Driving Fuel Efficiency in the Automotive Industry Using Composites

P R E S E N T E D T O

Composites Europe 2015

Sanjay Mazumdar, CEO, Lucintel P R E S E N T E D B Y/ D A T E

Table of Content

• About Us

• Executive Summary

• Automotive Materials Trends

• Current Challenges in Automotive Industry

• Role of Composites in Addressing Challenges

• Composite Materials Outlook: 2025

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Vision • To provide accurate data, insights, strategy and innovation which empowers companies to make

better informed decisions

History • Founded in 1998. • Team of over 120 analysts / consultants

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Published Market Reports • Over 500 published market reports

Consulting Services • Market entry strategy, Opportunity screening, Competitive assessment, Strategic consulting, M & A

services, Due diligence, Growth finance

3

About Lucintel

4

1000+ Clients in 70 Countries Value Our Service

5

• Lucintel has worked with a variety of global companies, including (but not limited to) 3M, Audi, Carlyle, Credit Swiss, Cytec, DSM, Eastman, GE, Gurit, Sverica International, Sumitomo, etc. and has conducted hundreds of projects dealing with due diligence, M & A, market entry strategy, opportunity screening, and strategic growth consulting

• Lucintel has +500 market reports on various market segments. Lucintel’s team consists of over 120 full time analysts and consultants with diverse backgrounds including engineers, PhDs, and MBAs

• Lucintel has performed a significant number of projects in market entry strategies, market assessment, M & A, due diligence, investment thesis and winning strategy formulation. Below are comments from our satisfied clients in the area of M & A, market assessment, and due diligence, demonstrating our capabilities in management consulting and timely delivery.

– “I was very happy with Lucintel’s work. It helped us in making a confident investment decision. They delivered the project in a timely manner. – Dave Finley, Managing Director, Sverica International.

– “Lucintel has its finger on the pulse of the market and drives deep strategic insights.” Andy Schmidt, Managing Partner, MacQuarie Partners

Lucintel’s Experiences in Market Research and Consulting Services

About Speaker Sanjay Mazumdar, PhD. (CEO, Author, Thought Leader & Strategist)

With a global consulting experience spanning over 14 years, Dr. Sanjay Mazumdar has been leading Lucintel since 1998 on projects as diverse as growth consulting, due diligence, value chain assessments and opportunity analysis providing actionable and cost-effective market intelligence, consulting and insights, to over 700 global customers.

Some highlights: • Provided advisory services (M & A, market entry) to hundreds of clients. • Subject matter expert in chemical & advanced materials & authored a book titled

"Composites Manufacturing: Materials, Product & Process Engineering". • Panelist at conferences with industry leaders such as Airbus, B/E Aerospace, Boeing,

Core Molding, Ershigs, Owens Corning, and more. • Speaker at various conferences & published more than 25 papers. • Worked for General Motors in ultra-lightweight product development project and

received 2 Record of Inventions. • Two Society of Plastics Engineers Awards and one DuPont Plunkett Award. • Ph.D. in Mechanical Engineering from Concordia University, Montreal and has

additional training in Strategic Management from MIT, Boston. • Thought leadership on nature inspired innovations and launched video describing 5

innovation mega trends. Click to benefit from innovation ideas.

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Dr. Sanjay Mazumdar

CEO, Lucintel

Address: 222 Las Colinas Blvd West, Suite 1650,

Irving, Texas 75039, USA

Email: sanjay.mazumdar@lucintel.com Phone: 972-804-8283 (cell) Website: www.lucintel.com

Table of Content

• About Us

• Executive Summary

• Automotive Materials Trends

• Current Challenges in Automotive Industry

• Role of Composites in Addressing Challenges

• Composite Materials Outlook: 2025

8

Executive Summary

• Automotive industry is adopting light weight materials to develop fuel efficient vehicles driven by government regulations such as CAFÉ standards of 54.5 mpg by 2025, EU mandate of CO2 emission to the level of 95g/km by 2020.

• Lightweight materials (AHSS, aluminum, composites, and magnesium) together accounted for 17% in the global automotive materials market in 2014 and is expected to increase to 29% share in 2025.

• Composite materials (glass fiber, carbon fiber and natural fiber) contributed only 1.6% of the total automotive materials market in 2014 and is expected to increase to 2.2% share in 2025.

• Key challenges with composite materials are low awareness towards benefits, high cost, high and parts cycle time.

• Auto OEMs are forming strategic alliances with CF players to address existing challenges of carbon composites, such as high cost and part cycle time

• There is significant fuel saving and emission reduction with the use of carbon composites.

• 10% and 20% CFRP usage in passenger cars globally will enable annual fuel savings of $200 billion and $460 billion in 2025

9

Table of Content

• About Us

• Executive Summary

• Automotive Materials Trends

• Current Challenges in Automotive Industry

• Role of Composites in Addressing Challenges

• Composite Materials Outlook: 2025

10

Steel & HSS (53.0%) Aluminum (8.6%) Iron (8.2%) Plastics (4.6%)

AHSS (6.3%)

Glass Composites (1.5%)

Carbon Composites (0.02%)

Others (17.7%)

Key Raw Materials & its Applications in Automotive Industry

• Wheels • Powertrain mount • Cylinder block / Engine • Auto transmission case • Suspension arms • Bumper beams • Intake manifolds

• Engine blocks • Drum breaks • Front & rear calipers

• Dashboards • Bumpers • Seats • Interior & exterior trim • Electrical components • Under the bonnet

components

• Body in White • Chassis • B pillars • Front end structures

• Instrument panel • Air intake manifold • Fender • Bumper • Roof • Door Module • Headlamp

• Roof • Chassis / monocoque • Fender • Tailgate • Bumper

• Chassis • Suspension arms • Door frame • Car hood hinge • Exhaust system • Bumper beams • A, B, C pillars

• Windshields • Mirrors • Sunroofs • Windows • Dashboards

% represents weight distribution of total vehicle weight

11

Structural (30%)

Power Train (22%)

Interior (23%)

• Steel • HSS • Carbon

Composites

• Steel • Aluminum • Magnesium • Carbon

Composites • Titanium

• Plastics • Steel • Glass Composites • Carbon

Composites • Magnesium

• Plastics • Rubber • Glass

Composites • Magnesium

• Steel • Aluminum • Plastics • Glass

Composites • Carbon

Composites

Key Raw Materials Used in Major Automotive Segments

Exterior (11%)

Electrical/Electronic & Others (14%)

• Chassis • Body in White

• Engine • Suspension • Transmission

• Dash board • Floor • Door panel • Steering • Seat

• Switches & Modules

• Wiring and lamps

• Door modules • Hood • Trunk lid • Bumper

% represents weight distribution of total vehicle weight

12

Magnesium Steel Carbon Fiber

1920 & Before

1960 1980 2000 2010

Glass Fiber SMC/BMC

Evolution of Raw Materials in the Automotive Industry

Plastic High Strength & Medium Strength

Steel

Aluminum

Introduction of Composites Key Insights

1940

• High emphasis on greenhouse gas reduction, improvement in fuel efficiency, and safety concerns led to the evolution of advanced lightweight materials in the automotive industry.

• To achieve lightweight construction without compensating properties, auto OEMs came up with solution of replacing conventional materials with AHSS, aluminum, magnesium, and composites.

13

14.0% 15.3% 16.1% 17.3%

8.8% 11.3% 13.8%

46.8% 44.4% 40.8%

3.0%2.2%

57.6%

2010

4,040

9.4% 4.3% 8.5% 5.9%

2002

3,924

7.8% 3.9% 7.5%

1995

3,694

6.5% 3.8% 6.3%

9.0%

1975

3,900

4.6%

15.0%

3.6% 12.6%

Steel

High Strength Steel

Iron

Aluminum

Other Metals

Plastics & Composites

Other Materials 154

199

57

258

419

0 500 -500 1,000 -1,000

-348

-598

Change in Materials Usage Per Vehicle from 1975 to 2010 (in lbs)

Aver

age

Vehi

cle

Wei

ght i

n lb

s

Automotive Material Mix from 1975 to 2010 (Average Vehicle Weight in lbs)

Material Trends in the North American Light Vehicles

14

Table of Content

• About Us

• Executive Summary

• Automotive Materials Trends

• Current Challenges in Automotive Industry

• Role of Composites in Addressing Challenges

• Composite Materials Outlook: 2025

15

Current Major Challenges in the Automotive Industry

Auto OEMs are ready to pay in the range of $15-$25 per kilogram saved depending on the vehicle segment

16

Increasing Passenger Safety Regulations

Technology Innovation Challenge

Manufacturing Implementation Challenge

Product Complexity and Aesthetic Challenge

Demand of Fuel Efficient Vehicles

Supply Chain Challenge

• FMVSS (Federal Motor Vehicle Safety Standards and Regulations) 216 3.0 X GVW

• Develop new material products to reduce cost, improve efficiency and speed to market

• High cycle time of new materials (Required cycle time is 1 to 2 minutes per part)

• Demand of more sophisticated cars with high functionality • Demand of better surface finish in exterior as well interior parts

• The Obama Administration’s CAFE (Corporate Average Fuel Efficiency) standards of 36.6 mpg by 2017 and 54.5 mpg by 2025. Currently, per vehicle fuel efficiency in US is about 28.9 mpg

• CO2 Emission Reduction: The European Union mandate of CO2 emission to the level of 130 g/km by 2015 and 95g/km by 2020. Currently, per vehicle CO2 emission in Europe is about 132.2 g/km

• Parts count consolidation, securing carbon fiber supply, etc.

Recycling and Repairing • The new end of life vehicle directives requires 95% of weight to be reused, recovery and recycled in 2015

US 2025[2]: 49.1 Canada 2025: 49.1

EU 2020: 60.6

Japan 2020: 55.1

China 2020[1]: 50.1

Korea 2015: 39.3

India 2021: 52

Mexico 2016 : 34.2

20

25

30

35

40

45

50

55

60

65

2000 2005 2010 2015 2020 2025

Mile

s pe

r Gas

olin

e G

allo

n N

orm

aliz

ed to

CAF

E Te

st

Cyc

le

US-LDV Canada-LDV EU Japan China S. Korea Australia India Mexico-LDV

Fuel Efficiency Requirements in Automotive Industry

[1] China's target reflects gasoline vehicles only. The target may be higher after new energy vehicles are considered. [2] US , Canada, and Mexico light-duty vehicles include light commercial vehicles.

Source: ICCT

Solid lines: historical performance Dashed lines: enacted targets Dotted lines: proposed targets or targets under study

17 Source: Lucintel

Powertrain

Chassis

Exterior

Interior

Currently Dominant Materials

Future Dominant Materials

Steel, HSS/AHSS HSS/AHSS, Aluminum

Composites

Steel, Aluminum, Plastics, Composites,

Steel, HSS, Aluminum Plastics, Composites,

Plastics, Composites

Steel, Iron and Aluminum

Aluminum, HSS/AHSS

Steel, Plastics, Composites

To Address Problems, Powertrain is Likely to Experience Greatest Change in Materials, followed by Chassis

Low Moderate High

Segments Expected Material Change

18

Table of Content

• About Us

• Executive Summary

• Automotive Materials Trends

• Current Challenges in Automotive Industry

• Role of Composites in Addressing Challenges

• Composite Materials Outlook: 2025

19

Glass Fiber Composites Carbon Fiber Composites Natural Fiber Composites

Interior Headliner

Instrument Panel

Load Floor

Airbag Housing

Bumper Beam

Underbody System

Front End Module

Deck Lid

Air Cleaner Housing

Air Intake Manifold

Air Duct

Engine Cover

Side Panels

Hood

Chassis/ Monocoque

Fender Rear Spoiler

Roof

Floor Panel

Trunk Lid

Tailgate

Hood Frame

Bumper

Door Panels

Load Floor

Seat backs

Major Applications of Various Types of Composite Materials

20

Composites Offer Advantage of Light Weight for Fuel Efficiency but it Comes at a Cost Penalty

0 20 40 60 80 100

25% 55%

85% Aluminum

Carbon Composites

100% AHSS

% Steel

0 200 400 600 800

200% Carbon Composites

135%

%

AHSS Aluminum

800%

100% Steel

Relative Part Weight

Relative Part Cost

0 20 40 60 80 100%

55% 40%

100%

80% Aluminum

AHSS

Carbon Composites

Steel

Plastics 85%

0 100 200 300 400 500

115%

Aluminum 500%

130%

Steel HSS

Plastics

Carbon Composites

%

100%

100%

Relative Part Weight

Relative Part Cost

Structural (Chassis) Non-Structural (Fender)

CAFÉ Requirement CO2 Emission Safety Drivers

21

Source: Lucintel

Weight and Fuel Saving Potential in Automotive Industry Utilizing Light Weight Materials

9.3% 18.7%

4.9% 2.5%

14.0% 28.0%

42.0% 21.0%

15.1% 7.5%

@40% Use of Lightweight Materials @20% Use of Lightweight Materials

$1,924 $962

$2,887 $1,443

$1,036 $518

$1,283 $641

$340 $170

25.2 50.4

37.8 75.6

27.2 13.6

16.8 33.6

8.9 4.4

Weight Reduction (of Total Vehicle Weight)

Fuel Saving ($) (Life Time Saving Per Vehicle)

CO2 Emission Saving (Gram/km Per Vehicle)

HSS/ AHSS

Aluminum

Glass Composites

Carbon Composites

Magnesium

25

Source: Lucintel Assumption: Average vehicle weight is 3,962 lbs. Lightweight replacement is considered in 70% of applications excluding non structural applications, such as glass and rubber.

Table of Content

• About Us

• Executive Summary

• Automotive Materials Trends

• Current Challenges in Automotive Industry

• Role of Composites in Addressing Challenges

• Composite Materials Outlook: 2025

23

Global Light Vehicles Production is Likely to Reach 116 Mn Units in 2025 with ~9.5% Reduction in Average Vehicle Mass

Trend and Forecast of Global Automotive Production and Average Vehicle Weight (2009-2025)

Note: Light vehicles includes Passenger Cars and Light duty vehicles

Auto

mot

ive

Prod

uctio

n Tr

end

and

Fore

cast

Uni

ts in

Mill

ion

116.0

85.7

58.4

3,0613,3803,356

0

60

120

180

240

0

1,000

2,000

3,000

4,000

2014 2025 2009

Aver

age

Vehi

cle

Wei

ght I

n Lb

s

Automotive Production (M Units) Average Vehicle Weight (lbs)

24 Source: Lucintel

98.4%

1.6%

Other Materials Composite Materials

98.4%

1.6%

97.8%

2.2%

2009

2014

2025

14818

3,049

25547

4,433

650264

7,020

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Carbon Fiber Composites

Glass Fiber Composites

Natural Fiber Composites

2025 2009 2014

Trend and Forecast of Composite Materials Market In Automotive Industry in Million lbs

Composite Materials are Likely to Account for 2.2% of Global Automotive Materials Market in 2025

Global Automotive Materials Market: 196 billion lbs

Global Automotive Materials Market: 290 billion lbs

Global Automotive Materials Market: 355 billion lbs

Share of Composite Materials in Global Automotive Materials Market

25

CF Potential: Significant Opportunity from High-End Cars to High-Volume Cars with the Production of Low-Cost CF

Super Cars

Super Luxury Cars

Luxury Cars

Other/Regular Cars

8,000

800,000

5.5 Million

110 Million

Global Light Vehicles Production in 2025

116 Million

Global Light Vehicles Production Forecast by Car Type in 2025

Expected Demand of CF @ Current Price in 2025

CF Usage in % of cars Mlbs $M

Demand in

100%

100%

15%

Expected Demand of CF @ $5/lb in 2025

80%

Mlbs $M Demand in

2.0

120.0

165.0

220.0

10.0

600.0

825.0

1,100.0

507.0 2,535.0

100%

95%

3%

55%

1.6

53.2

5.0

60.5

16.0

532.0

50.0

605.0

120.3 1,203.0

CF Usage in % of cars

32 Source: Lucintel

27

Fuel Saving & Emission Reduction Potential at Different Levels of CFRP Usage in Global Passenger Cars in 2025

Nil

FS: ~$0.20 Trillion Savings ER: ~0.29 Billion Tons Savings

FS: ~$0.46 Trillion Savings ER: ~0.78 Billion Tons Savings

Global Economic Impact

10% CFRP

20% CFRP

Conventional Material Mix

Fuel Consumption (in $Trillion @$5/Gallon)

CO2 Emissions (in Billion Tons)

~$1.83 Trillions

~$1.63 Trillions

~$1.37 Trillions

~3.93 Billion Tons

~3.64 Billion Tons

~3.16 Billion Tons

FS: Fuel Savings, ER: CO2 Emission Reduction • Global passenger car fleet size in 2025: 1.1 billion • Average body weight of conventional car: 3,061 lbs • Average miles travelled per car per year in 2025:10,000

Key Assumptions:

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