Slide 1

POWER TRANSMISSIONS

Slide 2

P O W E R T R A N S M I S S I O N S AT1

Automatic transmissions are gaining on manual in most regions

0% 20% 40% 60% 80% 100%

North America

Japan/Korea

China

Europe

South Asia

South America

2015 2020AT, CVT, DCT, Hybrid, AMT, Reduction

Data source: IHS Automotive, 2014

With over a 20% increase in production forecast by 2021, the transmissions market is in a period of healthy growth. This installation chart gives us a good picture of hardware trends, and we can clearly see that Automatic units are expected to gain on manual transmissions in almost every region.

Slide 3

P O W E R T R A N S M I S S I O N S

Electric vehicles

AMT

Hybrids

DCT

CVT

Stepped AT

Data source:

IHS Automotive, 2014

Most growth in DCT and CVT

Other transmission technologies have little market penetration for the foreseeable future

’15 ’20N. America

’15 ’20Japan/Korea

’15 ’20China

’15 ’20Europe

AT2

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

If we break down these Automatic transmission installations, an interesting picture emerges. The biggest driver for change in transmission hardware design is the need to improve fuel economy to meet tightening global targets and consumer demand. In the light-duty market, we have seen the trend for more gears and light-weighting of conventional stepped automatic transmissions – although in the major markets these transmissions will begin to lose ground in the coming years due to the growing popularity of dual clutch and continuously variable transmissions. But these transmission designs are not being introduced uniformly across the globe – and amongst other factors, their popularity typically reflects the driving profile of each region. North America will retain a majority of stepped automatic transmissions, but we expect CVTs to grow in popularity here, mainly through their use in larger vehicles. In Japan and Korea, the majority of growth will be in hybrid transmissions. DCT is most popular in Europe and China, where the existing manual transmission manufacturing facilities lend themselves to easy modification, although CVTs will also gain ground in China. Each of these technologies presents opportunities for advanced and tailored lubricant technology. However, while enhanced fluid performance and lower viscosity capabilities help to deliver fuel economy benefits, we must not lose sight of the need for fluids to deliver improved durability and longer drain intervals.

Slide 4

P O W E R T R A N S M I S S I O N S

Largest stepped AT growth:Hyundai, ZF and Ford

Moving to CVT:Honda, JATCO and Toyota

AT3

0

5

10

15

20

25

30

35

2005 2010 2015 2020

GLOBAL Stepped AT PRODUCTION, Millions

OtherMazdaDaimlerChryslerZF GroupJatcoToyotaFordHondaHyundaiGMAisin

Data source: IHS Automotive, 2014

As we can see here OEMs are concentrating on particular hardware options and while (*) Hyundai, ZF and Ford account for the most conventional automatic growth as they refine their designs with added forward speeds. (*) At the same time, the biggest decreases in stepped automatic production are seen at Honda, JATCO and Toyota who are shifting their production focus to next generation CVTs.

Slide 5

P O W E R T R A N S M I S S I O N S

0

5

10

15

20

25

30

35

2013 2014 2015 2016 2017 2018 2019 2020

Mill

ion

sMore Forward Speeds

TenNineEightSevenSixFiveFourThreeAverage

Data source: IHS

Automotive, 2014

Average 5.8 today to 7.4 by 2020

Increasing efficiency, with power-to-weight advantage over CVTs and DCTs

AT4

Stepped automatics

retain popularity

As fuel economy becomes more important, we expect to see a continued increase in the number of forward speeds in stepped automatics – reaching an average of over 7 by 2020. In addition, (*) the popularity of these transmissions will endure in many applications, due to Increasing efficiency derived from their power-to-weight advantage over CVTs and DCTs.

Slide 6

P O W E R T R A N S M I S S I O N S

AT5

Rapid DCT growth: VW and Getrag

DCTs remain a niche platform for most OEMs 0

1

2

3

4

5

6

7

8

9

2005 2010 2015 2020

GLOBAL DCT PRODUCTIONMillions

Other

Hyundai

GM

Fiat

Ford

Suzuki

Daimler

Getrag

Volkswagen

Data source: IHS Automotive, 2014

In the next five years we expect to see a fast growth in the production of DCT transmissions, which will be led by VW, followed by Getrag. However, for most other OEMs during this period, DCTs will remain a niche platform.

Slide 7

P O W E R T R A N S M I S S I O N S

Primary advantages: acceleration and torque• Ideal for sports applications

• Appealing to manual transmission market

DCT vs Manual• Sportier performance can be obtained with same FE

• Efficiency increases with less powerful designs

AT6

Source: www.fueleconomy.gov

2.0 L, 4 cylinder

Auto (AM-S6)Turbo

2.0 L, 4 cylinderManual 6

speed Turbo

2014 European Vehicle

The primary advantages of DCTs are acceleration and torque – making them ideal for sports applications. Their responsiveness means they are particularly appealing to users who in the past had preferred manual transmissions. (*) In these two vehicles, one has a DCT and the other a manual transmission. While they have the same fuel economy figures, the DCT has better overall performance. However, the efficiency of DCTs increases substantially with less powerful designs.

Slide 8

P O W E R T R A N S M I S S I O N S

Jatco : >40% CVT global production

Increased focus from Honda and Toyota 0

5

10

15

2005 2010 2015 2020

GLOBAL CVT PRODUCTIONMillions

Other

Hyundai

Volkswagen

Fuji Heavy

Honda

Daihatsu

Aisin

Toyota

Jatco

Data source: IHS Automotive, 2014

AT7

Currently JATCO has more than 40% of global CVT production, with most of these units being used by Nissan – although several other OEMs are also customers. Despite the fact that Honda and Toyota are increasing their focus on CVT, with the introduction of their next generation designs, JATCO is expected to retain its market share well into the future

Slide 9

P O W E R T R A N S M I S S I O N S

CVT popular with OEMs –market expected to grow

AT8

0

100

200

300

400

500

AT DCT CVT

AVERAGE ENGINE TORQUENm [2013 MY]

Data source: IHS Automotive, 2014

Honda Fuel EconomyCVT vs. Stepped AT vs. Manual

2.4 L, 4 cylinderAutomatic

variable gear ratios

2.4 L, 4 cylinderAuto (AV-S7)

2.4 L, 4 cylinderManual

6 speeds

OEMs find CVT attractive because it is efficient, small, light and relatively lower cost to produce. The fuel efficiency of the latest CVT designs rivals that attained by high speed conventional automatics. But until now, CVTs have typically been coupled with lower torque engines, limiting their growth in some markets. Change is on the way though - with the latest designs able to handle torque levels of up to 400 Nm, CVTs will become more attractive in markets where consumers prefer larger vehicles.

Slide 10

P O W E R T R A N S M I S S I O N S

New CVT designs introduced with unique requirements

Precise steel-on-steel and paper-on-steel friction is essential

OEM CVTF Genuine oils ensure operation and protection• Extended OEM drain intervals

Service fill demand slowly growing

AT9

Essential to ensure fluids will offer sufficient protection

More than any other transmission, a CVT relies on the fluid for its successful operation. As new CVTs with unique lubrication requirements are being designed, it is increasingly important that the transmission fluid is integrally built into the design of the CVT, so it is almost a component part of the hardware. The fluid needs to deliver high steel-on-steel friction to prevent belt slippage and minimise paper-on-steel friction to avoid shudder. Getting the balance between these two critical characteristics right, and controlling wear, oxidation and aeration is a tough challenge for formulators and presents opportunities for very advanced fluids. It also means that the use of Genuine OEM fluids is essential to ensure the CVT functions properly and is sufficiently protected. In most applications, these oils need to deliver extended protection, as most CVT units are fill-for-life. However, service fill CVT fluids are available in the market to provide choice for consumers, but it is critical to encourage consumers to use recognised brands backed by sound technology.

Slide 11

P O W E R T R A N S M I S S I O N S

Market drivers • Reduced emissions Improved fuel economy

• Reduced running costs Improved productivity

Automatic transmission penetration• Significant opportunities for growth

Manual transmission• More gears

• Intelligent systems

AT10

Future heavy-duty fluids must handle increasing power density and extend drain intervals

77% North America

5% ROW

Advanced transmission technology is not the sole preserve of the light-duty market. As heavy-duty OEMs work to cut CO2 emissions and lower fuel and maintenance bills for their customers, automatic transmissions with more gears are becoming an increasingly good fit for this market. This presents a significant potential for growth - (*) while In North America over three quarters of large trucks and buses are already fully automatic, in the rest of the world most medium- and heavy-duty vehicles have manual transmissions. (*)OEMs are also looking to improve the efficiency of manual transmissions by adding more gears and by including intelligent systems to ensure the vehicle is in the most efficient gear at all times. We can be sure that in both light- and heavy-duty markets, the initiatives being taken to improve efficiency, reduce costs and maintain reliability will impact future transmission fluid formulations.

Slide 12

P O W E R T R A N S M I S S I O N S

Transmissions systems and fluids deliver fuel economy

Fluids are enablers for advanced transmission hardware

• Fluid formulation must balance fuel economy and wear protection

Different regional hardware trends

• Reflect consumer driving preferences

No one size fits all in either hardware or fluid technology

AT11

Transmission fluids are helping to improve fuel economy performance in both light and heavy-duty applications, with the fluids being real enablers for advanced transmission hardware. Fluid formulation is becoming increasingly complex, and the careful selection of base stock and additive components is essential to ensure fluids deliver the right balance of fuel economy and wear protection. As we have seen, the latest hardware including CVT and DCT is being adopted at different rates in the various regions. And, just as hardware solutions are being tailored to meet different requirements, fluids must also be formulated to suit each transmission type. In our view, the co-engineering of the lubricant and hardware is essential to ensure they deliver the maximum contribution to fuel economy performance.