Ricardo plc 2017 Selected insights into road transport trends Ian Kershaw Managing Director, Ricardo Strategic Consulting Seventh IEA IEF OPEC Symposium on Energy Outlooks IEF Secretariat, Riyadh, Saudi Arabia, 15 th February 2017
Transport fuel demand drivers Passenger cars and trucks are key, as they account for circa 90% of road transport fuel demand 2015 Global road fuel demand, by vehicle type Buses & Two wheelers, coaches, 6% 3% Others, 1% Parc Comparison Worldwide parc for major vehicle types: Passenger cars 1030 million Trucks 183 million Trucks, 33% Passenger cars, 57% Compared with: Two wheelers 485 million 2015 estimated road transport fuel demand: 2005 Mtoe Source: Ricardo analysis, OPEC World Oil Outlook, European Tyre & Rubber Industry Statistics 2
Transport fuel demand drivers We analyse vehicle parc, mileage and fuel efficiency to determine road transport fuel demand INPUTS Vehicle parc (how many) Average mileage per vehicle (how far) Average vehicle fuel consumption* (how thirsty) X OUTPUT Road transport fuel demand (per year) *Note: Fuel consumption is the inverse of fuel efficiency Source: Ricardo 3
Parc outlook The global light vehicle parc is forecast to grow at ~3% CAGR to ~1.6 billion in 2030, with the fastest growth in China and India *Global light vehicle parc outlook Parc volume (million) 1800 1600 1400 1200 1000 800 600 400 200 0 1072 276 32 135 3.1% CAGR 1233 1442 305 77 48 215 319 329 342 358 373 300 323 349 374 2016 2020 2025 2030 The global light vehicle parc is expected to grow to 1.6 billion by 2030 India is the fastest growing region (CAGR ~10%), given the current very low rate of car ownership China is expected to grow at a CAGR of ~8%, though growth may decline with efforts to manage congestion Slow growth is expected in the saturated regions of N America (~1.5% CAGR) and Europe (~1% CAGR) 340 NAM EU China India RoW 1644 370 119 408 Source: Ricardo, LMC Automotive *NAM: North America; RoW: Rest of the World; Europe comprises western and eastern countries (including Russia and Turkey) 4
Mileage outlook Urban congestion globally and alternative transport in developed regions lie behind the expected decrease in VKT to 2030 Light duty vehicles - Vehicle Kilometers Travelled (VKT) VKT/Passenger Vehicles 80,000 Comments Travel per car is relatively stable as growth in the parc matches demand for travel VKT/ Passenger Vehicles 70,000 60,000 50,000 40,000 30,000 20,000 In developed regions, VKT is expected to gradually decrease due to: Traffic congestion Higher public transport use Telecommuting Environmental awareness Cars are no longer cool to urban under 30 s 10,000 0 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 NAM China Eur16 India Japan 2035 In developing countries, congestion is the primary driver for decreasing VKT China is a historic outlier; VKT/car fell notably as high mileage taxis and public vehicles became a much smaller share of the car parc Source: Ricardo 5
Drivers of change related to transport pollutants In the last 4 years there have been three powerful, disruptive drivers of change The shift from urban Diesel Air pollution in Megacities Local authorities decide Loss of trust in OEMs The 21 million inhabitants of China s capital appear to be engaged in a battle for life on an inhospitable planet The Mayor of London has pledged to introduce only hybrid or zero-emission double-decker buses to London s bus fleet from 2018 VW agreed with US authorities to pay ~$15bn to settle claims over Diesel pollution tests Other OEMs prosecuted over incorrect fuel economy claims Air quality in major cities (Beijing, Shanghai, Delhi, Paris, London etc.) has NOT improved, despite tightening emission standards Fuel economy experienced by road users has failed to improve in line with results from most standard test cycles Source: Ricardo, The Guardian, Transport for London 6
Noxious Emissions Standards Regulators around the world intensify efforts to tighten noxious emissions standards for passenger cars Passenger car noxious emissions legislation - global Europe 200 201 0 5 Euro 4 Euro 5a Euro 5b 2015 2020 2025 Euro 6c Euro 6d Euro 6b Euro 6d -TEMP US (49 states) California Tier 2 Phase-in (2004 to 2009) LEV II (2004 2010 phase-in) Tier 3 LEV III China China III China IV CN 5 China 6a China 6b Implemented Beijing Beijing IV Beijing V China 6a China 6b Proposed India Bharat Stage III Bharat Stage IV Bharat Stage VI 2005 2010 2015 2020 2025 Source: : National government sources, Ricardo Analysis 7
Consequences of WLTP and RDE With WLTP* and the prospect of Real Driving Emissions for CO 2, OEMs have to accelerate the pace of real world fuel economy improvement NEDC based CO 2 trajectory 130 2015 5.4% annual improvement 95 2021 6% annual improvement 75 2025 WLTP based CO 2 trajectory WLTP and RDE based CO 2 trajectory 141 2015 185 2015 6.8% annual improvement 9.5% annual improvement Assuming a CF of 1 for CO 2 75 2025 75 2025 In EU, the fleet CO 2 measured in 2015 was based on NEDC; 5-6% per annum CO 2 improvement needed to achieve 2021 and 2025 targets Under WLTP*, today s fleet CO 2 would be 7-10% higher, yet still have to reach the 75 target in 2025 The challenge could become much greater if regulators introduce both WLTP and CO 2 RDE** Source: Ricardo *WLTP: Worldwide harmonized Light vehicles Test Procedure **RDE: Real Driving Emissions 8
Commercial Vehicle electrification Electrification of commercial vehicles is focused on niche, urban applications, where air quality concerns justify the investment cost Mission Description Market Examples Public or private transport buses operating as plug-in or hybrid Urban transport City mission with frequent stop/start; electrification reduces emissions Short/medium range and return to base operation makes recharge easier BYD Transitbus Siemens ELFA Series Electric BAE Systems Hybridrive Private or public delivery trucks Urban delivery City mission with frequent stop/start and access to Low Emission Zones encourages electrification Small range & return to base makes recharge easier FUSO Canter E-Cell SCANIA hybrid Delivery truck Municipal trucks (e.g. refuse collection etc ) Municipal Frequent stop/start and high load operation when stationary. Electrification reduces noise and emissions Small range & return to base makes recharge easier Volvo FE Hybrid Mercedes Benz Urban E-Truck Source: Ricardo Analysis, Manufacturers 9
10 Any Questions? Ricardo Strategic Consulting Ricardo UK Ltd Cambridge Science Park Cambridge, CB4 0WH, UK Ian Kershaw Managing Director Telephone: +44 (0)797 180 7340 Ian.Kershaw@ricardo.com