A global study on the passenger car powertrain market towards 2025 Powertrain 2025 Study summary May 2012 A.T. Kearney Global Powertrain Team
Study introduction Our study targets to describe the passenger car powertrain landscape of 2025 Study approach and results Approach Global study on the future of passenger car powertrains Based on > 40 interviews with OEM, suppliers and governments/associations Supported by TCO calculations, desk research, etc. Scope Vehicle segments: Passenger Car A-F segment and LD CV < 3.5t Technologies: ICE, MHEV, SHEV, PHEV, REX, EV Regions: Europe, NAFTA, China, India Timeframe: Today - 2025 Results Forecast of global powertrain shares per vehicle segment in 2025 (scenario based) Description of the related key drivers: customer demand (e.g. TCO, functionality, environmental friendliness), OEM perspective, technology development and regulations ICE= Internal Combustion Engine; MHEV= Mild Hybrid; SHEV= Strong Hybrid; PHEV= Plug-in Hybrid; REX= Range Extender; EV= Electric Vehicle A.T. Kearney 10/03.2012/42878d 2
Study introduction Seven vehicle segments are in scope of the study; three major ones will be in the focus of this summary Vehicle segments Basic (e.g. Fiesta) Compact (e.g. Golf) Lower Medium (e.g. A4) Upper-Medium (e.g. 5-series) Large & Luxury SUV LD (<3.5t) (e.g. 7-series) (e.g. Explorer) (e.g. F-series) = in focus of summary A.T. Kearney 10/03.2012/42878d 3
Study introduction The 2025 powertrain landscape is driven by boundary conditions, customer demand and OEM strategies Drivers of the future powertrain landscape Boundary conditions How do macro parameters impact powertrain developments? Regulation Technology Fuel prices Customer demand What do customers want? Total oa cosso costs of ownership es Functionality Environmental friendliness OEM strategy What do OEM plan to offer? Technology ogy strategy Development status SOP/ramp-up planning All presented results are related to the Moderate scenario of the study (represents most likely development from today s perspective) A.T. Kearney 10/03.2012/42878d 4
Boundary conditions Future regulation will be a key driver for the electrification of the powertrain landscape Boundary conditions: Regulation Scenarios 2025 2025 CO 2 limits 75 g/km average (-38% cp. to 2015) Binding segment specific limits 102 g/km (54,5mpg; -43% cp. to 2015) Binding segment specific limits 112 g/km (-36% cp. to 2015) Binding segment specific limits 130 g/km Fleet average limit Taxation/ subsidies Moderate CO 2 -based tax Tax exemptions for EV/PHEV 1 Tax exemptions for EV/PHEV 1 Subsidies for EV in the basic segment Low CO 2 -based tax No subsidies E-only driving zones Some e-only -driving zones No e-only -driving zones 1. Stable total tax amount is assumed, i.e. if EV/PHEV are excluded from vehicle tax, the tax for other powertrains rises accordingly A.T. Kearney 10/03.2012/42878d 5
Basic Segment Profile The average customer in the Basic segment is very cost sensitive, but Green Lifestyle becomes more important Basic: Customer Demand 2025 Customer groups & driving pattern Customer Demand Relevance TCO Funct. EF 1 Car-sharing fleets Singles Families 12k km p.a. Long distance Extra urban Green lifestyle TCO very important in the basic segment Low acquisition price and economical running cost equally important Functionality and environmental friendliness 20% comparably low in importance 40% 40% Urban Only exception is Green Lifestyle customer group with limited TCO relevance and major affinity to small, hip and green vehicles, esp. EVs 1. Environmental friendliness A.T. Kearney 10/03.2012/42878d 6
Basic Segment Profile In the Basic segment ICE will remain most beneficial in terms of acquisition costs and competitive in terms of TCO Basic: Powertrain Assessment 2025 TCO p.a. Example Gasoline 1.790 1.840 1.890 2.560 Functionality & Environmental friendliness Functionality Strong hybrid with best functionality score EV with disadvantages in range and advantages in e-only driving capability Gasoline Gasoline Mild HEV Gasoline Strong HEV EV Gasoline with significantly lower acquisition cost than HEV variants Acquisition cost in often more important than TCO due to limited purchasing power EV with additional TCO of ~ 60/month Environmental friendliness EV with highest environmental friendliness scores Strong hybrids with low CO 2 emissions (71-77 g/km) and good green image communication Others (vehicle tax, maintenance, VAT) Fuel Financing A.T. Kearney 10/03.2012/42878d 7
Basic Segment Profile OEMs focus on improvement of conventional ICE and EVs for premium customers Basic: OEM Strategy and Powertrain landscape 2025 OEM Strategy Strategic assessment Strategies mostly focused on low-cost improve- ment measures for ICEs and mild hybrids In addition strong focus on EV for city usage pattern ( Green Lifestyle ) Examples HEV/EV E-Smart EV SOP 2012 E-Up! EV SOP 2013 Powertrain landscape 2025 (Moderate) SHEV MHEV EV 8% 8% 18% 66% ICE High ICE share driven by (initial) cost sensitive customers High EV share mainly used by Green Lifestyle customers Limited it share of MHEV and SHEV A.T. Kearney 10/03.2012/42878d 8
Compact Segment Profile The Compact segment has the most diverse customer group of all segments everything is important Compact: Customer Demand 2025 Customer groups & driving pattern Customer Demand Relevance TCO Funct. EF 1 Singles Families Elders 14k km p.a. Long distance Urban 25% 30% 45% Extra urban Green lifestyle Large segment with high bandwidth of customer types (families, singles, all age groups) Vehicle for most versatile usage patterns, typically only household vehicle for full range of activities High importance of TCO in this segment However, premium customers in this segment with relevant functionality and environmental friendliness requirements 1. Environmental friendliness A.T. Kearney 10/03.2012/42878d 9
Compact Segment Profile In the Compact segment, TCO of ICE and hybrids will be very close together in other criteria HEV/EV win Compact: Powertrain Assessment 2025 TCO p.a. Functionality & Environmental friendliness Example Diesel 2.260 2.330 2.460 2.420 3.590 Functionality PHEVs with best functionality score (best active driving performance through electric engine, highest combined range and technological attractiveness) Diesel Diesel Mild HEV Diesel Strong HEV Diesel PHEV EV ICE with lowest TCO but very close to electrified powertrains, especially PHEV with competitive TCO EV with additional costs of ~ 100/month Environmental friendliness EV and REX with highest environmental friendliness scores PHEVs with very low CO 2 emissions (~43g/km) and strong green image communication Others (vehicle tax, maintenance, VAT) Fuel Financing A.T. Kearney 10/03.2012/42878d 10
Compact Segment Profile The Compact segment powertrain landscape 2025 reflects the diversity of customer requirements Compact: OEM Strategy and Powertrain landscape 2025 OEM Strategy Strategic assessment Diverse picture of OEM strategies ranging from MHEV and SHEV to PHEV Also initial models of REX and EV for premium customers Powertrain landscape 2025 (Moderate) REX EV 10% ICE 9% 35% PHEV 20% Examples HEV SHEV MHEV Peugeot 3008 Diesel HEV Very diverse powertrain landscape SOP 2011 ICE with highest share but also broad Toyota Prius hybridization Gasoline PHEV High EV share mainly used by Green SOP 2012 Lifestyle customers 12% 14% A.T. Kearney 10/03.2012/42878d 11
Upper Medium Segment Profile In the Upper Medium segment, functionality and environmental friendliness will be of highest importance Upper Medium: Customer Demand 2025 Customer groups & driving pattern Customer Demand Customer Group 1 (60%) 12k km p.a. Long distance Extra urban 20% 45% 35% Urban Customer Group 2 (40%) 25k km p.a. Long distance 40% 20% Urban 40% Extra urban Private user Commercial user Relevance TCO Funct. EF 1 Segment with highest share of fleet vehicles, and highest overall mileage of all vehicle segments Functionality with high importance due to comfort and driving experience requirements Environmental friendliness with high importance due to social pressure and fleet buyer s requirements TCO with low importance 1. Environmental friendliness A.T. Kearney 10/03.2012/42878d 12
Upper Medium Segment Profile In terms of functionality, PHEVs will beat all other powertrain due to superior comfort and driving experience Upper Medium: Powertrain Assessment 2025 Functionality TCO & Environmental friendliness Criteria Acceleration Torque Pure electric driving NVH Range (combined) 1 Towing capacity Technology attractiveness ti Weight Plug-in HEV Strong HEV Score Mild HEV ICE TCO Very low differences between powertrain TCO E.g. Diesel with 3,470 p.a. and Diesel PHEV with 3,650 p.a. Environmental friendliness All HEV variants beat pure combustion engines in terms of environmental friendliness Especially PHEVs with very low CO 2 emissions (~60g/km) and strong green image communication 1. Penalty for EV/REX, as minimum range (>300 km) is critical for customer acceptance in Upper-medium A.T. Kearney 10/03.2012/42878d 13
Upper Medium Segment Profile PHEVs will dominate the 2025 Upper Medium powertrain landscape Upper Medium: OEM Strategy and Powertrain landscape 2025 OEM Strategy Strategic assessment Visible SHEV and PHEV strategy to achieve CO 2 limits and fulfill customer requirements (first PHEV launches planned for 2014+) Powertrain landscape 2025 (Moderate) REX ICE 10% 1% 1% MHEV 17% SHEV Examples HEV BMW 5 Series HEV Gasoline SOP 2011 71% PHEV Mercedes E HEV Diesel SOP 2012 Gaso e a d ese ) High PHEV share due to functionality advantages, green image and achievement of segment s CO 2 limits (roughly equal between Gasoline and Diesel) 1 A.T. Kearney 10/03.2012/42878d 14
The Future Powertrain Landscape Until 2025, almost 60% of all new vehicles in Europe will use an electrified powertrain with a focus on PHEV The future Powertrain Landscape: Europe Powertrain volumes PC Changes towards 2025 (%) ICE Significant decrease in marketshare 1% 7% Remaining volumes mainly in cost sensitive smaller 2% 12% vehicle segments 14% 4% MHEV 15% 24% Peak probably before 2020, decrease in share with growing relevance of SHEV and PHEV Potential ti to become standard d equipment towards 99% 12% 11% 2025 8% SHEV Peak around 2020, decrease in share with growing g importance of PHEV EV 50% 2011 2020 REX PHEV SHEV MHEV 41% 2025 ICE PHEV Increases in importance between towards 2020 and gains significant marketshares towards 2025 Combines high customer benefit with low CO 2 emissions especially for larger vehicles EV/REX Moderate growth until 2020 but especially EVs with double-digit share in 2025 mainly in Basic and Compact segment A.T. Kearney 10/03.2012/42878d 15
The Future Powertrain Landscape In NAFTA, focus of electrification towards 2025 will be on affordable MHEV and SHEV solutions The future Powertrain Landscape: NAFTA Powertrain volumes PC Changes towards 2025 (%) EV 3% 97% 2% 14% 10% 26% 45% 2011 2020 REX PHEV 3% SHEV MHEV 7% 4% 20% 12% 20% 37% 2025 ICE ICE Significant decrease in marketshare Remaining volumes mainly in cost sensitive smaller vehicle segments MHEV Peak around 2020 due to low costs solution to reduce fuel consumption Potential ti to become standard d equipment towards 2025 SHEV Struggles to gain major market shares compared to MHEV (low end) and PHEV (upper end) PHEV Increases in importance between towards 2020 and gains significant marketshares towards 2025 Combines high customer benefit with low CO 2 emissions especially for larger vehicles EV/REX Slow growth until 2020 and moderate growth towards 2025 A.T. Kearney 10/03.2012/42878d 16
The Future Powertrain Landscape China will see the largest EV share but also have a large share of more affordable SHEV powertrains The future Powertrain Landscape: China Powertrain volumes PC Changes towards 2025 (%) EV 7% 10% 17% 14% 20% 24% 100% 29% 10% ICE Significant decrease in marketshare Remaining volumes mainly in cost sensitive smaller vehicle segments MHEV Peak around 2020 due to low costs solution to reduce fuel consumption Potential ti to become standard d equipment towards 2025 SHEV Strong ggrowth towards 2025 as affordable alternative compared to PHEV and EV Benefits from comparably low battery prices in China 42% PHEV 26% Increases in importance between towards 2020 and gains significant marketshares towards 2025 Benefits from comparably low battery prices in China 2011 2020 2025 EV/REX Moderate growth until 2020 but especially EVs with REX PHEV SHEV MHEV ICE double-digit share in 2025 mainly in Basic segment (governmental subsidies) A.T. Kearney 10/03.2012/42878d 17
The Future Powertrain Landscape India s powertrain landscape will remain to be dominated by conventional ICE with a growing share of MHEV The future Powertrain Landscape: India Powertrain volumes PC Changes towards 2025 (%) ICE 100% 4% 14% 81% 1% 7% 17% 75% 1% Remains dominating powertrain type towards 2025 Will see significant technology improvements resulting in emission and fuel consumption reduction MHEV Gains double-digit market shares towards 2025 as low costs solution to further reduce fuel consumption SHEV Moderate growth until 2025 due to comparably high costs and limited buying power of customers PHEV Some very minor marketshare in luxury segment EV/REX No market share towards 2025 2011 2020 2025 EV REX PHEV SHEV MHEV ICE A.T. Kearney 10/03.2012/42878d 18
Contacts Our global powertrain team is looking forward to discussion the study results with you Authors Dr. Götz Klink (Stuttgart, Germany): Goetz.Klink@atkearney.com Stephan Krubasik (Munich, Germany): Stephan.Krubasik@atkearney.com Dr. Thomas Weber (Frankfurt, Germany): Thomas.Weber@atkearney.com Stephen Mickelson (Southfield, USA): Stephen.Mickelson@atkearney.com Stephen Dyer (Shanghai, China): Stephen.Dyer@atkearney.com Manish Mathur (Gurgaon, India): Manish.Mathur@atkearney.com The authors would like to thank Alexander Wünsch (Berlin, Germany) and Astrid Peine (Düsseldorf, Germany) for their valuable contributions to the study! Source: A.T. Kearney A.T. Kearney 10/03.2012/42878d 19
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