Global Automotive DowAksa current focus

Global Automotive DowAksa current focus

World at a glance

Light weighting is not a new idea

Key Market Driver: Mass Reduction CALIFORNI Mass reduction is vital for car makers to avoid fuel efficiency or emissions legislated penalties

CO 2 Emissions g/km Key Market Driver: Mass Reduction 10% mass reduction = +8-10% fuel efficiency including secondary mass (and cost) reduction of powertrain / chassis Vehicle Mass EU versus AverageEmissions US Car Avg. / Fuel Efficiency US Lt Truck Avg. 23% 330 300 270 US Lt Truck Avg. US Car Average Gasoline car Diesel car Gasoline Hybrid Diesel Hybrid 240 210 Gasoline Vehicles 180 150 EU Car Average Diesel Vehicles EU 2015 target US 2015 target 90 EU 2020 target CA 2020 target 60 30 1500 2000 2500 3000 3500 4000 4500 5000 5500 1500 2000 2500 3000 3500 4000 4500 5000 5500 lbs 680 910 1130 1360 1590 1820 2050 2270 2500 Kg Vehicle Mass (lbs) Vehicle Mass Original Source: WorldAutoSteel

OEMs face penalties - exceeding mandated emissions and efficiency standards Driving cycle CO2 emissions of top-10 selling OEMs g CO2/km 163 148 143 140 139 137 68 53 48 45 44 42 136 41 2010 fleet emissions EU target (2020) 132 130 126 37 35 31 Emissions standards are enforced through penalties The top 10 EU OEMs paid $6.2B in penalties in 2010 for exceeding emissions limits -42% -36% -33% -32% -31% -31% -30% -28% -27% -25% 95 95 95 95 95 95 95 95 95 95 Penalties for excess CO2 will increase and tiers will be eliminated for a uniform penalty of 95 Euro per gm / km of CO2 by 2020 Overall % Reduction 1 Emission Penalties $ Billions Penalties per vehicle 1 $ 41.8 35.8 33.3 32.0 31.5 30.6 30.3 27.8 26.9 24.5 18.6 12.4 31.1 14.6 5.0 14.7 9.8 9.8 5.7 6.1 8530 6610 5940 5600 5450 5240 5160 4570 4370 3860 1 Based on current fleet emissions performance numbers SOURCE: European Commission; McKinsey analysis If top 10 OEMs in EU were to maintain their current levels of emissions and car sales, they would pay a combined $127.8B in penalties, or ~$5700 per vehicle sold in 2020

Light weighting value varies by car segment and geography Value to OEMs from 1kg weight reduction $ 21 31 23 23 24 23 22 22 20 20 7 9 8 North America Europe China ROW 4 5 4 2 4 3 39 EU emission regulations and penalties increase the benefits of lightweighting for vehicles sold in the EU Lightweighting electric vehicles benefits by offsetting battery costs required to maintain range and performance Luxury carmakers are able to pass on a larger portion of costs to consumers Luxury Car Upper end mass market Mid range vehicle e.g. Audi A8 e.g. BMW 328 e.g. Honda Accord Low cost vehicle e.g. Toyota Yaris Electric Vehicles (mid market) e.g. Nissan Leaf

DowAksa Solution Portfolio

DowAksa Dow Dow VORAFORCE TM Dow VORAFUSE TM Resin Matrix Systems Tailored Substrate Surface Chemistry for optimal performance Materials Design and Joint Engineering to manage inter-relationship between different substrates Down-engineering of composite components by leveraging adhesive joint Solutions for Body Shop or Trim Shop assembly Dow BETAMATE and BETAFORCE Structural Adhesives Optimization of interface between carbon fiber and resin Ability to create carbon fiber systems tailored for automotive composite applications Adhesive bonding of cavity sections reinforced with structural foam Continuous bondline contains structural foam within the cavity DowAksa AKSACA Carbon fiber and Derivatives Potential to reduce level of carbon fiber in the composite by leveraging reinforcement contribution of structural foam Acoustical contribution of foam in composite body Dow BETAFOAM Structural Foam

BMW ground up CFRP Passenger Life Module Aluminum Skate Board NEW technologies NEW processes NEW design/s vehicle concepts

Ford Democratization Target a part e.g. front seat, B pillar, decklid etc. Commercialize on one vehicle model Extend across platform globally Driven by value of technology vis-à-vis alternative options in achieving target performance

VW parts replacement Identify a part e.g. front seat, bumper, roof panel etc. Design to fit in current assembly process Duplicate in other similar plants Driven by multi material hybrid parts strategy Brands [e.g. Audi] may follow different strategy while Wolfsburg focus on long term

1 Potential Carbon Fiber Composite Targets Example parts High performance Structural Reinforcing or non-structural Monocoque Trunk Hoods Radiator mounts Drive shafts Roof panels Door panels Dashboard X member Bumper beams Suspension components Spoilers Seats Bumpers Fenders Vehicle underbody

Parts Based approach Ref: Rocky Mountain Institute

Multiplication Effects Ref: Rocky Mountain Institute

Potential Supply Chain Ref: Rocky Mountain Institute

Designers/Engineer s Influence Ref: Rocky Mountain Institute

OEMs developing formal partnerships with CF players in order to drive costs of manufacturing CF components downwards JV partnership JDA JDA OEMs/ CF players are forming formal relationships in order to: Vertically integrate to jointly reduce component costs Ensure supply consistency, which is of utmost importance to auto OEMs Several OEMs have yet to form long-term partnerships with CF players Longstanding relationship

Business Drivers Light weighting CO2 regulations in EU, Japan Followed by Asia [China, S and SE Asia and Australia] CAFÉ regulations in US fleet average 54 mpg by 2025 Future CFC [carbon fiber comp] production capacity Concern by Auto OEM that potential demand far exceeds current and projected global supply New capacity is capital intensive All capacity is energy intensive Automotive supply chain CFC based design and part production capability

Risks/Risk mitigations Market/Demand Risk: Demand could be delayed for a variety of reasons including regulation peel back or delay, global economic downturn, unclear price/perf benefit Mitigation: Close collaboraton with Auto OEM. Staying close to decision makers Capital Risk: CF production is capital intensive...additional capacity requires high levels of capital infusion with ROI at risk. Also operation expenses linked to energy costs look for low cost energy geographies to locate CF production Mitigation: Demand guarantee or supply security agreements. Investment strategies in low energy cost locations Technical Risks: Efficient high volume CF composite production and part level cost/peformance. Mitigation: Technical focus Supply Chain Risks: ACN availability, Price of CAN Mitigation: Hedging

Summary Demand driven by Fuel Economy /CO2 emissions regulations which beget light weighting Current CFC capacity easily outstrips automotive market potential Intensive work globally to reduce the part level [piece price] cost of CFC Partnerships / Alignments forming e.g. Ford DowAksa CF capacity rationalization e.g. Toray Zoltek Risk identification and mitigation strategies