Electrification Opportunities in the Transportation Landscape

Chris Robinson

Analyst

International Battery Seminar 2017

2

About Lux Research

Agenda

Electrified personal mobility

Micro- and mild-hybrids

Plug-in vehicles

3

Personal mobility looks fundamentally at the question, how can I get from point A to point B?

4

The Ideal Transportation System

Image credits: Castor & Pollux, Vaibhav Radhakrishnan, Stephanie Wauters, and Sma-rtez from the Noun Project

Fast

Affordable

Sustainable

Dense

Around 54% of the world’s population live in urban areas, and this is expected to increase to 66% by the year 2050

Image credit: Boston Globe

Electric bikes and scooters have enabled fast and affordable transport to millions of people

5

Emerging markets have been the key driver of growth for personal mobility solutions, enabling fast, efficient, and affordable transportation to millions of people and goods

Image credit: New York Times

Service-based industries benefit from the speed and access allowed by electric bikes, which are faster than trucks in crowded cities

Adoption outside of Asia, even in bike-friendly European cities, has been somewhat slower and nonexistent in the U.S.

Image credit: BBC

E-bikes are no longer just for those who can’t afforda car, but now for those who want to avoid them

6

Newer e-bikes, with Li-ion batteries, are now targeting the conventionally car-favoring middle class with a distinctly different product

Lead-acid bikes Li-ion bikes

Image credits: Shenzen Shenling, Aowa, Tsinova, Sundy, Shuangye

“Traditional e-bikes are heavy, bad looking, and mainly made for people who can’t afford cars. Their users are couriers, security staff, and so on. [Our smart bike] is made for middle classes who usually already own cars in big cities.”

Chen Tengjiao(CEO Tsinova)

E-bikes are no longer just for those who can’t afforda car, but now for those who want to avoid them

7

“Traditional e-bikes are heavy, bad looking, and mainly made for people who can’t afford cars. Their users are couriers, security staff, and so on. [Our smart bike] is made for middle classes who usually already own cars in big cities.”

Chen Tengjiao(CEO Tsinova)

Shortcomings in the current personal mobility landscape present an opportunity

8

Safety in Li-ion batteries from consumer products is still a concern

Rider safety is also a concern for e-bike operators, with many urban riders working around weight and speed laws

Image credit: KERO-TV Image credit: The New York Times

Integrating e-bikes into an existing infrastructure including cars, pedestrians, and other bikes is challenging

Image credit: Toronto Star

The “last mile” transport problem will become an increasingly important one

9

Urbanization and global population increases, as well as possible bans on cars in city centers, will amplify the “last mile” problem

Image credit: Audi

Image credit: EcoReco

EasyMileElectric driverless shuttles

Summary information

Founded in 2014

Employees 30

Joint ventureLigier Group and Robosoft

Key metrics

Vehicle cost$220,000 (approx.)

Charge Time 8 to 12 hours

Technology and Differentiators:

Developing and building the EZ10 – a lightweight, driverless, electric automobile powered by two 9.6 kWh lithium iron phosphate (LFP) batteries

Strategy and Markets:Initial deployments will be on private properties such as university and corporate campuses; enabling early deployment with minimal regulatory concerns

Agenda

Electrified personal mobility

Micro- and mild-hybrids

Plug-in vehicles

10

Global policy trends are forcing automotive OEMs to change – and quickly

Standards for both emissions and fuel mileage are becoming stricter around the globe, with sharp increases in regulations coming in the next five years to 10 years.

These numbers aren’t directly comparable, due to differences in testing cycles that inflate some fuel mileage numbers like those in the U.S., but they do highlight the rapid change of pace in regulations.

110

10

20

30

40

50

60

70

China EU India Japan U.S.

Fuel efficiency regulations

(mpg)

2015

20202015

2015

20202021

2021

2016

2016

2025

0.0

0.5

1.0

1.5

2.0

2.5

3.0

China EU India Japan U.S.

Rate of required efficiency improvement (mpg/year)

Innovation in the gasoline engines have allowed many OEMs to meet efficiency targets

Automakers have innovated on the internal combustion engine (ICE) by way of engine downsizing, turbocharging, variable valve timing (VVT), and transmissions with more gears to increase efficiency and meet stricter fuel standards.

However, as OEMs adopt these technologies and still cannot meet efficiency and emissions targets, higher levels of electrification will be used to meet them.

12

*Trans-mission data not available for Asia

Sources: ICCT, Marklines

0%10%20%30%40%50%60%70%80%90%

100%

VVT Turbo Start-stop Hybrid 6+ speedtransmission

Percent of new vehicles sold in

2014, usinga particular fuel

efficiency technology

(note that more than one can be

used)

EU U.S. Asia - Pacific

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

2011 2012 2013 2014 2015 2016

EV PHEV

2016 marked yet another record year for plug-in vehicle sales

13

Allegations of fraud and other issues on China

plug-in market

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

2011 2012 2013 2014 2015 2016

Quarterlycar

sales bydrivetrain

(units)

EV HEV PHEV

While plug-in sales surge, however, full hybrid sales have mostly stagnated

48 V enable systems-level improvements to the automobile to achieve fuel-efficiency gains

14

A 48 V Li-ion battery provides more power, enables systems like electric supercharging that can’t be used with 12 V system.

The electric supercharger is used in tandem with turbocharging, providing a boost across the entire power band.

An optional 48 V motor provides propulsion assist, and can be connected to the rear axle for four-wheel drive functionality.

Integrated starter generators enable start-stop in both 12 V and 48 V units, harness energy during braking to charge the Li-ion battery, and can be used for propulsion assist.

Image sources: Valeo, A123 Systems

Although there is no one system architecture adopted by all 48 V vehicles, most examples include a combination of the following technologies:

We focus on four very different potential pathways to meeting the 54.5 mpg targets of 2025

15

Scenario One Scenario Two Scenario Three Scenario Four

Lightweightingoptions:

Extreme CFRP lightweighting

Moderate CFRP lightweighting

Minor CFRPlightweighting

Aluminumlightweighting

Electrification options:

None“Basic”

12 V micro-hybrid“Advanced”

12 V micro-hybrid48V

mild-hybrid

Autonomy options:

None Basic assist Basic assist None

$0

$500

$1,000

$1,500

$2,000

$2,500

Scenario#1

Scenario#2

Scenario#3

Scenario#4

Added price per vehicle to meet fuel efficiency standards

($)

Audi’s SQ7 is the first announced vehicle to use a 48 V

mild-hybrid system

China and Europe will drove most early adoption of 48 V mild hybrids

Europe will drive early stages of adoption due to earlier market availability, with the first 48 V mild hybrids debuting in 2016.

China’s aggressive increase in emissions and efficiency targets, which are due to see an increase in 2020, will see the country quickly rise to achieve 50% of global market share in 2023.

16

0

5

10

15

20

25

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

48 V mild-hybrid unit sales (millions

of units)

Rest of World (ROW)

Russia

India

Europe

Brazil

Japan

U.S.

China

Agenda

Electrified personal mobility

Micro- and mild-hybrids

Plug-in vehicles

17

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

2011 2012 2013 2014 2015 2016

EV PHEV

2016 marked yet another record year for plug-in vehicle sales

18

Allegations of fraud and other issues on China

plug-in market

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4

2011 2012 2013 2014 2015 2016

Quarterlycar

sales bydrivetrain

(units)

EV HEV PHEV

0

50

100

150

200

250

300

$- $20,000 $40,000 $60,000 $80,000 $100,000 $120,000

Electric drivingrange(miles)

Plug-in vehicle price

No vehicles currently live in the “EV holy grail” quadrant, but GM and Tesla are getting close

As of 2016, no OEM has yet cracked the code for offering a vehicle in the most important of the quadrants, but with the Chevrolet Bolt and the Tesla Model 3, two OEMs are getting close

With subsidies, these vehicles may enter this quadrant, but subsidies will expire eventually

19

Average new vehicleprice (all types)

Crucial 200-mile range threshold

Quadrant 1

The “EV holy grail”:The most important quadrant; once many vehicles populate it, the EV Inflection Point is near

Small carSUVLarge carLuxury vehicle

Legend:

More OEMs are now offering PHEV versions of ICE cars, offering electric range and increased performance

20

BMW 328i BMW 330e Volvo XC90 T6 Volvo XC90 T8 Audi A3 2.0T Audi A3 e-tron

Drivetrain ICE PHEV ICE PHEV ICE PHEV

Price $ 38,350 $ 44,695 $ 49,800 $ 68,100 $ 33,795 $ 37,900

Power (hp) 240 267 316 400 220 204

Torque (lb-ft) 255 399 295 472 258 258

0-60 mph (sec) 5.8 5.9 6.1 5.8 5.9 7.5

Rather than making brand-new vehicles, more OEMs are converting internal combustion engines (ICEs) to PHEVs:

In several cases, these cars are being marketed as high-performance versions of the ICE cars, offering more torque and horsepower.

This strategy allows OEMs to offer a greater number of plugins without designing a new car from the ground up, saving time and investment.

A BMW 330e charging, with the only external difference from the normal 328i

being a small charging port

Image credit: BMW

Plug-in sales are poised for rapid growth through 2020, reaching 1.5 million units sold and 50 GWh used

21

Although PHEV sales are poised for the most rapid growth, reaching nearly 740,000 units in 2020, a majority of battery demand will be driven by EVs (41 GWh of energy storage used) due to their higher capacity battery packs.

0

200

400

600

800

1,000

1,200

1,400

1,600

Yearly global vehicle

sales (thousands

of units)

EV PHEV FCV

0

10

20

30

40

50

60

Yearly global

battery demand

from plug-ins (GWh)

EV PHEV FCV

Plug-in vehicle growth will be balanced between different price ranges, at both bottom and top ends

22

0

200

400

600

800

1,000

1,200

1,400

1,600

Yearly plug-in vehicle sales

(thousands of units)

>$80k

$60k-$80k

$40k-$60k

<$40k

More plug-in offerings will become available in all price segments, with luxury vehicles gaining PHEV drivetrains for performance reasons and EVs reaching the mass markets.

46%

34%

18%2%

2015 Vehicle Sales

50%

27%

14%

9%2020 Vehicle Sales

However, with falling battery prices alone EVs will struggle to compete on costs

23

Even considering optimistic cell costs of $75/kWh in 2025 and $50/kWh after 2030, EVs will struggle to compete with conventional ICEs on price alone

Considering other services EVs can provide enables lower ownership costs

24

Automotive technologies will be adopted in three phases

25

0%10%20%30%40%50%60%70%80%90%

100%

2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038

Drivetrain type market share

12 V ICE

48 V mild hybrid ICE

Full hybrid ICE

Plug-in vehicles

Phase 112 V technology with start-stop is sufficient to fulfill most environmental regulations, with limited 48 V deployment

Phase 248 V mild-hybrid systems are used to meet environmental regulations and gain a majority market share in ICEs

Phase 3Plug-in vehicles take away market share from conventional ICE vehicles, leading to decreasing 48 V mild-hybrid sales

Lux Research Inc. 100 Franklin Street, 8th Floor Boston, MA 02110 USA Phone: +1 617 502 5300 www.luxresearchinc.com

Thank you

Chris Robinson

Analyst

christopher.robinson@luxresearchinc.com