The Global Oil Paradox

The Global Oil Paradox
Transforming the Automotive Industry:

Strategic Assessment of the Global Alternative
Powertrain Market
October 2008
© 2008 Frost & Sullivan. All rights reserved.

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© 2008Frost & Sullivan. All rights reserved.
2
Top 10 Global Automotive Issues
Fluctuation in oil prices

High
Global meltdown and financial crisis
Legislation on emission reduction
In-Car Green Technologies Shift in vehicle segment
Shift in vehicle production
Alternate Propulsion Systems
Low Cost Vehicle Technologies
IMPACT
Green Telematics
Congestion Charging and CO2
based taxation
Low
CERTAINITY
Low © 2008Frost & Sullivan. All rights reserved.
High
3
Agenda for today’s presentation
Global The Oil Scenario Outline

Alternative
Powertrain – Global Powertrain Mix – Breakdown of Propulsion
How is the technologies towards 2015
market shaping
Global Alternative Powertrain Technologies – Overview
up? of LPG / CNG, Hybrids, Fuel Cells, Electric Vehicles, Electric
Corner Modules
Global Biofuels – Potential of 2nd Generation Biofuels and

strategic analysis
OEM Preferences on ‘Green Technologies’ – Overview of

selected OEMs
European Consumers’ Attitudes & Perceptions Towards

Sustainability, Environment and Alternate Powertrains
Strategic Conclusions & Recommendations and

Discussions
4
By 2015, the Oil produced in US and China will
decline and the demand vs supply gap will widen
140 120
Global Supply Vs Demand
120 Forecasted 100
Demand in Million Barrels

Supply in Million Barrels
100 Global Supply

80
80
60
60
40
40
20 20
0 0
1995 2000 2005 2010 2015 2020
Year
US Canada Mexico North Sea OECD
Other OECD OPEC Former Soviet Union China
Other Non-OECD Global Demand Source: EIA and Frost & Sullivan
Growing demand for Oil is expected to be compensated by supply from OPEC region
OPEC: Organization of Petroleum Exporting Countries: Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia,
the United Arab Emirates, Venezuela © 2008Frost & Sullivan. All rights reserved.
5
Peak Oil Scenario Imminent: 4% supply shortage
may lead to 177% increase in crude oil price
60
N.America
N.America Europe
Europe FSU
Discovered in Past
360 FSU
50 360 bnbl
bnbl 80
80 bnbl
bnbl 330
330 bnbl
bnbl
Future discoveries forecast
Billion Barrels per year
Production
40
World Africa
Africa
30 Reserves
Produced 190
190 bnbl
bnbl AsiaPacific
AsiaPacific
130
130 bnbl
bnbl
20 MidEast
MidEast
2100 bnbl 810
810 bnbl
bnbl
10 S.America
S.America
200
200 bnbl
bnbl
0
1930 1950 1970 1990 2010 2030 2050
Most regions of the world are either at or past the mid-point of depletion:
U.S oil production peak: Combated by MidEast (and FSU and Africa) have produced <50% of their known resource
importing oil from other nations
IMPLICATIONS:
Demand - Transportation
Automobiles 100
Supply
Oil Demand Gap 80
increases The construction of an average 60
car consumes the energy 40
equivalent of approximately 20
20
barrels (840 gallons) of oil.
Ultimately, the construction of a 0
car will consume an amount of 2001 2005 Current WTI @ WTI @
fossil fuels equivalent to twice $150 $200
Fuel Other
Global production peak: Expected the car’s final weight. Every one dollar increase in fuel costs
leads directly to 1% increase in transport
between 2010 – 2016 costs
6
Increased oil prices to bring a paradigm shift in
consumer acceptance of small cars
180
• Hybrid, Fuel Cell Vehicles productions will increase
High Oil Price
160 • Decrease in Vehicle Sales Scenario
• Shift from Private to Public Modes of Transport
• VMs to offer more fuel efficient vehicles with the trend
140 towards Smaller vehicles
120 • Biodiesel made from Corn would serve as an Reference Oil Price
alternative to crude oil Scenario
Oil Price ($/Barrel)
• Hybrid and Fuel Cell vehicles would compete with

100 Petrol and Diesel engine vehicles.
• End users to prefer car pooling and car sharing to
reduce their economic burden. Low Oil Price
80 Scenario
60
Current & past oil • Demand vs Supply gap of oil to widen; increase the
price trend competitiveness of alternative fuels
40
• Natural Gas vehicles to become a feasible alternative
• Downsizing, turbo charging and direct fuel injection
20 likely to be preferred over alternative propulsion
vehicles
0
1995 2000 2005 2006 2007 2008 2010 2015 2020
Years
7

Alternative
market shaping
up? Global Alternative Powertrain Technologies – Overview
of LPG / CNG, Hybrids, Fuel Cells, Electric Vehicles, Electric
Corner Modules

strategic analysis

selected OEMs


Discussions
8
Global Powertrain mix – Diesel and Hybrids
likely to witness highest growth
Worldwide Powertrain production mix - 2015 88 Million
30
5%
11-12%
Gasoline Diesel
25 9%
Hybrids Alternative Fuels
25%
52 Million 23% •Hybrids include Micro, Mild and Full Hybrids.
•Alternative Fuels include Flex-fuel, LPG and CNG.
20
Millions
1%
9%
19% 8%
15 9%
12%
40%
10%
11%
10 6%
58-59%
80% 80%
72%
65% 9%
5 85% 6%
28%
1% 16%
13% 46% 9% 19%
15%
22% 39% 90% 65%
85%
0
Europe NA Japan China Latin India Russia South Korea
2005 America Africa 2015
Micro Hybridisation on a large scale to continue; Plug-in hybrids to account for a small share.
EVs infrastructure – public paid recharging stations to cater to both EVs and plug-in Hybrids.
Downsizing and Turbocharging – Drive towards compliance with ACEA CO2 norms; Solid SCR systems -
EURO 6 application in passenger vehicles likely.
9

Alternative
market shaping
Corner Modules

strategic analysis

selected OEMs


Discussions
10
Regional Snapshot of the LPG/CNG Vehicle Sales
in 2006 (OE and AM)
Rest of the World EU Russia
LPG: ~ 290,000 kits LPG:~ 645,000 kits LPG:~ 345,000 kits
CNG:~ 75,000 kits CNG:~ 95,000 kits CNG:~ 5,000 kits
Latin America
LPG: 0 kits
CNG:~ 450,000 kits
Global Split of LPG & CNG Sales, 2006
1%
12% Asia Turkey Australia
23% South East Asia
Iran
LPG:~ 265,000 kits LPG:~ 75,000kits
14% Australia CNG: 0 kits CNG: 0 kits
Turkey
5% Russia Iran Asia
2% EU LPG: 0 kits LPG: ~ 1,100 kits
Latin America
8% CNG:~ 150,000 kits CNG: ~ 25,000kits
24% Rest of World
11%
South East Asia
LPG: ~ 300,000 kits
© 2008Frost & Sullivan. All rights reserved. CNG:~ 435,000 kits
11
Hybrid vehicles are increasing their share globally
Scenario Analysis for Hybrid Vehicles - Global • Optimistic Scenario: Volume OEMs such as PSA Group,
20 Renault, GM, Ford, VW standardise Micro Hybrids across
18
the segment line up of basic, small, low medium and upper
16
medium segments along with Premium OEMs (BMW,
Daimler Benz, Audi) for micro hybrids. European OEMs
14 Standardisation of micro
hybrids by volume OEMs introducing mild and full hybrid vehicles.
12
• F&S Scenario: Premium OEMs standardise across their
Millions
10
entire line-up while volume OEMs such as VW, Ford, GM
8 introduce hybrids across selected models for micro hybrids.
6 Honda Insight being introduced with Toyota introducing new
4 model line up for full hybrid vehicles.
2 • Conservative Scenario: Premium and Volume OEMs to
0 introduce micro hybrids across selected model line-ups and
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 vehicle segments.
Conservative Frost&Sullivan Optimistic 12 F&S Scenario for Hybrid Vehicles - Global
10
• North America, Japan and Europe likely to be the major 15%
adopters of hybrid technology in the coming years. 8 14% 6%
• Micro Hybrids dominant in Europe mainly driven by OEMs 14%
Millions
such as BMW, PSA Group, Daimler Benz, Renault. 6
13%
• Japan and NA are likely to have higher volumes of full 14%

hybrid vehicles with estimated volumes of 400,000 and 4 78%
80% 79%
850,000 respectively. 19%
81%
• Toyota is likely to drive full hybrid vehicle technology 2 29% 81%
30% 75%
while Honda to continue its dominance in mild hybrid 64%
86% 64%
vehicle technology. 0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Micro Mild Full Plug-in
13
Scenario Analysis for Micro-Hybrid Vehicles / Stop-Start
Systems – Premium OEMs likely to follow BMW; standardise
Micro Hybrids for volume segments
Hybrid Volumes by key OEMs in 2012 after Comparison of different scenarios for Micro Hybrid
Microhybridisation Vehicles in Europe
Penetration rate ~ 30%

Conservative Frost & Sullivan
T housa nds
8000
Scenario Scenario ACEA Agreement
Premium OEMs such as Volume OEMs to 7000 Implementation
window
DC, Audi following BMW leverage Hybrids
OEM 6000
path and standardising technology showcased
small, medium and in Premium OEMs and
5000
compact segment introduce in volume
vehicles segments 4000
Penetration rate ~ 11%
BMW 760,000-780,000 760,000-780,000 3000
2000
Daimler 720,000-740,000 720,000-740,000
1000
Audi 500,000-520,000 500,000-520,000
0
Ford 280,000-290,000 580,000-590,000
2007 2008 2009 2010 2011 2012 2013 2014 2015
Volkswagen 270,000-300,000 850,000-860,000
Conservative Scenario Frost & Sullivan Scenario
French OEMs 200,000-250,000 2,000,000-2,300,000
Other OEMs 150,000-180,000 500,000-750,000
Micro Hybridisation on a large scale likely to help OEMs comply with the ACEA Agreement
target for 2012
Premium OEMs in a much better position to absorb Micro Hybridisation costs in comparison to
volume OEMs; initial introduction of Micro Hybrids by PSA group wasn’t a great success
14
EVs Market Overview- Market for Electric Vehicles more
than 250,000 units; Scandinavia and UK to constitute 65%
• Frost & Sullivan expects the total market for European Electric Vehicle Market: Unit shipment Sales, 2004-2015
electric vehicles to be more than 250,000 units
by 2015 in Europe. 300
U nit Shipm ents (Thousands)

• The market currently occupied by small OEMs
is likely to be 76% occupied by the big OEMs by 250
2015 in Europe. 2565
• Renault-Nissan is expected to be the first big 200
market entrant with likely volumes of 25,000
units in 2011 in Denmark. 150 No. of Units
510
• UK, Scandinavia, France, Italy and Spain are 100 160 260
likely to constitute 93% of the sales in Europe. 100
2004 2005 2006 2007 2008
Key Facts about Electric Vehicles 50
Technology Advanced lead acid, NiMH, Na-Ni- 0

Cl, Lithium Ion
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Advantages NO NOx, PM and CO2; high
efficiency, low running- •EVs could offer a monthly saving potential of
maintenance cost, energy security around €150-700 to the drivers. Cost of
OEMs Renault Nissan, Mitsubishi, Powertrain development 280% more.
Daimler, Think, REVA
•OEMs and related companies to opt different
Battery NEC, A123Systems, Johnson-Saft, financial models to tackle the cost issue- Leasing,
Suppliers Continental, GS Yuasa, Matsushita the most popular model to account for 75% of
Timeframe Serial introduction by top OEMs sales by 2015 in Europe.
beyond 2011. New business model- •The OEMs are to price the EVs between €18-
leasing 25,000 under the leasing model.
15
Electric Corner Module - Suppliers to drive the ECM
market rather than OEMs
Japan to be at the forefront in adopting ECM An ECM could be any
technology followed by NA and Europe combination of:
By Wire Technologies required for implementation •Tire
•Wheel
of ECM on all 4 wheels •Brake
Design flexibility, weight reduction, fuel savings •Steering
are some of the main drivers for ECM •Suspension
•Electric Motor
implementation •Cooling System
Key OEMs – Toyota, Honda, General Motors and
Mitsubishi ~1,640K Units
Japan
540,000
~380K Units
Honda Mitsubishi Bridgestone Michelin Japan NA

140,000 600,000
Honda’s ECM system has Mitsubishi system has Bridgestone concept has Michelin concept in-wheel
components such as components such as motor, steering, braking, motor has motor
motor, braking, steering motor, braking as part of suspension as part of unsprung with other
as part of ECM system. ECM system. Motor is ECM system. However components such as NA
160,000
Motor is sprung using a sprung due to easier the motor is sprung to steering, suspension,
bar. integration. avoid the extra weight of braking. However, this
Europe
unsprung mass. concept has a Europe 490,000
disadvantage in terms of 80,000
unsprung mass.
© 2008Frost & Sullivan. All rights reserved. 2015 2020
16
Fuel cells and battery propulsion impact long term; source of
electricity is to play a major role in the future
• Micro hybrids offer 3-4% CO2 reductions, Market for Fuel Cell Electric Vehicles: Advanced propulsion technologies
mild hybrid upto 12% and full hybrids upto (Global), 1995-2020
20%.
• Plug in hybrids could offer as much as 65%
CO2 reductions depending on the customer 100% Battery Fuel Cell
driving characteristics, is seen as a mid- Electric Electric
term solution. Vehicles Vehicles
• The future of bio fuels pose a challenge
Improved Emissions
with its own share of controversies 65%
(% CO2 reduction)
regarding harvesting of crops.
• Fuel cells and pure electric propulsion
Plug in
40% Hybrids
technologies impact long term, both being
zero emission technologies. However the
source of electricity is to play a major role
20%
in the future. Full, Mild and
120 K units
Micro Hybrids
3% IC Engine and
transmission
Japan
0% improvements
33,000
~ 550 units
Europe 1995
Japan
32,000
2002 2010 2015 2020
150
Europe Petroleum (Conventional and Alternative Sources)

100
Energy/Fuel
Bio Fuels (Ethanol E85, Bio-diesel)

Diversity
NA
NA 55,500
300 Electricity (Convnl and Alt Sources)
Hydrogen
2010 2020 Source: ATZautotechnology

17

Alternative
market shaping
Corner Modules

strategic analysis

selected OEMs


Discussions
18
Biofuel production around the World –
significant growth in Eastern countries
Biofuels penetration is heavily driven by local governmental regulations and biggest differentiating
factor is the source of Biofuels which varies from vegetables to fish. Clear leaders include Brazil,
Thailand and India whereas Australia appears to lag behind.
Global Bioethanol
58
8
4.5
27 42
19 Biodiesel
6
2 5
3
Bioethanol
10 2007 2013
Bioethanol Biodiesel Europe 8 1
USA 5
Bioethanol Biodiesel
Asia-Pacific
Global Biodiesel
18
15 2.5
1
Bioethanol Biodiesel 26.5

Brazil
8.5
All values in Mtoe – Million tonnes of oil equivalent 2007 2013

19
Second and Third Generation Biofuels –
Processing inefficiency hindering prospects
Shelf life of Algae to determine the success of 3rd Generation Biofuel – Algae-fuel; regional climatic
conditions and resources influence production / cultivation of Algae
Sustainability of 2nd and 3rd Generation Biofuel sources and the breakeven in price
achieved expected to determine success factor – large scale farming and govt. subsidies
2nd Generation processes still inefficient; costs involved high – not likely to change for the next 10-
12 years; economical feasibility only beyond 2020
2nd Generation Biofuels
Breakeven Crude Price for Biofuels from different
sources – a comparison •Biohydrogen – Hydrogen produced from Biomass feedstock can be
used in Fuel Cells.
$210 •Bio-DME – Uses Syngas for production, can be produced from
$173 Biomethanol. Bio-DME can be used CI engines.
$180 Conversion
•HTU Diesel – High temperature upgrading Diesel can be mixed with
[Dollars / Billion Barrels]
Feedstock $26 fossil Diesel in any percentage.

Breakeven Crude Price
$150
$120 •Fischer-Tropsch Diesel – uses F-T GTL technology; can be mixed with
$120 fossil Diesel in any percentage.
$29 •Wood Diesel – uses wood chips; charcoal byproduct is cintroduced
$90 Oil Price forecast back into the soil as a fertiliser. Dubbed ‘carbon negative’ as it is added
towards 2030 $147 back to the soil.
$60
$30 $91
$30 $4 3rd Generation Biofuels
$26
$0
Ethanol - Sugarcane Ethanol - Corn [USA] Biodiesel - Rapeseed
•Algae fuel – High yield-high cost feedstocks in comparison to 2nd
[Brazil] [Europe] Generation Biofuels; no impact on freshwater resources; costs about
$10 / kg – active research to reduce operating costs;
Source : Booz & Company
20
Cost Benefit Analysis – uncertain future for
Biofuels owing to high costs?
The cost disadvantage of producing Cost Benefit Analysis – Estimation of benefits and costs
involved in the commercial usage of Biofuels
Biofuels is significantly higher than the
benefits achieved with the use of them 300 ~ € 270 / toe - The ‘additional’ cost of
producing Biofuels – over and above
– Scenario not likely to change till 2015 cost of producing conventional fuel
even with the use of Second Generation
Biofuels.
~ € 10 - 130 / toe – Security of Supply –
Warranty issues - OEMs cannot guarantee 200 Benefit or savings in terms of an
enhanced security of Biofuels supply in
that nothing happens in the event of using
Euros / TOE
comparison to the security by other means
high Biofuels content owing to absence of
certification and standardised vehicle testing ~ € 40 / toe – Employment benefit
– extra wage earned by the new
guidelines 100 employee over his previous
employment
“We should put Biofuels on the well-to-wheel balance
and see if they actually help in offsetting CO2 emissions
and Biofuel compatible vehicles should get an extra
discount of about 20%.”
Leading European OEM 1
0
“The day the price of crude oil become more expensive
~ € 30 - 60 / toe – Environmental benefit
than the barrel equivalent price of Biofuel, we will see a - quantification of lifecycle GHG emission
huge increase in the Biofuels output. This is not likely values driven by price of Carbon
to happen during the next 10 years.”
Leading European Technology & Engineering Solutions
provider Source : 2008 JRC paper ‘Biofuels in the European Context – Facts and Uncertainties’
21

Alternative
market shaping
Corner Modules

strategic analysis

selected OEMs


Discussions
22
Micro Hybrids, Down Sizing and Turbo Charging are Key
Technologies to be Adopted by All Manufacturers for Short
Term Emission Reduction
OEM Fleet Average and Emission Reduction Technologies (Europe), 2008
BMW Micro Hybrids Hydrogen OEMs Current

Fleet
HCCI / Electric Average
Daimler Micro Hybrids, Down Sizing and Turbo Charging, GDI
Vehicles, Fuel Cells (2006)
Micro Hybrids, Down Sizing & Turbo Charging, DI, BMW 184 g/km
VW Flex Fuels, Fuel Cells
Daimler 188 g/km
Bio Fuels, Plug In Hybrids, Fuel
GM Fiat 144 g/km
Cells
Micro Hybrids, Downsizing and Ford 162 g/km

Ford
Turbocharging, GDI, Plug Ins, Fuel Cells
GM 157 g/km
Toyota Diesels, GDI, Micro Hybrids, Electric Renault 147 g/km
Honda Vehicles, Plug In Hybrids, Fuel Cells
Nissan 168 g/km
Nissan Micro Hybrids, GDI, Electric Vehicles, Plug In Hybrids PSA 142 g/km
Micro Hybrids, GDI, Electric Toyota 153 g/km

Renault Vehicles
Honda 154 g/km
Micro Hybrids, GDI,
PSA VW 166 g/km
Diesel Electric Hybrids
GDI, Micro Hybrids, Current Industry

Fiat Fleet Average,
CO2 Fleet Average (g/km) Fuel Cells
2006
Targeted OEM Fleet
180 160 140 120 Average, 2012
© 2008Frost & Sullivan. All rights reserved. Source: Frost & Sullivan
23

Alternative
market shaping
Corner Modules

strategic analysis

selected OEMs


Discussions
24
European Consumers’ Attitudes &
Perceptions Towards Sustainability,
Environment and Alternate Powertrains
(Hybrids, Flex-Fuels, NG Vehicles)
Key Relevant Findings

25
The Study Focuses on 5 Key Parameters that Define the
Sustainability and Environmental Impact of Products
Recycling
Recycling
Pollution
Pollution Depletion
Depletion of
of Natural
Natural Resources
Resources
•• Air
Air (Incl. CO2),
(Incl. CO2), Noise,
Noise, Water
Water and
and Alternative
Alternative Fuels
Fuels
Climate
Climate Change
Change Fuel
Fuel Efficiency
Efficiency
Passenger Cars + Light
Trucks – 55%
• A web survey was conducted using a randomly

screened on-line consumer panel, consumers France Germany Italy Spain Sweden UK Total
were given incentives
A&B 150 24.7% 152 25.0% 77 24.3% 76 25.3% 40 19.0% 151 25.0% 646 24.4%
• In all 2,648 interviews were conducted for this
C 151 24.9% 150 24.6% 77 24.3% 75 25.0% 43 20.4% 149 24.7% 645 24.4%
survey and F&S ensured that a solid
representation of vehicle segments were captured D&E 149 24.5% 150 24.6% 77 24.3% 76 25.3% 45 21.3% 150 24.8% 647 24.4%
from each country covered including France, UK,
Germany, Italy and Spain MPV 81 13.3% 75 12.3% 48 15.1% 38 12.7% 43 20.4% 79 13.1% 364 13.7%
• Respondents were recruited based on vehicle SUV 61 10.0% 56 9.2% 22 6.9% 23 7.7% 24 11.4% 60 9.9% 246 9.3%
segment who were personally involved in the Large
purchase decision of the vehicles.
SUV- 15 2.5% 26 4.3% 16 5.0% 12 4.0% 16 7.6% 15 2.5% 100 3.8%
• A good representation of different age groups Small
(younger than 17 were screened out) & gender to
Total 607 100% 609 100% 317 100% 300 100% 211 100% 604 100% 2,648 100%
ensure a good representation of consumers.
26
CO2 seen as most harmful vehicle emission overall in Europe
While CO2 is seen as the most harmful vehicle emission in Europe the UK sees carbon monoxide as most
harmful while in Italy particulate matter is seen as most harmful vehicle emission.
Total European Response Country-wise Breakdown

CO2 CO NOx HC PM
41% 26% 9% 12% 12%

Particulate Matter
(PM)
15%
Carbon Dioxide 39% 23% 9% 10% 19%
(CO2)
Hydrocarbons (HC) 36%
11%
14% 28% 7% 11% 41%
Oxides of Nitrogen
(NOx)
10% 43% 31% 12% 6% 5%
Carbon Monoxide
(CO)
28% 46% 13% 18% 12% 10%
36% 38% 5% 14% 3%
Base: 2008 n=2,648, Fr n=607, Ger n=609, Ita n=317, Spa n=300, Swe n=211, UK n=604
27
Swedish Consumers Show the Greatest Awareness of ‘Eco-
Driving‘ and ‘Eco-Driving’ Seen as Improving Emissions &
Fuel by Changing Drive Style
8 in 10 consumers in Sweden aware 1 in 2 consumers understand eco-driving to be
of the term eco-driving. Just over improving drive style to save fuel and emissions,
half of consumers in France and checking tyre pressure, lowering acceleration and using
Spain said they had heard of it. emission filters on vehicles.
Q8 Are you aware of the term ‘Eco- Q9 What does ‘eco-driving’ mean to you? Please select all
driving’? that apply
Improving my driving style due to a

56%
feedback / suggestion system - save fuel
Checking tyre pressure - better tyre
55%
43% 38% pressure improved fuel consumption
46% 51%
52% Low acceleration - less acceleration
61% 52%
means less fuel used
79%
Using emission filters on your vehicle - to
51%
lower CO2 or other gasses
Controlling and minimising the use of in
47%
car features such as air conditioning and
58% 62%
55% Using low resistance tyres - less
48% 49% 34%
39% resistance means less fuel used
21% Small down sized engines - smaller

33%
engines that have turbo or other techs
Gear shift digital meter or 'Gear Shift
31%
Indicator' - this shows on a screen when
ly
ce
l
n
y
m
en
ta
an
ai
Ita
do
an
To
ed
Optimised driving with the help of real

Sp
m
g
31%
Fr
Sw
er
in
time route guidance (navigation) system -

G
K
d
te
Others 6%
ni
U
No Yes
28
Tax incentives for hybrid vehicles and ‘green’
technologies will best benefit the environment
7 in 10 consumers say that tax incentives for hybrid vehicles and adopting ‘green’ technologies will benefit the
environment most. When data is compared to Q11, data suggests that incentives for purchasing hybrids are more
favorably perceived than 'green' vehicle taxation initiatives.
Q12 How much do you think the following ‘green tax’ initiatives for cars will benefit the environment?
No benefit at all No benefit Undecided Benefit Very beneficial
Tax incentives for purchasing Hybrid Vehicles 5% 6% 21% 44% 24%
Tax incentives for having "green" technologies which are implemented in

6% 8% 26% 43% 18%
the car well before government regulations require them.
CO2 vehicle emission based taxation policy - you are taxed more or less
9% 11% 29% 38% 14%
depending on your vehicles emissions
Pay as you drive insurance schemes 16% 20% 33% 25% 7%
Road pricing schemes - you are charged based on distance travelled 22% 24% 30% 18% 6%
Fuel surcharges - additional fuel surcharges 28% 26% 28% 13% 5%
29
1 in 2 consumers likely to resist Biofuel vehicles because of
concern about land to grow food and other resources
While consumers are open to alternative fuels biofuel adoption may continue to be a sensitive issue until it can be proven
that these fuels do not impact food or other resources.
7 in 10 consumers agree that they are much more willing to consider a vehicle that runs on electricity or alternative fuels
than in the past and demonstrates the greater awareness and heightened concerns about the environment and increasing
fuel costs.
Q3 Please state whether you agree or disagree with the following statements...
Disagree Undecided Agree
I am much more willing to consider a vehicle that runs on electricity or

14% 22% 64%
alternative fuels now than I was in the past
I use less petrol or diesel now than I previously did and I drive with the
18% 24% 58%
environment in mind
I would be very interested in purchasing a car that is made of recyclable parts 11% 32% 58%
I like having good performance from my car so would prefer buy extra
23% 27% 50%
technologies that help save fuel but I want to have high performance
I feel my vehicles impact on the environmental sustainability is not an issue,
39% 25% 36%
there are far more important environmental considerations to worry about
I am willing to pay for and take driving lessons to teach me how to drive more
45% 29% 26%
eco friendly
I do not understand what a 'carbon footprint' really is 56% 23% 22%
I am not concerned that the impact of using bio-fuels will mean there is less
54% 27% 18%
land to grow food and other resources
My government is doing more than they need to in order to help the
63% 23% 14%
environment
© 2008Frost & Sullivan. All rights reserved. Base: 2008 n=2,648 Level of significance: 99% (right-tail: 0.5%)
30

Alternative
market shaping
Corner Modules

strategic analysis

selected OEMs


Discussions
31
Strategic Outlook towards 2020 and Beyond –
To be prepared for the ‘unknown’
Demand from countries like China and India likely to play a critical
part in the price and output of crude oil – Oil exploration rate, cost of
processing and quality of oil to be deciding factors
Local governments providing strategic support to Biofuels need to ensure
that short term detrimental effects are minimised while providing subsidies
and benefits to Biofuels
Oil companies forecasting price for crude oil to be about $55 - $60
by 2030; huge potential for Biofuels to contribute considering
agricultural growth
2nd Generation Biofuels to be commercially successful only if price of
extracting Biofuels is lesser than or equal to price of producing fossil fuels
2030 Scenario 1 – considering historical 2030 Scenario 2 –considering half of

agricultural supply growth historical agricultural supply growth
Total supply of 110 MBPD Total supply of 85 MBPD
Non-OPEC Non-OPEC
Biofuels Supply
Supply
Volume 70% Biofuels
56%
44% Volume
30%
Source : Booz & Company
32
Increased oil prices to bring a paradigm shift in
consumer acceptance of small cars
180 High Oil Price Scenario Powertrain Mix 2020
Hybrids
Diesel 18-20% High Oil Price
LPG / CNG
25-28% 23-25% Scenario
160
140 EV / Fuel
Gasoline Cells
17-19% 11-13%
120 Reference Oil Price

Reference Oil Price Scenario Powertrain Mix 2020 Scenario
Oil Price ($/Barrel)
Diesel
25-28% Hybrids
100 7-9%
Low Oil Price

Scenario
80
Gasoline
40-42% EV / Fuel
Cells LPG / CNG
16-18%
60 5-8% Low Oil Price Scenario Powertrain Mix 2020
Full
Diesel
Current & past oil 24-26%
Hybrids
19-20%
price trend
40
20
EV / Fuel LPG / CNG
Gasoline
Cells 25-27%
16-18%
12-14%
0 // //
1995 2000 2005 2006 2007 2008 2010 2015 2020
Years
33
Strategic Conclusions and Recommendations
Costs involved in 2nd •The biofuel issue can be linked to farming subsidies
and in Europe currently if you are a farmer it is
Generation Biofuels to be commercially more attractive to grow fuel crops
very high in comparison to than food crops.
benefits achieved even •Oil majors not willing to have their share of oil
towards 2020 replaced with Biofuel content as it directly impacts
their revenues.
Separate Business Activities

to leverage existing Consumers will likely leap
stronghold in Europe – frog diesel in search of
increasing profitability and cheaper to run vehicles
margins
•OEMs, oil producers and suppliers can gain •7 in 10 rate fuel economy as most influential
considerable advantage is in logistics and in choice of next vehicle. 1 in 10 consumers
shipping costs. Cost savings on running a with conventional will consider alternative
related business to support biofuels fuelled vehicles.
processing likely to be a critical success
factor.
Being prepared for the Limited choice of available

Unknown – Demand from models holding back adoption
countries like China & India of hybrid & alternative fuelled
likely to influence global oil vehicles
output
•Historical growth rates for India and China do not do justice to •More than 1 in 2 consumers feel that choice of available models is
the actual expected demand by 2015 / 2020. High consumption of what they most dislike about hybrids and alternative fuelled vehicles.
fossil fuels likely to hamper Biofuels output at the global level.
34

The Global Oil Paradox

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The Global Oil Paradox

Transforming the Automotive Industry:

© 2008 Frost & Sullivan. All rights reserved.

Automotive & Transportation Aerospace & Defense

Chemicals, Materials & Food Healthcare

Energy Industrial Automation & Electronics

Environmental, Building Controls & PPE Information & Communication Technologies

Fluctuation in oil prices

Low Cost Vehicle Technologies

Global The Oil Scenario Outline

Global Biofuels – Potential of 2nd Generation Biofuels and

OEM Preferences on ‘Green Technologies’ – Overview of

European Consumers’ Attitudes & Perceptions Towards

Strategic Conclusions & Recommendations and

© 2008Frost & Sullivan. All rights reserved.

120 Forecasted 100

Demand in Million Barrels

100 Global Supply

• Hybrid and Fuel Cell vehicles would compete with

Global The Oil Scenario Outline

Global Biofuels – Potential of 2nd Generation Biofuels and

OEM Preferences on ‘Green Technologies’ – Overview of

European Consumers’ Attitudes & Perceptions Towards

Strategic Conclusions & Recommendations and

© 2008Frost & Sullivan. All rights reserved.

Global The Oil Scenario Outline

Global Biofuels – Potential of 2nd Generation Biofuels and

OEM Preferences on ‘Green Technologies’ – Overview of

European Consumers’ Attitudes & Perceptions Towards

Strategic Conclusions & Recommendations and

© 2008Frost & Sullivan. All rights reserved.

Global Split of LPG & CNG Sales, 2006

• Japan and NA are likely to have higher volumes of full 14%

© 2008Frost & Sullivan. All rights reserved.

Penetration rate ~ 30%

Other OEMs 150,000-180,000 500,000-750,000

U nit Shipm ents (Thousands)

Key Facts about Electric Vehicles 50

Technology Advanced lead acid, NiMH, Na-Ni- 0

Honda Mitsubishi Bridgestone Michelin Japan NA

Europe Petroleum (Conventional and Alternative Sources)

Bio Fuels (Ethanol E85, Bio-diesel)

2010 2020 Source: ATZautotechnology

Global The Oil Scenario Outline

Global Biofuels – Potential of 2nd Generation Biofuels and

OEM Preferences on ‘Green Technologies’ – Overview of

European Consumers’ Attitudes & Perceptions Towards

Strategic Conclusions & Recommendations and

© 2008Frost & Sullivan. All rights reserved.

Bioethanol Biodiesel 26.5

All values in Mtoe – Million tonnes of oil equivalent 2007 2013

Feedstock $26 fossil Diesel in any percentage.

© 2008Frost & Sullivan. All rights reserved.

Global The Oil Scenario Outline

Global Biofuels – Potential of 2nd Generation Biofuels and

OEM Preferences on ‘Green Technologies’ – Overview of

European Consumers’ Attitudes & Perceptions Towards

Strategic Conclusions & Recommendations and

© 2008Frost & Sullivan. All rights reserved.

BMW Micro Hybrids Hydrogen OEMs Current

Micro Hybrids, Downsizing and Ford 162 g/km

Micro Hybrids, GDI, Electric Toyota 153 g/km

GDI, Micro Hybrids, Current Industry