Executive Analysis of Global LPG/CNG Vehicles Market

M550-18 June 2010

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1. Executive Summary 9a. Top 7 key takeaways 10b. Comparative Analysis of OEMs 11c. OEM Market Share Analysis 12d. Supplier Market Share Analysis 13

2. Industry Challenges, Market Drivers and Restraints and Legislative Trends 14a. Industry Challenges 15b. Market Drivers and Restraints 16c. Key Asia Pacific Market trends 17d. Key European Market trends 18e. Key Latin American Market Trends 19

3. Market Metrics 20a. Scenario Analysis of LPG/CNG vehicle Market 21b. European Market Breakdown by OEMs 24c. Global LPG CNG vehicle OE Market 25d. OE Vs Aftermarket Analysis 26

4. Key Conclusions and Takeaways 27a. Key Conclusions and Takeaways 28

Table of Contents

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List of Figures

LPG/CNG Passenger Cars Market: Comparative Analysis of OEMs (Europe), 2009-2016 11

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List of Charts

LPG/CNG Passenger Cars Market: Market Share of OEMs Based on LPG Car Sales (Europe), 2009 12LPG/CNG Passenger Cars Market: Market Share of OEMs Based on CNG Car Sales (Europe), 2009 12LPG/CNG Passenger Cars Market: Supplier Market Share based on Kit Revenues in OE and AM (World), 2009 13LPG/CNG Passenger Cars Market: Industry Challenges (World), 2010-2016 15LPG/CNG Passenger Cars Market: Market Drivers and Restraints (World), 2010-2016 16LPG/CNG Passenger Cars Market: LPG Cars Units Shipment (World), 2008-2016 22LPG/CNG Passenger Cars Market: CNG Cars Units Shipment (World), 2008-2016 23LPG/CNG Passenger Cars Market: LPG and CNG Cars Units Shipment by OEM (Europe), 2010 and 2016 24LPG/CNG Passenger Cars Market: LPG & CNG Cars Units Shipment (OE) (World), 2009 and 2016 25LPG/CNG Passenger Cars Market: CNG Cars OE vs AM Analysis (World), 2007-2015 26LPG/CNG Passenger Cars Market: LPG Cars OE vs AM Analysis (World), 2007-2015 26LPG/CNG Passenger Cars Market: Key Conclusions (World), 2009 28

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• OBJECTIVE OF STUDY:

As a continuation of Frost & Sullivan’s strategic research in the automotive powertrain domain, this research study is conducted to:

Evaluate global market potential for LPG / CNG powered passenger cars

Identify key market trends, key legislative trends, key market drivers, restraints and industry challenges for LPG / CNG powered passenger cars in the global markets

Analyze OEMs strategy towards emission reduction, future products powered by LPG or CNG and supplier / fitment of these systems

Understand the future for LPG / CNG powered passenger cars globally

• Scope: Passenger cars that are partially or dedicatedly powered by either LPG or CNG. Includes cars offered by OEMs with LPG / CNG system at the time of purchase and cars converted by customers to run on either LPG or CNG after the purchase of the car. Does not include light commercial vehicles (vans).

• Geography: Key Global Markets

• Middle East – Iran

• Asia – India, Pakistan, Bangladesh, China, South Korea

• Europe – France, Italy, Germany, Poland, Russia

• South America – Brazil, Argentina, Venezuela,

• Rest of the World

• Base Year: 2009

• Forecast Period: 2010-2016

Project Objective and Scope

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Research Methodology

Frost & Sullivan Market Engineering MethodologyFrost & Sullivan market intelligence is based on secondary and primary information, where primary research accounts for approximately 70 per cent to 80 per cent of the data collection process.

• Secondary Research An extensive review of all the existing information available for this study has been conducted and some representative sources used are:

• Frost & Sullivan past publication and internal databases• Trade press and associations• Conferences attended on this topic and interviews conducted through networking events

Review and Utilise Existing Information - Avoid spending time on information that is already available- Focus on bridging information gaps, confirm and/or challenge existing knowledge

• Primary Research For the purpose of this study, telephonic interviews were conducted with key vehicle manufacturers and suppliers. The interviews were targeted at the middle and top level management in purchasing, product development, research and development, product planning and marketing functions.

Segment ExamplesBasic Ford Ka, Fiat Panda, Opel Agila, Citroen C2, Peugeot 1007, Toyota Aygo

High Luxury BMW 7-series, Mercedes-Benz S-Class, Audi A8, VW PhaetonHigh Medium BMW 3-series, Mercedes-Benz C-Class, Ford Mondeo, Volvo S40, VW PassatLow Luxury Mercedes-Benz E-Class, VolvoS80, Saab 9-5, BMW 5 Series, Jaguar S typeLow Medium BMW 1-series, Ford Focus, Alfa Romeo 148, Citroen C4, Toyota Corolla, VW Golf, Opel Astra

MAV Ford C-Max, BMW F3, Fiat Sedici, Opel MerivaSmall BMW Mini, Mercedes-Benz A-Class, Mazda2, Fiat Punto, Opel Corsa, Citroen C3, VW PoloSports Chrysler 300, Kia Opirus, Citroen C6, Peugeot 607, Toyota Camry

Super Luxury Rolls Royce Phantom, Bentley Arnage, Mercedes MaybachSUV BMW X3, Mercedes-Benz M-Class, Honda CRV, Land Rover Freelander

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Executive Summary

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While India, Italy and Russia are the largest markets for LPG powered cars; Pakistan, Iran, India and Italy are the largest markets for CNG powered cars

1

While India is set to be undisputed leader in growth for LPG and CNG car sales in the coming years the Iranian market for CNG vehicles is all set to reach 500,000 units by 2016

2

Average of 50% Cost savings per km compared to petrol and average of 30% Cost Savings per km compared to diesel, key driving force behind global LPG/CNG market growth

3

Stringent CO2 emission norms and tightening ecological standards are expected to be among key drivers for LPG/CNG growth in developed countries, in particular EU

4

In Europe, CNG is expected to have a sharp growth in the coming years however LPG is set to continue as a competitive option because of incentives by the EU countries due to heavy lobbying by the oil companies

5

In South America, Colombia and Bolivia are set to be new growth poles for CNG powered cars. South American governments will replicate EU strategy for reducing GHG emissions

6

2 main approaches for growth of CNG in Europe. Countries like Italy, Germany, Austria and Switzerland have well developed public filling networks while countries like Spain and France have increased fleet of urban buses and urban garbage trucks

7

Top 7 Take Away Facts About Global LPG/CNG Industry

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Comparative Analysis of OEMs: Fiat, Ford, Renault, GM and Volkswagen planning LPG/CNG variants of key models for emerging markets

OEM Fuel Key Models Key Regions Key Suppliers2009 Share of Europe Car Sales

2016 share of Europe Car Sales

Fiat GroupLPG

Panda, Punto Classic, Idea, Grande Punto, Bravo, Delta, MiTo

Europe Landi Renzo <0.1%10-12%

CNG Panda, Punto, Grande Punto, Multipla, Doblo

Europe, India, Brazil Metatron 55 %

FordLPG Focus, Fiesta, Transit,

Mondeo, Falcon, Ikon Europe, India BRC 1%5%

CNG Focus, C-Max, Transit Europe CNG Technik 0%

GM GroupLPG Meriva, Corsa, Matiz /

Spark

Europe, India, Asia Pacific, Australia

BRC & Landi Renzo 1.5%

5%

CNG Zafira, Astra Caravan Europe, India Landi Renzo 0.4%

RenaultLPG Logan, Sandero, Clio,

Logan MCV, Megane Europe, India Autogas 2%4%

CNG Logan, Kangoo Europe, India Landi Renzo <0.01%

Volkswagen

LPG Golf, Golf+, Sharan Europe Landi Renzo 0.7%

4-5%

CNG Caddy, T5, Passat, Passat Estate, Touran

Europe, USA, India Landi Renzo 2%

Note: All figures are rounded; the base Year is 2009. Source: Frost & Sullivan

LPG/CNG Passenger Cars Market: Comparative Analysis of OEMs (Europe), 2009-2016

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Market Share Analysis

15%5%

18%

2%

14%

32%

11%

1%

2%

GM Hyundai Renault Hyundai FordFiat PSA Mitsubishi Others

98%

0%0%1%

0%1%

Fiat VW GM Daimler PSA Others

• Renault, PSA and Ford will focus their efforts on the LPG market in the years to come.

• Fiat is the biggest players in the CNG OE market. New OEMs entering into this alternative fuel market will enter into the LPG market which will witness as much growth as CNG market but without competition from OEMs like Fiat and German OEMs like VW and is thus more open.

• Volume OEMs like Fiat will develop more CNG models in the small and medium segment preferable for city driving conditions. OEMs will follow a flexible approach encouraging more retrofitting of LPG rather than OE fitting to reduce the risks of the market and also the uncertainties of incentives and taxation.

• More active association of LPG suppliers than CNG suppliers resulting in more lobbying by LPG association for favourable incentives.

LPG/CNG Passenger Cars Market: Market Share of OEMs Based on LPG Car Sales (Europe), 2009

LPG/CNG Passenger Cars Market: Market Share of OEMs Based on CNG Car Sales (Europe), 2009

Note: All figures are rounded; the base Year is 2009. Source: Frost & Sullivan

Note: All figures are rounded; the base Year is 2009. Source: Frost & Sullivan

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Others40%

BRC (FSSC)27%

Landi Renzo SpA33%

Landi Renzo SpA BRC (FSSC) Others

Supplier Market Share Analysis: Landi Renzo and BRC global conversion kit manufacturer leaders

• Landi Renzo and BRC with their associated brands are leading the market in terms of global revenues from LPG / CNG kit sales to both OE and aftermarket.

• Global presence, OEM contracts, wide product portfolio, continuous R&D efforts in developing systems / technologies on par with changing engine technologies are some of the key factors for their leadership position in the global market.

• Landi Renzo supplies for Opel while BRC supplies for Chevrolet in the GM group. Except for Landi Renzo and BRC none of the other suppliers can have long lasting OEM relationships because of their size and because they can’t afford to offer post service options.

• Landi Renzo and BRC will look to develop strong OEM relationships and partnerships with small subsidiaries in the USA in the coming years for the LPG/CNG market.

Note: Others include companies such as Vialle, Prins, Tartarini

LPG/CNG Passenger Cars Market: Supplier Market Share Based on Kit Revenues in OE and AM (World), 2009

Note: All figures are rounded; the base Year is 2009. Source: Frost & Sullivan

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Industry Challenges, Market Drivers and

Restraints and Legislative Trends

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Key Global Market Challenges

Market challenges

Initiating the Governments to offer a homogeneous

incentive scheme for a 5 – 10 year period

Initiating the Governments to offer a homogeneous

incentive scheme for a 5 – 10 year period

Public attitude towards safety

Public attitude towards safety

Increase in weight due to fuel tank and kits

Increase in weight due to fuel tank and kits

Promotion of LPG/CNG conversion from

Governments and Industry

Promotion of LPG/CNG conversion from

Governments and Industry

Meeting global plans of LPG/CNG penetration by

2015-2020

Meeting global plans of LPG/CNG penetration by

2015-2020

Increasing competitive pressure from other

alternative powertrain technologies like hybrids

Increasing competitive pressure from other

alternative powertrain technologies like hybrids

Development of comprehensive refueling

station networks

Development of comprehensive refueling

station networks

Building consumer awareness of LPG/CNG benefits

Building consumer awareness of LPG/CNG benefits

LPG/CNG Passenger Cars Market: Industry Challenges (World), 2010-2016

Source: Frost & Sullivan

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Drive

rs

Cost savings in respect to petrol (on average 50%

of petrol cost) Development of

compressive service stations network

Key Global Market Drivers and Restraints

Development of legal incentives for

transition to alternative fuels

Tightening emission requirements

Res

trai

nts

Insufficient CNG service stations infrastructure

Lack of understanding of LPG/CNG benefits

among global population

Lack of OEM’s support of

LPG/CNG sector development in

particular regions

Lack of Governmental and

Industry Promotions

Expansion of LPG/CNG product

lines by OEMs

Competitive pressure from

alternative fuels and powertrain technologies

LPG/CNG Passenger Cars Market: Market Drivers and Restraints (World), 2010-2016

Source: Frost & Sullivan

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Key Asia Pacific LPG/CNG Market and Legislative Trends

• Inspite of slowdown in the global automotive industry in 2009, the Indian passenger car market is witnessing significant growth. As a result congestion and pollution levels in congested cities are increasing and the government is looking at ways to cut pollution and emissions by promoting alternative eco friendly fuels such as LPG and CNG. Cities like Mumbai and Delhi each have over 2000 urban buses running on CNG.

• With discovery of large new gas reserves, the Indian government has started building supply / re- fuelling infrastructure critical for the growth of LPG / CNG vehicles. Indian government offers incentives for CNG vehicles. Cost to remain the main driver for the Indian market.

• In Bangladesh, the Govt. encourages setting up of CNG refueling stations by providing complete funding at low interest rates. Bangladesh will be a key OE retrofitting aftermarket in the next few years with its high number of gasoline vehicles.

• The government of Iran has made it mandatory that all new cars have to be of dual fuel capacity. With the second largest gas reserves in the world Iran is set to continue as one of the top 3 countries of CNG car sales in the world. Every car in Tehran must now be gas driven.

• Chinese government is yet to offer incentives for LPG CNG cars and manufacturers are eagerly anticipating these incentives within a year. As the largest car market in the world it will be a watched market for LPG CNG vehicle sales in the coming years.

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Key Europe LPG/CNG Market and Legislative Trends

• Italy, one of the largest market for LPG / CNG vehicles, witnessed significant growth in LPG & CNG new vehicles and aftermarket conversion in 2009 as a result of the scrapping scheme and incentives. 2010 however has shown reduced sales with the Italian government removing certain incentives. The sales of LPG and CNG vehicles will reduce by 60 % and 70 % going forward if all the incentives were removed.

• France is a fast growing market with 25000 LPG cars sold in Q1 2010 as opposed to 25000 in the entire year of 2009 with incentives like 2000 Euros for buying LPG along with the scrapping incentives.

• The Ex Eastern Block of countries like Armenia, Bulgaria and Uzbekistan are set to be fast growing markets for natural gas vehicles. These ex Eastern block of countries have fixed contracts of “ Take or Pay “ with Russian gas companies.

• Owing to introduction of legislation governing CO2 emission of new cars sold in European markets from 2012, car makers are working on offering LPG & CNG variants of their key models in order to reduce its CO2 rating and thereby lower fines post 2012 resulting from CO2 emissions higher than the limit as per the legislation.

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Key Latin American LPG/CNG Market and Legislative Trends

• Argentina and Brazil are the second and fourth largest markets for CNG powered vehicles. Peru is the only South American country with LPG vehicles.

• Colombia and Bolivia will be the fastest growing market for CNG aftermarket in the next 3 years. Colombia and Bolivia currently have 300000 and 120000 natural gas vehicles respectively running in their countries.

• The Plangás’ objective in Brazil is to increase the Brazilian south/southeast daily gas production to 55 million cm3 by 2010 in order to lesser import dependency from Bolivia.

• CNG usage in Argentina has reached a mature stage as both passenger car vehicles and fleet owners use CNG as an alternative for petrol and diesel. Most of these vehicles are retrofitted converted from petrol vehicles.

• Venezuela is the only country in the region with a government program based on subsidies with the objective to stimulate CNG in vehicles. The Government, through PDVSA and its Autogas program, has given free gas kits to vehicle owners, and money incentives for conversion car shops – US$46.5 per vehicle converted.

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Market Metrics

20

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Scenario Analysis Assumptions

Optimistic Scenario Frost & Sullivan Scenario Conservative Scenario

Incentives & Regulations

• Fresh incentives in the different European countries like Poland, Italy, Germany and France alternate years until 2016 and also in India

• Government regulations mandating taxis to run of LPG CNG fuel

• These incentives will increase yearly LPG sales in Europe and CNG sales globally by 20% on average

• Incentives in countries limited only for a period of 2 years

• Government regulations mandating taxis to run on LPG CNG in European countries like Italy, France, Poland and Asian countries like India and Pakistan

• No incentives in both European and Asian countries till 2016

• No government regulations • LPG CNG car sales purely driven

by eco conscious consumer

Competition

• Limited penetration (< 5%) for competing green technologies resulting from poor consumer acceptance for hybrids and downsized engines

• Moderate penetration (5 – 10%) of mild hybrids and fuel efficient downsized and turbo charged engines

• LPC CNG car sales affected only mildly in European markets

• High penetration (>20%) of mild hybrids, full hybrids and fuel efficient downsized and turbo charged engines

• Therefore decreased penetration of LPG CNG car sales in Europe and India. LPG sales to tumble in Europe

Infrastructure • 15% of refueling stations are equipped for LPG CNG refueling globally by 2014

• 2-4% of refueling stations are equipped for LPG CNG refueling globally by 2014

• <2% of refueling stations are equipped for LPG CNG refueling globally by 2014

ScenarioKey Factors

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LPG Cars (OE Market) Scenario Analysis: Global LPG car sales to cross 800000 units by 2016

0.0

0.5

1.0

1.5

2.0

2.5

2008 2009 2010 2011 2012 2013 2014 2015 2016Year

Uni

ts S

hipm

ent

(Mill

ion)

LPG Conservative Scenario LPG Frost & Sullivan Scenario LPG Optimistic Scenario

CAGR (2009-2016): 18.6%

CAGR (2009-2016): 6.3%

CAGR (2009-2016): -8.5%

Scenario Analysis (LPG Cars) 2008 2009 2010 2011 2012 2013 2014 2015 2016

Optimistic Scenario 211,541 560,000 650,000 690,000 900,000 960,000 1,220,000 1,300,000 1,850,000

Frost & Sullivan Scenario 211,541 560,000 600,000 640,000 680,000 740,000 780,000 830,000 860,000

Conservative Scenario 211,541 560,000 375,000 380,000 390,000 350,000 325,000 300,000 300,000

LPG/CNG Passenger Cars Market: LPG Cars Units Shipment (World), 2008-2016

Note: All figures are rounded; the base Year is 2009. Source: Frost & Sullivan

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CNG Cars (OE Market) Scenario Analysis: Global CNG car sales to reach 1 million units by 2016

0.0

0.5

1.0

1.5

2.0

2.5

2008 2009 2010 2011 2012 2013 2014 2015 2016Year

Uni

ts S

hipm

ent (M

illio

n)

CNG Conservative Scenario CNG Frost & Sullivan Scenario CNG Optimistic Scenario

CAGR (2009-2016): 18.9%

CAGR (2009-2016): 6.9%

CAGR (2009-2016): -0.5 %

Scenario Analysis (CNG Cars) 2008 2009 2010 2011 2012 2013 2014 2015 2016

Optimistic Scenario 672,098 700,000 840,000 900,000 1,180,000 1,250,000 1,600,000 1,700,000 2,350,000

Frost & Sullivan Scenario 672,098 700,000 820,000 885,000 900,000 930,000 960,000 1050,000 1,220,000

Conservative Scenario 672,098 700,000 600,000 620,000 670,000 600,000 625,000 650,000 675,000

LPG/CNG Passenger Cars Market: CNG Cars Units Shipment (World), 2008-2016

Note: All figures are rounded; the base Year is 2009. Source: Frost & Sullivan

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European Market Overview: Fiat to dominate the CNG market; Renault, PSA and Ford grow in LPG

Italy is set to remain the biggest market for LPG – CNG vehicles in Europe with the biggest market share held by Fiat group

Ford Fiesta, Dacia Sandero and Fiat Punto will be high selling LPG models in the coming years while Fiat Panda and Fiat Punto will be high selling CNG models

Fiat group has the most comprehensive portfolio for LPG – CNG vehicles with high selling models like Fiat Panda, Fiat Punto, Lancia Ypsilon and Lancia Musa

Poland and Turkey will be fast growing LPG markets for the European OEMs

Renault, PSA and Ford to have 30 % growth in the LPG market boosted by strong incentives

0

50

100

150

200

250

300

Ford Fiat VW RenaultNisan

PSA Daimler Hyundai GM

Uni

t Sh

ipm

ents

('0

00)

LPG CNG

225,700

675,000

33%

67%

40%43%

30%

60%

67%

2010 2016

74%

26%

73%

27%

90%

10%

LPG/CNG Passenger Cars Market: LPG and CNG Cars Units Shipment by OEM (Europe), 2010 and 2016

2016

Note: All figures are rounded; the base Year is 2009. Source: Frost & Sullivan

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Global Snapshot: Global LPG/CNG Vehicle Sales to double and reach 2 million units by 2016

Turkey and Poland markets will be key for LPG growth in the coming years

Italy is set to remain the largest market for LPG/CNG car sales followed by Iran and India by 2016

Iran to account for 500000 CNG car sales by 2016

The South Korean LPG market to touch 200000 CNG car sales by 2017

2009 2016-50

50

150

250

350

450

550

650

750

Korea Turkey S .America

India Iran Italy Pakistan Poland France

Uni

t Sh

ipm

ents

('0

00)

LPG CNG

2016

41%

59%1.3 M

~ 2.2 M

56%

57%

42%

43%

75%

25%

Key: S.America includes Brazil, Argentina, Colombia and Venezuela

44%

LPG/CNG Passenger Cars Market: LPG and CNG Cars Units Shipment (OE) (World), 2009 and 2016

Note: All figures are rounded; the base Year is 2009. Source: Frost & Sullivan

2009 2016

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8.30

13.00%11.10%

91.70

87.0088.90

0

10

20

30

40

50

60

70

80

90

100

2007 2008 2009 2010 2011 2012 2013 2014 2015

Year

Pene

trat

ion

Rat

e (%

)

OE AM

OE vs Aftermarket Analysis: LPG growth mostly in Aftermarket; CNG growth in OE market and limited Aftermarket growth• LPG as an alternative fuel is more familiar in the

aftermarket as a result of ease of conversion and low cost of conversion to run on LPG.

• While India, Italy, Pakistan, Poland and Russia are key aftermarket for LPG, India and Italy are the only major OE markets for LPG.

• Recent trends show that none of the major European OEMs are in favour of OE fitting for LPG vehicles. Vehicles will not roll out of platforms as LPG compatible but will be retrofitted in most cases.

33.80

39.00%

22.00%

66.2061.00

78.00

0

10

20

30

40

50

60

70

80

90

100

2007 2008 2009 2010 2011 2012 2013 2014 2015

Year

Pene

trat

ion

Rat

e (%

)

OE AM

Note: All figures are rounded; the base Year is 2009. Source: Frost & Sullivan

Note: All figures are rounded; the base Year is 2009. Source: Frost & Sullivan

• Unlike LPG, CNG is familiar in both OE and aftermarket with early growth in Aftermarket from countries like Argentina and OE growth in countries like India and USA expected.

• Going forward it is expected that CNG powered vehicles will grow in aftermarket in poorer countries such as Bangladesh and Latin American countries like Colombia and Bolivia while it will grow in the OE market in countries like India, China and USA.

• CNG is considered as a long term viable alternative to conventional fuels and LPG. Hence governments and OEMs are keen on promoting CNG powered cars in the coming years.

LPG/CNG Passenger Cars Market: CNG Cars OE vs AM Analysis (World), 2007-2015

LPG/CNG Passenger Cars Market: LPG Cars OE vs AM Analysis (World), 2007-2015

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Key Conclusions and Takeaways

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Key Conclusions and Takeaways

Stringent CO2 emission norms and tightening ecological

standards - key drivers for LPG/CNG growth in developed

countries, in particular EU

Largest LPG markets – Italy,

India, Russia and largest CNG

markets – India, Iran and Pakistan

So what??

Source: Frost & Sullivan

Cost savings of average 50 per cent

compared to petrol/diesel - key driving force behind

global LPG/CNG market growth

800,000 LPG vehicles and1 m

CNG vehicles to be sold globally by

2015

Offer LPG / CNG variants of key models in key developing markets

Work with kit manufacturers and offer reliable solution to attract consumers otherwise going for

aftermarket conversions

Governments to support OEMs by developing re-fuelling infrastructure

LPG and CNG greatly help to reduce fleet emissions

Lower running and maintenance cost for consumers, eco friendly

transportation

LPG/CNG Passenger Cars Market: Key Conclusions (World), 2009

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