1

Key Elements of the Proposal for a Regulation to Reduce CO2 Emissions from Light-Duty Vehicles – Super-Credits

2

Key Objectives of Policy• Stimulate innovation• Enable continuing reductions in CO2 emissions

beyond the legislative target over the longer term• Encourage development of technologies that enable

full range of vehicles to continue to be available • Ensure new vehicles remain affordable to average

European families– Don’t prolong life of older, higher emitting vehicles

• Encourage compliance• Encourage competitiveness of European auto

industry – continued jobs & investment

3

Encouraging Breakthrough Technologies

• In addition to improvements to gasoline & diesel-powered internal combustion vehicles, the industry is working on “ultra-low” CO2 emissions technologies, such as plug-in hybrids, extended range electric vehicles and hydrogen-powered vehicles

• Basic enabling technologies are still in development & very expensive (e,g, batteries, H2 storage)

• First generations of vehicle technology are small volume, very expensive and applied to one vehicle model only, but enable fundamental learnings and scale up of supplier and production capacity

• Given the size of the challenge to meet the 130 g target, automakers are concerned that all resources will be required for near-term compliance with incremental technologies, “robbing” resources that would otherwise have been allocated to breakthrough technology development

• Government funding for research encourages further research which is one element to stimulate innovation – but does not encourage automakers to take risks to introduce new technologies to the market as early as possible

– Fundamental challenge is not just to develop the technology in a lab, but to make it work under extreme automotive conditions

4

Policy to Encourage Early Introduction of Advanced Propulsion Technologies

Petroleum (Conventional & Alternative Sources)

Bio Fuels (Ethanol E85, Bio-diesel)

Hydrogen

Electricity (Conventional & Alternative Sources)

TimeTime

ReducedPetroleumConsumpti

on

Improved

Vehicle Fuel

Economy &

Emissions

Greater Energy Diversity

2012

Hydrogen Fuel Cell

Battery ElectricVehicles (E-Flex)

Hybrid ElectricVehicles (including

Plug-In HEV)

IC Engine andTransmissionImprovements

5

Yr 1 Yr 2 Yr 4Yr 3 Yr 5 Yr 8Yr 7Yr 6 Yr 10Yr 9

Technology development and validation under real world conditions

Technology refinement and early market preparation

Commercial deployment into mass market

OEM/Vehicles

Energy/Infrastructure

100 veh / OEM 1000 veh / OEM 10,000 veh / OEM

10 Stations Leadtime

Leadtime

Leadtime

$1mil / veh (early incremental cost) $250k / veh $50k / veh

Technology Development Pilot Commercialization Early Commercialization

Region 1 Region 2

100 Stations

250 Stations

Region 1 Region 2

Scaling up New Technologies to Commercialization

6

Technologies in Development – E-flex extended range plug-in hybrid

• Plug-In electric drive vehicle with range-extending generator on board which recharges battery for long trips

• On-board generator could be designed for petrol, diesel, E-85 or hydrogen depending on local fuel sources

• Achieves 55 km pure electric range which meets trip needs of 75% of Europeans

– 700 km with E-REV

• Utilizes electricity from the grid as major propulsion source

– Off-peak charging = no plus CO2

– Infrastructure development required

• Lithium ion battery development a key priority to enable commercialization

7

Technologies in Development -HydroGen4: Next Step On Road To Hydrogen Fuel Cell Vehicles

•10 Vehicles in real-world use as part of Clean Energy Partnership in Berlin

•Understand how vehicles perform in real-world conditions with real customers

•Gain refueling experience

•Late 2008 - 2010

•Power: 73 kW•Fuel: 4.2 kg CGH2 (700 bars)•Range: 320 km•Top Speed: 160 kmh•Engineered for 80,000 km - 2.5 yrs•Start/operate in sub-zero temps•Meets current motor vehiclesafety standards

8

Super-Credits• “Super-credits” would encourage automakers to pull-ahead

early generations of ultra-low technologies– “Output enabler” to encourage earlier commercialization

Recognized by European Parliament in Chris Davies report• Should encourage broad innovation below a “challenge

threshold” such as 50 g/CO2– Threshold set to encourage non-conventional technologies

• Extra credit for these vehicles in averaging for CO2 compliance• Would encourage automakers to move forward with early

“uneconomic” generations of technology (low volumes) to reach full market economic viability– Hasten progress to technology developments and economies of

scale necessary to make these more broadly available across the vehicle fleet

Include a “super-credit” for all vehicles under 50g CO2/km.

For compliance purposes, these vehicles would count as 10 vehicles in 2012, 7 vehicles in 2013, 4 vehicles in 2014

and 2 vehicles in 2015

Additional Charts

10

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000

Luxembourg

U.K.

Finland

IrelandSweden

Denmark

Austria

Netherlands

Belgium

Germany France

Italy

Spain

CyprusGreece

Portugal

Slovenia

Bulgaria

Latvia

Hungary

Estonia

Czech RepublicMalta

RomaniaSlovakia

Poland Lithuania

Real GDP per Capita

Average real GDP per capita

Population, Thousands

EU15 = €28,114 €7,250 in new MS €

With GDP per capita less than theprice of a new small car in new MS,we need to ensure that new vehiclesremain affordable to averageEuropean families

EU - Affordability

11

0

1000

2000

3000

4000

5000

6000

7000

8000

Minimum Maximum

€ p

er v

ehic

le

CO2 - 130 Demand MeasDesignREACHELVMACPedProtEuro 5CO2 Vol

New EU regulatory requirements adding up to € 7000 per vehicle

12

Affordability – ECCP2 data•Independent EECP2 consultant (TNO) confirms high cost for reducing CO2 emissions from passenger cars

•Average retail price increase of €3600 for achieving 120g CO2/km target and €2500 for achieving 130g CO2/km target

13

Timing• CO2 legislation will require a 20 – 25% improvement on average

– Will require substantial vehicle redesign for aero improvements, addition of new technologies, etc.

– Will require suppliers to scale up new production to meet needs of entire industry– Leadtime of 2-3 years is completely unrealistic

• The typical development time for a new model in our industry is 3-5 years and the typical production duration is 6-7 years

– Industry cadences new vehicle launches to level the workload across engineering, manufacturing, suppliers, etc

– Industry cannot introduce new models across entire fleet in one year• Most of the vehicles to be sold in 2012 are already on the road or very advanced

in their development• We are planning to launch many next generation products at our plants in

Sweden, Germany, UK, Belgium, Poland, Spain, Hungary, Austria between 2008 and 2011

– We are already at an advanced stage of development of the vehicle and powertrains and have started making the necessary adjustments to the production line, contracted for tooling, made commitments to labour unions and established legal contracts with suppliers

– It is too late to change these programs now and not viable to stop production in 2012 after only a few years of production to make radical changes to the product

We strongly support a phase-in of the legislative requirements over the period from 2012 to 2015, with 25% of products to comply in 2012, 50% in 2013, 75% in 2014 and full compliance in 2015

14

Vehicle Development & Production Timing

Development Timefor a new Arch & Model

Ge

ne

rati

on

1

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17YEARS

Total Production of vehicles from Architecture (approx. 10 years)

Start of Production

Lifecycle of a new Model End

of Sales

Derivative Model

Ge

ne

rati

on

2

Development Timefor a new Arch & Model

Total Lifecycle of Architecture

Development Time of a new Powertrain

Supplier Selection

Tooling Start

Derivative Model

Derivative Model

Development Time of a new Powertrain

Supplier Selection

Tooling Start

ETC.

15

Cadenced Vehicle Development Workload

Agila

Corsa

Astra

Vivaro

Vectra

NEW

NEW

Significant MCE

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

NEW

NEW

NEW

NEW

Heavy

Medium

NEW

NEW

Automakers must cadence vehicle introduction to level internal and supplier engineering workload and capital expenditures, manage new technology risk and

ensure regular refreshment of offerings to consumers.

Significant MCE

Significant MCE

Significant MCE

Significant MCE

Significant MCE

Significant MCE

Significant MCE

Movano

16

Excess Emission Premiums

• Europe needs to put in place a fair and balanced regulation with the expectation that automakers can and will comply with the Regulation.

– We support a phase-in of requirements to facilitate introducing new technologies and models to enable us to comply

• Penalties must be reasonable and in line with CO2-related penalties on other sectors

• The European Emissions Trading System has already established a metric when carbon targets are not met – the price of a credit plus €100/tonne.

– This level applies to stationary sources (including many of our facilities) and will apply to the aviation sector going forward. It is equitable to apply this value across all sectors, including to passenger cars

Support phase-in of requirements

Penalties should be consistent with CO2 penalties for other sectors

17

Eco – Innovations• EU proposing mandatory Tire Pressure Monitoring and Low Rolling Resistance Tires

• Expensive technologies • Acknowledge that they will deliver 7 grams of reductions• Need to ensure full credit given for reductions

• Policy also needs to enable other technologies, which may not show in test cycle but will reduce “real-world” CO2 emissions to be utilized on vehicles with credits to automakers (such as 6-speed transmission, efficient lighting)

• Policy should encourage further technologies to be invented/applied– Cannot continually change test cycle to incorporate new technologies

• Complexity, uncertainty and delay– With 3rd party validation, credit should be available for these technologies in addition

to the vehicle technologies (in addition to powertrain, aerodynamics, material substitution, etc. which will show in test cycle)

CO2 Test Cycle Eco-innovation CO2 Real•Start/stop

•Eco-Turbo

•Lightweight

•Aero

•Etc.

•6th speed

•Efficient lighting

•Cruise control

•Ttc

•EU CO2 compliance process

•CO2 taxation

Provide CO2 credits in CO2 Policy for Passenger Cars for technologies that deliver proven CO2 reductions, but are not reflected in the test cycle