Frost & Sullivan Analyst Briefing: Strategic Assessment of Passenger Electric Vehicle Market- Electric Vehicle Infrastructure and Business Model Analysis

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Business & Mgmt

Published on March 6, 2009

Author: FrostandSullivan



With President Obama contemplating the biggest government infrastructure investment since the interstate highway system to jump-start the U.S. economy and strategically positioning green technologies to advance U.S. economic and technological leadership, the automotive industry is planning accelerated roll out of Hybrid and Electric vehicles.

The global economic downturn, volatile fuel prices and the rising levels of green house emissions has created a dynamic that is strongly favoring hybrid and electric vehicles. Electric vehicles (EV) are poised for accelerated roll out and projected to emerge as mainstream personal mobility solutions in the not too distant future. EV will open up opportunities for utilities, suppliers and finance businesses, as efforts are being made to create a one-stop shop for vehicles and energy.

Consulting Analyst, Benny Daniel discusses market measurements, business models, charging infrastructure, business strategies, and opportunities.

Strategic Assessment of Passenger Electric Vehicle Market: Can EVs revive the auto industry? Benny Daniel, Consultant Automotive & Transportation January 29, 2009 © 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan.

FOCUS POINTS 300 Unit Shipments (Thousands) 250 2565 200 Market Overview and Forecasts 630 150 260 160 100 100 2004 2005 2006 2007 2008 50 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 EV Infrastructure Analysis INDENTIFICATION OF ALTERNATE AND UNIQUE BUSINESS MODELS TO SUPPORT EV INFRASTRUCTURE *In du str ie s: Ide nti fied and se lected based on d efin iti on e xisti ng i n eq ui ty tra de Utilities mark ets •P ower Generation Co. **Sp end in g la rge a mou nts of mo ney i n o wn R&D, to find man y of the proje ct s i n •P artnership with Re newable Energy Providers dead -e nds, ho pin g for some to tur n ou t as su cce ssfu l bl ockb uster g ene rati ng hi gh r etur ns. The mode l i s com mon ly u se d in in dustr ies wh ere deve lop men t •Energy Storage co st s, r isks an d po tent ial rew ard s a re h igh . Financial Governmen t • Banks, Insurance •Carbon Trading • Venture Capital •Tax Incentive s Technology Cons umer New Business Models •Smart Card • Green Collared EV •Te lematics Jobs •Mobile Se rvice Providers Industrial Diversified • Material Mining •Gara ges a nd service stations • Buildings, homes, hospita ls •Cha rging Stations • Wire and Cable Bas ic M aterials •Parking Stations • Ele ctronics •Li-ion, Copper and other •Battery Swapping battery packaging mtls. •Recycling Voice of Customer Study- Customer Feedback on EV Potential for businesses to enter New business opportunities for EV market with relatively low Utilities and Innovative financial- investment; strategise to partner leasing firms- To be resilient with OEMs High before it makes profits Utilities Leasing Potential to generate revenue Battery Bus ine sses Rejuvenation Financial Opportunities Fle et Businesses Medium Coach Re cycli ng Servic e/ Bui lde rs De alership Tele ma tic s Innovative model but due to demographics it requires good Ma rketi ng Ins urance EV penetration and customer Swap Low Tele com utilization- to have high impact if Stations successful Medium High Low Frost & Sullivan Support Capabilities 2

Scenario Analysis – 700K Annual Sales Potential by 2015 in NA Regulations, Incentives, Loan Programs and Li-Ion Technology Advancement are Primary Drivers Electric Vehicle Market: Scenario Analysis (North America), 2008-2015 800,000 700,000 600,000 Unit Shipment 500,000 Source: Frost & Sullivan 400,000 300,000 200,000 100,000 0 2008 2009 2010 2011 2012 2013 2014 2015 Optimistic Frost & Sullivan Cons ervative Key Drivers Optimistic Scenario: Relatively high fuel prices (averaging well-over $150/barrel), continuation of federal government incentives for EVs and • CAFE regulations - 35 fleet mpg by 2020, could be higher if states are expansion of state/city incentives, significant growth in charging and allowed to set higher emission standards battery swap infrastructure, significant Li-Ion battery cost reduction (at • Government incentives and subsidies for EVs - $7,500 for Chevy Volt, free least 50% reduction in 5 years - 2010-2015), no battery supply constraints, parking for EVs by many cities, exemption from emission certification by favorable field experience and no major safety issues. some states, HOV lane driving exemption for EVs with a single occupant Frost & Sullivan Scenario: Relatively moderate fuel prices (averaging well • Industryaggressively pursuing HEV and EV strategy to secure $25B below under $150/barrel), continuation of federal government incentives federal auto retooling loans and $17B+ TARP loans for EVs, slow growth in charging and battery swap infrastructure, moderate • High energy security concerns and energy independence goal of the reduction in Li-Ion battery cost (no more than 33% reduction in 5 years - Obama administration 2010-2015), no battery supply constraints, no major safety issues. • Technological innovation and economies of scale have driven significant reduction in Li-Ion batteries • Growth in charging infrastructure and new business opportunities 3

Scenario Analysis - Market Entry Strategies of Top OEMs and Change in Congestion Charging Schemes Are the Top Influences Electric Vehicle Market: Scenario Analysis (Europe), 2007-2015 700000 600000 Volumes doubling Un S ipm ts due to early market 500000 en entrants Source: Frost & Sullivan Volumes by Small 400000 OEMs- Identical in it h all 3 scenarios 300000 200000 100000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 Optimistic Conservative Frost & Sullivan OPTIMISTIC SCENARIO - 2015 F&S SCENARIO - 2015 Start-Up OEs Start-up OE's 16 % BMW BMW 21 % 6% Honda Honda 3% 8% 9% Toyota 2% Toyota 9% 7% Mitsubishi 9% Mitsubishi 11% 4% 8% Daimler Daimler 10% 4% VW 7% VW 34% PSA PSA 31% Renault Nissan Renault Nissan 4

EV Technology and Product Roadmap- Charging Times to Drop From 6-8 Hours to <15 Minutes By 2015; But All Fast Recharging to Be Made Off-board Lead acid Advanced Lead acid Nickel Metal Hydride Batteries Sodium Nickel Chloride Phosphate based Manganese based Lithium Ion Titanate based Silica based Zinc Air Permanent Magnet Electric Motors Asynchronous Switch Reluctance In wheel motors Driving Distance/charge- Up to 200 kms 300 + kms Performance up to 60 kms Charge Time – 6 to 8 hrs < 1 hour < 15 minutes Battery Capacity – up Up to 50 kWh 75 kWh + to 16kWh Source: Frost & Sullivan Motor Power- Up to 70 kW 70 kW – 250 kW Slow charging - onboard Infrastr ucture Fast charging – mostly off board Battery Swapping 2005 2010 2015 5

Number Of Potential Customers* To Increase 5 Fold Post 2015 Across Prime W. European Markets As EV Range Extends to Reach Suburban and Adjacent Cities Electric Vehicle Market: Range and spread of Electric Vehicles (Europe), 2007-2015 Potential Customer = ~ 3.42Mn +150 Miles + + Key Markets = , Scandinavia, Switzerland Drivers: Cities + Sub-urban + Rural • 150 + Miles to be standard with high technology batteries 5 offering stronger storage capacity 201 • Environmental concerns to yield high adoption rate among potential customers 1- 100 Miles 201 Potential Customers = ~876K + Key Markets = , Scandinavian regions Cities + Sub-urban Drivers: • Competition will see EV manufacturers increase distance, speed and charging time configuration 50 Miles 0 01 • Consumers to increasingly use EVs to commute from home (suburban) to work (urban) -2 09 20 Potential Customers = ~ 686K 08 -20 Key Markets = Cities 04 Drivers : 20 • EV’s limiting range restrict application to cities 50 Miles 100 Miles +150 Miles *Potential Customer Customers “Very likely” to purchase EV with present specifications . •Likely purchase to actual adoption rate would depend on individual market developments Source: Frost & Sullivan 6

At least 13 Congestion Charging Cities to Be In Operation In Europe By 2013, All Key Cities Have Good EV Potential •Future Schemes at proposal stage, •Charging Stations = 50 (400 planed) 2008-2015 •Key Players = Govt PLANNED BY 2010 •Schemes with future •Highlights potential, beyond 2013 1. Charging station network is a government initiative 80 •Existing schemes Others 30 Others 200 Switzerland • Charging Stations = 100 (40+in London) 150 • Key Players = Government, EDF, Elektromotiv Austria • Highlights 193 1. Govt invested £ 90Mn to make Britain the France 425 Paris 50 “Capital of Electric Vehicles” 2. EDF has partnered with Elektromotive to build 250 stations in London Norway 400 120 Bordeaux 250 UK •Denmark •Charging Stations = 200 (100 + in 100 •Charging Stations= 20K plan Paris & Suburbs) 47 Lyon Italy 90 •Key Players = Better Place, •Key Players = EDF, Govt, VM’s Germany 15 Strasbourg Dong Energy •Highlights 60 500 1. Govt allocated €400M to develop charging network 2. EDF partnership with Renault & PSA to build charging 200 •Charging Stations = 60 stations 200 •Key Players = VM’s, •Synergies and initiatives from several Utilities industries will see the penetration rate of •Highlights •Charging Stations = 1300 1. VW & E-ON charging station increase dramatically target for 2011 20 2. Daimler & •Key Players = Govt, Nissan •The above forecast could prove RWE conservative •Charging Stations = 20 (400 Source: Frost & Sullivan planned) •Key Players = Daimler, ENEL • Strong correlation exists between regional markets adoption of congestion charging (and other green initiatives) and uptake of charging stations, e.g. London and Norway • Pioneering efforts from relevant industries could facilitate faster expansion of infrastructure 7

Shift From “Dumb Grid” to “Smart Grid” Will Support the Development of EV Infrastructure EV Support Utility Power Generation Infrastructure Implications on Utilities ROI Opportunities T op Capability ics Tim eF Conventional Grid and Infrastructure ram e • Centralised power Power Station stations • Limited to grid and • Centralised power Pre 2008 utility industry generation resulting in substantial power and Office transmission losses Building Houses Factory UTILITY Transformation of` Conventional Grid • Consumers – Utility Bills Energy Internet • Partnership with renewable 80 % energy generators developmen • Decentralized Hospital • Charging Stations t • Generating facilities – • Parking Space Smart Grid Control wind, solar • Govt - Carbon Trading Centre • Offices, hospitals • Venture Capital 2008 - 2015 Solar Power selling excess energy • Garage and Stores Support back to grid Wind EXTERNAL Power • EV as generators when • Battery Manufacturers not in use • Telecom Providers • Increased efficiencies Energy Storage • Smart Card • Banks, insurance etc. 40 % • Green Collared Jobs developmen t • Recycling Smart House with Low • Battery Servicing - Swapping EV car generator Own Generation High 8

Innovative Business Opportunities Arise from Partnership Formed Between Diverse Industries in Order to Expand Infrastructure in Time for the EV Boom Identification Of Alternate And Unique Business Models To Support EV Infrastructure *Industries: Identified and selected based on definition existing in equity Utilities trade markets • Power Generation Co. **Spending large amounts of money in own R&D, to find many of the projects in dead-ends, hoping for some to turn out as successful blockbuster • Partnership with Renewable Energy Providers generating high returns. The model is commonly used in industries where • Energy Storage development costs, risks and potential rewards are high. Financial Government • Banks, Insurance • Carbon Trading • Venture Capital • Tax Incentives Technology Consumer • Smart Card EV • Green Collared • Telematics Jobs • Mobile Service Providers Industrial Diversified • Material Mining • Garages and service stations Source: Frost & Sullivan • Buildings, homes, hospitals • Charging Stations • Wire and Cable Basic Materials • Parking Stations • Electronics • Li-ion, Copper and other • Battery Swapping battery packaging mtls. • Recycling BLOCK BUSTER BUSINESS MODEL** New Business Models that will address additional Electric Vehicle (EV) energy requirements will be formed at the intersection of several diverse and cross functional industries 9

Battery Leasing Best Returns: Future Leasing Models To Sell 75% Of EVs; The Rest 25% Sold Traditionally Business Model 1 Business Model 2 Business Model 3 Business Model 4 TYPE Energy Package Maintenance Package Part Subsidy Full Subsidy COVER Battery lease + Energy Package+ Maintenance Maintenance Package+ Electricity Insurance+ Maintenance Package+ Discount 100% Discount ENERGY Monthly Bill Flat: Max 2000km/month Flat: 25,000km/year Flat: 30,000km/year CONTRACT NA NA 4 years 7 years SUBSIDY NA NA 50% car price Free car MONTHLY Up to $200 Up to $400 $700- $1,000 ~ $1,200- $2,000 LEASE • Leasing EV batteries will be the likely option to continue beyond 2020. The leasing model might possibly be the main driver of how vehicles will be sold in the future. The immense engineering behind Future the batteries will only increase the cost and the performance. A strong option to amortize this is through the leasing models. • Reduction of the product cost is to promote market penetration. In the same direction the future belongs to several ways of separating the energy from the battery. 10

While Customer Awareness of EV Limitations are High, their Suggestions and Opinion on Incremental Improvements in EV are of High Interest to OEMs Electric Vehicle Market : Ideal Characteristics of an EV consumer (United Kingdom), 2008 OWNERSHIP & MAIN USAGE • Driving the vehicle to work is his main priority • ~40% of the market • Av miles per trip – 16 (London), parking duration 7 hours • 60% of these commuters do inner city commute • Shopping during weekends. • Differentiate between weekday and weekend usage – • average only twice a month - 100 miles or more MOTIVATING FACTORS DEMOGRAPHICS • Contribution to environment • Male/female falling under the age group of 26-45 yrs • Reduced fuel cost • Has a university degree • Savings on tax and other Govt subsidies • Earning between $30K - $655K Male/Female (26-45 yrs) • Free from congestion charging • Resides in London / Greater London • Compact and ease in parking • Flat /semi-detached house residence FEEDBACK ON LEASING BATTERIES SUGGESTIONS ON EV IMPROVEMENT • Prefer to lease battery than source • Reliability and after-sales service it directly from manufacturer • Latest battery to aid in greater distance • Efforts to dispose and effect on travelled environment key reasons • Improved and increased access to charging NEEDS stations • Reliability, price and fuel economy were the most important • Improved interior designs for greater issues considered while purchasing EV experience • Improved charging capability, provision of fast charger kits • Navigation tools to improve access to POII* and maintenance free motors were features that consumers would consider to boost chances of EV purchase Source: Frost & Sullivan 11

Electric Vehicle Market to Create Opportunities and Attractiveness for Industries such as Telematics, Mobile Phones, Fleet Businesses Electric Vehicle Market- Opportunity assessment for various businesses, 2012-2015 Potential for businesses to enter New business opportunities for EV market with relatively low Utilities and Innovative financial- investment; strategise to partner leasing firms- To be resilient with OEMs High before it makes profits Utilities Leasing Potential to generate revenue Battery Businesses Rejuvenation Financial Fleet Businesses Medium Coach Recycling Service/ Builders Dealership Telematics Innovative model but due to demographics it requires good Marketing Insurance EV penetration and customer Swap Low Telecom utilization- to have high impact if Stations successful Medium High Low Effort required to develop EV business Source: Frost & Sullivan : Size of the bubble represents the impact on EV market 12

Our EV Global Research Program Strategic Assessment of European Passenger Electric Vehicles Market - May 2008 Published Research Strategic Analysis of European Market for Electric Corner Modules - Oct 08 Strategic Analysis of Global Market for Fuel Cell Electric Vehicles - Aug 2008 World Hybrid/Electric Vehicle Battery Markets -Jun 2008 Strategic Analysis of In Car Green Technologies - Jun 2008 Advances in Hybrid Electric Vehicles (Technical Insights) Global Market Analysis of Plug in Hybrid Electric Vehicles Dec 2007 European Consumers’ Attitudes & Perceptions Towards Sustainability, Environment Strategic Review of New EV Includes section on Electric Vehicles and Alternate Power-trains - Business Models in the Automotive Industry – Q1, 2009 1. Analysis of Electric Vehicles Infrastructure for Automotive Applications in Europe and Revenue Generation 2. Opportunities for Utilities – Q1, 2009 In Process Research Strategic Analysis of the Fleet Market Opportunity for Electric Vehicles in Europe – Q2, 2009 3. Asia Pacific Market Analysis for Electric Vehicles for Fleets and Private Consumer – Q1, 2009 4. North American Market for Electric Vehicles for Fleets and Private Consumer – Q2, 2009 5. Analysis of Hybrid Vehicle Systems and Technologies in North America – Q2, 2009 6. VOC Study on EVs – Customers Interest in Electric Vehicles and Acceptability to New Business Models 7. The Generation Y Consumer : Future Vehicle and Features Choice and Brand Marketing Positioning Study – 8. Consumer Study to have section on EVs – Q2, 2009 VOC Study on Sustainability and Alternate-Fuel Vehicles and Technologies in USA 9. Strategic Profile and Business Model Assessment of (Project) Better Place – Q3, 09 10. Note : new titles and schedule is subject to change and is not guaranteed. Titles for second half of 2009 are still to be confirmed. Suggestions are welcome 13

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For Additional Information To leave a comment, ask the analyst a question, download a copy, or receive the free audio segment that accompanies this presentation, please contact Stephanie Ochoa, Analyst Briefing Coordinator, at (210) 247-2421 or via email, 16

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