AUTOMOTIVE Regulation & Electrification in Vehicle Sales Forecast Scenarios How will Forecasts reflect disruptive Trends? 23 March 2017 Paris, France Reinhard Schorsch, Director Advisory Services EMEA & APAC, reinhard.schorsch@ihsmarkit.com. All Rights Reserved.
Contents Preliminary questions Scenario concept Scenario examples Market regulations OEM strategies Electrification trends Summary 2
Preliminary questions How are disruptive trends impacting your planning processes? Which transparency and understanding of forecast/planning backgrounds do you require? Which what if questions do you need to answer? Do forecast backgrounds and scenarios give answers to these questions? What are your current and future expectations regarding automotive information, forecasts, or supporting services? 3
Contents Preliminary questions Scenario concept Scenario examples Market regulations OEM strategies Electrification trends Summary 4
Scenario concept 2. Top-down factors 1. IHS Markit data and forecasts 2.1. Market regulation -Emission compliance - Taxation, incentives, restrictions 2.2. Market structure - Charging infrastructure - Regulated state/city specifics 2.3. Technology and cost - Battery prices - Plug-in vehicle (xev)/internal combustion engine (ICE) development & production cost 2.4. Mobility and others - Total industry volume (TIV) impact - Business model 4. Scenario forecast - Registration and price-volume data - Production, powertrain, and sales forecasts Scenario forecast process E.g., Vehicle Sales by Powertrain Scenario Forecast 3.1. OEM strategies - Assessment of powertrain/ electrification strategies per OEM 3.2. OEM offerings - Assessment of vehicle & powertrain/ electrification portfolio per OEM 3.3. Positioning, pricing, and total cost of ownership (TCO) -xevpositioning - Target pricing - TCO analysis per segment 3.4. Sales potential - xev trend by pricevolume segment 5. Compliance check 3. Bottom-up factors 5
Contents Preliminary questions Scenario concept Scenario examples Market regulations OEM strategies Electrification trends Summary 6
China city restrictions are major forecast drivers Two major types of city restrictions License plate ban First introduced in Shanghai in 1986 to reduce carbon dioxide (CO 2 ) emissions and traffic in the city center Vehicles cannot enter the city center every day and are banned for one day of each week, depending on the number on their license plates Exception for neighborhood electric vehicles (NEVs) with special green license plates Top-30 potentially restricted cities Restricted cities Signs of city restrictions Beijing Guangzhou Hangzhou Changsha Chongqing Nanjing Ningbo Shanghai Shenzhen Tianjin Shenyang Suzhou Taiyuan Zhengzhou First introduced in Beijing in 2008 to reduce private vehicle volume and create safer, more livable cities with lower registration rates Chengdu Donguan Foshan Ürümqi Wenzhou Wuhan Car quota system Works like a lottery and includes better chances for NEVs to get a license plate (e.g., gasoline license plate in Shanghai costs CNY90,000) Potential restrictions Jiaxing Jinan Wuxi Xi an Beijing already set a cap to have not more than 6 million registered vehicles in 2017 and 100,000 vehicles a year from 2018 20 Kunming Qingdao Shijiazhuang Xiamen Zhongshan Zhuhai 7
China NEV quotas will effect sales significantly Beijing vehicle registrations by registration type, 2011 28 Thousands 600 500 400 300 200 100 - City restriction Replacement Replacement by NEV Yellow car rep NEVs Beijing introduced its license plate restriction scheme in 2011. The lottery-based system allowed 240,000 new plates to be issued each year. This limit was reduced to just 150,000 units in the beginning of 2014. IHS Markit assumes that this level will be maintained until the end of 2017 as the regulations have already been put in place. The main goal of the controls was to limit road congestion while expanding the Beijing metro system in parallel, increasing its size and coverage by a factor of three or four by 2020. In line with new national government guidance (September 2015), NEVs are no longer to be subject to licence plate or circulation restrictions. After 2020, NEVs will become common, so that they are assumed to be included in a separate cap (in line with assumptions on other restricted cities at that time). 8
China infrastructure will support NEV convenience Charging infrastructure development in China Regional focus Main focus on East, North, and South China, including megacities Beijing, Shanghai, Guangzhou, and Qingdao Charging standard New Chinese charging standard from early 2016 supports both DC fast charging and level 2 charging Infrastructure development About 81,000 public charging stations and more than 50,000 private charging stations USD600 million investment in 2016 Ambitious target Government aims to build 12,000 charging stations, 4.8 million charging points by 2020 Investment of up to USD19 billion 9
United States a market differentiated by two regulations Section 177 of Clean Air Act allows states to choose from: National regulations or California zero-emissions vehicle (ZEV) mandate The US Environmental Protection Agency (EPA) has established national greenhouse gas emission standards. National Highway Traffic Safety Administration (NHTSA) has established Corporate Average Fuel Economy standards. Parallel standards are combined in nationwide standards until 2025, mandatory for all states not using section 177. California is allowed to set own (stricter) emission standards owing to special provisions in the Clean Air Act. ZEV mandate forces OEMs to sell increasing percentages of transitional ZEVs, i.e., battery electric vehicles (BEVs), fuel-cell electric vehicles (FCEVs), and plug-in hybrid electric vehicles (PHEVs) until 2025. As other states are not allowed to set own regulations, nine so-called Section 177 states have chosen to follow the ZEV mandate instead of national regulations. 10
United States domestic OEMs are less dependent on ZEV states than European or Asian competitors Passenger vehicle sales share by OEM and regulation region, 2015 Tesla Motors BMW Daimler Honda Volkswagen Group Toyota Mazda Renault-Nissan ZEV states Hyundai Ford FCA General Motors Domestic players are less dependent on ZEV states 0% 20% 40% 60% 80% 100% Sources: US registration data by state Note: incl. passenger vehicles, excl. pickups, trucks, utility cars, vans 11
United States ZEV states drive the powertrain electrification ZEV mandate vehicle classifications and credits ZEV TZEVs, Type 0 ZEVs, NEVs AT PZEVs PZEVs 25% 20% 15% 10% 5% 0% 3.0% 3.0% 3.0% 2.5% 3.0% 3.0% 3.0% 3.0% 2.0% 4.0% Mercedes-Benz example below: 13% actual ZEV, TZEV share enough to reach 22% target in 2025 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 10.0% 12.0%14.0%16.0% 8.0% 6.0% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Example: Mercedes-Benz 2018 2019 2020 2021 2022 2023 2024 2025 Credits needed for 100,000 sales 4,500 7,000 9,500 12,000 14,500 17,000 19,500 22,000 Mercedes-Benz GLC PHEV: 0.7 credits (20 miles range assumed) Mercedes-Benz EQ BEV: 3.6 credits (310 miles range assumed) Max. units: 3,570 Min. units: 560 4,290 5,000 5,710 6,430 7,140 7,860 8,570-13% 1,110 1,670 2,220 2,780 3,330 3,890 4,440 ZEV: Zero emission vehicle TZEV: Transitional zero emission vehicle NEV: Neighborhood electric vehicle AT PZEV: Advanced technology partial zero emission vehicle PZEV: Partial zero emission vehicle 12
Europe a common emission regulation, but different market frameworks Forecast drivers France United Kingdom Spain Italy Germany Incentives Taxation Market frameworks City restrictions Infrastructure TCO OEM offerings Small segments Larger segments Industry wide Left: until 2021 Right: 2021 26 13
France BEVs target limited market volumes owing to high price positioning France premium, medium, and large SUV sales by price cluster 3000 2500 60% of the market priced below assumed minimum I-Pace entry price 100% 90% 80% Sales units 2000 1500 1000 Future Increased malus pushes net prices of ICE vehicles, while decreasing battery costs enables lower BEV positioning 70% 60% 50% 40% 30% Cummulated sales 500 20% 10% 0 110 + 107 105 102 100 98 96 94 92 90 88 86 84 82 80 78 76 74 72 70 68 66 64 62 60 58 56 54 52 50 48 46 44 42 40 38 36 34 32 0% List price in thousands abs. % Source: Registration data of France premium, medium, and large SUVs 14
France the malus system makes BEVs attractive at a high price positioning 100 Jaguar F-Pace/I-Pace Pricing Scenarios in France Thousands (euro) 90 80 70 60 50 Too low for BEV positioning (no AWD and auto.) BEV purchase cost to remain higher than ICE vehicles in smaller segments Malus on highemitting vehicles makes BEV price competitive 40 30 20d 20d AWD 20d AWD Auto. 30d AWD 35t AWD S AWD F-Pace F-Pace with malus I-Pace 10% surcharge I-Pace 15% surcharge Source: Jaguar France, malus assumption for 2017 15
Contents Preliminary questions Scenario concept Scenario examples Market regulations OEM strategies Electrification trends Summary 16
OEM strategies OEMs react differently to the challenges of regulation and electrification Plays in segments with high CO 2 level/impact CO 2 reduction focused Plays in segments with low CO 2 level/impact Low opportunity costs High opportunity costs Opportunity cost driven 17
OEM strategies Jaguar Land Rover (JLR) starts a BEV offensive Current strategic steps Alternative powertrain strategic relevance, 2026* PHEV BEV PHEVs mostly use diesel engine. Land Rover, especially, will not use gasoline engine for its PHEVs. Jaguar I-Pace is the first BEV in 2017. Luxury EV (I-Type) Formula E engagement is to promote BEV. JLR rumored to open battery plant in cooperation with BMW and Ford BEV FCEV PHEV diesel Mild-hybrid gas 6 5 4 3 2 1 0 Mild-hybrid diesel Full-hybrid gas Full-hybrid diesel Mild hybrid electric vehicle (MHEV) In 2026, MHEVs will dominate the market of JLR vehicles and will help the OEM to reach future compliance targets. Jaguar PHEV gas Land Rover Ian Callum (Head of Design, Jaguar) I m clear in my mind that an electric Jaguar would be suitable for the brand. You have to move with the times. Cate gory % of total sales 1 2 3 4 5 6 0% 0 <1% 1 <5% 5 <10 % 10 <20 % >20 % Source: IHS Sales by Powertrain Scenario Forecast Note: *Sales shares across EU28, China, and United States 18
OEM strategies JLR BEV lineup assumption Future BEV lineup A C B D E F I- Pace I- Type Grand Evoque XE Evoque A- CUV Discovery Sport currently offered 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Source: IHS Sales by Powertrain Scenario Forecast Note: Nameplates only placeholders SUV Hatch Sedan Others 19
OEM strategies BMW rolls out PHEVs, followed by BEVs, while mild-hybridization almost becomes a standard Current strategic steps Alternative powertrain strategic relevance, 2026* BMW i Performance Portfolio expansion of the i brand focuses on technologies, rather than on BEVs. inext is focusing on autonomous driving and connectivity. PHEV rollout across most model ranges, starting from 2 Series to 7 Series, branded as iperformance. BMW vehicles to be launched with BEV powertain (MINI, X3, 3 Series). BEV FCEV Mild-hybrid gas 6 5 4 3 2 1 0 Mild-hybrid diesel Full-hybrid gas Fuel cell research MHEV Fuel cell research in cooperation with Toyota Limited production volumes only due to costs and infrastructure hurdles In 2026, MHEV will dominate the offerings of BMW vehicle. PHEV diesel Cate gory % of total sales PHEV gas Full-hybrid diesel 1 2 3 4 5 6 0% 0 <1% 1 <5% 5 <10 % 10 <20 % >20 % Source: IHS Sales by Powertrain Scenario Forecast Note: *Sales shares across EU28, China, and United States 20
OEM strategies BMW BEV lineup assumption Future BEV lineup A D B E F 5 Series i X5 i X3 i 3 Series i C i5 i3 X2 i MINI E currently offered 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Source: IHS Sales by Powertrain Scenario Forecast Note: Nameplates only placeholders SUV Hatch Sedan Others 21
Contents Preliminary questions Scenario concept Scenario examples Market regulations OEM strategies Electrification trends Summary 22
Electrification trends EU28 emission regulations and OEM offerings lead to BEV & PHEV scenarios with >14% sales share 16 TIV light vehicle sales by propulsion system design and fuel type, 2016 26* Million units 14 12 10 8 6 4 2 PSD/fuel type 2016 2026 ICE diesel 53.1% 12.6% ICE gas 43.7% 21.0% Mild hybrid diesel 0% 15.8% Mild hybrid gas 0.1% 32.4% Full hybrid diesel 0.1% 0% Full hybrid gas 1.6% 3.8% Plug-in hybrid diesel 0.1% 0.6% Plug-in hybrid gas 0.7% 5.5% BEV electric 0.5% 8.2% FCEV hydrogen 0% 0.1% ICE diesel ICE gas Mild hybrid diesel Mild hybrid gas Full hybrid diesel Full hybrid gas Plug-in hybrid diesel Plug-in hybrid gas BEV electric FCEV hydrogen 0 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Notes: Gas includes gas, natural gas, LPG, and ethanol-petrol, RE included in PHEV, mild hybrid = 48V *Passenger cars incl. SUVs and excl. pickups 23
Electrification trends BEV & PHEV scenarios reach >20% sales share in the European premium vehicle market 3.5 Premium light vehicle sales by propulsion system design and fuel type, 2016 26* Million units 3 2.5 2 1.5 1 0.5 PSD/fuel type 2016 2026 ICE diesel 68.8% 7.3% ICE gas 27.3% 7.1% Mild hybrid diesel 0% 23.5% Mild hybrid gas 0% 39.5% Full hybrid diesel 0.2% 0.2% Full hybrid gas 1.4% 1.3% Plug-in hybrid diesel 0.1% 2.1% Plug-in hybrid gas 1.7% 6.8% BEV electric 0.5% 12.2% FCEV hydrogen 0% 0.1% ICE diesel ICE gas Mild hybrid diesel Mild hybrid gas Full hybrid diesel Full hybrid gas Plug-in hybrid diesel Plug-in hybrid gas BEV electric FCEV hydrogen 0 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Note: Gas includes gas, natural gas, LPG, and ethanol-petrol, RE included in PHEV, mild hybrid = 48V 24 *Passenger cars incl. SUVs and excl. pickups
Electrification trends market frameworks in United Kingdom and France support growth of PHEV sales 10% PHEV market share by country, 2014 26 9% 8% Long-term stabilization 7% 6% 5% PHEV 4% 3% 2% 1% 0% 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 France United Kingdom Germany Spain Italy Note: Gas includes gas, natural gas, LPG, and ethanol-petrol, RE included in PHEV, mild hybrid = 48V *Passenger cars incl. SUVs and excl. pickups 25
Electrification trends significant growth of BEV sales is expected after 2019 14% BEV market share by country, 2014 26 12% 10% 8% BEV 6% 4% 2% Slow growth in midterm 0% 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 France United Kingdom Germany Spain Italy Note: Gas includes gas, natural gas, LPG, and ethanol-petrol, RE included in PHEV, mild hybrid = 48V *Passenger cars incl. SUVs and excl. pickups 26
Contents Preliminary questions Scenario concept Scenario examples Market regulations OEM strategies Electrification trends Summary 27
Summary Markets require individual forecast approaches including anticipations of future regulations. OEM strategies and vehicle portfolios require individual assessments including anticipations of future emission compliance. Powertrain electrification is in progress. Customer acceptance and speed of xev penetration trend depend on the closure of price and convenience gaps. Overall, the complexity of the forecast process increases significantly, along with your questions regarding the assumptions and their sensitivity regarding scenarios. We look forward to discuss them with you. 28
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