Formula E Championship

Transcription

1 Formula E Championship Racing for an electric future Entertainment that create value for society

2 Introductory Remarks Aspirational goals and long term impact EY methodology Stage 1 - Assess Stage 2 Identify & Quantify Stage 3 - Evaluate Stage 4 - Measure Conclusions Annexes

3 Introductory remarks The FE championship is an international initiative with the potential to drive technological innovation, social awareness and infrastructure investment for sustainable mobility. The intent of this report is to make an assessment of the potential value for society which FE can generate by contributing to the expansion of the EV market. EY has developed a 4 stage approach, tailored to FE, to assess the championship s value creation potential for society. Stage 1: Assess. What is the market size difference in low, medium and high EV penetration scenarios? Stage 2: Quantify. What is the potential impact of each of the EV barriers to accelerate market penetration? Stage 3: Evaluate. How can FE contribute to removing the barriers and as a consequence increase EV usage globally? Stage 4: Measure. What is the value for society from the increased usage of EV? FIA, investors and the FE management team believe that the championship s potential to generate value for society is a strategic intangible asset of the competition. Therefore, a core differentiator of the organization is its sustainability strategy and environmental and social commitments. The main finding of the report is that FE can significantly contribute to remove EV market barriers and to create positive externalities and value for society Page 2

4 Introductory Remarks Aspirational goals and long term impact EY methodology Stage 1 - Assess Stage 2 - Identify & Quantify Stage 3 - Evaluate Stage 4 - Measure Conclusions Annexes

5 Formula E championship aspirational goals. Creating a world of sustainable mobility through entertainment Formula E aspirational goals A driver for the transition towards sustainable mobility. A catalyst for an international alliance between companies, leaders, experts, cities and policy-makers. A leading force that spreads the idea of the feasibility of an alternative electric future through the values of sport and technological progress. Championship long-term impacts Significant increase the market penetration of electric vehicles by: accelerating technological research, raising social and political awareness, promoting alliances to encourage the development of city infrastructure. Increase green growth, social prosperity and environmental savings EY s intent is to make an estimate of the long-term value FE can potentially create from an economic, environmental, and social perspective Page 4

6 Formula E championship aspirational goals: clear alignment between entertainment and accelerating EV market expansion World-class participants to remove technology barriers Leading electric car constructors: Tesla, Saft Running teams with a strong racing track record: McLaren, Williams, Fisker, Drayson Sponsors who may provide know-how: Google, Apple, Virgin Traditional car manufacturers: Toyota, Renault Sustainable value creation: lifting technological barriers and transferring innovation to the automotive industry Strong vehicle performance to attract attention Urban tracks in city centres to promote infrastructure development Fully electric single-seater race class, comparable to F3 0 to 100 km/h in less than 3 seconds, max speed 250 km/h Weight of car and driver: maximum 780 kg Aerodynamic adjustments and smart electronics, once the open race class is established. Sustainable value: worldwide demonstration of EV performance, green spectacle Greening of host cities Associate race to other events on the side (e.g. full day experience with music, video, gaming and side events) Boost economic activity for restaurants, hotels, retail shops Sustainable value: local green alliances and infrastructure development Page 5

7 Formula E championship aspirational goals: FE can contributes to accelerate EV market penetration, based on low scenario 431 billion savings extra sales in the car industry 42,000 permanent jobs Green Growth additional EVs sold 77 million* for consumers fuel energy (NPV) 142 billion created in the car industry 152 billion Social Savings on healthcare costs from pollution reduction Significant quality of life improvement in cities X billion Global value creation 4.0 billion oil barrels avoided (2 years of Italy s annual emissions) 13.9 billion Environmental saved (2.5 years Japan s current consumption) 900 million tonnes of CO 2 eq saved on CO 2 costs (NPV) LOCAL impact SPONSORS Average 16 million of visitor spending per event 333 jobs per event Community pride increase 1 Green image New market niches Brand visibility 2 *For a low scenario analysis 1 See details in Annex III 2 see details in Annex IV Page 6

8 Formula E championship aspirational goals: FE can contributes to accelerate EV market penetration, based on moderate scenario 325 billion savings extra sales in the car industry 30,000 permanent jobs Green Growth additional EVs sold 54 million* for consumers fuel energy (NPV) 107 billion created in the car industry 107 billion Social Savings on healthcare costs from pollution reduction Significant quality of life improvement in cities X billion Global value creation 2.9 billion oil barrels Environmental avoided (1.5 years of Italy s annual emissions) 10 billion saved (1.8 years Japan s current consumption) 655 million tonnes of CO 2 eq saved on CO 2 costs (NPV) LOCAL impact SPONSORS Average 16 million of visitor spending per event 333 jobs per event Community pride increase 1 Green image New market niches Brand visibility 2 *For a moderate scenario analysis 1 See details in Annex III 2 see details in Annex IV Page 7

9 Formula E championship aspirational goals: FE can contributes to accelerate EV market penetration, based on an accelerated scenario 563 billion savings extra sales in the car industry 55,000 permanent jobs Green Growth additional EVs sold 100 million* for consumers fuel energy (NPV) 186 billion created in the car industry 200 billion Social Savings on healthcare costs from pollution reduction Significant quality of life improvement in cities X billion Global value creation 5.2 billion oil barrels avoided (2.5 years of Italy s annual emissions) 18.1 billion Environmental saved (3.25 years Japan s current consumption) 1.2 million tonnes of CO 2 eq saved on CO 2 costs (NPV) LOCAL impact SPONSORS Average 16 million of visitor spending per event 333 jobs per event Community pride increase 1 Green image New market niches Brand visibility 2 *For a low scenario analysis 1 See details in Annex III 2 see details in Annex IV Page 8

10 Introductory Remarks Aspirational goals and long term impact EY methodology Stage 1 - Assess Stage 2 - Identify & Quantify Stage 3 - Evaluate Stage 4 - Measure Conclusions Annexes

11 EY methodology. Ernst & Young has developed a methodology tailored to Formula E, to assess the value creation potential of the championship Ernst & Young has developed a methodology that measures the potential contribution of value to society over a 25-year period ( ). Ernst & Young has created a specific tool for this project (Green Acceleration Factor (GAF)), which: Measures the additional amount of EV sales the competition can encourage in any given market scenario. Based in the outcome of the FE GAF our methodology can determine the future externalities and global impact in terms of green growth, environmental savings, and social prosperity. Page 10

12 EY methodology. EY s model is structured in 4 different stages 1 Analysis of different EV market share evolution scenarios over the period EV scenario analysis EY contribution: synthesizing a variety of market studies into a vision of 3 different evolution scenarios: low, moderate and high. 2 Barriers analysis Analysis of barriers for EV development EY contribution: measuring the link between EV scenarios and barriers 3 Estimation of FE impact on the number of EV s sold worldwide Formula E impact on EV EY contribution: quantifying to which extent FE actions address barriers market share for EV development, and hence increase EV market share that which FE boosts to EV development is called the Green Acceleration Factor (GAF) Externalities and global value created 4 Estimation of FE domino effect on economy, society and environment EY contribution: translating FE impact on EV market share into measurable externalities (e.g. Employment, CO 2 emissions, health, consumer surplus,...) Page 11

13 EY methodology. The value creation of Formula E is estimated by analyzing FE s potential contribution to changing market dynamics For a given year, FE contribution is the sum of the potential impact of any FE action on each barrier potential to impact the EV market Gap between low and high EV scenarios x Barrier sensitivity x Impact of the action on the barrier Measures the extent to which FE may contribute for EV development to jump to a higher scenario Measures the share of the gap that is influenced by the considered barrier Rates the strength of the FE action in lowering the barrier Measure of global externalities generated by FE contribution Page 12

14 Introductory Remarks Aspirational goals and long term impact EY methodology Stage 1 - Assess Stage 2 - Identify & Quantify Stage 3 - Evaluate Stage 4 - Measure Conclusions Annexes

15 Stage 1. Assess. EV scenario analysis: EV market share shows a high degree of uncertainty The studies reviewed by EY predict different sales scenarios which depend on the evolution of barriers such as: Pricing Technological progress Social awareness and responsiveness Infrastructure Regulations Findings The future EV market shows a high degree of uncertainty. The degree to which barriers are removed determines different scenarios. The EV market share varies between 17.5% and 65% in 2040 depending on the degree to which barriers are removed. 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% BEV + PHEV evolution of market share (% of total passenger car sales) end of EY s time horizon analysis IEA (2011) Fulton (2009) Carbon Trust (2011) Sperling and Lutsey (2009) (optimistic) Sperling and Lutsey (2009) (pessimistic) ETC/ACC (2009) (optimistic) ETC/ACC (2009) (moderate) ETC/ACC (2009) (pesimistic) Page 14

16 Stage 1. Assess. EY identification of high, moderate and low scenarios. Based on current market uncertainty EY identified three potential scenarios which will be the parameter for future calculation in this report: Low Scenario: 17% market share in 2040 Moderate Scenario: 50% market share in 2040 High Scenario: 65% in 2040 Based on the snowball effect, the market penetration trend over the next decade will have significant influence over the outcome of following decades. Finding Depending on the degree to which barriers are removed, the EV share can have a variation of 47.8% of the total car sales. 70% 60% 50% 40% 30% 20% 10% 0% BEV + PHEV evolution of market share (% of total passenger car sales) EY High Scenario EY Moderate Scenario EY Low Scenario 15,6% 47,8% Years Next step: measuring the importance of how barriers can change EV market share. Page 15

17 Introductory Remarks Aspirational goals and long term impact EY methodology Stage 1 - Assess Stage 2 - Identify & Quantify Stage 3 - Evaluate Stage 4 - Measure Conclusions Annexes

18 Stage 2. Identify and Quantify. Identify the most material barriers and define the influence on the EV market. Pricing barrier Technological barrier Social barrier Infrastructural barrier Regulatory barrier Initial cost of the car Running costs of the car Maintenance Residual value of the vehicle Battery capacity Car performance, especially durability Charging time Battery performance (cycles) Charging time Consumer awareness, eco-aspiration Range anxiety Safety: noiseless driving, electrocution risk Grid capacity Charging infrastructure Climate regulation (CO 2 ) Air quality regulation (NOx, SOx, etc.) Environmental impacts (Well-to-Wheel) Uncertain government incentives and support The relative influence of each barrier on EV market share is analysed by considering three criteria: 1. Potential impact on the EV penetration success 2. Complexity and the effort needed to overcome the barrier to achieve massproduction by Influence of barrier on the other evaluated barriers Page 17

19 Stage 2. Identify and Quantify. The relative influence of each barrier, reflected through a sensitivity indicator quantifies its importance in the penetration of the EV market Each barrier has a relative importance, which is shown by a sensitivity indicator. The sensitivity indicators evolve over time. The ones shown below are the average for the period. All barriers are connected with each other. Overcoming one of them will impact the sensitivity of the others. Technological barrier Social barrier Pricing barrier Regulatory barrier Infrastructural barrier 24% 22% 20% 19% 15% Each sensitivity point attributed to a given barrier was calculated based on a number of experts opinions. The description of our approach is presented in Annex I. Page 18

20 Stage 2. Identify and Quantify. Minimizing barriers can shift market growth from low to high 70% 60% 50% BEV + PHEV evolution of market share (% of total passenger car sales) EY High Scenario EY Moderate Scenario EY Low Scenario Technological 47.8% x 24% = 11.5% Social 47.8% x 22% = 10.5% Importance of each barrier in EV market share change potential = Gap between low and high EV scenarios x 40% 30% 20% 10% 0% 47.8% Years Pricing 47.8% x 20% = 9.4% Regulations 47.8% x 19% = 9.1% Infrastructural 47.8% x 15% = 7.3% Barrier sensitivity Findings The 47.8% market share variation is allocated based on each barriers individual sensitivity. Next step: measuring the potential impact of Formula E actions on the barriers. Page 19

21 Introductory Remarks Aspirational goals and long term impact EY methodology Stage 1 - Assess Stage 2 - Identify & Quantify Stage 3 - Evaluate Stage 4 - Measure Conclusions Annexes

22 Stage 3. Evaluate. FE has an overall strategy to encourage technological innovations, social awareness and infrastructure development The FE aspirational goal is to contribute to a significant increase of the EV market penetration by developing actions to encourage sustainable mobility, provide a technological showcase and attract public interest. The plan includes three sets of actions that can have an impact on the EV barriers. The plan is also aligned with the organization s sustainable strategy. 1. Technological innovations with R&D efforts related to battery performance and electronic management systems. 2. An innovative communication agenda to increase awareness and acceptance on the EV potential and on sustainability values. 3. Initiating and facilitating alliances between cities, people and the energy industry to accelerate the development of charging infrastructure. Transferring innovations to the mass market Escalating and responding to stakeholder aspirations Innovation and aspiration is a two-way street. FE car innovation will eventually be transferred to EV mass production. On the other hand, FE will reflect aspirations in terms of green mobility. Page 21

23 Stage 3. Evaluate. FE overall strategy can contribute to minimize the barriers and to increase EV market penetration Action Direct influence on barriers Contribution to EV market share Technological innovations Pricing barrier Technological barrier Innovative Communication Agenda Facilitating alliances Social barrier Infrastructural barrier Regulatory barrier Action Impact Indicator (AII) will translate FE strategy influence on barriers into changes in the EV market share Next step: evaluate the potential contribution of FE overall strategy to remove EV barriers by developing the AII. Page 22

24 Stage 3. Evaluate. Establishing the links between actions and barriers (Action Impact Indicator) Action Direct influence on barriers Technological innovations Pricing barrier Technological barrier The company actions will have a direct influence on the barriers. Thus, each action has a direct impact on certain barriers as it is shown in the figure. Indirect influence has not been taken into account. Innovative Communication Agenda Facilitating alliances Social barrier Infrastructural barrier Regulatory barrier For each link, EY models the impact and influence FE can possibly have on the barriers. Those impacts will result in the Green Acceleration Factor (GAF): the contribution that FE could potentially have either directly or indirectly on EV market share if its actions are successful. Page 23

25 Stage 3. Evaluate. Formula E s strategy for the most effective impact on barriers: Promoting technological innovation *Detailed analysis of FEH intangible assets in Annex V Promoting Technological Innovations FE strategic levers Investment in R&D Innovative Communication Agenda FE actions FE s technological roadmap sets clear targets and provides a vision for 3, 5, and 10 years Facilitating Alliances Expected long-term results Battery weight reduction (by 50% in 5 years) Battery range enhancement (to 1.5 hours in 3 years) Car materials environmental footprint reduction (to 1/3 in 3 years) Technology transfers (e.g. similar to kinetic energy recovery developed in F1) Page 24

26 Stage 3. Evaluate. Formula E s strategy for most effective impact in barriers: Innovative Communication Agenda Promoting Technological Innovations FE strategic levers Marketing and Communication Sustainability strategy Innovative Communication Agenda FE actions Integrated report development FE s communication plan tailored to each target audience Include measurement and monitoring of the impact. Green sponsorship Policy. FE has a detailed plan to develop sustainability alliances with sponsors. Integrated report development FE measures CO 2 emissions FE has an offsetting strategy Green policy for suppliers Employee engagement policy FEH s team is highly competent and committed Facilitating Alliances Expected long-term results Change consumer behavior to increase EV acceptance. Reach 300 million people within 5 years (Competition + EV perception). 100% sponsors fully aligned with FE s values. Presence in leading media outlets Achieve Carbon Neutrality 100% signing suppliers commitment letter 100% team retention Page 25

27 Stage 3. Evaluate. Formula E s strategy for most effective impact in barriers: Facilitating Alliances *Sponsor evaluation analysis available in Annex IV Promoting Technological Innovations FE strategic levers Strengthen stakeholder relations (FIA, cities, civil society, sponsors, car makers, green economy, energy companies and other stakeholder) Innovative Communication Agenda FE actions FE supports cities to develop a green strategy. FE promotes infrastructure legacy in hosting cities. FE promotes alliances between energy companies, cities and car manufacturers. Facilitating Alliances Expected long-term results Development of infrastructure aligned to the EV sales increase, prioritizing the host cities Page 26

28 Stage 3. Evaluate. EY s impact measurement methodology Reminder of EY s approach Gap between low and high EV scenarios x Barrier sensitivity x Impact of FE on the barrier (Action Impact Indicator)? The calculation of the Action Impact Indicator is summarized below: The impact of the action on the barrier is evaluated between 0 and 3, for each link (3 being the strongest, 0 the weakest) The impact is adjusted according to the time horizon: the impact of some actions will be strongest in the short-term (e.g. communication), the impact of other actions will be strongest in the longer-term (e.g. technological innovation) The impact is adjusted according to the EV market share of the reference scenario: the maximum impact will differ from one scenario to the other; for instance, in a scenario with a high market share where barriers are easily overcome, the impact of FE actions would be lower Full spreadsheet model and explanation available upon request Page 27

29 BEV + PHEV Market Share Stage 3. Evaluate. The Action Impact Indicator is captured by the Green Acceleration Factor (GAF) of EV market penetration 70% 60% 50% 40% The Green Acceleration Factor, in a given scenario, represents the potential for FE to generate extra EV car sales by minimizing barriers. 30% 20% 10% 0% High Low GAF based on moderate Moderate GAF based on low Page 28

30 Stage 3. Evaluate. How does the GAF translate into extra car sales? Total BEV + PHEV sales in different scenarios Additional EVs sold through FE actions over the period million in the moderate scenario million in the low scenario, where barriers are stronger and FE can potentially make a bigger difference High scenario Moderate scenario Low scenario GAF based on low GAF based on moderate Total car sales Page 29

31 Introductory Remarks Aspirational goals and long term impact EY methodology Stage 1 - Assess Stage 2 - Identify & Quantify Stage 3 - Evaluate Stage 4 - Measure Conclusions Annexes

32 Stage 4. Measure. EY s unique methodology for measuring positive externalities from the acceleration of EV deployment Areas of focus for assessment of positive externalities Green Growth Social Impact Environmental Impact Global externalities Industrial impact on the energy and automotive sectors Reduction of oil dependence Contribution towards welfare and health (e.g. reduction of particle emissions) Reduction of CO 2 emissions Global increase of environmental awareness Green technology improvement Local externalities (detailed in Annex III) Investment attraction EV business attractiveness Local development of R&D GDP Taxes Employment Host cities attractiveness Community pride and involvement Development of local skills and education Noise pollution Local public awareness on sustainable development Traditional scope Extended EY scope Page 31

33 Introductory Remarks Aspirational goals and long term impact EY methodology Stage 1 - Assess Stage 2 - Identify & Quantify Stage 3 - Evaluate Stage 4 Measure Global externalities Local externalities Conclusions Annexes

34 Stage 4. Measure. Global externalities. Global economic externalities: impact on the energy and automotive sectors (1/2) Assumptions available in Annex III 77 million extra EV cars sold over the period billion oil barrels saved 2.5 years of Japan s current consumption 431 billion energy savings for consumers 521 billion savings on fuel 90 billion extra spending on electricity (Net Present Value) Page 33

35 Stage 4. Measure. Global externalities. Global economic externalities: impact on the energy and automotive sectors (2/2) Assumptions available in Annex III 54 million extra EV cars sold over the period billion oil barrels saved 1.8 years of Japan s current consumption 325 billion energy savings for consumers 395 billion savings on fuel 70 billion extra spending on electricity (Net Present Value) Page 34

36 Stage 4. Measure. Global externalities. Global economic externalities: EV expansion will increase consumer surplus and benefit the automotive industry Considerable movements of capital and expenditure to the benefit of consumers... EV development, to which FE will contribute, will cause: a reduction in oil consumption an increase in electricity consumption Overall, consumers will make substantial savings on energy spending, and will be ready to pay a Green Premium for their Electric Vehicle This Green Premium is evaluated at 1,800 per vehicle. Detailed explanation available in Annex III FE would contribute towards diffusing this green premium, with the following value creation for the automotive industry over that period... and the automotive industry In the GAF on low scenario (77 million extra EVs sold over ) 142 billion of extra car sales 7.1 billion of extra profits for the automotive industry 42,000 permanent jobs* created in the automotive industry 27 billion of extra tax revenue generated In the GAF on moderate scenario (54 million extra EVs sold over ) 107 billion of extra car sales 5.4 billion of extra profits for the automotive industry 30,000 permanent jobs* created in the automotive industry 20 billion of extra tax revenue generated * Based on a career duration of 40 years Page 35

37 Stage 4. Measure. Global externalities. Global environmental externalities: impact on the reduction of CO 2 emissions (1/2) Assumptions available in Annex III CO 2 avoided in IEA baseline scenario and GAF based on low scenario CO 2 avoided in IEA Bluemap scenario and GAF based on low scenario 77 million extra EV cars sold between Carbon intensity of electricity from 500 to 471 g CO 2 / kwh between 2015 and million extra EV cars sold between Carbon intensity of electricity from 500 to 191 g CO 2 / kwh between 2015 and million tonnes of CO 2 avoided 1.1 billion tonnes of CO 2 avoided 2 years of Italy s current CO 2 emissions A net present value of 13.9 billion 2 years of South Korea s current CO2 emissions A net present value of 17.3 billion Page 36

38 Stage 4. Measure. Global externalities. Global environmental externalities: impact on the reduction of CO 2 emissions (2/2) Assumptions available in Annex III CO 2 avoided in IEA baseline scenario and GAF based on moderate scenario CO 2 avoided in IEA Bluemap scenario and GAF based on moderate scenario 54 million extra EV cars sold between Carbon intensity of electricity from 500 to 471 g CO 2 / kwh between 2015 and million extra EV cars sold between Carbon intensity of electricity from 500 to 191 g CO 2 / kwh between 2015 and million tonnes of CO 2 avoided 800 billion tonnes of CO 2 avoided 1.5 years of Italy s current CO 2 emissions A net present value of 10.0 billion 1 year of Germany s current CO 2 emissions A net present value of 12.2 billion Page 37

39 Stage 4. Measure. Global externalities. Global social externalities: reduction of Particle Matter (1/2) Assumptions GDP Loss due to Particulate Matter pollution avoided (GAF based on low scenario) PM concentration in each country between calculated using the average growth between 1990 and 2009 GDP growth in each country between calculated using the average expected growth between 2010 and 2017 Percentage of PM caused by road transport GDP Loss due to decrease in productivity and health issues caused by PM Only PM 10 are taken into account Car sales assumptions % 5.14% 14.20% 5% GDP for PM concentration = 60 μg/m 3 already presented in previous slides More than $400 billion loss due to the PM pollution caused by transport in 2040 $198 billion saved between billion saved in productivity and healthcare costs (e.g. respiratory problems) Sources: 1Data World Bank, PM10 Concentration Data World Bank, GDP European Environment Energy, MIT Joint Program on Climate Change, years of Morocco s current annual GDP Page 38

40 Stage 4. Measure. Global externalities. Global social externalities: reduction of Particle Matter (2/2) Assumptions GDP Loss due to Particulate Matter pollution avoided (GAF based on moderate scenario) PM concentration in each country between calculated using the average growth between 1990 and 2009 GDP growth in each country between calculated using the average expected growth between 2010 and 2017 Percentage of PM caused by road transport GDP loss due to decrease in productivity and health issues caused by PM Only PM 10 are taken into account Car sales assumptions % 5.14% 14.20% 5% GDP for PM concentration = 60 μg/m 3 already presented in previous slides More than $400 billion loss due to the PM pollution caused by transport in 2040 $198 billion saved between billion saved in productivity and healthcare costs (e.g. respiratory problems) Sources: 1Data World Bank, PM10 Concentration Data World Bank, GDP European Environment Energy, MIT Joint Program on Climate Change, year of Hungary s current annual GDP Page 39

41 Introductory Remarks Aspirational goals and long term impact EY methodology Stage 1 - Assess Stage 2 - Identify & Quantify Stage 3 - Evaluate Stage 4 Measure Global externalities Local externalities Conclusions Annexes

42 Stage 4. Measure. Local externalities. Local externalities which can be expected following Formula E events (Externalities calculated for Miami) Traditional event impact measurement $13.0 million spent per event by visitors $3.6 million of tax collection. About 333FTE jobs generated. $20 Million Local event calculation details available in Annex III GDP & Taxes Income effect Increase in economic activity Employment Long-term economic impact Increase in visitors. Eco-tourism Business R&D Creation of business clusters Investment attraction Highly skilled labor force Technology development $52M/ yr Political impacts Waste City image Decrease in waste generation Increase in recycling and reuse Pride Community involvement Political support Positive feedback Green image settlement Reputation Policy creation Political support Water Emissions and air quality Water savings Water quality improvement Emissions savings Air quality improvement Social welfare Social awareness Energy Educational programs Research Sustainable lifestyle Increase in quality of life Purchasing power Positive feedback Change in lifestyle Renewable energy development Energy efficiency improvement Decrease in energy consumption Environmental value Social value City attractiveness Education Infrastructure Urban renewal $40-50M in 5yr $80M in 5yr Page 41

43 Introductory Remarks Aspirational goals and long term impact EY methodology Stage 1 - Assess Stage 2 - Identify & Quantify Stage 3 - Evaluate Stage 4 - Measure Conclusions Annexes

44 Conclusions Formula E Holdings is in a position to significantly boost the EV market and create positive externalities and value for society. Beyond providing entertainment, Formula E will play a strong role in: Technological research Global awareness on electric vehicle performance, and on sustainability values Infrastructure development Formula E Holdings can aim for ambitious targets, as measured in this report, by deploying a proactive and comprehensive strategic roadmap. Page 43

45 ANNEXES Annex I: Barriers for EV market development calculation Annex II: FE impact calculation on EV Market Annex III: Local externalities following FE events Annex IV: Sponsors Evaluation Tool Annex V: Intangible valuation

46 Annex I. EVs: three levels of vehicle electrification considered in the scope of this report Hybrid-electric vehicle Such a vehicle has two or more energy storage systems, both of which must provide propulsion power, together or independently. The internal Combustion engine is typically the primary system, with the electric motor used to power the vehicle for short distances or to support the main engine for example, when the vehicle idles at a traffic light. This type of electric vehicle is not part of our scope, since it cannot be considered as electric drive Plug-in hybrid-electric vehicle These vehicles have two energy storage systems and both can provide propulsion power. The battery capacity is enlarged for longer range or city usage. Battery can be recharged with on board internal combustion engine or an electricity supply into which the vehicle can be plugged. Plug-in hybrid-electric vehicle with range extender These vehicles have one energy storage system: a battery recharged with power from either an on-board generating device (for example, a small internal-combustion engine) or an electricity supply into which the vehicle can be plugged Battery electric vehicle This kind of vehicle has one energy storage system, a battery, and no primary onboard means of generating electricity. You transfer energy to the vehicle by plugging it in to an electricity supply or by exchanging the battery for a charged one. Even though the Fuel Cell Electric Vehicle (FEV) has an electric motor, it will not be taken in the scope of the present analysis, though its evolution could have positive as well negative effects on future EV evolution. Page 45

47 Annex I. Roadmap towards Zero Emission (ZE) mobility Zero emission technologies Alternative drivelines and fuels Adjustments to vehicles and driving habits CO 2 Reduction [%] Roadmap to Zero Emission Within a timeframe of 40 years, three different innovations will lead to carbon free mobility: 1) improvements of existing ICE car fleet 2) transition to alternative fuels 3) ZE technology in the form of hydrogen fuel cell or battery electric vehicles charged by a renewable energy source Year O. Pascual & E. Rietveld, Efficiency Garage, 2010 Although in the first decade the percentage of Zero Emission vehicles will be relatively low, developed advanced technology (i.e. materials, smart electronics, energy management) will be implemented in ICE cars and this can be seen as positive side effect. Page 46

48 Annex I. Studies consider every barrier as significant: our starting point is an equal allocation of sensitivity of EV market share to each barrier Pricing barrier Technological barrier Social barrier Infrastructural barrier Regulatory barrier 20% 20% 20% 20% 20% This starting point means, for instance for the 2020 outcome, that each barrier is responsible for a 3,1% gap in the 15,6% total gap between the low and high scenarios. Each barrier will be analysed throughout the following pages. We interpret the available literature with regards to the three criteria described before. The sensitivity scores are progressively adjusted according to that analysis. We assume that : every barrier is influential enough to account for at least 10% of the total influence a barrier, on its own, can account for no more than 30% of the total influence Page 47

49 Annex I. Pricing barrier analysis: a barrier with moderate impact due to its strong dependency on other barriers Pricing barrier Technological barrier Social barrier Potential impact on EV market share Battery cost deemed as an absolutely critical aspect to achieve break-even cost with ICE vehicles, but depends significantly on technological and social evolutions Complexity Battery costs ($/kwh of storage) must be reduced by half by 2020 However, fuel prices for electricity are far lower than that of ICE vehicles Uncertainty concerning residual value of the EV (value of battery pack? precious metals?) Influence on other barriers Social: reducing prices can overcome consumer willingness to pay for a more expensive car Regulation: lower prices reduce the need for policies to regulate ICE use and incentivise electric vehicles Infrastructural barrier +3% points of EV market sensitivity Regulatory barrier Pricing 23% Techno 20% Social 19% Infra. 20% Regul. 18% Page 48

50 Annex I. Technological barrier analysis: the main trigger of EV development and the strongest barrier to overcome at present Pricing barrier Technological barrier Social barrier Potential impact on EV market share Battery performance (energy and power density, recharge time, efficiency, durability, lifeexpectancy, safety) is the most critical aspect in EV development Complexity Battery durability: a complex technical hurdle to near-term commercial application EV driving range needs to increase to km at least (current driving ranges are km for regular ICE vehicles) Need to achieve recharge time of 10min for 100km Influence on other barriers Social: can overcome consumer range anxiety and reluctance related to charging times Infrastructure and regulation: better charging time and range reduce those requirements Pricing: battery technology progress reduces prices Infrastructural barrier +7% points of EV market sensitivity Regulatory barrier Pricing 22% Techno 27% Social 18% Infra. 17% Regul. 16% Page 49

51 Annex I. Social barrier analysis: strong actions needed to improve consumer perception and adapt behaviors to electric driving Pricing barrier Technological barrier Social barrier Potential impact on EV market share Consumer behaviour estimated by experts to be a key influence on EV market share, comparable to technology Complexity Need to induce a willingness to pay a premium for an electric-vehicle, despite lower energy expenditure Need to adapt driving and charging behaviours, though PHEV can overcome range anxiety Influence on other barriers Pricing: consumer willingness for eco-friendly driving can lower that barrier Technological and infrastructural: different driving behaviour can reduce necessity for driving range and recharging time Regulation: social demand for environmental protection can encourage politicians to take action Infrastructural barrier +5% points of EV market sensitivity Regulatory barrier Pricing 21% Techno 26% Social 23% Infra. 15% Regul. 15% Page 50

52 Annex I. Infrastructural barrier analysis: a relatively weak influence due to a strong dependency on other barriers Pricing barrier Technological barrier Social barrier Infrastructural barrier Potential impact on EV market share An adequate recharging infrastructure is essential, though not particularly complex to achieve Complexity PHEV does not require massive infrastructure investment Many households around the world already have parking locations with access to electricity plugs However, need for more public recharging spots (e.g. offices, shopping centres) Need for increased and reliable electricity supply Influence on other barriers Social: can overcome consumer range anxiety Technological: a strong infrastructure can make driving range less essential +2% points of EV market sensitivity Regulatory barrier Pricing 21% Techno 25% Social 22% Infra. 17% Regul. 15% Page 51

53 Annex I. Regulatory barrier analysis: a strong role to play in lowering other barriers Pricing barrier Technological barrier Social barrier Potential impact on EV market share Policies, which have not yet been discussed, will play a key role in addressing the other barriers, especially in providing recharging infrastructure Complexity Need to incentivise and subsidise the provision of recharging infrastructure in public places Need to increase CO 2 - based taxes Need to provide favourable financing terms for EV Non-cost related role of policy: restrict ICE access to city centres, regulate pollutants Influence on other barriers Infrastructure: government policies will play a key role in providing adequate infrastructure Pricing: incentives can make purchasers break even much faster Technological: small impact on research programs Infrastructural barrier +4% points of EV market sensitivity Regulatory barrier Pricing 20% Techno 24% Social 22% Infra. 15% Regul. 19% Page 52

54 Annex I. The relative influence of each barrier ( sensitivity ) indicates its importance in the penetration of the EV market Each barrier has a relative importance, which is shown by a sensitivity indicator. The sensitivity indicators evolve over time. The ones shown below are the average for the period. All barriers are connected with each other. Overcoming one of them will impact the sensitivity of the others. Technological barrier Social barrier Pricing barrier Regulatory barrier Infrastructural barrier 24% 22% 20% 19% 15% Every sensitivity point attributed to a given barrier was calculated based on a number of experts opinions. The description of our approach is presented in Annex I. Page 53

55 Annex I. Lifting barriers will close the gap between market growth scenarios (shifting from low to high growth paths) 70% 60% 50% BEV + PHEV evolution of market share (% of total passenger car sales) EY High Scenario EY Moderate Scenario EY Low Scenario Technological 47,8% x 24% = 11,5% Social 47,8% x 22% = 10,5% Importance of each barrier in EV market share change potential = Gap between low and high EV scenarios x 40% 30% 20% 10% 0% 47,8% Years Pricing 47,8% x 20% = 9,4% Regulations 47,8% x 19% = 9,1% Infrastructural 47,8% x 15% = 7,3% Barrier sensitivity Findings The 47,8% market share oscillation is allocated based on the barriers individual sensitivity. Next step: measuring the potential impact of Formula E actions on the barriers. Page 54

56 ANNEXES Annex I: Barriers for EV market development calculation Annex II: FE impact calculation on EV Market Annex III: Local externalities following FE events Annex IV: Sponsors Evaluation Tool Annex V: Intangible valuation

57 Annex II. FE has an overall strategy to increase technological innovations, awareness and to facilitate alliances. The ultimate goal of the organization is to contribute to a significant increase of the EV market penetration. FE intents to develop a set of plans for the short- and midterm to encourage sustainable mobility, provide a technological showcase and attract public interest. The plans include three sets of actions that can have an impact on the EV barriers. The plans are also aligned with the organization s sustainable strategy. 1. Technological innovations with R&D efforts related to battery performance and electronic management systems. 2. An innovative communication agenda to increase awareness and acceptance on the EV potential and on sustainability values. 3. Initiating and facilitating alliances between cities, people and the energy industry to accelerate the development of charging infrastructure. Transferring innovations to the mass market Escalating and responding to stakeholder aspirations Innovations and aspirations is a double-way road. FE car innovations will eventually be transferred to EV mass production. On the other hand, FE will reflect aspirations in terms of green mobility. Page 56

58 Annex II. FE overall strategy can contribute to remove the barriers and to increase EV market penetration Action Direct influence on barriers Contribution to EV market share Technological innovations Pricing barrier Technological barrier Innovative Communication Agenda Facilitating alliances Social barrier Infrastructural barrier Regulatory barrier Barrier sensitivity analysis translating FE influence on barriers into changes in EV market share. Next step: evaluate the potential contribution of FE overall strategy to remove EV barriers. Page 57

59 Annex II. Establishing the links between actions and barriers Action Direct influence on barriers Technological innovations 1 2 Pricing barrier Technological barrier The company actions will have a direct influence on the barriers. Thus, each action has a direct impact on certain barriers, as it is shown in the graph. Indirect influence has not been taken into account. Innovative Communication Agenda Facilitating alliances Social barrier Infrastructural barrier Regulatory barrier For each link, EY models the impact and influence FE can possibly have on the barriers. Those impacts will result in the Green Acceleration Factor (GAF): the contribution that FE could potentially have either directly or indirectly on EV market share if its actions are successful. Page 58

60 Annex II. EY s impact measurement methodology Reminder of EY s approach Gap between low and high EV scenarios x Barrier sensitivity x Impact of FE on the barrier? The calculation of the impact of FE s actions on identified barrier is summarized below: The impact of the action on the barrier is evaluated between 0 and 3, for each link (3 being the strongest, 0 the weakest) The impact is adjusted according to the time horizon: the impact of some actions will be strongest in the short-term (e.g. communication), the impact of other actions will be strongest in the longer-term (e.g. technological innovation) The impact is adjusted according to the EV market share of the reference scenario: the maximum impact will differ from one scenario to the other; for instance, in a scenario with a high market share where barriers are well-overcome, the impact of FE actions would be lower Full spreadsheet model and explanation available upon request Page 59

61 Annex II. Quantifying the impact of FE actions on barriers on the 0-3 scale (1/2) Impact of FE technological innovations on pricing Impact of FE technological innovations on technological barriers Impact of communication on social barriers Stimulation of engineering efforts within the teams Increase of R&D budgets for EV components suppliers (and for automotive OEMs after some years with the open race) will lead the way for price reduction and mass-production Innovation jump expected on electronic management systems before 2020, and on battery power density, thereby reducing the amount of batteries needed and reducing prices of passenger cars Impact rating Increase, through R&D, of battery capacity and power density Improvement of battery performance (cycles and Battery Management Systems, BMS) Need for fast charging during pit stops will lead to high power systems and nano-tech applications in battery design Exposure to a large audience of the technical innovations implemented in the pinnacle of motorsports Demonstration that EV can perform like conventional racing cars and that recharging time, battery range and safety are challenges solved Diffusion of the idea of ecocoolness around electric drive: overcome the threshold of consumer acceptance Page 60

62 Annex II. Quantifying the impact of FE actions on barriers on the 0-3 scale (2/2) Impact of FE alliances on technological barriers Impact of FE alliances on infrastructural barriers Impact of FE alliances on regulation barriers Initiation and facilitation of industrial consortiums to design and build the winning eracer of the future. Gathering of the most innovative companies and bright engineers to work together and improve the electric drive train in every detail Every race to lead to an alliance of the city government & services involved, local electricity provider, city branding, and other relevant organizations Outcome over the years: more recharging facilities for inhabitants and improvements of grid capacity over areas and time (day/night) Working with global, national and local governments, under auspices of FIA to bring politicians and decision makers together aiming for the same goals of reducing air pollution, decrease climate change and using renewable energy sources Engender consolidated policies after a decade to face environmental challenges, with global support and understanding Page 61

63 Annex II. EY s impact measurement methodology: example for link n 2, year 2040, in reference to the low scenario Gap between low and high EV scenarios x Barrier sensitivity x Impact of the action on the barrier? 47,8% in % for technological barrier 1 for link n 2 in 2040 (33%) multiplied by 85% to adjust for the 2040 market share in the low scenario multiplied by a 20% fixed adjustment factor to account for FE s maximum potential contribution as a sports and entertainment provider Note: FE contributions will not be calculated for the EY high scenario, as it is impossible to contribute beyond the highest scenario. Page 62

64 Annex II. The case for an adjustment factor of 20% To influence social acceptance for new developments and emerge a market for its products, the main instruments are: Advertisement; TV, internet, printed press, billboards, flyering Product placement, pilots, free trials, discounts Trade fairs, expert seminars, expositions, public conferences To change public opinions and discourage undesirable behavior, mainly used are: Multi-media public campaigns & educational programs Three main actors, which are highly active in this field are: 1. OEMs & commercial corporations with large marketing budgets for promoting new products, models or services to the target group (40% of total contribution) 2. Governments & NGO s use public campaigns to encourage (clean energy) or discourage (drunk driving) public opinion and therefore peoples behaviour (40% of total contribution) 3. Sports & Entertainment industry creating role models, idols and winners (heroes). The public will identify themselves and copy behaviour, looks & goods (20% of total contribution) Formula E is operating within the Sports & Entertainment industry, which is assumed to have a maximum influence of 20% of the total. Page 63

65 Annex II. EY identification of a high, moderate and low scenarios. Based on current market uncertainty EY identifies three potential scenarios: Low Scenario 1 : 17% market share in 2040 Moderate Scenario 2 : 50% market share in 2040 High Scenario 3 : 65% in % 60% 50% BEV + PHEV evolution of market share (% of total passenger car sales) EY High Scenario EY Moderate Scenario EY Low Scenario This vision of significantly different outcomes in 2040 is aligned with the snowball effect : the market penetration trend over the next decade will have significant influence over the outcome of following decades. 40% 30% 20% 10% 15,6% 47,8% 1 An average of the 2 most pessimistic scenarios studied 2 An average of all the scenarios not included in the low or high scenarios 3 Most optimistic scenario (ETC/ACC Optimistic) * Studies which only reach up to 2030 have not been taken into account 0% Years Next step: measuring the importance of how barriers can change EV market share. Page 64

66 BEV + PHEV Market Share Annex II. The impact of FE results in what EY has called the Green Acceleration Factor (GAF) of EV market penetration 70% 60% 50% 40% 30% 20% 10% 0% High Moderate Low GAF based on low GAF based on moderate Page 65

67 BEV + PHEV Market Share Annex II. The shaded area shows additional EV s sold through FE contribution in the low scenario 70% 60% 50% 40% 30% 20% 10% 0% High Moderate Low GAF based on low GAF based on moderate Page 66

68 BEV + PHEV Market Share Annex II. The new shaded area shows additional EV s sold through FE contribution in the moderate scenario 70% 60% 50% 40% 30% 20% 10% 0% High Moderate Low GAF based on low GAF based on moderate Page 67

69 Annex II. How does the GAF translate into additional car sales? Total BEV + PHEV sales in different scenarios Additional EV s sold through FE actions over the period million in the moderate scenario million in the low scenario, where barriers are stronger and FE can potentially make a bigger difference High scenario Moderate scenario Low scenario GAF based on low GAF based on moderate Total car sales Page 68

70 ANNEXES Annex I: Barriers for EV market development calculation Annex II: FE impact calculation on EV Market Annex III Global externalities Local externalities Annex IV: Sponsors Evaluation Tool Annex V: Intangible valuation

71 Annex III. Global externalities. Global economic externalities: impact on the energy and automotive sectors, assumptions Assumptions Energy for electric driving will remain far cheaper than for ICE driving Average energy intensity of new fuel 8 L / 100km 5,1 L / 100km cars 1 Average new electric car energy intensity 2 Average gasoline price 3 Average price of electric driving 3 Weighted average cost of capital (WACC) 0,16 kwh / km 0,09 kwh / km 1,00 /L 0,12 / kwh 2,09 /L (3% yearly increase) 0,19 / kwh (2% yearly increase) 5% 5% Despite ICE vehicle fuel efficiency gains, gasoline prices will more than double over the period and make ICE cars increasingly expensive to drive. On the other hand, the cost of electric driving remains about constant: fuel efficiency gains offset the rise in electricity prices. The energy price gap between ICE and electric car widens over time. / 100 km 12,00 10,00 8,00 6,00 4,00 Sources: 1FIA Foundation, 50by50 global fuel economy initiative 2IEA, Energy Technology Perspectives EY survey of major gasoline and electricity consuming countries 2, ICE car energy price ( / 100 km) Electric car energy price ( / 100 km) Page 70

72 Annex III. Global externalities. Global environmental externalities: impact on the reduction of CO 2 emissions, assumptions Assumptions Electric vehicles will remain more CO 2 -efficient than ICE vehicles Average new ICE car CO 2 emissions 1 Average new electric car energy intensity 2 Traveled distance per car per year 3 Average carbon intensity of electricity IEA baseline scenario 2 Average carbon intensity of electricity IEA Bluemap scenario 2 Averagecar use duration g CO 2 / km 116g CO 2 / km 0,16 kwh / km 0,09 kwh / km km km 500g CO 2 / kwh 500g CO 2 / kwh 471g CO 2 / kwh 191g CO 2 / kwh 10 years 10 years Cost of CO / tonne 55 / tonne Sources: 1FIA Foundation, 50by50 global fuel economy initiative 2IEA, Energy Technology Perspectives University of Groningen, Option for a sustainable passenger transport sector in EY press survey of major car using countries 5IPCC, SPM WG III, 2007 Despite the progress expected in ICE vehicle efficiency, electric vehicles will remain much cleaner, even in a pessimistic energy mix scenario where the carbon intensity of electricity makes little progress. g CO 2 / km New ICE vehicle average emissions New electric car average emissions, baseline IEA scenario New electric car average emissions, Bluemap IEA scenario Page 71

73 Annex III. Global externalities. Global economic externalities: FE contribution will increase consumer surplus and benefit the automotive industry Considerable movements of capital and expenditure to the benefit of consumers and the automotive industry Besides massive changes in the automotive industry, EV development will also cause a reduction in oil consumption an increase in electricity consumption FE contribution towards these movements, over the next decades, is measured in hundreds of billion Euros, as seen previously. Consumers will make substantial savings on energy spending: the NPV of this consumer surplus is about 5,600 per purchased Electric Vehicle It is assumed that about a third of this Green Premium, 1,800, will be injected in the initial purchase of the vehicle; the rest will go towards other expenses, though a significant share will be going to increased taxes on driving The share of the Green Premium that goes in the purchase of the vehicle represents a transfer of wealth from the energy to the automotive industry The following benefits, resulting from FE contribution (77 million extra EV cars sold), are measured for the automotive industry (and the government taxes thereby generated) over the period billion of extra car sales 7.1 billion of extra profits for the automotive industry 42,000 permanent jobs* created in the automotive industry 27 billion of extra tax revenue generated Page 72

74 ANNEXES Annex I: Barriers for EV market development calculation Annex II: FE impact calculation on EV Market Annex III Global externalities Local externalities Annex IV: Sponsors Evaluation Tool Annex V: Intangible valuation

75 Annex III. Local externalities. Local economic externalities: shortterm increase in GDP, employment, and tax collection Direct local economic impact Indirect local economic impact Economic activity from event organization Spending from visitors (e.g. lodging, restaurants, transports, ) Increased intermediate spending from producers Income effect through increased household spending Increased tax revenue for local, regional and national government Brazil s example World Cup 2014 Miami case: Estimated economic benefits from spending from visitors (lodging, restaurant, transport, retail) $ 31 billion for the population in the period million jobs, ¾ of benefits from indirect economic impact $ 9 billion tax collections 50,000 unique visitors (Australian F1 GP: 109,234) 22,500 county residents and 27,500 non-residents $ 20 million spent FE event visitors in Miami-Dade County 333 FTE jobs $ 765,000 in local tax revenue $ 1,226,000 in state government tax revenue $ 1,698,000 in federal government tax revenue Page 74

76 Annex III. Local externalities. Local economic externalities: longterm development of local clusters and attraction of global investment Sectors which contribute to the growth of local clusters R&D Animation & Communication Manufacturing Local Cluster Tourism Hobbies Hosting cities will have the opportunity to attract investments through the creation of local clusters The success of the existing clusters is mainly based on two major strategic assets: Local high-skilled labor Education Specific local technologies The example of 2 regions whose R&D and economy have benefited from racing competitions Motorsport Valley 25,000 qualified engineers 4,500 SME $ 9.2b turnover (60% exported) 30% of sales turnover spent in R&D Motor Valley Over 35,000 local employees 5,000 SME 11 major international investors 15.6b in exports (2008) Page 75

77 Annex III. Local externalities. Local social externalities: raising awareness from a local to a global dimension The objective is to increase the population awareness about environment and sustainability through the different forms of the social legacy: Improved image of the cities hosting the Formula E Gains in education and training provided by the competition s experience and temporary jobs Social inclusion of underprivileged youngsters and elderly people under volunteering programs Activities oriented towards environmental issues and sustainable development Improvements obtained with investments in health and safety Local Volunteers 2,000 Spectators 100,000 +Tourists and locals 200,000 Global Audience 300,000, ,000 volunteers for FE 1,000 for side events Spectators directly interested in the competition Tourists and locals attracted by the competition People following the competition through different media Page 76

78 Economic externalities Environmental externalities Social externalities LOCAL EXTERNALITIES Annex III. Local externalities. EY s approach for further measurement of local externalities over the long-term Social welfare Pride Pride Social welfare Education Infrastructure Social awareness City image City image Social awareness Political impacts Emissions and air quality Noise Waste Water Energy Water Energy Waste Emissions and air quality Taxes Employment Revenues Short-term externalities City attractiveness TOTAL VALUE City attractiveness Investment Business R&D Long-term externalities GDP & Taxes A detailed calculation of these KPIs will be performed before presenting to the host candidate cities. Page 77

79 Social externalities LOCAL EXTERNALITIES Annex III. Local externalities. Measuring local externalities over the long-term: Social Short-term externalities Long-term externalities Social awareness Social welfare Pride City image Pride City image Social welfare Educ. Social awareness Infrastructure Political impacts Social awareness Social Welfare FE will demonstrate the high performance of EVs, communicating the environmental issues linked. Inhabitants will be directly impacted by the message. During the event, there would be a minor disruption of the local welfare, due to the possibility of incidents, overcrowding, congestion, noise, a potential decrease on the environmental quality and others. The long-term impact will be higher, due to the positive feedback generated by the event and the change in the lifestyle of residents. Raising the environmental awareness leads to a change towards a sustainable lifestyle, increasing the quality of life of locals (less environmental impacts, more EV, etc.) If the city keeps on hosting FE races and the local feedback of the first race is positive, the pride will be higher. Social awareness Social welfare Community Pride Community Pride FE will encourage the population s implication through volunteerism, increasing the sense of belonging. Locals will be proud of its city hosting such an event, specially for being the first one having a sustainability component. The influence would be higher if the city hosts the opening or the closing race, and if the city hosts a race during the next championship, or if it turns into a global reference of the FE championship. The impact on the city image will be higher in the long term as the green image will settle with time. FE would become part of a reputation-enhancement strategy, aiming to show initiatives towards Cleantech research, infrastructure improvement, and environmental protection. The event transforms in a significant way the interest of people and especially students on the EV and sustainability. City Image Education City image FE race will make the city more visual to the public and therefore link the image of the city to and sports event, a green city, attractive for tourism and technology research. If the organization of the event is perceived as well managed by the host city, its positive image will increase. There is a possibility of an urban renewal happening in the long-term in the host city (a more conscious society will demand the creation of green neighborhoods or eco/smart-buildings, etc.). Locals will demand a political support and the creation of policies linked to EVs, renewable energies and sustainability. Infrastructure Political impacts Page 78

80 Environmental externalities LOCAL EXTERNALITIES Annex III. Local externalities. Measuring local externalities over the long-term: Environmental Short-term externalities Long-term externalities Emissions and air quality Noise Waste Water Energy Water Energy Waste Emissions and air quality Emissions and air quality Energy Waste Hosting the event itself will cause the emission of CO 2 due to transportation, the spectators, etc. Also the air quality will decrease due to the emission of particulate matter. Hosting the event will increase the energy consumption locally. The event will generate a higher amount of waste coming from the event itself and the spectators attending to it. As a consequence of the social and political awareness towards sustainability generated by FE race, there would be emission savings due to an improve of the efficiency, the development of the local EV market and renewable energies and higher energy efficiency. In the long term the local energy consumption will decrease due to social awareness. Also there would be an improvement on the energy efficiency in the city and a promotion of green energy sources. Emissions and air quality Energy Water FE race will raise the local water consumption (by a attendees and the water consumed for staging the event). Also there will be a decrease of the local water quality due to pollution and discharges. A potential change in the lifestyle of the communities linked to a raise of the social awareness would lead to an increase on the recycling habits and a decrease of the waste generated.. Waste Noise Hosting the event can cause a raise on the generation of noise due to overcrowding, traffic, and so. It is important as it can cause a disruption of the quality of life on locals during the event. in the long-term, the competition could generate water savings and an improvement on the quality of local water resources as a consequence of a social awareness linked to its consumption and conservation. Water Page 79

81 Economic externalities LOCAL EXTERNALITIES Annex III. Local externalities. Measuring local externalities over the long-term: Economic Short-term externalities Long-term externalities Taxes City attractiveness Employment Revenues City attractiveness Investment Business R&D GDP & Taxes GDP & Taxes Employment Revenues City attractiveness FE generates economic activities far beyond the event s organization, The expenditure on one event would generate about 3.6 million $ of tax collection in the case of Miami. 1 The total increase in economic activity improves employment. The expenditure on one event would generate about 333FTE jobs in the case of Miami. 1 We estimate that a total of $20 million would be spent in one Formula E event in Miami-Dade County by visitors, media, officials, teams and other related organizations or corporate buyers, for the benefit of local businesses. 2 FE event will attract tourists that visit the cities in order to attend the event. We estimate that the FE event organized in Miami can initially attract 50,000 unique visitors, being about 55% of them non-residents. 3 The income effect generates a superior household spending resulting from the higher level of production. This increase the economic activity in the long term, that creates employment and improves tax revenues. In the long term, FE will indirectly encourage the creation of business clusters that will promote the development of a local high-skilled labor force and the development of specific technologies locally available (taking as examples the clusters UK Motorsport Valley in Northamptonshire and Oxfordshire, and the Italian Motor Valley in Modena area). FE will attract investment mostly in the long term through the development of research and business clusters, particularly focusing on cutting-edge mechanical, management and electrical engineering as well as fluid mechanics. GDP & Taxes Business, R&D Investment 1 According to Americans for the Arts, Arts and Economic Prosperity III, The Economic Impact of Nonprofit Arts and Culture Organizations and their audiences, Supposing that the consumption behavior of Australian Grand Prix attendees (The Guardian, Earth Car or not, Button will emit over 50 tones of C02 this season, Friday 2 March 2007) is similar to the one of FE, and adapting Australian Dollar exchange rate and Price Index to the United States (OECD, August 2, 2012). 3 Conservative approach based on the Australian Grand Prix figures (Ernst & Young, Tourism Victoria, The economic impact of the 2011 Formula 1 Australian Grand Prix, July 2011). The long-term contribution of FE would be modest at best. It is hardly conceivable that Formula E would become a key reason for visiting large cities with many tourist attractions. FE can contribute towards the long-term greening of the hosting cities image, especially those spreading a generally negative environmental perception and therefore attract eco-tourism. City attractiveness Page 80

82 ANNEXES Annex I: Barriers for EV market development calculation Annex II: FE impact calculation on EV Market Annex III: Local externalities following FE events Annex IV: Sponsors Evaluation Tool Annex V: Intangible valuation

83 Annex IV. Sponsors Evaluation Tool (SET): Introduction Ernst & Young believes that Formula E Championship offers opportunities for sponsors that go beyond regular sponsorship. Apart from increasing the visibility of brands, and due to its sustainability attributes, Formula E promotes linking a green image among its sponsors and opens new niches for the brands involved. Each sponsor has singular motives for sponsoring an event such as Formula E. Depending on them, and taking into account the nature of the brand (reputation, marketing strategy ), Ernst & Young considers that Formula E Holdings should establish a different strategy for approaching each of them. It is important for Formula E Holdings to understand each sponsors expectations in order to develop an accurate strategy for approaching them. Ernst & Young has developed a methodology that analyzes each company and, depending on its business segment, its sustainability performance and its customers; profiles the sponsors, identifies its expectations, and highlights the key aspects to be considered when approaching them. Each aspect analyzed by the Ernst & Young s Sponsors Evaluation Tool is: Sponsors Evaluation Tool Green image: How potential sponsors would be interested in linking its corporate image to green reputational values. Visibility of brands: How potential sponsors would be interested in being showed to the Formula E spectators and its alignment with the FE marketing strategy. New niches for brands: How potential sponsors would be interested in entering the different market segments that Formula E is tackling. Page 82