diesel technology due to existing investments and CO2 emission targets

> Diesel powertrain is getting more expensive, partly due to implementation of RDE cycles with Euro 6c

> Diesel will lose market share (esp. in smaller vehicle segments)

2025 worldwide outlook and drivers for the use of diesel in passenger cars


Three scenarios on future of diesel possible in Europe 2030 – "Most likely" is decrease of diesel with shift toward upper car segments

Diesel scenarios in Europe/forecast new car diesel shares in EU-28 until 20301)


1) In % of new car sales

"Diesel constant"

No changes regarding diesel as powertrain solution

"Focused shift"

Diesel engines decreasing, but remain the dominant powertrain in upper vehicle segments

Conclusion > Diesel will stay at the same level as today in terms of volume

> No change in vehicle segments

> Diesel engine will lose market share constantly, esp. in lower car segments

> Diesel will still play a major role in upper vehicle segments

> Diesel will completely lose all importance by 2030

> OEMs have to shift their powertrain strategy to alternative solutions

> Diesel engine becomes more expensive due to additional after-treatment technologies

Diesel technology

> No additional technology needed > Does not meet new regulation targets

Politicians > Support the diesel engine without any restrictions

> Accept importance of diesel technology for CO2 reduction in general

> Increase regulation on Real Driving Emissions > Tax changes in some EU member states

> Scrap actual tax incentives for diesel fuel > Strong support of alternative powertrains > Change regulations against diesel, e.g. ban

it from the roads

"Diesel extinction"

Diesel engines to be fully replaced by gasoline and alternative powertrains

Customers > Still trust diesel technology as "clean" > Diesel is "technology of choice"

> Still trust diesel technology as "clean" > TCO will be a strong buying criteria

> Do not trust diesel technology as a "clean" solution any more

Diesel (incl. MH diesel)

RB most-likely scenario

53%20%

2030 2020 2015

10%

53% 48% 41%

2030 2020 2015

53% 53% 53%

2030 2020 2015


Diesel powertrain still expected to hold dominant position in upper passenger car segments despite decline in diesel share by 2030

"Focused shift": New car diesel forecast by segment in EU-28 until 20301)


98% 100% 100%

2%

36% 33% 26%

64% 67% 74%

64% 60% 55%

36% 40% 45%

2030 2020 2014

84% 79% 69%

16% 21% 31%

88% 80% 70%

20% 30%12%

50% 44% 37%

50% 56% 63%

2030 2020 2014

Diesel (incl. MH diesel) Other powertrains

Mini cars

Small cars

Medium cars

Large cars

Executive cars

Luxury cars

A

B

C

D

E

F

e.g. VW Passat e.g. Fiat Panda

e.g. MB E-class

e.g. BMW 7 series

e.g. Peugeot 208

e.g. Citroen C4

1) In % of new car sales


Diesel essential for CO2 reduction by OEMs but higher technology demand to meet regulations – Potential benefits for supplier industry

"Focused shift": OEM and supplier implications

Accept and close the gap between cycle and Real Driving Emissions of diesel engines

Develop and implement (after-treatment) solutions in order to reduce RDE

Adapt powertrain strategy by shifting the diesel focus from lower to upper car segments

Accelerate implementation of alternative powertrain solutions (electrification) to meet CO2 regulations

Successfully convince car buyers and policymakers of "The New Clean Diesel"

OEMs Suppliers

Innovative solutions for more efficient and clean diesel technologies needed

Innovative solutions for more efficient gasoline technologies needed

Higher demand for alternative powertrain solutions increases demand for cost-intensive BEV/PHEV cars

Higher demand for after-treatment solutions for diesel engines to meet RDE regulations

Long-term volume reduction through increasing demand for BEV cars

Shift from diesel to gasoline engines in car segments changes the technology

Po

wertrain

sup

pliers

Exh

aust syst. su

pp

liers

Source: Roland Berger

Documents

Diesel controversy –Temporary shock or paradigm shift in ... · ≙ 15.1 km/l ≙ 20.3km/l ≙ 2.07 MJ/km ≙ 182 g/mi ≙ 1.82 MJ/km ≙ 253 g/mi 1) Average weight-dependent CO