Powertrain Acceptance & Consumer Engagement Study

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1 Powertrain Acceptance & Consumer Engagement Study July 2009 Chrysler Powertrain Research March

2 Agenda The Need for Powertrain Research Study Overview Highlights of Findings Optimal Powertrain Configurator & Simulator Morpace Syndicated Research: 2009 PACE Powertrain Study 2

3 The Need for Powertrain Research Morpace Syndicated Research: 2009 PACE Powertrain Study 3

4 Balance of Fuel Economy, Performance and Price Attitudes Toward Alternative Fuel Technologies Consumer Sentiment Toward Reliance on Foreign Oil Impact of Environmental Issues Morpace Syndicated Research: 2009 PACE Powertrain Study 4

5 The Need for Powertrain Research Outside Factors Impact Powertrain Strategy Consumer attitudes and demand as well as the technology and fuel type alternatives available to manufacturers will be influenced and determined by external factors: Government regulations and standards Government subsidies for specific technologies and fuel types Increasing global demand for energy and consequent rising energy costs The state of the business cycle in economies across the globe As automakers seek new product strategies to counteract and address these outside influences, it is critical that consumer reaction is measured and understood Morpace Syndicated Research: 2009 PACE Powertrain Study 5

6 Introducing: PACE Morpace Syndicated Research: 2009 PACE Powertrain Study 6

7 Research Objectives The 2009 Morpace Powertrain Acceptance & Consumer Engagement (PACE) study provides a comprehensive assessment of current and future powertrain technologies from the consumer s point of view. The key objectives addressed in the 2009 PACE study include: Quantifying awareness, initial interest, and purchase consideration for various powertrain technologies Identifying consumer preferences for powertrain characteristics, including engine size/power, fuel type, drivetrain, and transmission type Modeling the impact that powertrain-related issues have on the overall vehicle purchase decision, versus other vehicle characteristics (Max-Diff analysis) Understanding the trade-offs that consumers will make among specific powertrain technologies given the specifications of each and the resulting impact on expected share (Discrete Choice analysis) Measuring brand image for powertrain performance, innovation and technology Morpace Syndicated Research: 2009 PACE Powertrain Study 7

8 Methodology The PACE study was conducted online among a total sample of 3,908 U.S. respondents Survey was fielded February 12 25, 2009 The total survey took approximately 35 minutes to complete and included two advanced analytical techniques: Max-Diff analysis and Discrete Choice analysis Sample Participants in the study met the following criteria: Owned a qualifying MY vehicle Qualifying vehicle was purchased/leased new and is still owned by the respondent Respondent was primary vehicle owner and decision-maker Respondent does not work for an auto manufacturer/supplier/ dealer, etc. or a marketing/advertising company All data is sales-weighted by vehicle segment VEHICLE SEGMENT SAMPLE SIZE Total Car 1,323 Small Car 353 Midsize Car 407 Large Car 255 Compact Luxury Car 154 Midsize Luxury Car 154 Total Pickup Truck 1,056 Midsize Pickup 251 Fullsize Pickup (LD) 805 Total Utility 1,529 Small CUV 262 Midsize CUV 254 Small SUV 251 Midsize SUV 259 Large SUV 252 Midsize Van 251 Morpace Syndicated Research: 2009 PACE Powertrain Study 8

9 Highlights of Findings Morpace Syndicated Research: 2009 PACE Powertrain Study 9

10 Analysts predict a steady rise in fuel prices over the next two decades Source: Energy Information Administration Morpace Syndicated Research: 2009 PACE Powertrain Study 10

11 Consumers offer a pessimistic or perhaps realistic opinion on the future of fuel prices Fuel Price $5.00 $4.50 $4.40 $4.00 $3.50 $3.00 $2.50 $2.04 $2.74 $3.56 More than $1.00/gallon higher than analysts estimates $2.00 $1.50 $1.00 $0.50 $0.00 Recently Paid Anticipated Cost 1 Year From Now Anticipated Cost 3 Years From Now Anticipated Cost 5 Years From Now Morpace Syndicated Research: 2009 PACE Powertrain Study 11

12 Consumers are least satisfied with the fuel economy of their current vehicle Satisfaction is lowest among SUV and Pickup owners Satisfaction with Current Engine & Transmission % Completely Satisfied Mean Rating % Completely Dissatisfied Engine reliability & durability % Overall engine % Engine vibration % Overall transmission % Smoothness of transmission/shift feel % Engine noise % Power and pickup provided by engine % Fuel economy % Morpace Syndicated Research: 2009 PACE Powertrain Study 12

13 Fuel economy is a critical component in the vehicle shopping process For most vehicle segments, only price is more important Most Important Attributes (Mean Score) Attribute Total Sample Attribute Total Sample Price paid for vehicle 25 Exterior styling of vehicle 1 Overall fuel economy 19 Fun to drive 1 Ability to safely maneuver on wet or icy roads 13 Good transmission shift quality 1 Overall vehicle handling 8 Vehicle performance while towing 1 Vehicle performance under normal conditions 8 Ability to drive over any type of terrain 1 Equipped with the options/features I want 6 Quickness of acceleration 1 An engine that offers reduced emissions 4 Interior quietness of vehicle 1 Vehicle range before refueling 3 Powerful towing capability 1 Smooth engine and transmission response 3 Interior styling of vehicle 1 Smoothness of ride 2 An engine that can barely be heard while driving 0 Morpace Syndicated Research: 2009 PACE Powertrain Study 13

14 Fuel economy is most important to Small car, Small CUV, and Midsize Van owners Large SUV and Pickup Owners less concerned place more importance on how the vehicle is equipped Small Car Midsize Car Most Important Attributes (Mean Score) Large Car Midsize Van Compact Luxury Car Price paid for vehicle Overall fuel economy Ability to safely maneuver on wet or icy roads Overall vehicle handling Vehicle performance under normal conditions Equipped with the options/features I want An engine that offers reduced emissions Vehicle range before refueling Smooth engine and transmission response Smoothness of ride Exterior styling of vehicle Fun to drive Good transmission shift quality Vehicle performance while towing Ability to drive over any type of terrain Quickness of acceleration Interior quietness of vehicle Powerful towing capability Interior styling of vehicle An engine that can barely be heard while driving Midsize Luxury Car Small CUV Midsize CUV Small SUV Midsize SUV Large SUV Midsize Pickup LD Fullsize Pickup Morpace Syndicated Research: 2009 PACE Powertrain Study 14

15 More than half will choose a vehicle that is more fuel efficient the next time they are in market Though some will not necessarily downsize their vehicle Morpace Syndicated Research: 2009 PACE Powertrain Study 15

16 Consumers are willing to trade engine size for improved fuel economy They are also more likely to shop other brands rather than change vehicle segment to find the most fuel efficient vehicle Buyer Personal Characteristics (% on a 5 point scale) STRONGLY AGREE STRONGLY DISAGREE Trade engine size for fuel economy Consider environmental vehicles if similar performance in the class Keep same type but shop different brands for fuel efficiency Pay more for environmental vehicle Sacrifice performance for fuel economy Take vehicle for a drive just for fun Consider vehicle just basic means of transportation Environmental friendly overriding factor for shopping decision Pay more for delivering more exhilarating performance Consider self car/truck enthusiast Don't understand or care about what is under the hood Morpace Syndicated Research: 2009 PACE Powertrain Study 16

17 Toyota and Honda rank highest for most powertrain attributes Mercedes-Benz and Porsche make best diesels and powerful engines, respectively Top Manufacturers that Best Fit Each Statement 1st 2nd 3rd 4th 5th Are Renowned For Having Good Engines Toyota Honda BMW Mercedes-Benz Chevrolet Will Be The First To Introduce An All-Electric Vehicle Toyota Honda Chevrolet Ford Nissan Smart Make The Best Diesels Mercedes-Benz Ford Volkswagen Dodge Chevrolet Make Powerful Engines Porsche Ford Chevrolet BMW rcedes-benz Dodge Make Fuel-Efficient Vehicles Toyota Honda Hyundai Nissan Kia Volkswagen Makes The Most Environmentally-Friendly Vehicles Toyota Honda Smart Chevrole Ford Nissan Volkswagen Morpace Syndicated Research: 2009 PACE Powertrain Study 17

18 For most consumers, the fuel type they own today may not necessarily be what they choose for their next vehicle Currently, 94% of respondents own a gasoline engine Fuel Type (%) Gasoline 46 Hybrid Electric Engine 16 Flexible Fuel/Bio-Fuel Diesel Plug-In Hybrid Electric Vehicle Hydrogen/Hydrogen fuel cells Other * * Don't Know/Not Sure 25 Morpace Syndicated Research: 2009 PACE Powertrain Study 18

19 Technology Assessment Morpace Syndicated Research: 2009 PACE Powertrain Study 19

20 Hybrid Electric Vehicles are considered more often than other alternative fuel technologies Takes into consideration up-front purchase cost and fuel economy improvement % Consider Technology for Next Vehicle (Top 2 Box) Morpace Syndicated Research: 2009 PACE Powertrain Study 20

21 Tax incentives increase purchase consideration for alternative powertrain technologies Purchase Consideration (% Definitely Purchase) Tax Incentive Amount No Tax Incentive $1,000 Up to $2,000 Up to $3,000 Up to $4,000 Up to $5,000 $5,000 or More Clean Diesel HEV PHEV Morpace Syndicated Research: 2009 PACE Powertrain Study 21

22 Key Findings: Clean Diesel Despite poor reputation, consumers feel diesel technology is improving The cost of diesel fuel versus gasoline is a barrier to considering Clean Diesel technology Luxury Car and Fullsize Pickup owners are most likely to consider Clean Diesel Small Car owners are least likely Morpace Syndicated Research: 2009 PACE Powertrain Study 22

23 Most consumers need more information on the use of a liquid additive before determining the impact it will have on their consideration for Clean Diesel Impact on Considering Purchasing Clean Diesel (%) (If Requiring Liquid Additive in Maintenance) No impact - Still consider Major impact - Would not purchase Slight impact - Need information Impact on Considering Purchasing Clean Diesel (%) (If Limiting Vehicle Performance when Liquid Fully Depleted) No impact - Still consider Major impact - Would not purchase Slight impact - Need information Morpace Syndicated Research: 2009 PACE Powertrain Study 23

24 Key Findings: Hybrid Electric Vehicle Nearly all respondents are familiar with Hybrid Electric Vehicles The high up-front cost to purchase an HEV makes it difficult for consumers to consider the technology Gasoline hybrids are strongly preferred over diesel hybrids HEV consideration is strongest among car segments, with much less interest from SUV/Truck owners Morpace Syndicated Research: 2009 PACE Powertrain Study 24

25 Among alternative powertrains, consumers are most familiar with HEVs Familiarity with Technology (%) Know it very well Know something about it Heard of it 45 Never heard of it Continuously Variable Transmission All-Wheel Drive Turbo Charged Direct Injection Plug-In Hybrid Electric Vehicle Clean Diesel Hybrid Electric Vehicle Morpace Syndicated Research: 2009 PACE Powertrain Study 25

26 Key Findings: Plug-In Hybrid Electric Vehicle Many consumers are interested in this technology despite the $5,000 upfront cost to purchase Key reasons for not considering a PHEV include concern over driving range of vehicle, dependability, and the ability to conveniently re-charge the engine The lack of a public re-charging infrastructure as well as limited access at home limits the appeal of PHEVs Midsize Luxury Car, Midsize Van, and Midsize Car owners are most interested in PHEV technology Small SUV, Large SUV, and Pickup owners are least interested Morpace Syndicated Research: 2009 PACE Powertrain Study 26

27 Re-Charging Plug-In Hybrid Vehicles Importance of Charging Locations (%) At Home 90 At Work 51 In Public Parking Garage or Lot 36 In Retail Parking Lot 34 Morpace Syndicated Research: 2009 PACE Powertrain Study 27

28 Interest in Fully-Electric Vehicle Interest in Fully Electric Vehicle (%) Top Reasons for Interest (%) (Top 5 by Rank) Improved fuel economy 30 Lower operating costs These vehicles are better for the environment Less reliance on fossil fuels 19 Very interested Not sure Very uninterested 23 Somewhat interested Somewhat uninterested I want to be seen as doing something good for the environment 4 Morpace Syndicated Research: 2009 PACE Powertrain Study 28

29 Key Findings: GTDI Low familiarity and a high price limits consideration for GTDI engines Most choose GTDI because of fuel economy and overlook the improved performance offered by the engine As demonstrated in the discrete choice analysis, GTDI is highly sensitive to price and fuel economy ratings Luxury Car owners are most interested in GTDI, while Small SUV owners are least likely to consider the technology Morpace Syndicated Research: 2009 PACE Powertrain Study 29

30 Optimal Powertrain Configuration Morpace Syndicated Research: 2009 PACE Powertrain Study 30

31 Discrete Choice Model - Overview The objective of the discrete choice exercise is to measure share of preference for different engine types as a function of power, acceleration, fuel economy, and price. In the choice exercise, respondents were asked to select an engine from a set of five that best met their needs. The engines offered varied by segment, and within a segment the engines varied by the factors referred to above. Morpace Syndicated Research: 2009 PACE Powertrain Study 31

32 Discrete Choice Model Attribute Importance

33 Midsize Car: Expected Shares (Base Case) Expected Engine Shares at Base Case Level (%) 4-Cylinder Gasoline (175 HP, 160 lbs-ft ; 9.5 sec.; 23/34 MPG; $0) 42 V6 Gasoline (235 HP, 215 lb s-ft ; 8.0 sec.; 18/26 MPG; $1,500) 4-Cylinder Gasoline Turbo Direct Injection (GTDI) (240 HP, 220 lb-ft ; 8.0 sec.; 22/33 MPG; $1,500) 4-Cylinder Diesel (150 HP, 250 lb -ft ; 10.0 sec.; 32/46 MPG; $2,500) 4-Cylinder Hybrid-Electric Gasoline (175 HP, 160 lb -ft ; 10.0 sec.; 36/34 MPG; $3,200) None of these engines 7 Morpace Syndicated Research: 2009 PACE Powertrain Study 33

34 Optimal Powertrain Configurator Compact Car Engine Simulator Engine 1 Present? Acceleration Fuel Economy Engine Horsepower / Torque (0-60 mph) (city / hwy) 4-Cylinder Gasoline 160 HP lbs-ft 10.0 sec. 28 / 35 Price $0 Engine 2 4-Cylinder Gasoline Turbo Direct Inje 175 HP lbs-ft 9.0 sec. 28 / 35 $2,500 Engine 3 4-Cylinder Diesel 110 HP lbs-ft 9.5 sec. 32 / 46 $1,785 Engine 4 4-Cylinder Hybrid-Electric Gasoline 160 HP lbs-ft 10.0 sec. 35 / 44 $2,720 Engine 5 4-Cylinder Plug-In Hybrid-Electric 160 HP lbs-ft 10.0 sec. 64 / 64 $3,825 None Calculate? Sensitivity? Morpace Syndicated Research: 2009 PACE Powertrain Study 34

35 Results of Changes in Simulator Midsize Car 4-Cylinder Gasoline 38% 42% B6 Gasoline 12% 14% Improved performance 4-Cylinder GTDI 13% 11% 4-Cylinder Diesel 13% 18% Improved fuel economy 4-Cylinder Hybrid-Electric 13% 12% Lowered price None of these engines 5% 7% 0% 10% 20% 30% 40% 50% Base Case Revised Specs Morpace Syndicated Research: 2009 PACE Powertrain Study 35

36 For More Information: Bryan E. Krulikowski Vice President Morpace Syndicated Research: 2009 PACE Powertrain Study 36