Hybrid Report 2009

THE HYBIRDS REPORT Published by SupplierBusiness Ltd, An IHS Global Insight Company

2 St Paul’s Street Tel: +44 (0) 1780 481712 Stamford Fax: +44 (0) 1780 482383 Lincs PE9 2BE Internet: United Kingdom http://www.supplierbusiness.com E-mail: [email protected]

SupplierBusiness Ltd., An IHS Global Insight Company is a specialist consultancy providing analysis of the automotive industry for the automotive industry. SupplierBusiness has focused on developments in the supplier sector and has published a range of reports on industry issues in the last twelve years. SupplierBusiness contributors to this report include: Alex Boekestyn, Edmund Chew, Gaby Leigh, Moushumi Mohanty, Stewart Pedder, Tilak Swarup Cover Image: GM © SupplierBusiness Ltd 2009 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, SupplierBusiness Ltd. This report is the product of extensive research work. It is protected by copyright under the Copyright, Designs and Patents Act 1988. The authors of SupplierBusiness research reports are drawn from a wide range of professional disciplines. The facts within this report are believed to be correct at the time of publication but cannot be guaranteed. All information within this study has been reasonably verified to the author’s and publisher’s ability, but neither accept responsibility for loss arising from decisions based on this report. This title is provided to you on a single-user basis, supplied on the strict understanding that each title is not to be copied or shared. Alternatively, our reports can be shared within departments or entire corporations via a cost-effective multi-user license. Multi-user licenses can also save you money by avoiding unnecessary order duplication. To further add value all multi-user copies are hosted on a password protected extranet for your department or company – saving you time, resources and effort when sharing research with your colleagues. To find out more about multi-user pricing, please contact Sarah Graham; [email protected]

Contents Table of figures ................................................................................................................................................ 5

Executive Summary ......................................................................................................................................... 8

Introduction ...................................................................................................................................................12

History ...................................................................................................................................................12

Drivers of hybrid vehicle development .................................................................................................13

Hybrid Technology .........................................................................................................................................21

Types of hybrid vehicle ..........................................................................................................................21

Micro Hybrids ........................................................................................................................................21

Electronic components ..........................................................................................................................23

Series hybrids.........................................................................................................................................23

Parallel hybrids ......................................................................................................................................24

Series/Parallel hybrids ...........................................................................................................................24

Full Hybrid ..............................................................................................................................................24

Mild or Assist Hybrids ............................................................................................................................25

Plug‐In or Dual‐Mode hybrids ................................................................................................................25

Hybrid transmissions .............................................................................................................................25

One‐Mode and Two‐Mode Hybrids .......................................................................................................27

Regenerative braking .............................................................................................................................28

Electric motors .......................................................................................................................................29

AC Motors ..............................................................................................................................................29

DC Motors ..............................................................................................................................................29

Synchronous motors ..............................................................................................................................30

Switch reluctance machines ..................................................................................................................32

Battery Technology ................................................................................................................................32

Lead acid ................................................................................................................................................33

Nickel‐metal hydride (NiMH) .................................................................................................................34

Sodium nickel chloride (NaNiCl) ............................................................................................................35

Lithium‐ion ............................................................................................................................................36

Li‐ion technology improvements ...........................................................................................................38

Supercapacitors and ultracapacitors .....................................................................................................40

OEM Strategies ..............................................................................................................................................42

General Motors .....................................................................................................................................43

Ford ........................................................................................................................................................46

Volkswagen ............................................................................................................................................48

Daimler ..................................................................................................................................................51

BMW ......................................................................................................................................................54

Honda ....................................................................................................................................................59

Nissan ....................................................................................................................................................60

Renault ..................................................................................................................................................61

PSA .........................................................................................................................................................62

Hyundai ..................................................................................................................................................63

The Hybrids Report

© SupplierBusiness Ltd 2009 8/21

Incentives ......................................................................................................................................................68

Fuel Economy ........................................................................................................................................68

Hybrid Incentives and Taxation .............................................................................................................69

North America .......................................................................................................................................69

Europe ...................................................................................................................................................72

Japan ......................................................................................................................................................72

The global light vehicle market ..............................................................................................................73

The hybrid market .........................................................................................................................................73

North America .......................................................................................................................................75

Europe ...................................................................................................................................................77

Japan ......................................................................................................................................................78

Company Profiles ........................................................................................................................................... 81

Aisin AW .................................................................................................................................................... 81

Axeon Holdings .......................................................................................................................................... 83

Azure Dynamics ......................................................................................................................................... 85

Cobasys ..................................................................................................................................................... 88

Continental ................................................................................................................................................ 90

Denso ........................................................................................................................................................ 95

Eaton ......................................................................................................................................................... 98

Hitachi ..................................................................................................................................................... 101

JATCO ...................................................................................................................................................... 103

Johnson Controls ..................................................................................................................................... 105

Keihin ....................................................................................................................................................... 109

Maxwell Technologies ............................................................................................................................. 111

NessCap ................................................................................................................................................... 115

Saft .......................................................................................................................................................... 117

Sanyo ....................................................................................................................................................... 120

Sumitomo Wiring .................................................................................................................................... 123

TDK .......................................................................................................................................................... 126

Toyota Industries ..................................................................................................................................... 129

UQM ........................................................................................................................................................ 132

Visteon .................................................................................................................................................... 135

Yazaki ....................................................................................................................................................... 139

ZF ............................................................................................................................................................. 142

The Hybrids Report


Table of figures Figure 1: Hybrid model introductions by year ‐ US ......................................................................................... 8

Figure 2: Figure 2: Hybrid percentage share of US vehicle sales ..................................................................... 9

Figure 3: US gasoline prices versus hybrid monthly sales volume ................................................................10

Figure 4: Global hybrid production 2008 – 2015 ...........................................................................................11

Figure 5: Proportions of gasoline and diesel hybrid vehicles ........................................................................12

Figure 6: The attractiveness of hybrid technology compared to other powertrain technology ...................13

Figure 7: Potential roadmap to mass hybrid uptake .....................................................................................14

Figure 8: European diesel sales 1999 – 2008 .................................................................................................15

Figure 9: The relationship between acceleration and fuel economy for selected VW models .....................15

Figure 10: Increasingly strict emissions standards for diesels .......................................................................15

Figure 11: The relationship between acceleration and fuel economy for hybrid vehicles. ...........................16

Figure 12: CO2 versus cost for various powertrain options ...........................................................................16

Figure 13: Carbon dioxide emissions versus cost per percentage fuel reduction .........................................17

Figure 14: CO2 emissions by engine type.......................................................................................................18

Figure 15: CO2 savings by hybrid type ...........................................................................................................19

Figure 16: Ratio of engine and motor operation in the hybrid system .........................................................21

Figure 17: Continental’s ISAD Unit ................................................................................................................22

Figure 18: Micro‐hybrid production forecast ................................................................................................22

Figure 19: Delphi Belt Alternator Starter .......................................................................................................23

Figure 20: Hybrid electric vehicle drive configurations .................................................................................24

Figure 21: One‐Mode Hybrid Input‐Split EVT. ...............................................................................................25

Figure 22: Two‐Mode Hybrid Input‐Split EVT ................................................................................................26

Figure 23: One‐Mode Hybrid Input‐Split EVT ................................................................................................26

Figure 24: Two‐Mode Hybrid with Input‐Split and Compound‐Split EVT Modes. .........................................27

Figure 25: Two mode hybrid transmission. ...................................................................................................28

Figure 26: Regenerative Braking System .......................................................................................................28

Figure 27: EV motors .....................................................................................................................................29

Figure 28: Switch reluctance machines .........................................................................................................32

Figure 29: Battery price trend forecast .........................................................................................................32

Figure 30: Battery technology evolution .......................................................................................................34

Figure 31: Energy storage overview ..............................................................................................................34

Figure 32: A typical Zebra battery module ....................................................................................................36

Figure 33: Lithium‐ion battery pack ..............................................................................................................37

Figure 34: Energy density versus output density in battery systems ............................................................38

The Hybrids Report


Figure 35: A Ragone plot showing energy density vs power density for various energy‐storage devices ....40

Figure 36: Regional hybrid manufacture forecast .........................................................................................42

Figure 37: Hybrid production forecast Asia ...................................................................................................43

Figure 38: GM's powertrain and fuels strategy .............................................................................................44

Figure 39: GM's pre‐reorganization strategy .................................................................................................45

Figure 40: General Motors 2MT70 FWD two-mode hybrid transaxle, as seen from engine side .....46

Figure 41: Ford’s SmartGauge cluster ......................................................................................................47

Figure 42: Ford Hybrid second generation hybrid systems architecture ..............................................47

Figure 43: Volkswagen’s twinDRIVE system operating modes .............................................................48

Figure 44: Volkswagen’s powertrain and fuel strategy ............................................................................49

Figure 45: VW forecast micro hybrid production ..........................................................................................50

Figure 46: VW Touareg hybrid powertrain ....................................................................................................50

Figure 47: E‐motor support effect on torque and power ..............................................................................51

Figure 48: Daimler Micro‐Hybrid production forecast ..................................................................................51

Figure 49: Daimler Mild and Full hybrid production forecast .......................................................................52

Figure 50: Mercedes‐Benz micro hybrid system featuring a belt driven starter‐generator ..........................52

Figure 51: Mercedes‐Benz ISG featuring a disc shaped electric motor as fitted to the S‐Class ....................53

Figure 52: Mercedes‐Benz Two‐Mode hybrid drive ......................................................................................53

Figure 53: Mercedes‐Benz BlueZero concept ................................................................................................54

Figure 54: BMW Micro‐Hybrid production forecast ......................................................................................54

Figure 55: BMW X6 hybrid configuration ......................................................................................................55

Figure 56: BMW Group hybrid strategy.........................................................................................................55

Figure 57: BMW Mild and Full hybrid production forecast ...........................................................................55

Figure 58: Figure 43: Toyota micro hybrid production forecast ....................................................................56

Figure 59: Toyota full, mild and plug‐in hybrid production forecast .............................................................56

Figure 60: Japanese Toyota Prius sales by month .........................................................................................57

Figure 61: Evolution of Toyota hybrid systems to 2009 ................................................................................57

Figure 62: Prius 3 assembly ...........................................................................................................................58

Figure 63: Honda mild and full hybrid forecast .............................................................................................59

Figure 64: 2009 Honda Insight interior featuring the Ecological Driver Assist System .................................59

Figure 65: Honda's CR‐Z hybrid sports car .....................................................................................................60

Figure 66: Nissan's Leaf electric vehicle ........................................................................................................61

Figure 67: Renaults' Ondelios diesel hybrid crossover vehicle ......................................................................62

Figure 68: Peugeot's 308 hybrid diesel prototype .........................................................................................63

Figure 69: Hyundai's Elantra LPG Hybrid powertrain ....................................................................................64

The Hybrids Report


Figure 70: Fuel economy/GHG regulation .....................................................................................................68

Figure 71: Phase‐out credit calendar .............................................................................................................69

Figure 72: Toyota Prius tax credit timeline ....................................................................................................70

Figure 73: Toyota and Honda tax credit history ............................................................................................70

Figure 74: US Tax credit availability April 2009 .............................................................................................71

Figure 75: Global hybrid production and growth rates to 2015 ....................................................................73

Figure 76: Global hybrid vehicle production forecast to 2015, by region .....................................................74

Figure 77: Global hybrid vehicle production forecast to 2015, by region .....................................................75

Figure 78: US hybrid vehicle production forecast to 2015 ............................................................................75

Figure 79: US hybrid sales by month .............................................................................................................76

Figure 80: US Hybrid market shares 2008 .....................................................................................................76

Figure 81: US hybrid sales for January and April 2009 by manufacturer and model ....................................77

Figure 82: Toyota hybrid vehicle sales in Japan, 1997 to 2009 (Jan – Apr) ...................................................78

Figure 83: Number of Toyota's clean‐energy vehicles sold in Japan .............................................................79

Figure 84: Monthly Prius sales since 2007 – Japan ........................................................................................79

The Hybrids Report


Executive Summary One of the primary driving forces behind the production of hybrid vehicles has been the tightening of global emission regulations. The need for fuel efficiency has moved from being a consumer based motivation to an environmental concern that requires regulation, not only to combat pollution from noxious gases, but to limit the transport contribution to CO2 output – partly responsible for global warming – and to provide a route to moving away from strategic dependence on oil.

Hybrid vehicles as we know them today were launched on the market by Toyota in Japan in 1997 and this was followed quickly by the arrival of the Honda Insight into the US. Since then gasoline ‐ electric hybrid vehicles have become a part of the automotive landscape with virtually all the major OEMs in either the market or working towards model launch. At the end of 2008 there had been some 34 models ranging from the full hybrid Prius to the mild hybrid Mercedes S Class. Total hybrid global sales are now estimated at around 500,000 (not including stop‐start micro hybrids), with more than 350,000 hybrids sold during 2007 in the US alone before the market fell to just over 300,000 units in 2008.

Today, despite the global economic issues currently faced by the automotive industry, emission legislation holds a stronger focus; this is due in part to the United Nations Climate Change Conference in Bali during December 2007 which highlighted the next round of negotiations for the subsequent Kyoto period covering 2008‐2012.

In the US 17 states including California have been denied the right to set their own emission standards, and legal battles continue with the automotive industry poised to accept the implications of the final result. In Japan fuel economy standards are set to change as they move from the 10‐15 test cycles and prepare for the 2010 JC08 cycle designed to enforce much tougher standards up to the year 2015.

Europe also is entering the phase II emission test cycle set for 2008‐2012 and aims to reduce CO2 emissions to 120g/km by 2012 and 25‐40% below 1990 levels. All these changes will affect the automotive sector considerably, and the hybrid electric powertrain is emerging as a critical technology in moving forward over the medium and the long term.

Figure 1: Hybrid model introductions by year ‐ US

Source: US Department of Energy

The Hybrids Report


While automotive manufacturers have made fleet average fuel economy commitments, such as CAFE in the US and the ACEA agreement in Europe, they have been placed under pressure by the popularity of SUVs and luxury vehicles. However, the underlying concern that consumers have been shown to have in supporting “green technology” has now become a strong marketing focus in the automotive sector. However, the consumer still requires a wide range of comfort and convenience features, and increasingly stringent safety regulation is driving even more feature content. This has meant that despite very significant progress in conventional powertrain efficiency and lightening of vehicles, more radical solutions are needed to deliver sustainable long‐term improvements.

One of the key applications for hybrid technology is to increase the fuel efficiency of inherently high‐fuel‐consumption vehicles, such as SUVs and luxury sedans in order to help sustain the popularity they have enjoyed in recent years. Concept unveilings have also included sports cars in which the electric drive adds power without the penalty of poorer fuel economy. While these shifts in application are criticised by some environmentalists, hybrid manufacturers defend the strategy by insisting that fleet fuel efficiency gains are still being achieved.

Despite further regulatory work by the EPA in the US, to date many consumers have been disappointed with the publication of fuel economy statistics for hybrids in comparison with conventional gasoline vehicles. This issue has certainly had a significant impact on hybrid volume sales and has the potential to enhance the uptake of diesel technology. This point is emphatically demonstrated by the achievable fuel efficiency performance of light diesel engines in Europe, where they now make up more than 50% of the light vehicle market.

Furthermore, the price premium asked for a hybrid vehicle over and above a conventional gasoline version has been estimated at over $5,000. This has also made market success vulnerable to several competing technologies not the least of which is the diesel engine, which can currently prove equally fuel‐efficient and carries a lower price premium. However it is subject to much more stringent emission regulations and fights a lack of acceptance in many markets outside Europe.

Figure 2: Figure 2: Hybrid percentage share of US vehicle sales

Source: US DOE

The Hybrids Report


Reducing the premium paid for the hybrid powertrain is one of the key issues facing the exponents of this technology, and although they are favourably viewed by US consumers, there remains considerable scepticism about the ability of hybrid vehicles to deliver fuel efficiency at a reasonable cost.

Recent research by Syovate in the US highlighted that there is a great deal of confusion amongst consumers faced with choices about which advanced powertrain to purchase. This has been perpetuated by the industry through the ‘noise’ perpetrated through the press, which leads consumers to wait when considering advanced technologies. The survey found that although hybrids and plug‐in hybrids were the preferred technologies for most consumers, misconceptions about the alternatives threaten to bring about delays in the market.

Furthermore, the Synovate survey highlighted the consumer’s concerns

about reliability and the current state of development of the technology, particularly batteries. However, in 2009 perceptions about reliability appear to be improving, but are not yet anywhere near on a par with traditional ICE powertrains. Furthermore, consumer perceptions about power and performance must improve considerably to bring about ‘mainstream’ success.

In the US those consumers considering a hybrid vehicle are primarily driven by considerations for the environment and fuel economy, and the recent falls in fuel prices have in many cases mitigated this motivation in the short term, as is illustrated by Figure 3 and the falls in hybrid market share overall as the oil price has recently reduced. However this effect is also masked by the consumer’s unwillingness to pay a large premium for a hybrid in depressed market conditions. In the US in December 2008 hybrid sales dropped 43%, in comparison to a reduction of 36% in all vehicle sales.

In the longer term the share of hybrids, even in the diesel phobic US market, are not only dependant on the reducing cost premium of the hybrid and increasing perceptions of reliability, but also the future price premium of diesel and the reducing cost.

Technology development remains intense, particularly in the area of battery technology, which is considered to be the weak point of hybrid technology to date. Lithium‐ion technology is now taking centre stage in its various forms, but significant performance improvements are still needed, not least in terms of cost. Current state‐of‐the‐art Li‐ion batteries have costs estimated to be between $300 and $500 per KWh. Recently, in a response to a study by researchers at Carnegie Mellon University on the cost‐effectiveness of different sizes of battery packs for plug‐in hybrids, Jon Lauckner, GM Vice President Global Program Management, commented that the current cost of the GM Volt Li‐ion packs is “many hundreds of dollars per kWh” lower than the $1,000 kWh figure often quoted towards the end of 2008. Other current estimates quote costs as low as $250 per KWh, reflecting both material and manufacturing

Figure 3: US gasoline prices versus hybrid monthly sales volume

Source: US Department of Energy/SupplierBusiness

The Hybrids Report


savings as well as considerable economy of scale benefits through the installation of new, more efficient plants.

OEMs have entered into agreements and alliances with battery specialists in a race to hold the key to energy efficiency, and the various strategies of the OEMs regarding hybrids are becoming, if not clear, more defined. However, the increasing mass of commentary both from the OEMs and from the wider industry is also adding confusion and uncertainty at the consumer choice level. As well as basic gasoline electric hybrids plug‐in hybrids, electric and fuel cell vehicles and diesel hybrids are now being discussed at length as the industry strives for answers to the medium and long term carbon emissions issues. However, according to the Synovate research, this is causing confusion and can negatively affect the risk‐averse consumers, despite their willingness to do ‘the right thing’.

The conditions required for the mass uptake of hybrids have not yet been satisfied and the following issues need to be addressed:

• More consumer choice in terms of attractive reliable models from manufacturers they trust;

• Increasing consumer commitment to ‘do the right thing’ in terms of the environment;

• Demonstrated better fuel economy;

• Rising fuel prices;

• Reduce the perceived risk associated with alternative powertrain vehicles fuelled by conflicting messages from the industry;

However, research to date would seem to indicate that hybrids are still favoured as an idea by the consumer, who wants to be seen to address the ideas of consuming and emitting less. Furthermore, the increasing environmental focus at a policy level around the world that is encouraging increasing fuel taxation and rewarding greener consumerism are having an effect, despite the short term issues associated with the current economic downturn. On the other hand the premium demanded for hybrid technology is increasingly unsustainable. Recently the beginnings of severe price competition have emerged, particularly between two key OEMs; Toyota and Honda. This picture, when added to the competition from downsized and turbocharged diesel engines and the general ‘noise’ around other progressive powertrain solutions will inevitably lead to lowering premiums for hybrid models. Therefore the speed of hybrid technology development in terms of both performance and cost reduction is increasingly important, and it is becoming imperative for OEMs to achieve significant volumes within the next few years.

Figure 4: Global hybrid production 2008 – 2015

Source: Global Insight

The Hybrids Report


Accurately forecasting the hybrid vehicle market is perhaps more difficult than forecasting the global vehicle market in general. The segment is still immature and future growth must be extrapolated from only a few years of history. Furthermore, it is not yet clear what effect the complex economic and competitive forces will have on the market. Not surprisingly, forecasts from different analysts vary widely, with global production volumes forecast by Global Insight at just over one million units in 2010 (full and mild hybrids) and approaching three and a half million vehicles by 2015. During this period the production of micro‐hybrids will progress from around two million units to nearly nine million, reflecting the fast progress it is possible to make with this technology. It is likely, however, that the US, Japan and the rest of Asia, particularly China, will be the leading markets for hybrid vehicles. Europe will continue to favour the diesel, but this will also contribute to an increasing population of diesel hybrid vehicles. Diesel electric hybrid production (full and mild hybrids) is forecast to reach around 350,000 units by 2015.

Introduction

History In 1839 Robert Anderson of Aberdeen, Scotland, built the first electric car and Dr Ferdinand Porsche is often credited with the world’s first hybrid in 1901 with a prototype that used in‐wheel motors and an inboard gas engine to recharge the batteries, making the car a series hybrid. However, he did not see any good reason to continue development, as gasoline became very cheap and the electric motors were considered prohibitively expensive. The vehicle is said to have been capable of travelling for 40 miles on battery power alone!

In 1966 the US Congress introduced first bills recommending use of electric vehicles as a means of reducing air pollution and between 1968 and 1971 three scientists working at TRW created a practical hybrid powertrain. Dr. Baruch Berman, Dr. George H. Gelb and Dr. Neal A. Richardson developed, demonstrated and patented the system called an electromechanical transmission (EMT) providing brisk vehicle performance with an engine smaller than required by a conventional internal combustion engine drive. Many of the engineering concepts incorporated in that system are used in today's hybrids.

In 1969 the GM 512, a very lightweight experimental hybrid car, ran entirely on electric power up to 10 mph. From 10 to 13 mph, it ran on a combination of batteries and its two‐cylinder gas engines. Above 13 mph, the GM 512 ran on gasoline. It could only reach a top speed of 40 mph.

The 1973 oil crisis prompted renewed interest in fuel‐efficient vehicles, and the US Department of Energy (DoE), ran tests on many electric and hybrid vehicles produced by several manufacturers. In 1974, the US Environmental Protection Agency (EPA) tested a prototype hybrid that had been created using a Buick

Figure 5: Proportions of gasoline and diesel hybrid vehicles


The Hybrids Report


Skylark body. It was certified as meeting the Agency’s guidelines for clean vehicles, but no further interest was taken in it.

In 1976, the US congress enacted the Electric and Hybrid Vehicle Research Development and Demonstration Act, with the goal of encouraging the improvement and development of batteries, electric motors, controllers and other components. General Electric was chosen to construct a parallel‐hybrid sedan, and Toyota built its first hybrid ‐ a small sports car with a gas‐turbine generator supplying current to an electric motor.

In 1979, Mother Earth News built and publicised a hybrid that averaged 83.6 mpg, and 60,000 readers wrote in for the plans. The hybrid had been developed using an Opel GT that was driven by a 6hp (4.5kW) lawnmower engine, a 400A electric motor and an array of 6‐volt batteries.

In 1989, Audi unveiled the first Audi Duo experimental vehicle, which was based on the Audi 100 Avant Quattro. The car had a 12.6hp (9.4kW) electric motor that drove the rear wheels, while the front‐wheel drive was powered by a 2.3‐litre five‐cylinder engine with an output of 136hp (101kW). A nickel‐cadmium battery was used to store the electrical energy. Two years later, Audi unveiled a second generation Duo, also based on the Audi 100 Avant Quattro. Audi later became the first European manufacturer to take a hybrid vehicle into volume production – another Duo based on the A4 Avant. The vehicle was powered by a 90hp (67kW) 1.9‐litre turbo‐diesel engine in conjunction with a 29hp (22kW) electric motor. Both power sources drove the front wheels and a lead‐gel battery stored the electrical energy. However, the Duo was not a commercial success.

When the US Clinton Administration announced the Partnership for a New Generation of Vehicles (PGNV) in 1993, Toyota was excluded from the program and launched a secret development program of its own. After several years and a billion dollars, the PNGV emerged with three prototypes that were all hybrids capable of 80 mpg. In 1997, Toyota unveiled the Prius and sold nearly 18,000 during the first year. Toyota also launched a hybrid model of its small Coaster bus in the domestic market in 1997.

Honda followed Toyota into the hybrid market with the quirky Insight in 1999, and was the first to launch in the US market. Toyota applied hybrid technology to the domestic market Crown and Estima models during 2001, and Honda followed with the Civic Hybrid in 2002. The first US‐manufactured hybrid was the Ford Escape Hybrid, which was launched late in 2004.

Drivers of hybrid vehicle development The fundamental drivers of hybrid development, as with other more fuel efficient technologies, are on the face of it quite simple: a reduction in dependence on oil for reasons of both scarcity and strategic

Figure 6: The attractiveness of hybrid technology compared to other powertrain technology

Source: AllianceBernstein

The Hybrids Report


dependence, and a reduction in noxious emissions. In addition, both of these objectives need to be achieved in market conditions where, despite the current market downturns, there are likely to be more cars produced in the next 20 years than in the last 110 years.

By 2006 global oil consumption had increased to 85 million barrels per day from 49 million in 1971 despite efficiency improvements spurred on by the oil shocks of 1973/74 and 1979/80. Within this timescale, as other industries have moved away from oil, consumption has shifted markedly toward transportation, and road transport has been responsible for around two‐thirds of the incremental growth in oil consumption since 1971. By 2030 estimates put the transportation demand at around 65 million barrels per day with non‐transportation uses running at around 56 million. Within transportation, light duty vehicles are

critical at around 32 million barrels per day.

The key drivers for the development of hybrid vehicles have for some years been debatable in terms of the ability of the technology to deliver a cost effective solution in the face of competition from other drivetrain technologies. However, this situation has changed somewhat and the economic crisis affecting the global economy can be seen as something of a catalyst for changes in the driving forces that better promote the development and uptake of hybrid technology.

Many technologies and powertrains are likely to increase fuel efficiency in the near future, including gasoline‐electric hybrids, diesel, diesel‐electric hybrids, natural gas, flex‐fuel (biofuel), all‐electric (battery only) and fuel‐cell vehicles. Over the next decade, however, it is likely that hybrid technology will be the most important. Lee Iacocca, the former CEO of Chrysler, said, “I don’t see anything on the horizon short term that can improve fuel economy faster than a hybrid”.

Hybrid‐power technology offers a more attractive set of benefits than alternative powertrains (Figure 6). Hybrids offer improved fuel efficiency and performance measured by acceleration and

horsepower (hp), lower emissions and greater convenience. Unlike diesel, hybrids do not sacrifice performance to gain fuel efficiency (diesels require additional technology such as turbochargers to approach gasoline performance); unlike biofuel vehicles, hybrids do not require special pumps at refuelling stations; unlike all‐electric vehicles, hybrids do not limit driving range.

Additionally, consumers are enjoying an increasingly wide array of model choices. Furthermore, the technology has been rapidly improving and in an industry atmosphere of cost cutting and rationalisation, hybrids stand to benefit substantially from research underway on engine, electrical component and battery technologies.

Figure 7: Potential roadmap to mass hybrid uptake

Source: AllianceBernstein

The Hybrids Report


Finally, hybrids offer tremendous flexibility: diesel and flex‐fuel engines, as well as gasoline‐burning engines, can be hybridised. Gasoline‐electric hybrids (the most common offering today) have just two weaknesses: load capacity and initial cost.

Load capacity is generally not a major issue for passenger cars, although it is a concern for pick‐up and heavy trucks, but over the next few years, diesel hybrids could emerge as the option for these segments. As for the initial price

premium, costs for this new technology are set to fall significantly as both increased competition and economies of scale benefits emerge.

Given their many advantages and limited, surmountable drawbacks, hybrid cars are likely to make up around 20% of new car sales by 2020 in the US and around 13% of global sales. Within this period JPMorgan forecasts that the on‐cost of the hybrid system will fall to $1,890 from $5,667 in 2008. Correspondingly, this means that the market for hybrid components will grow from an estimated $3.16 billion in 2008 to around $23.6 billion in 2020.

Diesel is the powertrain most often mentioned as a viable competitor to hybrids, due to its lower initial price, high fuel efficiency and high

power torque at low speeds. In Europe, where taxation makes gasoline much more expensive than it is in the US, diesel popularity has increased significantly over the past decade such that diesel’s share of new light‐duty vehicle sales in Europe had risen from about 20% in 1997 to over 50% in 2008. On the other hand diesel car sales still remain around the 3% mark and over the longer term, the conventional diesel powertrain may be complementary, rather than competitive, to the hybrid powertrain in the passenger vehicle market. This is likely to come about for several reasons: firstly, although conventional diesel engines are more fuel efficient than gasoline engines when

Figure 8: European diesel sales 1999 – 2008

Source: IHS Global Insight

Figure 9: The relationship between acceleration and fuel economy for selected VW models

Source: fueleconomy.org

Figure 10: Increasingly strict emissions standards for diesels

Source: dieselnet.com

The Hybrids Report


measured over the full cycle from oil well to vehicle wheels (on a well‐to‐wheels basis), they are not as efficient as hybrids. A Toyota study comparing vehicles of similar weight and size concluded that the diesel car has a well‐to‐wheel efficiency of 19% versus 13% for gasoline, and 32% for the Prius hybrid. Other studies provide similar results, though the magnitude of the hybrid’s advantage varies somewhat between studies.

Second, conventional diesel engines require a trade‐off between performance (acceleration) and fuel efficiency; hybrids, by contrast, improve both performance and fuel efficiency. Although diesels can deliver more torque in addition to higher fuel efficiency than gasoline equivalents, their higher torque is best used for accelerating

to low speeds and for carrying heavy loads.

Diesels perform less favourably when judged by horsepower and acceleration to high speeds than gasoline‐powered vehicles. Compared to hybrids, diesels are disadvantaged in acceleration to low speeds, since hybrids produce maximum torque instantaneously while diesels need time to achieve maximum torque.

Diesels are also likely to be disadvantaged in acceleration to high speeds because they generally have lower maximum power than gasoline and hybrid vehicles. Therefore, diesels are not a “no‐ compromise” solution in terms of performance, as hybrids have the potential to be.

Figure 11: The relationship between acceleration and fuel economy for hybrid vehicles.

Source: fueleconomy.org

Figure 12: CO2 versus cost for various powertrain options

Source: Ricardo

The Hybrids Report


Third, and perhaps most important, conventional diesel vehicles face significant regulatory challenges in many regions. While diesel engines emit less carbon dioxide than gasoline engines, they emit more nitrogen oxide and particulate matter. Thus, California, New York and several other states in the US have effectively restricted sales of diesel passenger vehicles.

Clean diesel engines and fuels may be developed in the future, but this is likely to be an expensive effort. Furthermore, it remains unclear if even these new engines and fuels can meet the increasingly stringent environmental requirements being adopted in many countries. In fact a number of OEMs have proved too reluctant to incur the expense of cleaning up diesel powertrains for the US market. VW, Audi, BMW and Mercedes‐Benz are the only mainstream OEMs offering diesel options in the US today and around nine diesel models planned for this market by other manufacturers including Nissan, Honda and GM, have recently been cancelled.

Competition from hybrids is particularly important in Europe, because Europe is where diesel has captured the greatest market share. European Union environmental standards are set to become much tighter in the next few years, which will further increase the price of diesel vehicles and is pushing OEMs towards gasoline‐electric or diesel‐electric hybrids.

The Euro 5 requirements in place today reduced allowable emissions of nitrogen oxide and particulate matter for diesel by 20% and 80%, respectively in 2008. Possible Euro 6 standards will go even further, particularly on nitrogen oxide, sometime around 2014 an additional 50% reduction compared to Euro 5. Furthermore, OEMs complying with the standards must also ensure that devices fitted for pollution control last for a distance of 160,000 km.

The cost of compliance with the increased particulate standards alone has been estimated at $500 to $1,000 per vehicle, and this could be more if medical research shows that more effective particulate filters are required to curb health risks. New, more expensive catalytic converters may also be required to reduce nitrogen oxide emissions to the target level.

Figure 13: Carbon dioxide emissions versus cost per percentage fuel reduction

Source: Ricardo

The Hybrids Report


In addition, the European Union is targeting reductions in carbon dioxide emissions to 120 grams per km (g/km) for all new passenger vehicles by 2012, versus 172 g/km today for new gasoline vehicles and 155 g/km for new diesel vehicles. Several OEMs have suggested that the cost of compliance with this new standard could initially be more than $5,000 per vehicle. This regulation therefore further motivates OEMs to embrace hybrids as a cost‐effective alternative.

Conventional diesel technology may remain the best choice for pick‐up trucks and vans that carry heavy loads, but as price premiums for hybrid vehicles decline and the technology becomes standardised, manufacturers will introduce diesel hybrids that would provide the greater torque needed. Furthermore with Europe’s large‐scale conversion to diesel over the past decade, OEMs are quickly announcing plans to introduce diesel hybrids into the European passenger car market, offering better performance, fuel efficiency and emissions than either conventional gasoline or diesel powertrains.

Significant fuel economy gains have been claimed for hybrid vehicles for many years, and at a consumer level this has proved to be a mixed blessing. Once the expectations for considerably improved fuel efficiency have been established the mixed achievements on this front across all manufacturers have seemed something of a disappointment, and many analysts and commentators have pointed out that the failure to deliver on expectations has had a negative effect on demand. However this picture has changed significantly over the past two years as consumer expectations have been pulled back and the fundamental reasons for buying a hybrid vehicle have become understood to include reasons other than just fuel economy.

This picture can be clouded considerably as fuel prices fluctuate, and although the high prices of early 2008 had the effect of making consumers pay close attention to fuel efficiency, the low prices of 2009 can be seen to have the opposite effect. In this case, consumers who are in the market for new vehicles, consider that fuel consumption improvements are not as important as they earlier believed, and certainly that the high on‐cost of a hybrid is prohibitive.

Figure 14: CO2 emissions by engine type

Source: Ricardo

The Hybrids Report


On the other hand there is little doubt that in the long term fuel prices are on an upward trend based purely on supply and demand economics operating in concert with the developed economies’ desire to disentangle supply dependence from the politically difficult Middle East.

Recent moves by the US government to set fuel consumption targets have brought the importance of fuel economy as a driver for hybrid development and consumer uptake into sharp relief. Similarly in Europe OEMs must achieve significantly lower CO2 fleet average outputs and the underlying threat of financial penalties is serving to reinforce this point where a previous voluntary agreement failed to deliver. Regardless of the technology used to achieve the results a long term woolly commitment to fuel cells and a business as usual for now strategy is no longer good enough. However, the limited timescales for the implementation of such fuel saving measures may also have the effect of promoting the already cost‐effective diesel technology available in Europe, as it will bring about the cost savings needed to make hybrid technology competitive. Indeed the increasing influence of European OEMs over the US market with the current Chrysler and GM situations may also serve to promote diesel over hybrid.

Fuel economy alone, although becoming increasingly desirable across even low fuel cost markets, has as yet failed to be enough of a driver to bring hybrid production up to mainstream industry volumes, particularly as the consumer has seen the on‐cost as prohibitive across most of the market. However, if this is seen in the context of CO2 reduction and

environmental concern, hybrid powertrains with their use of ‘clean’ electric motors at least for part of the system can be seen as a way for some consumer segments to make a statement about their ‘green’ credentials. It is indeed telling that car purchasers who might have been considered as high‐end consumers, and have purchased executive, luxury or sport models now regularly consider what are effectively mid‐range cars such as the Prius as a way of demonstrating their environmental beliefs.

Lower emissions levels are of global, regional and national interest, particularly to countries that have signed the Kyoto Protocol. Likewise manufacturers have had to adhere to increasingly stringent emissions standards that can mean both financial risk and opportunities for OEMs. The EU and Japan have the most restrictive emission standards, but these nations are already forecast to have a $300 per vehicle advantage over the US OEMs, who will need to accelerate their competing hybrid technology in order to advance in the industry.

To date OEMs have believed that hybrids will not yield the return on investment they require for some years, although Toyota are believed to be close to this situation if the current global industry demand crisis is discounted. However a view to the next round of emissions regulation shows that more OEMs are utilising the kudos of hybrid development to highlight their ‘green‘ credentials through marketing channels and are attempting to gain consumer approval by their willingness to develop and support hybrid technology in their production planning.

Figure 15: CO2 savings by hybrid type

Source: Ricardo

The Hybrids Report


Figure 13 highlights the relationship between carbon dioxide emissions reductions and the costs of fuel efficiency technology. In the figure, FC stands for Fuel Consumption, FE for Fuel Efficiency and %FE for percentage fuel efficiency benefit. The values along the x‐axis are the dollar cost divided by the fuel efficiency benefit.

Consumers today are increasingly driven by green credentials. Hybrid sales volumes have risen rapidly, despite the price premium, but the Toyota Prius has outsold its closest rival, the Honda Civic Hybrid, by some considerable distance. While this can be explained to some degree by the fact that the Prius is a full hybrid with higher EPA fuel economy ratings than the mild hybrid Civic, the Prius is also a designated hybrid vehicle with no non‐hybrid model available. It is therefore distinctive, whereas the Civic Hybrid is identical to a non‐hybrid Civic, apart from minor badge detail. Manufacturers are well aware of this, and plan to badge their hybrid offerings more distinctively.

For some years before the introduction of binding regulations with penalties for those OEMs not complying, government and state incentives have provided both manufacturers and consumers with reward for producing and purchasing hybrid cars respectively. Japan, France, China and the US to name a few countries all have developing policies for purchase and manufacturing subsidies and credits, while these measures have been seen as temporary, the push for further fiscal intervention in whatever way possible continues in the hybrid arena.

Since its early options of specific hybrid models such as the Prius and Insight, the model offering has expanded considerably to include models across the range of segments. It can be argued that the larger margins generally available on upper segment vehicles make it easier to introduce technology with a significant on‐cost rather than trying to introduce the technology in the hardest fought, most cost competitive segments. However, the use of a hybrid element in the powertrain of US pick‐up trucks and luxury brands is also less effective in delivering low fuel consumption vehicles. However, it would seem that the market has now progressed quickly to a state where a hybrid powertrain is an option along with a range of other options, including diesel and downsized ICE. Hybrids are best suited to the urban drive cycles where regenerative braking and stop‐and‐go traffic runs can highlight the more cost efficient fuel saving opportunities. On the other hand a diesel powertrain might be better suited to longer distance commuting. In this way the current competitive conditions around the world are driving towards a product offering that reflects the optimum powertrain solution for each application or duty cycle ‐ a situation already under constant consideration in the transit bus market.

However, the market developing in this fashion brings some issues to the OEMs themselves. Historically engine families with production runs amounting to decades have done changes restricted to head and smaller modifications. However, the offering wholesale of alternative powertrains including hybrids brings another dimension to the established business model, and further developments such as PHEVs and EVs will contribute to the product offering complexity. This will also drive further collaborations between OEMs of the kind that have already produced new transmissions for hybrid powertrains between BMW, Daimler and Chrysler. It may also bring new opportunities for the supply sector to make further inroads into the powertrain sector. Engines have historically been seen by many OEMs as a critical in‐house part of their product offering, but a growing variety of options will mean increased outsourcing.

However city buses and delivery trucks are already being manufactured in hybrid variants, and some forecasts predict that the hybrid heavy‐duty market will reach 25% by 2020, whereas passenger car and small‐truck penetration is expected to reach less than 10% in the same period.

The Hybrids Report


Hybrid Technology

Types of hybrid vehicle There are several ways to create a hybrid drive system using a combination of an internal combustion engine (ICE) and one or more electric motors.

The differing types can be differentiated by:

How the electric and ICE drive systems of the powertrain connect;

At what times each drive system is in operation; and

What proportion of the power is provided by each propulsion system

Most hybrids also use the electric motor(s) as generators to add charge to the battery when the vehicle is braking, retrieving some of the vehicle’s kinetic energy for later use. Many also shut off the ICE when it is not needed, thus saving energy and reducing emissions in stop‐start

traffic, although this feature is not unique to hybrids. It was pioneered by Subaru in the early 1980s and has been used, for example, in the VW Lupo 3L and Citroën C3. This is sometimes referred to as micro‐hybridisation.

The most common types of electric‐ICE hybrid are series and parallel. The parallel type is currently being applied to most hybrid vehicles. Parallel hybrid

systems can be further subdivided into ‘assist’, ‘mild’ or ‘full’, and ‘full’ can be divided into ‘input‐split’ or combined‐split’

Micro Hybrids Stop/start systems are also commonly referred to as micro hybrids, which can create confusion when looking at the hybrid market. Typically a micro hybrid uses electric motors only to supply the starter/generator and to manage engine stop/start and battery charging – sometimes with regenerative braking power and auxiliary power. The electric motor is not used to supply additional torque when the ICE is running.

The use of higher voltage electrical systems enables the use of the Integrated Starter Alternator Damper (ISAD), which has been a central component in the development of hybrids but which can bring several benefits to non‐hybrid vehicles. Indeed, many analysts believe that the ISAD will be the strongest competition to full hybrids in the medium term.

Figure 16: Ratio of engine and motor operation in the hybrid system

Source: Toyota

The Hybrids Report


As the name suggests, the ISAD integrates the vehicle’s starter motor and alternator into the flywheel, or crankshaft damper, on a conventional ICE. The starter motor, by being integrated, is “engaged” at all times and can start the engine with little noise and no wear and tear on components. Depending on the size of the battery, the starter motor can also be used to launch the vehicle from rest before the ICE is started, or can be used to provide added torque for acceleration. The engine‐starting function allows the engine to be turned off when the vehicle is stationary and the ISAD’s use during initial acceleration from rest helps to reduce emissions during the ICE’s most polluting phase.

Since an electric motor can be used as a generator when driven, the integrated starter motor functions as an alternator, but without the energy losses associated with the conventional, belt‐driven configuration. It can also be used for regenerative braking, converting some of the vehicle’s kinetic energy back into electrical energy by charging the battery.

The ISAD configuration is similar to that already used in several so‐called “mild” hybrids, of which the Honda Insight was the first commercial success. Mild hybrids, unlike “full” hybrids, cannot operate solely on electric power, apart from the initial launch function from rest. ISAD technology is typically associated with fuel economy and emissions improvements of 15 – 30%, which, while less than the potential of a full hybrid, is very attractive. General Motors uses Continental’s ISAD technology in its Chevrolet Silverado and GMC Sierra mild hybrid pick‐ups, and claims fuel economy benefits of up to 15%.

However, ISAD technology has several advantages over full hybrid technology, not the least of which being that they cost no more to produce than the components they replace. Further, major suppliers, such as Siemens and Continental, plan to produce millions of ISADs annually, which can only have a beneficial effect on unit price, making the technology low risk for automotive manufacturers, with batteries and DC‐DC converters as the only significant extra costs.

The Belt Alternator Starter (BAS)

Several manufacturers have employed similar, but less integrated, technology in the form of the Belt Alternator Starter (BAS).

The BAS, although less effective than the ISAD, is also providing competition for full hybrids because the technology is relatively inexpensive to produce, it can be fitted into existing vehicle platforms and engines without any significant modifications, and it provides some improvement in fuel economy and emissions, particularly in stop‐start conditions.

Figure 17: Continental’s ISAD Unit

Source: Continental

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

2008 2009 2010 2011 2012 2013 2014 2015

Figure 18: Micro‐hybrid production forecast


The Hybrids Report


In a BAS system, the conventional, belt‐driven alternator is replaced with a larger electric motor that acts both as a generator and a starter. When the vehicle’s engine is running, the BAS operates normally as a belt‐driven alternator and charges a 36/42‐volt battery as well as the 12/14‐volt system. As with the ISAD, ancillary units, such as power steering and air‐conditioning, are driven by the high‐voltage battery system so that they can operate without the ICE. The BAS also operates under braking as part of the regenerative system, and as the vehicle comes to a stop, the ICE is switched off until the driver takes pressure off the brake pedal, at which point the BAS operates as a belt‐driven starter motor, restarting the engine. The BAS can also be used to smooth the gear shifting of an automatic gearbox.

For highway driving, the system offers no advantage, and claims regarding improvements in fuel economy have ranged from a few%to as much as 15%. Clearly the results depend on the type of driving cycle and, as ever, the driver’s driving style.

Electronic components As well as batteries, electric motors and transmissions, electronic controllers, converters and inverters are key components in hybrids. In turn, these electronic units require components such as semiconductors and sensors that are specific to hybrids. Extra wiring harnesses are also necessary to connect hybrid components and the control units that manage the power throughout the vehicle.

An inverter converts the DC battery output to AC input for the electric motor. Under regenerative braking, this process is reversed, so that the AC output of the motor, while operating as a generator, is converted to DC to recharge the battery. A DC‐to‐DC converter converts the high voltage supplied by the main battery to a lower voltage to charge a 12‐volt auxiliary battery and supply electric power to various accessories, such as headlamps, wipers and horns. A battery‐monitoring control unit monitors the voltage, current and temperature of the high‐voltage battery.

Computer modules control the internal combustion engine and the electric motor, allowing them to run together or separately, and the transmission, whether automatic, CVT or dual clutch, is also managed electronically. A main system relay connects and disconnects electric currents between the high‐voltage battery and high‐voltage system, and shuts off the high‐voltage system in a collision to ensure the safety of vehicle occupants and rescue workers.

Hybrid vehicles have led the shift towards 36/42‐volt electrical systems because they require electrically‐powered ancillaries, all of which require sensors and electronic control units. Non‐hybrid vehicles will also increasingly require these, as will fuel cell vehicles. Fuel cell vehicles will also need other electric/electronic components, such as valves for air and hydrogen, blowers to recirculate hydrogen, hydrogen sensors, compressors and water pumps.

It is forecast that the value percentage per light vehicle of electronic systems will increase to at least 35% ($4,300) by 2010, and this will drive a move to module‐based software platforms and a consolidation of the current high number of control units despite the increasing numbers of functions to be controlled.

Series hybrids In a series hybrid, the ICE has no mechanical connection to the electric drive, but powers an electric generator to drive the electric motor and charge the battery. A series hybrid is therefore essentially an electric vehicle with a fossil fuel recharging system on board. Locomotives have used a series hybrid configuration for many years, although they do not use batteries to store energy.

Figure 19: Delphi Belt Alternator Starter

Source: Delphi

The Hybrids Report


In a series hybrid vehicle with a battery system, both sources of power can be used if necessary, and the use of wheel motors can provide all‐wheel drive. Weaknesses of the series arrangement are that it requires a separate generator, whereas a parallel system can use the electric drive motor as a generator for regenerative braking, and power delivery is limited by the electric drive motors because the ICE cannot directly drive the wheels.

Parallel hybrids Parallel systems connect both the electric motor and the ICE to a mechanical transmission. In some cases, the ICE is the predominant drive system with the electric motor operating to add extra power as required. Others can run with just the electric motor driving. Most designs combine an electric motor/generator into one unit, often situated between the ICE and the transmission where a conventional flywheel would be. A large battery is required, providing high voltage and high storage capacity. Accessories such as power steering and air‐conditioning must be powered by electric motors so that they can operate independently when the powertrain is stopped. This, in turn, offers further efficiency gains by using energy only when it is needed, rather than having ancillary systems driven at all times by the ICE.

Series/Parallel hybrids A series/parallel system combines series and parallel systems to maximise the benefits of both by using both an electric drive motor and a generator so that electricity can be generated while the electric motor is driving the wheels. Toyota’s THS system uses series/parallel technology in an ‘input split’ configuration.

Full Hybrid A full hybrid can run on just the ICE, or just the electric motor, or a combination of both. The Toyota Prius and the Ford Escape Hybrid are examples of full hybrids. A large, high‐capacity battery is required for electric‐only

operation. A full hybrid has a split drive system that allows flexibility and balances the drive from each system using a differential‐type linkage between the ICE, the electric motor and the transmission. An electronic control system manages the propulsion systems, determining which combination of the two to use in each circumstance. Typically, the ICE is shut down when the vehicle is stationary, and the vehicle is launched into motion again by the electric drive, engaging the ICE only when it is needed for extra power or to recharge the battery.

The differing torque characteristics of the ICE and electric motors are ideal for synergistic operation. An ICE’s torque is low at low engine speeds and the need for adequate power under acceleration has resulted

Figure 20: Hybrid electric vehicle drive configurations

Source: Bosch

The Hybrids Report


in the use of engines that are much larger than required for steady cruising. On the other hand, an electric motor develops maximum torque from stationary, and its efficiency tends to improve with load, making it ideal for acceleration.

The Toyota Hybrid System (THS) is an input‐split system, with only a single power split device. This keeps the mechanical componentry relatively simple, and allows the use of a smaller ICE, but has the drawback of maximum speed being limited by the speed of the smaller electric motor. Also, the efficiency of the transmission is heavily dependent on the amount of power being transmitted by the electric motor, as the multiple power conversions, each with their own losses, lead to a low efficiency path compared to the purely mechanical path. This means that at higher speeds, the efficiency of the transmission falls below that of a conventional automatic transmission with a hydraulic coupling.

A combined‐split drive system has a second planetary gear set and two clutches, enabling switching of the proportions of mechanically and electrically transmitted power in order to manage both low‐ and high‐speed regimes. However, this restricts the system to smaller, less powerful electric motors. To overcome this, General Motors, BMW and DaimlerChrysler (now Daimler and Chrysler) have been working together on a so‐called ‘two‐mode’ hybrid system, which uses two electric motors of around 50kW to 70kW to provide two electric speed ranges.

Mild or Assist Hybrids Mild or assist hybrids use the ICE for primary power, with an electric motor to provide additional power as required via a conventional powertrain. Assist hybrids differ from full hybrids in that they cannot operate normally on the electric motor alone. Honda’s hybrids use this system, which Honda calls Integrated Motor Assist (IMA), combining the company’s expertise with small, efficient gasoline engines with a low‐power electric drive and its correspondingly smaller battery capacity.

PlugIn or DualMode hybrids Plug‐In hybrids are vehicles that can run in a pure electric mode (electric motor drive) or ICE mode independently or together depending on the different driving modes, but have the facility for externally charging the battery.

These types of hybrid are known as DM hybrid in China, and are not to be confused with the Two‐Mode hybrids as described below.

Hybrid transmissions The current success of hybrids relies upon several factors including a robust versatile transmission system. The architecture of many hybrid systems depends on the transmission system for its successful implementation, so it is essential to consider the transmission function during the specification and development. To date OEMs have often approached hybrids with a mix‐and‐match concept in order to get an acceptable balance between performance and fuel consumption.

This means there are degrees of hybridisation which have evolved from ‘mild’ hybrids to ‘full’ hybrids and further to include so‐called ‘plug‐in’ hybrids with larger batteries, right up to full EVs. The market demands particular levels of shift characteristic, shift quality, gear change speed, launch quality, creep and hill‐hold, and the acceptability of these characteristics changes across market sectors and geographic regions.

Figure 21: One‐Mode Hybrid Input‐Split EVT.

Source: GM, Daimler, BMW

The Hybrids Report


Manual transmissions are acceptable in some mild hybrid systems, however if the hybrid system requires the transmission to be a part of the hybrid control system, then an MT is not suitable. The choice for an automated transmission is now very wide with ATs, CVTs, AMTs and DCTs all available. Hybridisation represents opportunities to make improvements to transmission features and functions and to make systems, particularly AMTs acceptable where otherwise they are broadly unacceptable.

Examples of ‘full’ hybrids are the Toyota Prius and the Ford Escape, which are built to be powered by the internal combustion engine independently, or the electric motor independently, or a combination of both. Both power sources are connected by link to the transmission. The pathway of power is divided between mechanical and electrical. Thus, depending on what kind of drivetrain structure it houses, the vehicle is able to utilise an internal combustion engine, an electric motor and in many cases an electric generator, with power usage divided in relation to

driving conditions. For example at standstill, an electric motor can provide maximum torque as opposed to the minimal torque at lower engine revolutions in a conventional vehicle. The use of the generator can provide power to an electric motor (or several motors) that in turn can move the vehicle while the battery is simultaneously charging. More efficiency gains are possible by linking accessories such as power steering to the electric motor instead of the combustion engine. Similarly supercapacitators can be fitted to certain hybrid drivetrains to minimise the loss of battery power. Charging options during idling and cruising can also be extended to boost engine power when road demand dictates and conversely can be utilised to produce re‐generative braking whilst actually improving fuel economy.

‘Plug‐in’ hybrids (PHEVs) are widely forecast to become a significant part of the hybrid vehicle market in the future. They allow the driver the freedom to operate in full electric mode for small journeys and general commuting, but for longer distances the fuel‐dependent mode can be utilised. In addition to this its larger capacity battery can be recharged using an electrical power grid (national power source), hence the concept of ‘plug‐in’. It is also not confined to just conventional gasoline fuel but can be designed for diesel, bio‐diesel or hydrogen.

Figure 22: Two‐Mode Hybrid Input‐Split EVT


Figure 23: One‐Mode Hybrid Input‐Split EVT

Source: GM, Daimler BMW

The Hybrids Report


In terms of transmission design, the latest developments in ATs and DCTs incorporate features that allow them to be considered relatively hybrid ready. This can be in terms of limited hybridisation by incorporation of an integrated starter alternator damper (ISAD), or more sophisticated systems.

OneMode and TwoMode Hybrids In 2006, an alliance was formed between General Motors, Daimler and BMW called the Global Hybrid Cooperation Group, with the sole purpose of developing hybrid technology and more specifically the two‐mode hybrid transmission. This was the basis for establishing the Electrically Variable Transmission (EVT). Similar to that of Continuously Variable Transmission (CVT) where the speed of the engine is varied mechanically, ECT allows for the same process but by electrical means as well as storing energy electrically in a battery. Overall the result is system efficiency and reduced fuel consumption. However the group acknowledged problems with the transmission of electrical power like efficiency, packaging and cost

issues, thus the technology developed was aimed at eliminating or reducing these problems. This became the birth of the two‐mode hybrid.

While the group used a modern automatic transmission with fixed gear ratios as one of the concepts for its two‐mode hybrid, the EVT provided the stronger concept for exploring power‐split transmission.

The reader is guided to a variety of earlier patents that appear to describe this configuration very closely, including work from Stridesberg.

Initially the one‐mode EVT was the most commonly used hybrid system, and was made up of two electric motors and one planetary gear set (without clutches). The power flowing through the transmission was split into two ways (input‐split): power flow begins from engine to gear set and through the transmission where it would then split. First, mechanically, which ultimately transfers to the final drive; and second, electrically, which passes through the first electrical motor and/or second electrical motor before passing to the battery and eventually back into mechanical output.

One of the inherent problems with the one‐mode EVT was the fact that there was seldom enough electrical power to match that of the engine, requiring larger sized motors which results in reduced efficiency, packaging issues and increased manufacturing costs. This is ultimately attributed to the one‐mode hybrid only having a single transmission ratio which impacts the electrical path in the form of power loss, making this option suitable for small to medium sized vehicles at best.

The two‐mode hybrid was designed to combat these problems, and essentially the difference is that a dual EVT mode is added providing a second clutch (with torque advantage at low speeds) which allows a two‐way power flow through the transmission. Alternately between each clutch the system runs as both a compound‐split EVT and an input‐split EVT, thus increasing the range of transmission ratios.

With both compound and input options the vehicle has the ability for electric‐only launch, engine off idling, engine‐off during deceleration, plus the boost to the engine electrically and energy capture in deceleration. High speed cruising is more efficient and there is minimum electrical power loss.

Likewise where the one‐mode EVT requires much larger cumbersome motors, the two‐mode EVT allows for compact sized motors aiding regenerative braking.

As far as General Motors, Daimler and BMW Group are concerned the hybrid drivetrain is here to stay and 2007 – 2008 have seen more two‐mode hybrids in the marketplace in a wide variety of vehicle segments.

Figure 24: Two‐Mode Hybrid with Input‐Split and Compound‐Split EVT Modes.

Source: GM, Daimler BMW

The Hybrids Report


Overall, the two‐mode hybrid offers General Motors, Daimler, and BMW Group customers an optimal combination of performance, fuel economy and comfort in compact, efficient packages. Motor peak and continuous power are reduced by the options of operation in input‐split, compound‐split or fixed gear parallel‐hybrid operation. The fact that motor size is not only smaller but less dependent on engine size enables a more conventional and smaller hybrid transmission package and allows the two‐mode hybrid to be offered on a wider range of vehicles while reducing overall system cost.

The first two‐mode hybrid to be offered for sale by the Global Hybrid Cooperation will be for rear wheel drive SUVs and other full‐size light trucks. This transmission will be featured in General Motors and Chrysler vehicles, starting with the 2008 Chevrolet Tahoe followed shortly after by a Dodge Durango. Figure 25 displays the exterior of the two‐mode hybrid transmission for rear wheel drive trucks, which will be installed in North American V8 truck engines.

Each of the members of the Global Hybrid Cooperation will also be offering a more compact two‐mode hybrid transmission for rear‐wheel‐drive luxury cars and other vehicles which require a more compact transmission. This transmission will be featured in a variety of General Motors, Daimler, Chrysler and BMW Group vehicles.

Although the two‐mode hybrid design will be jointly developed, the hybrid drive‐train system will be integrated into the vehicles by the manufacturers taking into account the brand specifications.

Regenerative braking There are a number of regenerative braking system designs and all of the major braking system manufacturers now have products available. Continental uses a conventional ESC unit allowing the Regenerative Brake System to perform all the usual braking interventions and stability functions (e.g., ABS, EBV, TCS, ESC, BAS, OHB‐V, ACC, etc.).

The company’s ESC Hybrid is based on a standard hydraulic brake system. The only additional component required is a brake pedal position sensor. When the driver depresses the

Figure 25: Two mode hybrid transmission.


Figure 26: Regenerative Braking System

Source: Continental

The Hybrids Report


brake pedal, the driver activates the hydraulic brake. Simultaneously, the pedal position sensor measures the brake pedal stroke. The brake HECU converts the brake pedal stroke into a deceleration torque and commands an electric generator to achieve the torque. In essence, the driver simultaneously activates the conventional hydraulic brake and the electric generator based brake. The recuperation focuses on the dominant vehicle deceleration range (< 0.1g).

The driver compensates the decreasing generator torque at low vehicle speed. To increase the recuperation efficiency, the effect of the hydraulic brake is deferred to a higher brake pedal stroke using a hydraulic gap (also called eGap) in the brake HECU. The hydraulic gap takes advantage of the already existing valves in the brake HECU.

TRW's system, called Slip Control Boost (SCB) had its first production application on the General Motors two‐mode hybrid SUVs and the fuel cell Equinox that is being used for Project Driveway. Because hybrids and EVs don't necessarily have a vacuum source available for brake boost, the SCB system incorporates a hydraulic brake booster and a high pressure accumulator to supply brake pressure on demand. SCB also provides full slip control functionality, including ABS, traction control and stability control. TRW has also announced a second‐generation version SCB2 that is 25% smaller and lighter than the original. The SCB2 system can also be used on diesel vehicles to replace the vacuum pump or hydraulic assist systems for the brakes. This should also be a lower cost which will contribute to automakers reducing the costs of their hybrid and electric vehicles.

Electric motors Motion is produced by magnetic attraction/repulsion. Magnetic field may be produced by permanent magnets or current flowing in a wire. To get rotation, the current and/or magnetic field must change as the rotor rotates. There are many different types of motor, the main ones being:

AC Motors An AC motor is an electric motor that is driven by an alternating current. It consists of two basic parts, an outside stationary stator having coils supplied with AC current to produce a rotating magnetic field, and an inside rotor attached to the output shaft that is given a torque by the rotating field.

There are two types of AC motors, depending on the type of rotor used. The first is the synchronous motor, which rotates exactly at the supply frequency or a submultiple of the supply frequency. The magnetic field on the rotor is either generated by current delivered through slip rings or by a permanent magnet.

The second type is the induction motor, which turns slightly more slowly than the supply frequency. The magnetic field on the rotor of this motor is created by an induced current.

DC Motors A DC motor works by converting electric power into mechanical work by forcing current through a coil and producing a magnetic field that spins the motor. One drawback to the motor is the large amount of torque ripple that it has. The reason for this excessive ripple is because the coil has a force pushing on it only at the 90° and 270° positions. The rest of the time the coil spins on its own and the torque drops to zero. The torque

Figure 27: EV motors

Source: SupplierBusiness

The Hybrids Report


curve produced by this single coil (always more than one coil), as more coils are added to the motor, is smoothed out. The resulting torque curve never reaches the zero point and the average torque for the motor is greatly increased. As more and more coils are added, the torque curve approaches a straight line and has very little torque ripple and the motor runs much more smoothly. Another method of increasing the torque and rotational speed of the motor is to increase the current supplied to the coils. This is accomplished by increasing the voltage that is sent to the motor, thus increasing the current at the same time.

Brushed Motors

The brushed DC motor generates torque directly from DC power supplied to the motor by using internal

commutation, stationary permanent magnets, and rotating electrical magnets. Advantages of a brushed DC motor include low initial cost, high reliability, and simple control of motor speed. Disadvantages are high maintenance and low life‐span for high intensity uses. Maintenance involves regularly replacing the brushes and springs which carry the electric current, as well as cleaning or replacing the commutators. These components are necessary for transferring electrical power from outside the motor to the spinning wire windings of the rotor inside the motor.

Synchronous DC Motors

Synchronous DC motors, such as the brushless DC motor and the stepper motor, require external

commutation to generate torque. They lock up if driven directly by DC power.

Brushless DC Motors

Brushless DC motors use a rotating permanent magnet in the rotor, and stationary electrical magnets on the motor housing. A motor controller converts DC to AC. This design is simpler than that of brushed motors, because it eliminates the complication of transferring power from outside the motor to the spinning rotor. Advantages of brushless motors include long life span, little or no maintenance and high efficiency. Disadvantages include high initial cost, and more complicated motor speed controllers.

High power brushless DC motors are at the root of most electric vehicle technology. These motors are essentially AC synchronous motors with permanent magnet rotors.

Synchronous motors These are distinguished by a rotor spinning with coils passing magnets at the same rate as the alternating current and the resulting magnetic field which drives it. They can be said to have zero slip under usual operating conditions in contrast with an induction motor, which must slip in order to produce torque.

Synchronous motors have the following advantages over non‐synchronous motors:

Speed is independent of load, provided an adequate field current is applied;

Accurate control is possible in speed and position using open loop controls, e.g. stepper motors;

Synchronous motors will hold their position when a DC current is applied to both the stator and the rotor windings;

Their power factor can be adjusted to unity by using a proper field current relative to the load;

Furthermore, a "capacitive" power factor, (current phase leads voltage phase), can be obtained by increasing this current slightly, which can help achieve a better power factor correction for the application overall; and

Their construction allows for increased electrical efficiency when a low speed is required.

Examples of synchronous motors are:

Brushless permanent magnet DC motors;

The Hybrids Report


Stepper motors;

Slow speed AC synchronous motors; and

Switched reluctance motors.

The electric motor for an EV can be sited in a number of locations. Mitsubishi has elected to work with an in‐wheel motor electric vehicle (MIEV) concept, (the company also envisages the utilisation of this technology with hybrid powertrains and fuel cell vehicles).

The in‐wheel motor makes it possible to regulate drive torque and braking force independently at each wheel without the need for any transmission, drive shaft or other complex mechanical components. The fact that the drive system is housed inside the wheel itself offers significantly greater design freedom and also makes it easier to locate such space‐consuming components as the battery system, fuel cell stacks and hydrogen tanks used in hybrid and fuel cell vehicles. However, the packaging of traditional foundation brakes, which are required by construction and use regulation, is problematic.

UK company PML Flightlink has developed its Hi‐Pa Drive system, a disruptive (through the use of a 1‐switch‐per‐coil inverter system) vehicle propulsion unit that can be used in‐wheel. It features a fully integrated power delivery system and development platform including both the in‐wheel motor that can act as a generator or brake and is several times lighter, smaller and more powerful than the conventional electronic propulsion systems and generators it replaces. It also features embedded control electronics that can manage the control of the motors. The integrated power management system distributes drive power to the motor and then recaptures and feeds most of that energy back into the battery using a regenerative system. Intelligent control software is used to optimise efficiency and vehicle performance while giving drivers a significant feel of control over the driving experience.

Indeed, one of the drawbacks of the initial range of technology developed for EVs is a perceived lack of involvement for the driver used to using conventional vehicles.

US electric car maker Zapp has signed an exclusive $10 million deal with PML Flightlink, whose wheel centred technology is to play a major role in the next generation EVs that are currently in design with Zapp Lotus Engineering. The vehicles currently in development boast a top speed of 155mph, 0‐60mph in 4.8 seconds and a peak 644hp. The PML systems bring the advantage of independent quad electric drive, traction control and anti skid built into each wheel, regenerative braking for energy recovery, good acceleration and top speed, around 80 mpg via onboard engine/generator and no need to recharge batteries (although you can if you wish). Although in the prototype Mini QED a small petrol motor is used for re‐charging purposes only, this can be turned off.

The EV is meant to be a simpler machine with fewer moving parts than the internal combustion engine, however, there are as yet far more unknowns surrounding EV technology. The principal technical hurdle for the wider application of pure electrical vehicles is the development of the electrical storage device i.e. battery technology.

The other crucial and expensive part of the EV is the control electronics for the battery, and this needs to achieve the correct low cost/high efficiency level.

The Hybrids Report


Switch reluctance machines Switch reluctance machines work through rotation caused as a magnetically permeable rotor moves to minimise reluctance the magnetic field creates by the stator coils.

The advantages are:

They are very robust due to simple rotor with no windings;

Nearly all losses occur in stator, which has a few concentrated coils;

High starting torque with a wide speed range;

Torque ripple (“cogging”) can be higher than other motor types ‐ which may also cause acoustic noise;

o Torque ripple can be improved by increasing number and shape of poles; and

o Noise characteristics can be improved by careful housing design.

A simple inverter (no shoot‐through);

o Only four mosfets per three phases is possible if only used as a motor.

Will still function with one lost phase.

These characteristics result in the increased use of switch reluctance machines in the automotive sector, particularly considering their low relative cost.

Battery Technology Current battery manufacturing trends

As the manufacture of electric vehicles gains momentum, one of the most intense areas of development is that of battery technology. Battery makers are under immense pressure to produce smaller, more powerful and cost effective batteries, whilst at the same time conforming to environmental compliance and safety. Two things are happening in car design that are having far‐reaching consequences in automotive battery technology.

Firstly, power consumption is relentlessly increasing with conventional vehicles. Systems that were once engine driven have changed to electric power to reduce fuel consumption through parasitic engine load, and the customer has a continuing appetite for more features and gadgets. Renault estimates that since 1980, electrical power consumption has increased ten‐fold and some larger vehicles today require around 5 kilowatts. However, despite the talk of 42‐volt systems the industry has been very slow in development.

Figure 28: Switch reluctance machines

Source: Ricardo

Figure 29: Battery price trend forecast

Source: Volkswagen

The Hybrids Report


However, another set of electrical requirements, driven by the use of alternative power systems entirely are now driving considerable technology changes. As illustrated by Figure 31, vehicle applications require either high energy or high power density batteries.

Despite the fact that battery technology is at the forefront of electric and hybrid progress, the battery industry has seen a demise of the smaller manufacturers and an upturn in the larger manufacturers consolidating to compete for global market share. Only the stronger players remain and this group includes Exide Technologies, Johnson Controls – Saft, Delphi and GM Yuasa. However that has not stopped companies that are less known for their automotive sectors, such as Panasonic, Sanyo and Cobasys from competing.

At the same time more stringent legislation in emissions and recycling options are forcing the market away from lead based batteries and more toward nickel metal hydride and lithium‐ion technology. Several start‐up companies are already emerging to tender for contracts to develop the technology and secure a future in the EV, HEV and PHEV markets. Compact Power Inc (CPI), which is a subsidiary of Korean battery manufacturer LG Chem, was recently awarded a contract by the United States Advanced Battery Consortium (USABC) to develop lithium‐ion technology specifically for PHEVs.

Similarly BYD Auto, a Chinese subsidiary of BYD Group, has developed a 20 kWh lithium‐ion phosphate battery pack for its recently displayed plug‐in hybrid called the F6DM, showcased at the North American International Auto Show in January 2008. It was constructed through BYD’s own production cells and is said to be able to achieve a 50% recharge in ten minutes, is Euro 4 compliant and only emits 70 g CO2/km. BYD is confident they can market its product with associated technology in the next three to five years.

Lead acid

Lead‐acid batteries were invented in 1859 by French physicist Gaston Planté and they are the oldest type of rechargeable battery. Despite having the second lowest energy‐to‐weight ratio (next to the nickel‐iron battery) and a correspondingly low energy‐to‐volume ratio, their ability to supply high surge currents means that the cells maintain a relatively large power‐to‐weight ratio. These features, along with their low cost, make them attractive for use in cars to provide the high current required by starter motors. Today lead is still relatively cheap, it is recyclable and performs well at low charge. However this technology does not work under deep cycle conditions.

Starting batteries

Lead acid batteries designed for starting automotive engines are not designed for deep discharge. They have a large number of thin plates designed for maximum surface area, and therefore maximum current output, but which can easily be damaged by deep discharge. Repeated deep discharges will result in capacity loss and ultimately in premature failure, as the electrodes disintegrate due to mechanical stresses that arise from cycling. A common misconception is that starting batteries should always be kept on float charge. In reality, this practice will encourage corrosion in the electrodes and result in premature failure. Starting batteries should be kept open‐circuit but charged regularly (at least once every two weeks) to prevent sulphating.

Deep cycle batteries

Specially designed deep‐cycle cells are much less susceptible to degradation due to cycling, and are required for applications where the batteries are regularly discharged, such as photovoltaic systems, electric vehicles (forklift, golf cart, electric cars and others) and uninterruptible power supplies. These batteries have thicker plates that can deliver less peak current, but can withstand frequent discharging.

Fast and slow charge and discharge

When a battery is charged or discharged, this initially affects only the reacting chemicals, which are at the interface between the electrodes and the electrolyte. With time, these chemicals at the interface spread by diffusion throughout the volume of the active material.

The Hybrids Report


If a battery has been completely discharged and next is given a fast charge for only a few minutes, then during the short charging time it develops only a charge near the interface. After a few hours this interface charge will spread to the volume of the electrode and electrolyte, leading to an interface charge so low that it may be insufficient to start the car.

On the other hand, if the battery is given a slow charge, which takes longer, then the battery will become more fully charged, since then the interface charge has time to redistribute to the volume of the electrodes and electrolyte, and yet is replenished by the charger.

Similarly, if a battery is subject to a fast discharge (such as starting a car, which is a draw of some 200 amps) for a few minutes, it will appear to go dead. Most likely it has only lost its interface charge; after a wait of a few minutes it should appear to be operative. On the other hand, if a battery is subject to a slow discharge (such as leaving the car lights on, which is a draw of only 6 amps), then when the battery appears to be dead it has probably been completely discharged.

Nickelmetal hydride (NiMH) The first commercial variety of NiMH appeared on the market in the late 1980s based on electrode research and development carried out by Dr Masahiko Oshitani from Yuasa Company (formerly Yuasa Battery Japan). While the original batteries were used in electronic applications, today they have become popular in many HEV applications and are predominantly being developed for use in hybrids by most major OEMs. Automakers and EV up‐graders are fast becoming aware of the high specific energy and long life cycle associated with NiMH batteries. They are much less expensive than nickel cadmium batteries and less toxic (NiCad batteries have been banned for automotive use due to the material toxicity), and also offer around 50% higher energy density (50 to 60Whr/kg), have low internal impedance that allows high discharge rates and have a higher cycle resistance. However they have a high self‐discharge rate at around 30% per month.

Figure 30: Battery technology evolution

Source: Ricardo

Figure 31: Energy storage overview

The Hybrids Report


Original patents for NiMH were held by Ovonics whose battery development and manufacturing ventures caught the eye of General Motors in 1994 and, through a series of acquisitions and purchase agreements, have now passed to Cobasys LLC which is a 50:50 joint‐venture between Chevron Corp and Energy Conversion Devices Inc. They have supplied NiMH batteries and various battery control systems. However, the company has been caught in funding limbo since September 2007, when Chevron Technology Ventures filed claims against Ovonics. Chevron asserted damages totalling $162 million and other relief, alleging among other things that the alternative energy company withheld funding for Cobasys.

The two sides suspended arbitration in February 2008 to pursue a sale to GM, But in March 2009 the OEM notified ECD and Chevron it would not purchase Cobasys.

Complicating matters for Cobasys is a lawsuit filed during 2008 by Daimler, which alleges the company failed to supply battery packs for a planned Mercedes‐Benz hybrid SUV after the OEM paid it $6 million. Cobasys was subsequently at the centre of a recall involving 9,000 2007 Saturn Aura and Vue hybrids. The company claims to remain an active battery supplier to GM, saying that it was also supplying batteries for the two‐mode hybrid Saturn Vue, and it was among the suppliers being considered for a lithium‐ion plug‐in Vue to be produced in 2011.

Despite initial bad publicity and accusations that Cobasys has tried to monopolise the NiMH market, recent contracts with GM highlight their desire to utilise the technology in the development of hybrids. In keeping with this, Cobasys provided the NiMH batteries for the Saturn Aura hybrid sedan released by GM in 2007 and will do the same with the Chevrolet Malibu hybrid due for release in late 2008.

There are four main suppliers of NiMH batteries for automotive use. They are Japan’s Panasonic and Sanyo, China’s GP Industries, Johnson Controls from US and the aforementioned Cobasys. Ford is using batteries from Sanyo especially for its Ford Escape Hybrid, while Toyota sources from Panasonic and Honda uses both companies.

However, battery chemistry is steadily moving away from lead acid and NiMH to Li‐ion and Zebra; ultra capacitors and flywheels are also being developed for other niche applications. Furthermore, the high and rising cost of nickel, and the reducing cost of Li‐Ion technology due to increasing scale will eventually produce a cost parity situation.

Sodium nickel chloride (NaNiCl) A promising future battery for electric propulsion of vehicles is the sodium‐nickel chloride battery often referred to as a ZEBRA (Zero Emission Battery Research Activities) variety. It is a high temperature battery that offers a higher energy density (around 100Wh/kg) than NiMH along with similarly low internal impedance. It has a lower cycle resistance and although its cooling requirement in operation is easily accommodated, it requires heating in order to operate again after standing. It can be left unplugged for significant amounts of time without incurring damage, but before driving can continue it must be re‐heated to its standard operating temperature, which is considered relatively high and sits at around 270° ‐ 350° C. As a result, battery temperature is used to sustain temperature.

NaNiCl batteries have been the topic of significant research in recent years, and companies such as AEG and Mercedes‐Benz have tested this technology in various applications demonstrating that the battery has a potential calendar life of approximately five years and could essentially be available at a low cost depending on economies of scale. It has been thought to be ideal for applications where battery usage is continual, for example in taxis and delivery vans.

The Hybrids Report


In June 2007 an engineering team at Imperial College London developed and tested a series‐hybrid with a combined powertrain that consisted of an Intermediate‐Temperature Solid Oxide Fuel Cell (IT‐SOFC) with a ZEBRA battery (manufactured by Beta Research and Development). SOFC fuel cells operate at a higher temperature than PEM Fuel cells (Polymer Electrolyte Membrane or Proton Exchange Membrane) and in general have a greater level of fuel flexibility. By connecting these separate technologies the result is overall system efficiency, as the battery provides maximum power while the fuel cell operates in a predominantly always‐on mode. The SOFC works in conjunction with a fuel processor, which uses heat generated by the SOFC as well as from the battery. In effect the heat can be re‐utilised for additional power generation.

Such technology is still in the development phase with respect to automotive use but points the way to greater and more effective solutions.

ZEBRA batteries have the following advantages:

Over a discharge of one hour, the Zebra battery delivers double the energy and is half the size when compared to the lead‐acid cell;

Range of battery configurations available from 2 to 50kWh;

Energy is stored by the transfer of sodium ions through a solid electrolyte of beta‐alumina ceramic, leaving a coating of nickel chloride on the nickel powder granules of the positive electrode;

0 to 80% charging in 75 minutes; and

Normal operating temperature 250°‐300° C.

However, self discharge and the energy required for self‐heating is a serious problem to overcome. These effects can flatten a battery in five days.

Lithiumion Perhaps the technology best positioned to dominate the automotive world is Lithium Ion Phosphate (LiFePO4) commonly called lithium‐ion. Predictors are saying that these batteries will eclipse all others in the hybrid/electric world of the future, and already the technology is being primed to take over where other technologies have left off. Most OEMs have already recognised its potential and are including lithium‐ion development in their hybrid strategies. As the price of crude oil has increased, the race to provide alternative electric powertrains has snowballed and will continue to do so, until the price for the average battery and electric power supply to a vehicle becomes a mere fraction of the cost once incurred through a gas‐powered vehicle.

Figure 32: A typical Zebra battery module

Source: Rolls‐Royce

The Hybrids Report


The three primary functional components of a lithium‐ion battery are the anode, cathode, and electrolyte, for which a variety of materials may be used. Commercially, the most popular material for the anode is graphite. The cathode is generally one of three materials: a layered oxide, such as lithium, one based on a polyanion, such as lithium‐ion phosphate, or a spinel, such as lithium manganese oxide, although materials such as TiS2 (titanium disulphide) were originally used. Depending on the choice of material for the anode, cathode, and electrolyte, the voltage,

capacity, life, and safety of a lithium‐ion battery can change dramatically.

In January 2008, the world’s first lithium‐Ion factory was opened in Nersac, France, by leading battery specialists Johnson Controls in a joint‐venture with Saft Advanced Power Solutions. The factory is intended to mass produce lithium‐ion batteries specifically for electric and hybrid vehicles. It is designed to support customers such as GM, Chrysler and Mercedes‐Benz, but with the added intention of expanding the operation into Asia and other regions as a global operation. Officially it looks like the lithium‐ion battery is very much here to stay.

These batteries have been widely used in portable and consumer electronics, but in recent times lithium‐ion has been developed to the point that considerable scope for further development is imminent. They have an exceptionally good energy‐to‐weight ratio and a slow loss of charge when not in use. They offer energy density up to 125 W/kg with some researchers recording levels as high as 2000 W/kg.

However, lithium‐ion batteries can suffer from thermal runaway under certain conditions, and this risk has been minimised by more stringent selection of materials used in their production to enhance their safety. The other major concern facing manufacturers was the cost to produce these types of battery. Although relatively cheaper than NiMH varieties, with small production numbers costs, have historically been high. However, economies of scale effects as production numbers grow should make lithium‐ion cost viable against a backdrop of increasing nickel prices adversely affecting the cost of NiMH technology. This will also help to reduce the overall cost premium of hybrid technology.

Continental is another battery specialist that began production of lithium‐ion batteries in 2008, although they estimate fairly small production numbers initially. They also have a contract with GM to develop the product for their electric drive system called E‐Flex, which is project designed to enhance hybrid and electric drive vehicles as featured in their Chevrolet Volt concept.

Similarly there seems to be a race to develop this technology as fast as possible, with Japan focusing research and development resources on battery development. Japan’s Ministry of Economic Trade and Industry (METI) is planning a research project through business and academic channels to create an electric vehicle by 2015 on the same cost basis as a standard minicar variety. This includes an extra task to

Figure 33: Lithium‐ion battery pack

Source: Bosch

The Hybrids Report


the battery manufacturers concerned to develop a high capacity lithium‐ion battery set at 85% less than its current cost structure.

Nissan has recently signed a joint‐venture agreement with NEC Corporation and subsidiary NEC Tokin to mass produce advanced lithium‐ion batteries for use in electric‐powered vehicles. The new company is called Automotive Energy Supply Corporation (AESC) and has begun trial production of lithium‐ion batteries for a wide range of automotive applications at its factory in Zama, Kanagawa Prefecture, Japan.

With start‐up capacity at 13,000 units per year, Automotive Energy will gradually increase battery production to 65,000 units a year by 2010. The company will manufacture the batteries for use in Nissan electric vehicles and hybrid vehicles to be introduced in Japan and the United States in 2010.

The batteries employ a compact module comprised of laminated‐type cells that contribute to more efficient packaging. The use of a manganese‐type electrode reportedly offers thermal stability and the laminated structure improves cooling.

Automotive Energy intends to mass produce and eventually market its batteries to other interested OEMs.

Germany also has its own project through Volkswagen who has an alliance with STEAG Saar Energie, Bosch, Evonic Degussa, BASF and Li‐Tec in order to champion a lithium‐ion initiative, which has been co‐funded with a €60m investment through Germany’s Federal Ministry for Education and Research.

Liion technology improvements Improvements in Li‐ion technology focus on several areas, and often involve advances in nanotechnology and microstructures:

Figure 34: Energy density versus output density in battery systems

Source: METI

The Hybrids Report


Increasing cycle life and performance (decreases internal resistance and increases output power) by changing the composition of the material used in the anode and cathode along with increasing the effective surface area of the electrodes (related developments have helped ultracapacitors);

Improving capacity by improving the structure to incorporate more active materials; and

Improving the safety of lithium‐ion batteries.

Manganese Spinel Cathodes

LG, which is the third largest producer of lithium‐ion batteries, uses the lithium manganese spinel for its cathode. It is working with its subsidiary CPI to commercialise lithium‐ion batteries containing manganese spinel for HEV applications. Several other companies are also working on manganese spinel, including NEC and Samsung.

Lithium Iron Phosphate Cathode with Traditional Anode

The University of Texas first licensed its patent for lithium iron phosphate cathodes to Hydro‐Quebec. Phostech was later spun off from Hydroquebec for the sole development of lithium iron phosphate.

Valence Technology, located in Austin, Texas, has also been working on lithium iron phosphate cells. Since March 2005, the Segway Personal Transporter has been shipping with extended‐range lithium‐ion batteries made by Valence Technology using iron phosphate cathode materials. Segway chose to build its large‐format battery with this cathode material because of its improved safety over metal‐oxide materials.

In November 2005, A123Systems announced the development of lithium iron phosphate cells based on research licensed from MIT. While the battery has slightly lower energy density than other competing lithium‐ion technologies, a 2‐Ahr cell can provide a peak of 70 amps without damage and operate at temperatures above 60° C. Their first cell is in production (1Q/2006) and being used in consumer products including power tools, aviation products, automotive hybrid systems and PHEV conversions.

Traditional Cathode with Lithium Titanate Anode

Altairnano, a small firm based in Nevada, has announced a nano‐sized titanate electrode material for lithium‐ion batteries. It is claimed the prototype battery has three times the power output of existing batteries and can be fully charged in six minutes. However, the energy capacity is about half that of normal Li‐ion cells. The company also says the battery cells have now achieved over 9,000 charge cycles and they still retain up to 85% charge capacity, so durability and battery life are much longer, estimated to be around 20 years or four times longer than regular lithium‐ion batteries.

The batteries can operate from ‐50 °C to over 75 °C and will not explode or result in thermal runaway even under severe conditions, because they do not contain graphite‐coated‐metal anode electrode material. The batteries are currently being tested in a production car made by Phoenix Motorcars.

Combined anode and cathode developments

EnerDel, which is jointly owned by Ener1 and Delphi, is working to commercialize cells containing a titanate anode and manganese spinel cathode. Although the cells show excellent thermal properties and cyclability, their low voltage may hamper commercial success.

The Hybrids Report


Supercapacitors and ultracapacitors Another energy storage technology that is attracting research and development attention is that of the Super – or Ultra capacitor (Supercap/Ultracap) also known as Electrochemical Double Layer Capacitors (EDLC). An Ultracap is an electrochemical energy storage device with exceptionally high volumetric capacitance energy. It was first noticed by engineers at General Electric but not fully explored until 1966 when Standard Oil of Ohio tripped over the concept while researching fuel cell technology. They eventually passed the licence agreement to NEC who began marketing the concept in 1978. Today the technology is worth approx $400 million in the US.

In relation to energy density general ultracapacitors rate approximately 0.5 ‐ 10 Wh/kg. By comparison a lead‐acid battery is around 40 Wh/kg whereas lithium‐ion batteries rate closer to 120 Wh/kg. Relative to ordinary batteries ultracapicitors offer a much higher power density approximately ten to one hundred times as great as the following diagram depicts.

According to the US Energy Department this class of capacitors can store enough power to be useful in advanced automotive powertrain applications. Subsequently ultracapacitor technology has achieved performance levels that are useful for power assist hybrid vehicles and for use in buses, medium and heavy duty trucks and other large vehicles. Ultracapacitors pack up to 100 times the energy that conventional capacitors offer and they deliver ten times the power of ordinary batteries. They obtain a higher overall energy conversion efficiency especially during urban driving cycles and, with extended power availability, allow functions to remain during outages in the main power source.

Their capabilities have become integral to OEM development programs for low‐emission, fuel‐efficient hybrid powertrains and advanced electrical drive systems. Although they are sensitive to temperature, if used appropriately ultracapacitors can last over six years which places them as a rival technology to diesel power in terms of cost, but also with exceptional emissions advantages. Plus they are about one‐third the weight and one‐half the volume of conventional batteries.

NASA has enjoyed significant success at its Glenn Research Centre with ultracapacitor energy storage as part of its Hybrid Power Management Program (HPM) which was utilised in many applications but, specifically in a NASA Hybrid Electric Transit Bus (HETB), a 40 ft transit bus with hybrid drive and a gross weight exceeding 37,000lb. In their research they discovered that ultracapacitors had many advantages in comparison with batteries. One particular benefit was the ability to charge and discharge an ultracapacitor over one million times, which improves system reliability and reduces life‐cycle costs. Likewise, environmental impacts are greatly reduced by the recyclable components of ultracapacitors and they are significantly efficient in capturing recharging energy. They are durable, reliable and maintenance‐free with consistent performance over time. Safety is also promoted, in that they can be discharged easily and then left indefinitely in a safe discharged state.

Ultracapacitors have already found their way into the Toyota Prius, albeit in a minor and largely unnoticed role – a Panasonic supercapacitor powers an electro‐hydraulic pump in the mechanical braking system. The combination of an ultracapacitor and a battery has considerable potential for vehicle energy storage systems and is already used in a hybrid application by Nissan Diesel in its Capacitor Delivery Truck. It enables the use of a smaller battery because peak loadings can be covered by the ultracapacitor and low loadings by the

Figure 35: A Ragone plot showing energy density vs power density for various energy‐storage devices

Source: Maxwell Technologies

The Hybrids Report


battery, making ultracapacitors an option as the motive power storage system in mild hybrids. For example, in electric vehicles, the use of ultracapacitors can increase range by more than 20% and acceleration by up to 15%.

The next stage of supercapacitor development is set to include some electrochemical activity to increase the relative energy density and close the performance gap with Li‐ion batteries.

The Hybrids Report


OEM Strategies Over the past five years Toyota has taken a considerable lead in the hybrid race, with its unique market leadership and branding along with patenting its key components. It is on schedule to sell 600,000 hybrids per year in the US alone and more than one million worldwide, by early next decade.

However, developing hybrid technology as an early market leader has proved expensive and Toyota initially wanted to franchise its technology to other manufacturers to capitalise on its investment, become an industry standard, share the ongoing R&D burden and to help drive down costs, which add from $3,000 to $11,000 to the price of a vehicle depending on segment.

To this end Nissan and Ford eventually purchased the technology, but their licensing has so far not been extensive and, in the case of Ford at least, is not likely to continue as the company utilises its own proprietary solution. General Motors in Europe has had plans to use Toyota hybrid technology to develop hybrid cars under the Vauxhall brand, but other brands had decided to make their own way. However, with the changes and rationalisation affecting GM, it was reported that Toyota and GM would enter talks in August 2009 to look at options for selling a GM branded Prius variant utilising the jointly owned NUMMI assembly plant in California. However, subsequently Troy Clarke, GM’s President, North America said in a statement that GM and Toyota could not reach an agreement on a future product “that made sense to all parties.” As a result, NUMMI would be considered part of the “Old GM” and sold off as the company works its way through bankruptcy.

Currently GM has eight hybrid models, two of which are Saturn’s and therefore due for sale to Penske Automotive Group. Of the remaining six models only one is not a light truck – the Chevrolet Malibu. This will then give GM the option to fill a considerable hole appearing in its product range through rationalisation.

At least in part as a consequence of not recruiting many other manufacturers, Toyota has worked hard to strengthen its current market domination through acquisitions and increasing in‐house activity. Other manufacturers have been concerned that Toyota is moving to control as much of the supply base of hybrid components as possible, in order to delay the transfer of hybrid technology to other suppliers, especially those in North America and Europe.

Toyota has increased its ownership of Panasonic EV to 60%, giving it control of the batteries that Panasonic produces. The acquisition also turned Toyota’s joint‐venture with Matsushita Electric, which produces a wide range of electronic products including sensors and control units, into a Toyota subsidiary. Toyota has also acquired a stake in Fuji Heavy Industries, which some see as related to the fact that Fuji and NEC have a joint‐venture for the development of lithium‐ion batteries. Although Aisin Seiki, which is 25% owned by Toyota, has supplied the hybrid transmission since the first‐generation Prius, Toyota is

-

200,000.00

400,000.00

600,000.00

800,000.00

1,000,000.00

1,200,000.00

1,400,000.00

1,600,000.00

2008 2009 2010 2011 2012 2013 2014 2015

Asia Europe North America

Figure 36: Regional hybrid manufacture forecast


The Hybrids Report


producing its third‐generation electronically controlled hybrid transmission in‐house. Toyota also plans to produce 400,000 electric motors per year at its own plants in Japan.

To date the Toyota Prius is still the most popular hybrid on the market and is projected to continue as the sales leader among hybrids for some time to come. However there are indications that the recently launched Honda Insight made significant inroads into Toyota’s leadership ahead of the launch of the Prius III, for which the company now has 180,000 orders in Japan alone, far surpassing its target of 10,000 per month. For May 2009 the Toyota Prius was the best selling vehicle in Japan where currently hybrids are heavily incentivised through zero road tax and rebates.

Sales of the new Honda Insight are thought to be below the planned 90,000 units and the company is considering additional smaller models in lower price brackets as the impending price war between these two major players begins to take effect.

As the production of hybrids and the range of new model offerings increases rapidly the ensuing competition will have some marked effects on the sector as it grows. The premium paid for hybrid powertrains will be quickly eroded, a situation exacerbated by the current market downturn in overall automotive demand.

In 2008, hybrid production in Asia was approximately 470,000 units with predictions for 2009 exceeding 530,000 despite the economic crisis, increasing to 850,000 in 2010. While rapid growth is forecast to occur in both China and India, Japan continues to be the largest manufacturer of hybrids.

Although forecasts for hybrids in Europe are less encouraging, the incentive to produce vehicles for the US market has prompted European manufacturers to consider development, and some are also targeting the European market to compete with the small and medium‐size hybrids from Toyota and Honda in Japan.

While it has become a standard part of most OEMs’ sustainability report, many of the larger vehicle manufacturers have developed a focus toward a hybrid strategy for the near future. With ongoing legislation changes and the need to explore energy alternatives, electrically driven vehicles are seen as a valued source of sustainability in the war to reduce emissions. In general most hybrid strategies also involve the use of other technologies such as fuel cells, bio‐fuels, catalytic converters, transmission technology and the like as a means to develop an overall holistic approach to a sustainable future.

General Motors Despite its recent high profile financial troubles GM is steadily progressing across a range of alternatives to the traditional engine options offered. The ‘aggressive’ roll‐out of hybrid‐electric vehicles is a key

-

200,000.00

400,000.00

600,000.00

800,000.00

1,000,000.00

1,200,000.00

1,400,000.00

2008 2009 2010 2011 2012 2013 2014 2015

Japan China other Asia

Figure 37: Hybrid production forecast Asia


The Hybrids Report


portion in the company’s publicised initiative to build a portfolio of electrically‐driven vehicles that help to improve fuel economy and reduce emissions. In the US, GM's hybrid currently stands at six models on the road today and the company plans to increase this to nine models by the end of 2009. By 2012, GM plans to offer a total of 15 hybrid models. These will use a range of hybrid systems designed to meet global driving patterns, and which will vary in fuel economy savings and cost.

General Motors firmly believes in a displacement of petroleum through energy diversity; it is focused on a range of gas‐friendly to gas‐free advanced technologies and vehicles. Currently it believes that ethanol has the most potential as an oil alternative, but ultimately the future holds fleets of vehicles that will be electrically driven and powered by electricity and hydrogen interchangeably. In the interim GM has until recently been releasing an average of one new hybrid model every three months.

These models include the Saturn Vue and Chevrolet Malibu. In addition to these a selection of “two‐mode” hybrid vehicles is available such as the Chevrolet Tahoe and GMC Yukon which boast a 50% improvement in city mileage over gas versions. Director for Global Products for Cadillac John Howell recently commented, “I think you could easily imagine a future at least where all cars will have a certain amount of hybridisation...”

This part of GM’s strategy to focus on energy diversification could be considered the cornerstone for its plug‐in hybrid concept like the Chevrolet Volt. This can be powered to run off the national electricity grid, and the power is then stored as battery capacity and would enable a driver to travel in full electric mode for approximately 40 miles in total.

Making its debut at the 2009 New York International Auto Show, the Yukon Denali Hybrid adds another full‐sized truck utilising the Two‐Mode system to the GM line‐up, designed for direct competition with the luxury Lexus offerings. “The eight‐passenger GMC Yukon Denali Hybrid goes just as far on a gallon of gas in the city as a much smaller V‐6 Toyota Camry sedan,” commented Susan Docherty, vice president, Buick‐Pontiac‐GMC. “And in terms of fuel savings, the GMC Yukon Denali saves about 250 gallons of fuel a year over the Lexus GX 470.”

Figure 38: GM's powertrain and fuels strategy

Source: GM

The Hybrids Report


Docherty said the number one consideration for those purchasing the GMC Yukon Hybrid is fuel economy (80%); followed by 66% for its environmentally friendly technologies and more than half because of its technological innovation.

At the heart of GM’s hybrid offering is the Two‐Mode system which was first seen in the company’s 2007 Chevrolet Tahoe and YMC Yokon, and has moved on in 2009 to a front wheel drive option in the Saturn Vue Green Line.

With the FWD two‐mode targeted at larger sedans up into crossovers and SUVs, and the RWD two‐mode applied in full‐size SUVs and light trucks, GM has a product gap for an advanced full hybrid offering for smaller, lower‐torque engines in more compact vehicles.

To address that, GM is developing a third full hybrid system targeted at these applications, according to Larry Nitz, GM executive director of Hybrid Powertrains. He also noted that the coming next‐generation of the mild GM Hybrid System, which in its current form is applied in the Malibu, Vue and Aura, will offer equivalent power to Honda’s IMA system in the new Insight and that the next‐generation GM Hybrid System was “aligned with Honda’s perspective” on cost‐effectiveness and performance.

Meanwhile in Europe GM is working with Politecnico di Torino and Regione Piemonte in Italy and has announced that, within their three parties’ alternative powertrain focus, a key development will be the creation of the Diesel Electrification Competence Centre within the GM Engineering Centre. The centre’s objective will be to lead research and development on a cost‐effective diesel hybrid technology which could be implemented across a range of GM vehicles. Diesel hybrid has the potential to become a key element of GM’s electrification strategy in Europe. However, the future of this initiative is unknown at this time in the light of the acquisition of GM’s European organisation by other parties, including Fiat.

Figure 39: GM's pre‐reorganization strategy

Source: GM

The Hybrids Report


The net effect of GM’s move into Chapter 11 bankruptcy protection on the company’s hybrid strategy is yet to be determined, but GM would seem to be committed to moving forward across a wide range of powertrain options. It may have to scale back its ambitions in development of longer term options, such as fuel cells, but its commitment in growing its portfolio of hybrid models in the US remains relatively intact.

However, one recent casualty is the Chevrolet Malibu hybrid, which is to be discontinued due to low sales numbers. Recent commentary has highlighted that the premium of $4,000 in the US market over the base model is proving too much for the consumer, particularly as fuel mileage for both models is identical and GM still makes a loss on the hybrid.

Ford Ford executive chairman Bill Ford has announced an accelerated plan to bring the company’s next‐generation hybrid‐electric (HEV), a plug‐in hybrid electric (PHEV), and battery‐electric (BEV) vehicles to

market quickly and more affordably over the next few years.

The plan, unveiled in early 2009, builds on Ford’s work with a range of partners in areas including batteries, manufacturing and infrastructure. Ford will introduce a new battery electric commercial van in 2010 in the US, and in the UK Ford is collaborating with Tanfield to offer battery‐electric versions of the Ford Transit and Transit Connect commercial vehicles for fleet customers in the European markets.

A new battery electric small car due in 2011 is to be developed jointly with Magna International, with the electric powertrain to be applied in a new‐generation C‐sized global vehicle platform. The BEV will first be introduced in North America, with the potential to migrate to the European and Asia‐Pacific markets later.

Ford also plans to introduce electrified powertrains (battery electric or plug‐in hybrid) into two major new global product platforms: a new Focus‐size C‐car platform and another Fusion‐size, CD segment platform.

By 2012, Bill Ford said, the company will have four high‐mileage BEVs and the likely development direction for BEVs is to the B‐size platform from the C‐size, according to Barb Samardzich, Ford vice‐president of Powertrain Engineering.

“Ford is committed to offering customers affordable, environmentally friendly technologies in vehicles they really want,” says Mulally. “We are focusing on sustainable technology solutions that can be used not for hundreds or thousands of cars – but for millions of cars, because that is how Ford can truly make a difference.”

Ford is now in its fifth year producing the Escape Hybrid, and the company has five hybrids on the

Figure 40: General Motors 2MT70 FWD two‐mode

hybrid transaxle, as seen from engine side

Source: GM

Ford’s plug‐in hybrid commercialisation partners

• Southern California Edison

• New York Power Authority

• Consolidated Edison of New York

• American Electric Power of Columbus, Ohio

• Alabama Power of Birmingham, Ala.

• Progress Energy of Raleigh, N.C.

• DTE Energy of Detroit

• National Grid of Waltham, Mass.

• New York State Energy and Research Development Authority, a state agency.

• Electric Power Research Institute (EPRI)

The Hybrids Report


road: the Escape, Mercury Mariner Hybrid and Mazda Tribute, the Ford Fusion and the Mercury Milan Hybrid.

In the future Ford has announced plans to deploy different levels of hybridisation with either diesel or gasoline engines – depending on the market and vehicle type. In Europe, for example, Ford has established (in 2006) its European Hybrid Technologies Centre in Gothenburg, Sweden, which will have overall responsibility for ensuring that Ford of Europe is able to apply core hybrid systems into its products. This relationship is likely to continue despite the company’s ambitions to offload Volvo.

The company’s hybrid strategy also calls for the aggressive development of plug‐in hybrid electric and fuel cell vehicles to ramp up to greater volumes once the technology challenges can be overcome.

In December 2008, Ford delivered a demonstration version of its Ford Escape Hybrid Plug‐in to ten partners as part of a partnership to explore the commercialisation of plug‐in hybrids together with the business models that might make them viable. The partnership is designed to advance plug‐in technology as well as an energy vision that connects transportation to the energy grid.

In a recent interview with SupplierBusiness, Sharif Marakaby, chief engineer, Ford Global Hybrid Engineering said “Our main strategy is to get fuel economy, which is important to millions of drivers. This is a really high volume strategy and we are pursuing using our EcoBoost turbocharged, fuel injection engine, which allow us to downsize and get a 10 ‐ 15% fuel economy performance. Along with this we realise the importance of electrification, whether it is hybrids, plug‐in hybrids or electric vehicles”.

“As yet it is not very clear which of these options is going to win”, says Marakaby. “We want to position ourselves so that we are ready to ramp up the volume on any of these options, whether it’s hybrids, plug‐ins or EVs, depending on the cost of these systems and the market reception”.

As with the majority of hybrid applications, Ford uses Atkinson cycle ICEs with its hybrid vehicles.

The Atkinson cycle keeps the intake valve open longer after the piston reaches bottom dead centre. This results in a compression stroke that is effectively shorter than the power stroke. An Atkinson cycle is more efficient but produces less torque than a conventional Otto cycle. Hybrids compensate by using the electric motor to fill in the gaps in the torque. At the end of 2009 a second generation hybrid system will be launched that builds on the Escape’s full hybrid power split system and benefits extensively from Ford’s work on HMI (Human Machine Interface), which has resulted in the development of the company’s SmartGauge Cluster.

Figure 41: Ford’s SmartGauge cluster

Source: Ford

Figure 42: Ford Hybrid second generation hybrid systems architecture

Source: Ford

The Hybrids Report


Ford claims that the second generation system uses Ford engineered technologies developed in North America. It delivers increased powertrain output, and features an integrated inverter and power electronics controller with a variable voltage converter. This second generation hybrid system is designed to optimise the combination between the Atkinson cycle engine, Intake Variable Can Timing, which allows the smooth transition between electric and ICE modes because the spark and cam timing can be varied according to the engine load. The variable voltage controller boosts the voltage to the traction battery to operate both motor and generator in a more efficient range, and the new converter technology increases output. The system also combines smarter climate control with regenerative braking, and the package as a whole is designed to allow the operation of the vehicle in electric mode to higher speeds, therefore delivering the hybridisation benefits over a wider range of duty cycles.This also maintains overall control over its key technologies as the sector takes off. To this end the 2010 Ford Fusion hybrid has to date been the subject of 119 patents or patent applications ‐ making it the most patented car to date.

Volkswagen Volkswagen has developed a powertrain strategy that covers fuels and powertrain. The company has considerable commitments to the whole range of CO2 reducing strategies, including the high performance diesels that are fundamentally important to its short term European business, biofuels, hybrids, EVs and fuel cells.

During 2009, Volkswagen has stated plans to simultaneously bring three fuel‐efficient Passat versions with low emissions to the market: the second generation of the Passat BlueMotion, the Passat Blue TDI and the Passat TSI EcoFuel. Volkswagen is presenting all three Passats under a new umbrella brand: BlueMotion Technologies. This label covers all production‐mature or near‐production technologies and products that significantly reduce fuel consumption and CO2 emissions. Under the same label, Volkswagen is offering an initial look at the prototype of the new Touareg Hybrid.

The term BlueMotion Technologies does not define a fixed set of technologies but a range of continually evolving solutions, currently including systems such as a new stop‐start system, regenerative braking, SCR catalytic converter and the NOx storage catalytic converter, electric drive and hybrid systems.

The company has been researching electric drives with numerous partners for several years as part of its fuel and powertrain strategy. During 2008, the company unveiled its Golf twinDRIVE at the Automobil Forum in Berlin. TwinDRIVE is a plug‐in hybrid concept that combines an electric motor with a combustion engine as usual, but the prototype can cover distances of up to 50 kilometres exclusively on electrical power. Its batteries can be charged simply using conventional mains power.

Figure 43: Volkswagen’s twinDRIVE system operating modes

Source: Volkswagen

The Hybrids Report


“At present, cars would be inconceivable without highly efficient petrol and diesel engines. One thing is sure: the future, however, will belong to electric motors — ‘filled up’ at a mains socket”, commented Professor Dr. Martin Winterkorn, Chairman of the Board of Management of Volkswagen AG at the launch of the twinDRIVE prototype. The first prototype was equipped with a diesel engine (1.5l TDI) as the combustion unit. However a further 20 test vehicles were introduced at the beginning of 2009 utilising 1.4l TSI petrol engines around Berlin and Wolfsburg to begin the process of proving the electrical drive in everyday use.

Improved battery technology will also be developed in the project, which involves seven other companies and research institutions and will run until 2012.

Overall, Volkswagen is expanding its research and development program for long‐term electrification of drives and states that its three essential goals in this area are:

The development of regenerative braking to power the electric motors;

The durability and cost progress of the latest battery technology; and

Achieving high durability and low cost to allow the electric drive to make the breakthrough to mass production.

Figure 44: Volkswagen’s powertrain and fuel strategy

Source: Volkswagen

The Hybrids Report


In electric mode, twinDRIVE is designed to offer competitive range and zero emissions for an urban or local duty cycle. Current fuel consumption figures released by Volkswagen show the prototype with a diesel engine uses around 2.5 litres of diesel and eight kilowatt hours every 100 kilometres in combined operation. The TSI version used for the fleet test achieved three litres and eight kilowatt hours per 100 kilometres.

Volkswagen has stated that it is investing a two‐digit million sum in the research project for the emissions‐free mobility of tomorrow. Furthermore, the German Federal Ministry for the Environment has granted a million‐figure subsidy for its range of project partners.

In contrast to other hybrid drive systems, Volkswagen claims that its twinDRIVE allows medium ranges in city driving conditions in exclusively electrical mode. The key point with the twinDRIVE system is the way that the ICE supplements electrical operation rather than the other way around.

The intelligent vehicle operating system is designed to select the best operating mode. The system is individually tailored to the respective route and driving situation so that the most efficient combination of electric motor and combustion engine is used. Although the company makes a considerable effort in describing its ‘electrification roadmap’ as it moves through the micro/mild hybrid and full hybrid towards its stated goal of extended range fuel cell vehicles, to date the numbers of hybrids produced are small. The company is forecast to produce more than 800,000 micro hybrids by 2015, reflecting the extensive uptake of stop‐start technology, however, production of some 70,000 full and hybrid units are forecast for 2015 with a considerable number of the mild hybrids using a diesel ICE.

Volkswagen’s first production offerings will be the Touareg SUV full hybrid and the Golf diesel and Touran MPV gasoline mild hybrids. Volkswagen has chosen a parallel hybrid drive for use in the Touareg. In contrast to other possible hybrid systems, both off‐road properties and climbing performance can be maintained, as can the towing performance of the SUV with a maximum trailer load of up to 3.5 metric tons.

In the new Touareg BlueMotion Hybrid, in common with the large US manufacturers, Volkswagen is applying hybrid technology to one of the company’s thirstiest

0100,000200,000300,000400,000500,000600,000700,000800,000

2008 2009 2010 2011 2012 2013 2014 2015

Figure 45: VW forecast micro hybrid production


Figure 46: VW Touareg hybrid powertrain

Source: Volkswagen

The Hybrids Report


vehicles, allowing it to get substantially better fuel efficiency while maintaining its SUV capabilities.

This modular parallel hybrid system is capable of operating in electric boost, electric only and regenerative braking modes. When the nickel metal hydride battery has sufficient charge, the total output from the powertrain is 374 hp and 406 lb‐ft of torque, enough to push the Touareg to 62 mph in 6.8 seconds. Electric drive is available at speeds up to 30 mph and a clutch disengages the engine from the transmission when the throttle is released, reducing drag. In the production model, VW claims the hybrid delivers a 25% overall boost in fuel efficiency, with a combined rating of 26.1 mpg (US), slightly better than the 25.3 mpg (U.S.) achieved by the 3.0L TDI Touareg on the European test cycle.

The powertrain itself consists of the Volkswagen’s V6 TSI, an 8‐speed automatic transmission suited for hybrid operation and tow vehicle use and the hybrid module integrated between the internal combustion engine and the automatic transmission. The latter weighs 55 kilograms. The compact module houses – in one unit – the disengagement clutch located after the V6 engine and the electric motor.

The ‘hybrid manager’ is a multi‐functional unit integrated with the engine controller, and this communicates via the CAN bus lines with the various operational components – the automatic transmission, high voltage battery and power electronics that control the electric motor. The latter also manages the energy flow between the electric motor and battery. Depending on the charge state of the battery, vehicle speed and other vehicle‐specific parameters, the hybrid manager automatically selects the ideal operating mode.

Daimler Daimler has made it clear that it sees vehicle electrification as a major plank for its future powertrain strategy including a full range of hybrid options to complement the company’s successful diesel powertrains. These range from micro, or stop‐start functions to full electrification. The company’s low‐nitrogen BLUETEC diesel engines have reduced the fuel consumption and CO2 emissions of their passenger car fleet in Europe by 20% since 1995.

They are also well positioned in the area of hybrid technology, are the worldwide market leader in the hybrid bus segment and have a significant range of delivery commercial vehicle options in production. Beyond this however, the company has a stated aim of developing hybrid options for every one of their passenger cars.

Figure 47: E‐motor support effect on torque and power

Source: Volkswagen

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

2008 2009 2010 2011 2012 2013 2014 2015

Figure 48: Daimler Micro‐Hybrid production forecast

Source: Global insight

The Hybrids Report


Daimler has established a strategic alliance with Evonik Industries for the development and production of lithium‐ion batteries. Evonik has invested around €80 million. Both groups plan to drive forward the research, development and production of battery cells and battery systems in Germany, and Daimler is also thought to be looking for a third partner in this venture with expertise in control electronics, although the company has worked extensively with Continental

to develop the battery and power management systems for the S‐400 hybrid.

Mercedes‐Benz launched its two‐mode ML 450 HYBRID at the 2009 New York International Auto Show. The two‐mode hybrid technology is derived from the work done in cooperation with BMW, GM and Chrysler in the Global Hybrid Cooperation. The ML 450 HYBRID was specifically developed for the North American market.

In response to increasing engine loads and higher speeds, the two‐mode technology variably shifts the power transfer from the electrical path to the mechanical drive path. As a result, the system exhibits improved efficiency across the driving duty cycles. It also allows smaller electric motors to be used.

In 2010 Mercedes‐Benz is due to launch its S400 BlueHybrid, which uses a thin 15‐kilowatt electric motor sandwiched between a 275‐horsepower V‐6 engine and the company's seven‐speed automatic transmission. The motor adds torque to the engine under heavy loads, restarts the engine when it stops at rest, and helps the car move away from rest in the second or so before the engine switches on. The result is almost 30 miles per gallon (or 7.9 litres/100 km on the European test cycle), relatively efficient for a full‐size luxury automobile.

Another advantage of using this alternative to the Two‐Mode system is that the S400 system requires no body re‐engineering, unlike the larger 1.8‐kilowatt‐hour nickel‐metal‐hydride pack used in the ML450. Instead, the lithium pack used replaces the car's standard 12‐volt battery, with a loop of the air‐conditioning system routed through it to keep the cells cool.

0

50,000

100,000

150,000

200,000

250,000

2008 2009 2010 2011 2012 2013 2014 2015

Diesel-Electric Gasoline-lectric

Figure 49: Daimler Mild and Full hybrid production forecast


Figure 50: Mercedes‐Benz micro hybrid system featuring a belt driven starter‐generator

Source: Daimler

The Hybrids Report


However, even as Daimler brings these initial offerings to market, the company is thought to be rethinking its hybrid strategy and be moving away from the Two‐Mode Hybrid system. Instead the company’s proprietary mild‐hybrid system will spread from the 2010 S400 Hybrid into the new E‐Class in a "couple of years”. Mercedes is moving toward mild hybrids as a solution, something like the Honda approach, according to Bernhard Glaser, general manager of product management for Mercedes‐Benz USA.

The S‐Class hybrid is the world’s first integration of a lithium‐ion battery in a mass‐produced passenger car and a critical element in the technology integration is the fact that the lithium‐ion battery uses the vehicle’s air‐conditioning circuit for cooling. As a result of this, the battery unit is able to operate at system temperatures between 15° and 35°C. This allows an acceptable service life for use in passenger cars (10 calendar years; 600,000 charging cycles) coupled with efficiency and safety.

One of the advantages of the lithium‐ion battery over conventional nickel‐metal hydride batteries lies principally in its compact dimensions combined with much greater efficiency. Compared with NiMH technology, lithium‐ion batteries have an improved energy density (around 30%) and power‐to‐weight ratio (50%). Continental was responsible for software development and overall system application. A complex battery management system ensures the battery remains within an optimum operating range at all times. The electronics also monitor general functions such as temperature and energy output as compared with battery age. Safety circuits prevent the battery from overheating, for example, and a ‘cell supervising circuit’ monitors individual cells so as to guarantee optimum interaction. Production of the battery will be overseen by Continental at a new production facility in Nuremberg.

Looking to the future Daimler has demonstrated its thoughts about progressing towards a future electrification strategy using its BlueZERO concept. This concept vehicle uses a sandwich floor based architecture that makes it possible to realise a wide

variety of powertrain and energy sources including electric only (E‐Cell), hybrid (E‐Cell Plus and hydrogen powered (F‐Cell). Herbert Kohler, Daimler’s vice president, Group Research and Advanced Engineering responsible for E‐Drive and future mobility development says, “besides the affordability of electric and fuel cell vehicles there are two concerns: first customers need to feel certain that there is sufficient

Figure 51: Mercedes‐Benz ISG featuring a disc shaped electric motor as fitted to the S‐Class

Source: Daimler

Figure 52: Mercedes‐Benz Two‐Mode hybrid drive

Source: Daimler

The Hybrids Report


infrastructure in terms of recharging and refuelling available to them. Second, standards need to be established to ensure that you can refuel or recharge across national boundaries”.

“However”, continues Kohler, “as far as battery development is concerned we will still take things step by step. The whole automotive industry is experiencing a paradigm shift, from being based on fossil energy resources in internal combustion engines to electrification and beyond to fuel cell drive systems”.

BMW Although BMW reduced its CO2 average considerably during recent years to achieve 137g/km, the company still needs to make improvements of close to 20% by 2012. Some years ago the company began development in the hybrid area with its “Best of Hybrid” approach that looks to use optimum components within a range of vehicle concepts. This stems from the company’s belief that a hybrid system is only one step in a consolidated network of fuel‐saving measures. It has also led them to develop the BMW ActiveHybrid drive system which focuses on a balance of two‐mode hybrid coupled with a two‐mode active transmission that regulates its power split for optimum performance and overcomes problems that occur in conventional hybrids with a continuously variable transmission system.

While BMW began its hybrid development program in the late 1980s development has culminated in the form of the BMW Concept X6 ActiveHybrid which will pave the way for BMW hybrid drive vehicles available in 2009, and the promise of rear‐wheel drive passenger vehicles in the premium segment.

BMW is also continuing research into Hydrogen 7 which is a hydrogen based combustion engine that uses regenerative hydrogen as a fuel source in motor traffic. It endorsed the technology by installing the world’s first hydrogen filling station at Munich airport, firmly believing that this could well be the energy of the future.

As a culmination of its development to date the X6 and 7‐Series will be production ready by the end of 2009. The 7‐Series is to use a Li‐ion battery pack in a mild hybrid configuration while the X6 will use the Two Mode hybrid drivetrain which was developed in conjunction with Chrysler, GM and Mercedes‐Benz. This

Figure 53: Mercedes‐Benz BlueZero concept

Source: Daimler

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

2008 2009 2010 2011 2012 2013 2014 2015

Figure 54: BMW Micro‐Hybrid production forecast


The Hybrids Report


is likely to be the first part of the company’s effort to use hybridisation to achieve drivetrain efficiency while maintaining the BMW’s characteristic performance.

According to Norbert Reithofer, Chairman of the Board of Management of BMW AG, between 2010 and 2012 the company will update more than half the entire product range. The company’s strategy Number ONE also brings about the formation of project‐i for the development of increasingly sustainable transport.

The first project‐i vehicle is currently undergoing a large scale testing

program with a view to bringing the vehicles into production by 2015. “We will be launching the first megacity vehicle with a fully electric drive or an ultra‐efficient combustion engine by the first half of the next decade. This vehicle will launch a whole family of extremely low‐emission single and double‐track vehicles,” explains Reithofer. A first step in this direction is the electric‐powered MINI E which is being tested in extensive customer field trials in Germany, the United States and the UK as part of ‘project‐i’ this year.

The BMW X6, ActiveHybrid is the culmination of development of BMW’s EfficientDynamics strategy, combining features for optimum energy management and aerodynamics with light‐weight construction. The two‐mode active transmission hybrid has an 8‐cylinder petrol engine that uses around 20% less fuel than a comparable vehicle with a

standard combustion engine.

“People always seem to think that performance is in contradiction to fuel efficiency”, says Jürgen Guldner, department manager, Project Engineering X6 ActiveHybrid. “We have shown with our strategy that they are not a contradiction at all, but that we can deliver both. So our hybrid strategy is allowing us to deliver driving dynamics, performance and better fuel efficiency in the order of 20% improvement. We have shown that

Figure 55: BMW X6 hybrid configuration

Source: BMW

Figure 56: BMW Group hybrid strategy

Source: BMW

0

5000

10000

15000

20000

25000

30000

2008 2009 2010 2011 2012 2013 2014 2015

Diesel-Electric Gasoline-lectric

Figure 57: BMW Mild and Full hybrid production forecast


The Hybrids Report


efficiency and dynamics are complementary”.

“EfficientDynamics is a three‐phased product strategy that has already seen the integration of advanced technologies on our latest cars and reduced fuel consumption by up to 23% in Europe. Our new 7 Series alone offers 5% more power and 12% better fuel economy than its predecessor, making it the most fuel efficient in its segment. We are proud to be rolling out the next stage of EfficientDynamics with our X6 ActiveHybrid in 2009 followed by a 7 Series ActiveHybrid in 2010. Both these models will integrate the latest electric and petrol engine technologies, which will provide efficient powertrains and further reduce emissions. At the same time we continue to invest in research and development of alternative fuels such as hydrogen so we can realise our long term vision of vehicles with zero emissions.” says Phil Horton, managing director of BMW Middle East Group.

Toyota Toyota continues to dominate the global industry in full hybrid manufacture and sales and the company’s enormous success with the Prius, released initially in Japan in 1997. The Prius has paved the way for significant progress towards the volume production needed to make hybrids truly viable.

Furthermore, in mid‐2009 after a period of cutting output Toyota was once again increasing overtime and production of its new version of the Prius, which now holds the number one spot for Japanese domestic car sales with sales of 22,292 vehicles for the month of July 2009.

Since the launch of the second‐generation Prius in 2003 the model has moved from being essentially a niche vehicle to mainstream. The Prius is now Toyota’s third best selling model in the US and seems to inspire a cult‐like devotion for its drivers.

The third‐generation Prius was officially unveiled at the Detroit auto show in January 2009 and went on sale in April. It has built on the phenomenon started by previous models, although competition with the Honda Insight has become fiercer.

0

100000

200000

300000

400000

500000

600000

700000

800000

2008 2009 2010 2011 2012 2013 2014 2015

Figure 58: Toyota micro hybrid production forecast


0

200000

400000

600000

800000

1000000

1200000

2008 2009 2010 2011 2012 2013 2014 2015

FULL MILD PLUGIN

Figure 59: Toyota full, mild and plug‐in hybrid production forecast


The Hybrids Report


However, the Japanese company remains the global leader in hybrid vehicles by some margin and offers, as well as the ubiquitous Prius, a further five hybrid models between its Toyota and Lexus brands. This number is set to grow dramatically as the OEM has a stated strategy to make every vehicle it supplies available with a hybrid powertrain option by 2020.

Toyota will however, not be combining the benefits of diesel and

hybrid technology according to Katsuaki Watanabe, president of Toyota, because the combination of the two powertrain options would be too expensive.

In late 2011 it is likely that the OEM will launch a sub compact model based on the Yaris platform. However, such a vehicle will continue the unique design strategy that has proved successful for the Prius,

Figure 60: Japanese Toyota Prius sales by month

Source: Green Car Congress

Figure 61: Evolution of Toyota hybrid systems to 2009

Source: Toyota

The Hybrids Report


although the hybrid system is likely to be more cost competitive than the existing full hybrid systems sold by the company. The Yaris is a major seller for Toyota in both Japan and Europe (where it is manufactured in France).

Toyota is heavily committed to ‘aggressive cost management’ of its increasing hybrid portfolio as it grows. Furthermore, it is looking for early commercialisation advantages from its next‐generation technologies including looking beyond Li‐Ion battery technology. Recently the company established a department for battery research that appears to be focusing on metal‐air cells as the next generation of its battery technology.

At a recent technology forum in Tokyo Watanabe said that the company was setting out to produce a next‐generation battery that will far out‐perform Li‐ion. The company has also founded a chair for research on advanced batteries at Kyoto University.

A further critical element to Toyota’s technology strategy is its work on Power Control Units (PCUs) and regenerative braking systems. PCUs are a critical component for lowering fuel consumption and improving driving performance, and PCU development has resulted in reductions in dimensions of around 30%

Figure 62: Prius 3 assembly

Source: Toyota

Figure 12: Worldwide Toyota Prius sales 1997 – 2009

* 2009 January ‐ April

Source: Toyota

The Hybrids Report


coupled with a 180% increase in power density to date, which enables the use of smaller and easier to install units.

Honda Honda’s threefold sustainability strategy involves the development of existing engine technology, advancing fuel efficiency through research and development of current and new engine technologies like hybrids and clean diesel and finally the exploration of new fuel alternatives. In terms of hybrids the company’s Integrated Motor Assist (IMA) hybrid system is now in its fifth generation, and Honda can be currently thought of as dominating the mild hybrid sector.

Honda would seem to be concentrating on the compact and sub‐compact sectors, because the company believes that it is in these segments that hybridisation can deliver the greatest benefits, according to Masaaki Kato, president of the Honda Research & Development (Honda’s product development subsidiary). This strategy differs radically from many of its rival OEMs that are using hybridisation to improve the fuel efficiency of larger models. To date the company’s largest hybrid vehicle is the Civic, and the company sees future product development as bringing its IMA system to smaller rather than larger vehicles. Kato says that hybrid systems are best used in small cars, because small hybrids are most often used for city driving, where regenerative braking can be at its most effective in recharging the batteries. “Cars that stop and go are the most suitable for hybrid technology”, says Kato.

Integral to the success of Honda’s hybrid strategy has been the launch of its dedicated hybrid model, the Infinity. Significantly this car took market share away from the Toyota Prius prior to the launch of the third generation of Toyota’s dedicated hybrid model, and there is some evidence of intensifying price competition between these models as both companies look for hybrid systems volume.

The company’s new chief executive, Tananobu Ito, says that Honda is set to speed up the launch of hybrid models as the competition with their Japanese rivals becomes more intense. During June 2009 Ito said Honda will launch its planned CR‐Z hybrid sports car around February 2010 and a gasoline‐electric Fit towards the end of the year, citing the growing importance that customers place on fuel economy and

environmental issues. “I think everyone is going to move towards hybrids”, said Ito. “Bringing hybrids quickly to customers will be a major focus of our activities”, he said as he went on to discuss a strategy that uses an increased pace of development to attain a competitive edge.

Almost all the engineers that were part of Honda’s Formula One team are said to be now working on hybrid development and Takeo Fukui, Ito’s

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

2008 2009 2010 2011 2012 2013 2014 2015

FULL MILD

Figure 63: Honda mild and full hybrid forecast

Source Global Insight

Figure 64: 2009 Honda Insight interior featuring the Ecological Driver Assist System

Source: Honda

The Hybrids Report


predecessor recently predicted that hybrid vehicles will account for 10% of worldwide car sales in the early part of the next decade.

Honda is accelerating the development of a new hybrid system that utilises two electric motors to be mounted on medium and large models, and the company has significantly shelved its plan to use clean diesel engines to improve fuel economy on larger vehicles.

Honda’s overall sales of the Insight have exceeded the monthly target of 5,000 and the company is installing new capacity at its Suzuka plant that will take daily production to over 700 units. However, Insight sales in the US have not reached the annualised target of 90,000 units, or just under half of its global sales of 200,000. This shortfall has been partly due to the economic situation in the US and production limitations in Japan, although the Prius is both larger and more luxurious at around $2,000 more than the Insight. In light of these results Ito believes that emerging markets in China and India hold the most promise for growth with the US and Europe looking at two years at least to some significant recovery, a position which also gives credence to the company’s smaller hybrid model strategy.

Nissan While Nissan’s hybrid fleet seems limited it has had success with its Altima Hybrid released in 2007 using technology licensed from Toyota. With a V6 engine the sedan has been marketed as giving fuel economy comparable to that of compact cars. Their focus extended to the development of further hybrid technology through the technical partnership with Toyota who provided some of the hybrid power components for the Altima. Currently the company favours non‐core electric‐powered technologies capable of being incorporated into their current vehicle portfolio.

Nissan was the world’s first OEM to market a car powered by a lithium‐ion battery – the Prairie Joy EV which was released in Japan in 1996, and this gives a strong clue to the company’s long term strategy for low emissions or zero emissions vehicles. The company has established a company for the development, production and sale of lithium‐ion batteries destined to be installed in Nissan’s hybrid offering as well as the company’s fuel‐cell vehicles and electric vehicles.

Nissan’s Green Program 2010 sees the launch of a hybrid vehicle using its own hybrid technology sometime in 2010. While the company’s CEO has consistently indicated that he believes that hybrids are too expensive for consumers and have little profit incentive for car makers, more recently the company has said that its own hybrid cars will “balance cost and value so that they would be profitable from the start.”

In August 2009 the company took its first steps towards it stated goal of leading the industry in the zero emissions field by showing its much‐awaited electric car – the Leaf. Nissan will begin selling the Leaf

Figure 65: Honda's CR‐Z hybrid sports car

Source: Honda

The Hybrids Report


model in the US, Japan and Europe towards the end of 2010. It is due to add two more electric models during 2011 and expects to be producing around 200,000 units by 2012.

Nissan has been badly affected by slowing vehicle sales worldwide and it has suspended its goals previously set under its mid‐term business pla, with the exception of the company’s aggressive push in the electric vehicles. The CEO Carlos Ghosn recently commented that he expects one in ten new cars to be electric by 2020.

While its overtly electric car strategy begins to take shape, Nissan is developing a hybrid system that can be used to power smaller cars as an interim solution to improving mileage before pure electric cars can take over. Executive vice president Mitsuhiko

Yamashita said that the OEM had made no final decision about actually offering small and mid‐sized hybrid vehicles, but that the technology may be necessary for consumers who need fuel‐efficient, all‐purpose cars that have the same driving range as conventional gasoline or diesel cars.

“The best option of course would be for zero‐emission electric vehicles to cover all needs, but that’s going to take a while,” Yamashita, who heads research and development at Nissan, said at a Nissan technology event. However, a substantial range of hybrid powertrains would signal a major shift in strategy for Nissan, which has been looking to close the image gap in environmentally friendly technology with hybrid pioneers Toyota and Honda by leading in the zero‐emission electric vehicle (EV) field.

Nissan has long maintained that zero‐emission electric vehicles, while limited in range on a single charge, are sufficient for everyday use, citing research that more than 80% of drivers travel less than 100 km (62 miles) a day.

Renault Renault is currently working on the development of low‐emission and zero‐CO2 emissions vehicles in what it refers to as “a determined bid” to introduce as many effective technologies as possible at an affordable price. Its work on future powertrains focuses on two main areas: the development of a range of electric motors for all‐electric vehicles, and new technologies for conventional engines, including a new generation of turbocharged internal combustion engines as well as on new automatic transmissions. Therefore the company’s commitment to hybrid powertrains, like Nissan, is limited. It also finds itself in the situation that by far the majority of its vehicles are sold in the European market, which has nowhere near the enthusiasm for hybrids that is seen in the US and Japan, and where more than 50% of car powertrains sold are diesels.

Like Nissan, Renault believes that hybrid vehicles are essentially not profitable and costly to both the manufacturer and consumer, although they are exploring the use of electrically powered cars in their alliance with Nissan. This has led to an Israeli project established with Renault known as “Project Better Place” that consists of Renault producing 100% electric vehicles for sale in Israel by 2011. Tax incentives are to be introduced nationally to all customers as will an electric recharge grid with around 500,000 charging units available nationwide. Standardised lithium‐ion battery packs will be sourced from Nissan. Most Israeli car owners drive an average of 70 kilometres as a daily commute, and all major areas are

Figure 66: Nissan's Leaf electric vehicle

Source: Nissan

The Hybrids Report


accessible within a radius of 150 kilometres making this project the ideal mass‐market for an all electric fleet.

As with its partner Nissan, Renault has firmly established that electric vehicles are its future in the medium to long term. To this end the alliance has signed an MOU for collaboration with UK transport infrastructure company Elektromotive with the aim of accelerating the installation of charging networks for EVs in cities. The alliance will also undertake an education program and develop incentive schemes to hasten technology uptake. The alliance also has partnerships with French utility company EDF and Swiss electric company Energie Ouest Suisse (EOS).

In the short term Renault aims to remain versatile with its hybrid strategy and is keen to be perceived as flexible in its future options, and the company will, as part of its process of achieving CO2 reductions in

conventional combustion engines, be extensively using stop‐start systems that are also referred to as micro‐hybrids. “Rising fuel prices and new environmental taxes will help us introduce technologies like stop‐start that our customers previously were not willing to invest in”, says Alice de Brauer, Renault’s environmental director. The micro hybrid technology will be introduced in both gasoline and diesel models.

In terms of mainstream hybrids Renault has shown a diesel‐electric powertrain in a

mild hybrid configuration. The Ondelios as shown at the 2008 Paris Motor Show is an aerodynamic and environmentally friendly concept vehicle. Some of the car’s structural parts are made from natural flax fibre for greater recyclability, and in order to make the car as light as possible, its body is made from carbon and the glazed areas from polycarbonate.

The Ondelios is powered by a powerplant which combines a 205hp (150kW) 2‐litre diesel engine, with two 20kW electric motors at the front and rear. These operate in a mild hybrid mode, giving the engine extra boost as required. They use a brake and boost system, recovering energy during braking then delivering it to the engine to boost acceleration. The front motor also features stop‐start technology. The electric motor mounted on the rear axle drives the rear wheels when the ESP sensors detect a loss of traction, thus giving Ondelios the capability of a 4WD vehicle. Using a seven speed, double‐clutch transmission the vehicle achieves a fuel consumption of 4.5 litres/100km and CO2 emissions of 120g/km and is described by Renault as a luxury cross‐over vehicle.

The company also produces a plug‐in hybrid version of its Kangoo model along with a pure EV.

PSA Peugeot‐Citroën undertook a review of its hybrid strategy in 2008 and following uncertainty concerning its partnership project with Continental, Bosch, Valeo and ThyssenKrupp and delays in government funding the OEM, decided to develop its own vehicles. Originally the OEM’s partnership project was to have received public funding of €101m, however, delays due to an investigation by the European Commission competition authorities has lead the OEM to rethink its strategy.

Figure 67: Renaults' Ondelios diesel hybrid crossover vehicle

Source: Renault

The Hybrids Report


Citroën ex‐managing director Gilles Michel said that new models are due to be ready for series production from around 2011 and they will be a part of the Peugeot line‐up and Citroën’s premium range of vehicles.

“As the Group (PSA) was not able to go ahead with a ‘mass hybrid’ project, and as our solution remains an expensive one we are going to apply it to expensive cars and volumes will be more limited”, said Pascal Henault, PSA Director of Research and Innovation.

Subsequent to this, PSA and Bosch worked together to develop diesel hybrid powertrain technology, and the two brands exhibited the Peugeot Prologue and Citroën Hypnos with a view to series production of models in 2011.

PSA unveiled the first diesel hybrid in 2009, which is based on a 308 four wheel drive model. The Hybrid4 is a conventional front wheel drive turbocharged diesel powertrain featuring a stop‐start system. However the rear axle of the vehicle has been modified to incorporate an electric motor and driveshafts for the rear wheels. A battery pack and power control units

have been fitted under the boot floor and the hybrid system is said to add only 100Kg to the mass of the vehicle.

To reduce costs Peugeot is using its existing robotised six‐speed transmission, which uses an automatic clutch actuation to enable automated shifting, and the only connection between the two powertrains is the under‐floor wiring. The Hybrid4 can run in front wheel drive mode, all wheel drive and rear wheel drive, the latter offering a zero‐emissions option.

The hybrid system has been designed to fit PSA’s Platform 2 (Peugeot 308/Citroën C4) and the Platform 3 (Peugeot 407/Citroën C5), and although initial hybrid system costs are reputed to be a premium of around 15% over the existing top of the range models, the company believes that it can drive system costs down as the hybrid powertrain is utilised across more of its model range.

Hyundai Recently Hyundai Motor began selling the world's first LPG (liquefied petroleum gas) hybrid cars (July 2009). Although Hyundai is only due to sell the model in South Korea for the moment the move by the Korean OEM signals the start of an ambitious strategy. According to Kim Pil Soo, Automotive Engineering Professor at Daelim College near Seoul, the new model, which starts at $16,200, is a ‘stepping stone’ for Hyundai as it prepares to face off against the likes of Toyota and Honda in the global hybrid vehicle markets.

The introduction of Hyundai's first hybrid electric vehicle coincides with the company's aggressive marketing campaign in the US, and such campaigns in the past have helped the OEM to increase its sales significantly over the past decade. In the US, for instance, Hyundai’s market share increased to 4.3% in the

Figure 68: Peugeot's 308 hybrid diesel prototype

Source: PSA

The Hybrids Report


first six months of 2009 from 3.1% a year earlier. In China and the European Union, Hyundai's share jumped to 7.3% (from 5.3%) and to 2.3% (from 1.7%), respectively, in the first five months of 2009.

The first hybrid electric model, largely based on the existing Elantra, uses an innovative lithium‐ion polymer battery stack. Yang Woong Chul, Hyundai's president, commented recently "We are moving with 'Hyundai speed' to achieve our goal of environmental leadership in our industry and redefining the Hyundai brand as a technological innovator".

Hyundai says its lithium‐ion polymer batteries weigh 35% less than current nickel‐metal hydride cells used in Toyota's (TM) Prius and Honda's (HMC) Insight and are 40% smaller. They also last 1.5 times longer than nickel‐metal hydride batteries, generate less heat, and are more resilient to shock than other types of lithium‐ion batteries. Furthermore, because the polymer resembles a gel, the battery stack can conform to many shapes, allowing a solution to the thorny problem of packaging because they can be installed almost anywhere on a vehicle.

The Korean carmaker has no current plans to sell the Elantra hybrid in export markets, as only a handful of countries use LPG as an automotive fuel on any scale. However, Hyundai plans to introduce a gasoline‐electric hybrid in the US in 2010 based on the next‐generation Sonata using the same battery technology as the Elantra hybrid.

Hyundai sees that it has made significant strides in its hybrid strategy as the OEM has developed all of the major componentry for its system, such as batteries, electric motors, and converters in Korea to avoid patent disputes with the likes of Toyota. "We now have all the key ingredients to compete in the hybrid segment," says Lee Ki Sang, director in charge of developing the hybrid system at Hyundai.

Using an LPG‐ instead of gasoline‐powered ICE may limit Hyundai's hybrid export chances for the moment, but in its domestic market the move will help the company take advantage of low prices for propane. LPG costs about half the price of gasoline in Korea ‐ for the price of one litre of gasoline the Elantra hybrid can travel 39 km, according to Hyundai. This is a one kilometre improvement over the latest Prius. Hyundai aims to sell 22,500 Elantra hybrids by the end of 2010 and has indicated that it will increase total annual hybrid sales to 50,000 once the Sonata hybrid is launched.

Industry analysts have commented that defending its domestic market is necessary for Hyundai as it makes the bulk of its earnings in South Korea.

Hyundai has also signalled its intention to launch a plug‐in hybrid in the US market by late 2012. Yang Woong Chul confirmed that the model, the Blue‐Will, will target other OEM models such as the Chevrolet Volt and the Plug‐In Prius. The car will feature a proprietary powertrain developed by Hyundai in South Korea based on its now extensive in‐house capability.

Figure 69: Hyundai's Elantra LPG Hybrid powertrain

Source: Hyundai

The Hybrids Report


Hybrid Model Timeline MH = Mild Hybrid, FH = Full Hybrid

1997 TOYOTA Prius FH Launched in Japan

1999 HONDA Insight MH Launched in USA

2000 TOYOTA Prius FH Launched in USA

2002 HONDA Civic Hybrid MH

2004 FORD Escape Hybrid SUV FH

HONDA Accord Hybrid MH

2005 TOYOTA Lexus RX 400H SUV FH

TOYOTA Highlander SUV FH

MERCURY Mariner (Compact SUV) FH

GM Saturn VUE SUV FH

GM Chevrolet Silverado Pick-Up MH

CHRYSLER Ram Dodge Pick-Up MH

2006 TOYOTA Camry Hybrid FH

TOYOTA Lexus GS 450H FH

MERCURY Mariner SUV FH

2007 NISSAN Altima Hybrid FH

TOYOTA Lexus LS 600H L FH

MAZDA Tribute Hybrid SUV FH

GMC Yukon SUV FH

2008 GM Saturn Vue Green Line FH

GM Chevrolet Tahoe SUV FH

FORD Fusion Sedan Hybrid FH

MERCURY Milan Hybrid FH

The Hybrids Report


KIA Rio FH

MERCEDES S-Class Hybrid MH

AUDI Q7 Hybrid SUV FH

GM Chevrolet Malibu Hybrid MH

HYUNDAI Accent Hybrid MH

2009 CHEVROLET Silverado Hybrid Pick-Up FH

BMW X6 FH

FORD Five Hundred Hybrid FH

TOYOTA Prius Generation 3 FH

SMART Hybrid 2-Seat Subcompact MH

HONDA Insight MH

VW Jetta Hybrid FH

TOYOTA Sienna (Van) FH

FORD Escape Hybrid SUV FH

CADILLAC Escalade Hybrid FH

CHRYSLER Aspen Hybrid FH

2010+ PORSCHE Cayenne Hybrid FH

VW Touareg Hybrid SUV FH

HONDA Fit FH

PORSCHE Panamera Hybrid FH

HONDA CR-Z sports car MH

CHEVROLET Volt Plug-In Hybrid FH

GM Saturn Vue Green Line Plug-In Hybrid FH

TOYOTA Jolt Plug-In Hybrid FH

The Hybrids Report


MERCURY Montego Hybrid FH

HYUNDAI Elantra Hybrid FH

FISKER Plug-In Hybrid Sports Sedan FH

TOYOTA FT-HS Sports car FH

TOYOTA Sienna FH

HONDA Fit MH

The Hybrids Report


Incentives Hybrid vehicle sales have been subject to various incentives from payments to reduce the premium paid to less tangible benefits such as parking concessions and exemption from road user or congestion charges. "I think incentives are useful to kick start the technology or get it going, I think we all know incentives don’t last forever”, says Sherif Marakby, Hybrid Chief Engineer for Ford, “They have helped, but I think it is very important to develop a sustainable business that can thrive on its own”.

Fuel Economy Vehicle comparisons in relation to emissions road testing not only provides an invaluable measuring tool but helps to educate and inform consumers of their environmental options when purchasing new vehicles. In the US the Environmental Protection Agency is responsible for carrying out laws to control air pollution from motor vehicles, engines and their fuels. Their extensive testing facility utilises a combination of inspections, urban dynamometer drive schedules and federal testing procedures. The results are calculated in the form of miles per US gallon (mpg) for both city and highway driving and a combined total figure is available also. US consumers can save between $200 and $1500 in fuel costs each year by choosing the most fuel efficient vehicle in relation to mpg achieved.

Japan 10-15 Cycle

EPA figures did come under intense scrutiny for some time due to inconsistencies and claims of misrepresentation in relation to fuel consumption figures published. Consumer complaints resulted in the

Country/Region Type Measure Structure Test Method

United States Fuel mpg Cars and light trucks US CAFE

European Union CO2 g/km Overall light-duty fleet EU NEDC

Japan Fuel km/L Weight-based Japan 10-15

China Fuel L/100-km Weight-based EU NEDC

California GHG g/mile Car/LDT1 and LDT2 US CAFÉ

Canada Fuel L/100-km Cars and light trucks US CAFÉ

Australia Fuel L/100-km Overall light duty fleet EU NEDC

Taiwan,

South Korea

Fuel km/L Engine size US CAFE

Figure 70: Fuel economy/GHG regulation

CAFE – Corporate Average Fuel Economy

EU NEDC – New European Drive Cycle

The Hybrids Report


EPA reconfiguring testing schedules and publishing figures more in line with independent product‐testing organisations. In reality all vehicles are subject to drive conditions and fuel efficiency figures may not coincide directly with the actual fuel consumed in everyday drive situations. The EPA have taken steps to rectify this as far as possible by taking into account higher operating speeds in their testing schedules along with air‐conditioner usage and cold‐start conditions.

Research conducted by the Civil Society Institute (CSI, a non‐profit energy and ecological think tank) shows a distinct “fuel‐efficient car gap”, and in 2007 it was revealed that only two hybrids could achieve a combined gas mileage of at least 40mpg – the Honda Civic Hybrid and the Toyota Prius Hybrid. A further study conducted by JD Power found that many consumers often over‐estimated the actual fuel‐efficiency gained by hybrid electric vehicles.

However, since the EPA changed its test schedules the fuel economy figures obtained through real‐world testing have become much closer to those stated.

Hybrid Incentives and Taxation Governments, particularly in the US, have taken considerable steps to incentivise the uptake of hybrid vehicles through tax credits. This approach is in contrast to the European approach that seeks to limit CO2 output through agreement with ACEA, and when this proves less than effective, sanctions against OEMs that fail to comply with the regulation.

North America The United States has used tax incentives to the greatest extent to kick start the hybrid market. The Energy Policy Act of 2005 provided a credit for tax payers who purchase certain energy efficient vehicles. The credit for purchasing a new hybrid car or truck (previously owned vehicles do not qualify) with a gross vehicle weight rating of 8,500 pounds or less can range between a minimum of $250 to a maximum of $3,400 depending on fuel economy. The hybrid tax credit is made up of two separate credits, the hybrid tax credit and the alternative fuel vehicle credit. The Inland Revenue Service is responsible for certifying the correct tax credit available to each consumer.

Figure 71: Phase‐out credit calendar

Source: US IRS

The Hybrids Report


At the beginning of 2006, Toyota was selling over 10,000 hybrids a month; therefore it quickly hit the 60,000 limit. The tax credit phase‐out period began for Toyota just nine months from the start of the program on 1st October 2006. Honda took longer, beginning the phase‐out period on 1st January 2008.

The Internal Revenue Service (IRS) recently added ten bus hybrid bus models to a list of vehicles that qualify for the Alternative Fuel Motor Vehicle Credit enacted by the Energy Policy Act of 2005.

The ten qualifying models offered by IC Bus are the first school and commercial buses to be added to the list, and through this IRS program, purchasers of certain large hybrid vehicles can claim credits of $3,000, $6,000 or $12,000 if they qualify for the Qualified Alternative Fuel Motor Vehicle Credit.

“These credits are significant because they can help to offset the price of hybrids,” noted David Hillman, marketing director at IC Bus. “This tax credit will be appealing to schools and organisations looking for added incentives to purchase hybrid buses. Even tax‐exempt customers like schools can take advantage of the federal program by working with their selling IC Bus dealer.”

Date Situation Available Credit

Jan 1 2006 – Dec 31 2010 Tax Credit becomes available $3,150

June 2006 Toyota reaches threshold 60,000 vehicles $3,150

Jul 1 2006 – Sept 30 2006 Prius purchased still eligible during this time $3,150

Oct 1 2006 – Mar 31 2007 Prius purchased eligible 50% credit $1,575

Apr 1 2007 – Sep 30 2007 Prius purchased eligible 25% credit $787.50

Oct 1 2007 – Ongoing Prius purchased not eligible for credit $0

Figure 72: Toyota Prius tax credit timeline

Source: US IRS

Figure 73: Toyota and Honda tax credit history

Source: IRS/Green Car Congress

The Hybrids Report


The second credit is called the alternative fuel vehicle credit. In order to be eligible for this credit, vehicles must be able to run solely on compressed or liquefied natural gas, liquefied petroleum gas, hydrogen or any liquid that is at least 85% methanol. This credit is not subject to a sales threshold and phase‐out period and is set at a maximum of $4,000.

While it is the manufacturer’s responsibility to get a vehicle certified, each taxpayer must follow certain criteria in order to qualify for a credit:

1. The vehicle must be placed on or before 31 December 2010;

2. The original use of the vehicle must begin with the taxpayer claiming the credit;

3. The vehicle must be acquired for use or lease by the taxpayer claiming the credit; and

4. The vehicle must be used predominantly within the United States.

As well as federal tax incentives, a number of state governments also offer tax rebates or credits for low emission vehicles. Tax incentives range from $500 for some hybrids in Pennsylvania to $2,000 in Massachusetts, although some of the amounts stated are upper limits for credits that are based on a proportion of the incremental price difference between the hybrid and its non‐hybrid equivalent model. Some states also offer discounts on annual licence fees.

Several cities in the US offer free or discounted parking for low emission vehicles and allow them to use high‐occupancy traffic lanes (HOV) with only one occupant, although the latter is generally limited by fuel economy ratings so that a number of large car and SUV hybrids fail to qualify. Some states offer $100 prepaid parking cards if their vehicle reaches a certain EPA

Make Model Tax Credit

BMW 335d (Clean Diesel) $900

BMW X5 xDrive35d (Clean Diesel) $1,800

Chevrolet Malibu Hybrid $1,300

Chevrolet Silverado Hybrid $2,200

Chevrolet Tahoe Hybrid $2,200

Ford Escape Hybrid (2wd) $3,000*

Ford Escape Hybrid (4wd) $2,200*

Ford Fusion Hybrid $3,400*

GMC Sierra Hybrid $2,200

GMC Yukon Hybrid $2,200

Honda Civic Hybrid $2,100*

Honda 2005 Civic Hybrid (auto) $1,700*

Lexus GS 450h $1,550*

Lexus LS 600hL $450*

Lexus RX 400h $2,200*

Mazda Tribute Hybrid (2wd) $3,000*

Mazda Tribute Hybrid (4wd) $2,200

Mercedes GL 320 Bluetec (Clean Diesel) $1,800

Mercedes R320 Bluetec (Clean Diesel) $1,550

Mercedes ML 320 Bluetec (Clean Diesel) $900

Mercury Mariner Hybrid (2wd) $3,000

Mercury Mariner Hybrid (4wd) $2,200

Mercury Milan Hybrid $3,400

Nissan Altima $2,350

Saturn Vue Green Line $650

Saturn Aura Green Line $1,300

Toyota Camry Hybrid $2,600*

Toyota Highlander Hybrid $2,600*

Toyota Prius $3,150*

Volkswagen Jetta TDI (Clean Diesel) $1,300

* Credits for Toyota and Honda hybrids no longer qualify at all for tax credits.

Ford hybrids are still eligible, but the credits will be cut in half from amounts

listed below starting April 1, 2009. In October 2009, the credits will be cut in half

again, and will completely phase out on April 1, 2010.

Figure 74: US Tax credit availability April 2009

Source: US IRS

The Hybrids Report


air pollution score. These policies are receiving criticism from environmentalists who believe they encourage increased vehicle use with increased fuel consumption and emissions and question whether these incentives are sound transport policy. While other groups such as the Set America Free Coalition, a group of environmentalists who are campaigning for $2 billion in incentives, are advocating that if all cars are hybrids and half that total are plug‐in hybrids, US oil imports would drop by eight million barrels per day.

Furthermore, some corporations offer their employees incentives to purchase a hybrid vehicle. The Bank of America will reimburse a proportion of the price to employees purchasing new hybrids. Google software company Hyperion Solutions plus organic food and drink producer Clif Bar & Co have a limit of $5,000 for their hybrid‐buying employees which does include Prius models. Integrated Archive Systems, a Palo Alto IT company, offers a $10,000 subsidy toward the purchase of hybrid vehicles for eligible employees. These and others offer free or preferred parking, or increased vehicle allowances. Some insurance companies are offering discounts to hybrid owners – for example, The Farmers Insurance Group offers 10% discount in most states, and some hotels offer parking and tariff discounts. Representatives of these organisations have quite frankly pointed out their incentive policies are intended to attract custom through the propagation of a ‘green’ image.

The federal government in Canada has approved a purchase rebate for consumers buying or leasing hybrid cars with similar incentives being offered in British Columbia, Manitoba, Quebec, Ontario and Prince Edward Island.

Europe A number of governments have differing incentives to encourage hybrid purchase.

In Belgium the national government provides a purchase reduction of as much as 15% to hybrid consumers, while in the Netherlands the government has lowered the tax for Class A cars (the Prius being one such class). All other classes of cars pay a vehicle tax set at 22 – 25% whereas class A models are set at 14%.

France, along with Finland, has just introduced a new taxation system directly related to the amount of CO2 emissions released by new cars bought. Gas consumption will be set at a threshold of 160g/km. Any vehicle exceeding this level will be charged from €200 to €2,600 for vehicles that emit as much as 250 g/km. This is reversed if consumers drive cars such as the Smart and VW Polo BlueMotion. They will receive rebates between €200 ‐ €1,000 if they are able to achieve less than 130 g/km. In Finland this will be applicable to used imports as well.

In the UK the government has recently announced increased tax incentives for plug‐in hybrids and EVs to encourage the growth of this sector and has implemented significant reductions in vehicle excise duty for fuel efficient vehicles including hybrids. For example a Honda Civic hybrid owner will pay around �15 per annum whereas a conventional gasoline engine variant will cost �140 per annum. Furthermore, hybrid vehicle drivers are exempt from London’s �8 per day congestion charges, and some London Boroughs such as Westminster charge hybrid drivers less for parking permits.

Japan In Japan, electric and hybrid vehicle purchasers can receive a purchase subsidy of up to 50% of the incremental cost of the vehicle over a non‐electric or non‐hybrid equivalent. This subsidy amounts to around 10% of the purchase price of a Toyota Prius or Honda Insight and 11% of the price of a Honda Civic Hybrid. A Toyota Coaster Hybrid small bus is eligible for a subsidy of 31% of its purchase price, although this leaves it still considerably more expensive than a non‐hybrid Coaster.

In December 2007 the Japanese Ministry of Economic Trade and Industry (METI), in conjunction with Keio University, revised a set of promotional policies for a full scale diffusion of next generation vehicles. It included subsidies for clean energy vehicle purchasers, a 50% reduction of the automobile tax depending

The Hybrids Report


on emission and fuel efficiency and 1.8% reduction of the auto acquisition tax for hybrid passenger cars in 2008. Other advantages include discount parking opportunities, discounted insurance for next generation vehicles and the possibility of low‐interest loans for those choosing to purchase clean energy vehicles. These policies are currently being revised in conjunction with national and local governing bodies.

The global light vehicle market Global Insight forecasts that demand for light vehicles is expected to grow to 87.4 million by 2013. Similarly demand for diesel‐powered light vehicles is projected to increase from 17.4 million to 23.7 million during the same period, which is likely to result in an increase in market share from around 24% in 2007 to 27% by 2013 for global diesel powertrain sales. The popularity of diesel in Europe has led to an overall sales growth in central and eastern Europe with considerable growth throughout the region (excluding Russia and Ukraine). However, this may also indicate that the diesel market in western Europe has already passed its peak, and increasingly stringent emissions standards will mean that costs associated with diesel powertrains will become too onerous. Overall sales growth for Europe is predicted to remain at around 3%. North America, which is an almost entirely mature market, is forecast to see growth of slightly over 1% per annum. African and Middle Eastern countries, which make up the bulk of sales in the rest of the world, are predicted to see growth of around 3.5% per annum.

China has been the fastest growing automotive market over the past decade and is forecast to continue such high growth levels to the point that it will eventually become the largest worldwide automotive market within the next 10‐15 years. Sales are reported to have exceeded 9.3 million units in 2008. India is also expected to achieve high sales gains, and with the advent of Tata Motor’s “people’s car” in 2008, and OEMs like Renault and Ford investing billions in assembly plants in India, rapid sales growth which is expected to be around 8%, is forecast to continue making both these nations the largest vehicle sales regions globally by 2012.

The Hybrid Market Forecasting hybrid car sales is notoriously difficult given the current fluctuations in economic fortunes and fuel prices around the world and in fact hybrid sales since 2000 have progressed more quickly than anticipated. In February 2004, Dave Hermance of Toyota, said, "The Japan and US markets are taking

orders for the product at a much higher rate than expected.” Fourteen months later, in April 2005, Dieter Zetsche, then DaimlerChrysler’s CEO said, "We underestimated the interest that Toyota and Honda hybrids would generate." In May 2005, Mary Ann Wright, Ford's former hybrid chief, said “Frankly, we underestimated the demand for the Escape Hybrid." As late as October 2005, Kazuo Okamato, Toyota executive vice‐president of R&D, was still showing surprise. He declared, "We didn’t think demand would jump like this."

By the end of 2005, the thoughts of the OEMs seemed

Figure 75: Global hybrid production and growth rates to 2015


The Hybrids Report


to have changed and a survey by KPMG suggested that nearly 90% of senior executives expected gas‐electric hybrids to gain market share, a significant increase from the 75% who thought this a year earlier. Furthermore, the executives had begun to change their opinions on fuel efficiency, and the survey indicated that they believed sales of all fuel efficient models including hybrids would out‐pace the sales of SUVs, pick‐ups and luxury models to 2010.

To date all of the world’s automotive forecasting professionals have found it difficult to come up with consistent numbers. A situation that is not surprising once the speed of the recent economic downturn is taken into account, together with the large effect fuel price movements has on sales in the short term, and the increasing range of choice available to the consumer.

In 2005 global hybrid production stood at around 340,000 vehicles. Production and sales have grown dramatically from that time to a total of around 877,000 in 2008. Global hybrid vehicle production between 1997 and the end of 2008 is estimated at around 2,590,000, with Toyota claiming almost 70% of that total. However, the pace at which other OEMs are joining the fray is heating up despite the global recession, and no fewer than 50 hybrid models are forecast to have been launched in the US market by the end of 2010.

Furthermore, the market is also maturing quickly with the beginnings of a price war evident as Honda seeks to challenge Toyota’s dominance. As well as this the choice of hybrid type powertrains is increasing rapidly. According to Global Insight there will be more than three million hybrid vehicles sold per annum by 2010 and this forecast grows to 12.4 million by 2015.

2008 2009 2010 2011 2012 2013 2014 2015

W Europe 151,612 606,732 1,533,965 3,054,857 4,736,976 5,728,478 6,416,646 7,196,582

Asia/Pacific 602,218 685,683 1,148,991 1,545,866 1,929,473 2,152,410 2,325,011 2,427,110

C/E Europe 2,218 156,032 324,167 644,699 875,494 1,134,232 1,371,836 1,523,687

NAFTA 120,602 142,649 266,509 551,249 837,763 1,167,459 1,383,482 1,570,805

Total 876,650 1,591,096 3,273,632 5,796,671 8,379,706 10,182,579 11,496,975 12,718,184

Figure 76: Global hybrid vehicle production forecast to 2015, by region


Figure 55: US hybrid sales figures 1999 – 2009

Source: Various

The Hybrids Report


North America At the beginning of 2009 light vehicle sales in the US were at their lowest per capita level in nearly 50 years. Within this environment, diminished access to credit, together with the stress caused by low volumes, have brought to the fore some very significant problems for the industry. This has culminated in the demise of two of the Big Three US car manufacturers as they have existed and coupled with the current initiatives to get these large companies moving again there are significant structural changes emerging.

Within this volatile market the market for hybrids continued to grow as a proportion of overall light vehicle sales despite depressed sales overall reaching just over 26,000 units for June 2009, a significant reduction on the record month of May 2007, when sales were 45,000 units in the US. This marks the fourth month in a row that hybrids have taken an increased share of the market.

Since its introduction in 1997 the hybrid has gained just 2.5% of the US market as consumers and OEMs have progressed from what were seen as exotic vehicles closer to mainstream market penetration.

To date, the US has been the major market for hybrids, and growth in hybrid sales has been increasingly strong. Initially in 2000 there were only two hybrid models available and fewer than 10,000 sold, in 2007 there were 17 models and sales totals of over 350,000. However, there was a dramatic contraction in sales in 2008, with November sales dropping 53%, compared with an overall auto sales drop of 37%. By May 2009 Toyota’s Prius was still selling 30% less compared to a year earlier, and Honda was

Figure 77: Global hybrid vehicle production forecast to 2015, by region


Figure 78: US hybrid vehicle production forecast to 2015


The Hybrids Report


selling 7.5% more hybrids thanks to the launch of its new Insight. During 2009 sales have dropped 45.5% year‐on‐year over 2008 to 21,735 units. This compares to total LDV US sales down 34.4% overall.

Based on these figures hybrids hold around 2.4% market share of new vehicle sales, a significant drop from the 3.2% high point in April 2008.

Within these figures Toyota has seen a 62.8% drop in sales year on year. Prius sales are down 61.5% in advance of the introduction of the new model in 2010. In contrast the new Insight pushed Honda hybrid sales up 25% year‐on‐year and at Ford the new Fusion and Milan models have pushed hybrid sales to 2,299 units, up 21% compared to April 2008, while within these numbers the Escape and Mariner hybrids were down 40%.

US hybrid sales are currently running at (June 2009) 100,311 units, a fall of 36% on the 2008 figure of 157,118 over the same period. The annual total sales is forecast at around 255,000 units for 2009, or a 10% decline for the year, which follows a 9% decline for 2008 over 2007 when sales peaked at just over 352,000 units.

According to Sherif Marakby, hybrid chief engineer for Ford, the current market decline in the US is not just a function of the recession. “The fuel prices tend to affect demand more” says Marakby, “When fuel prices were peaking in 2008 you couldn’t buy a hybrid and waiting lists were out at a year. Then fuel prices dropped to half and they were available, so consumers are reacting more to the fuel prices than the recession”.

In the same way, analysts and forecasters have some trepidation as to the popularity of new SUV hybrid models entering the market since the compact and medium sized variants have been so successful. Perhaps because the market is not fully developed and requires more maturity for accurate predictions, a wait‐and‐see approach has permeated the industry, with speculators wondering if fuel efficiency alone can guarantee the success of hybrids in the US market, and whether compromise on power levels will be readily accepted in the name of the environment.

Honda was the first manufacturer to take hybrid technology to the mid‐size sedan segment in the US with the Accord V6 Hybrid, but its slow sales could have supported the argument that hybrid buyers tend to place fuel economy

Figure 79: US hybrid sales by month


Figure 80: US Hybrid market shares 2008


The Hybrids Report


above power, and/or they wish to make a visible environmental statement. Again, the Accord Hybrid looks like any other Accord and it provides no fuel economy advantage over a four‐cylinder, non‐hybrid Accord – they have almost identical EPA ratings.

Europe Although there is likely to be rapid and widespread uptake of stop‐start systems or so‐called micro‐hybrids in Europe, the adoption of mild and full hybrids will remain slow in competition with other powertrain options.

As environmental concerns increase, forecasted demand for hybrids in Europe is likely to exceed 50,000 units by 2012. The UK is regarded as the likely leader in the adoption of hybrid vehicles in Europe, followed by France, where PSA Peugeot Citroën has already launched micro hybrids. In the longer term it is considered likely that hybrid vehicles will also become established in Germany, with the potential to propel the nation to one of the leading hybrid markets in Europe by 2015.

Another factor working against hybrids in Europe is the European drivers’ culture of requiring superior vehicle dynamics to their counterparts in Asia and North America. For hybrids to appeal, they will have to match the dynamics of traditional European vehicles, including reasonable levels of overtaking performance. It is not that the current range of full and mild hybrid vehicle products is not capable of satisfying these requirements, but rather the historical image of sluggish electric vehicles which could lead new vehicle

purchasers to overlook hybrids.

With the introduction of the first two hybrids in 2000, sales were a paltry 1,330 and took three years to double to around 3,000 in 2003. In 2004, sales trebled to around 9,000 and more than doubled again in 2005 to reach around 19,000 units.

By June 2006, Toyota hybrids, including the Lexus brand, had exceeded the cumulative total of 50,000 vehicles sold in Europe. By June, sales of the Prius had reached 41,000 since its launch into the European market in 2000. The Lexus RX400h and GS450h entered the European market at the beginning of 2005 and had sold more than 10,000 units by mid‐2006.

Figure 81: US hybrid sales for January and April 2009 by manufacturer and model

Source: Hybrid Cars

The Hybrids Report


Combined sales of Toyota and Lexus hybrids in Europe rose some 18% in 2008 over the previous year to 57,819 units, which represented 5.7% of the company’s total sales. Overall Toyota Motor Europe’s sales were down 10% to 1,119,521 versus 2007. The Prius continued to perform strongly in Europe in 2008, up 29% to 41,495 units, helping TME break the 175,000 mark in 2008 for cumulative European hybrid sales. The Lexus RX 400h sold 11,923 units in 2008 (down 10% versus 2007).

However, the situation has become significantly more competitive in 2009 with the introduction of the new Honda Insight leading to this model becoming the best selling hybrid for a number of months. Toyota, however, has recently introduced the new Prius, which has been selling very well in North America and Japan.

Japan Since its launch in 1997, the Toyota Prius has dominated the hybrid vehicle market in Japan, with Honda’s Insight and Civic hybrids trailing in distant second and third places respectively. By April 2005, when Honda reached cumulative sales of 100,000 hybrids worldwide, it had sold only 5,900 in Japan, compared to around 155,000 Toyota Prius units.

The first generation Prius was very much a niche market vehicle, and production capacity was initially set at only

12,000 units per year. After the initial interest in 1998, sales volumes in Japan trended down until 2003. The second Prius model, which is equipped with the Toyota’s second generation Hybrid System II, was introduced in 2003 with an emphasis on delivering both eco‐friendliness and driving performance. Production capacity was increased substantially and sales volumes multiplied worldwide during 2004. In Japan, sales volumes fell 27% in 2005.

For 2006, Prius sales in Japan totalled 48,571. This, together

Figure 82: Toyota hybrid vehicle sales in Japan, 1997 to 2009 (Jan – Apr)

Source: Toyota

Figure 29: Japanese hybrid vehicle production forecast to 2015


The Hybrids Report


with 2005 sales, possibly indicates that a strong ‘early adopter’ effect was seen during 2004 and early 2005. Another likely factor in the drop in Prius sales is that Toyota’s Camry hybrid went on sale in Japan early in 2006, offering competition from among the popular following that the Camry has enjoyed for many years. Through 2007 and 2008 sales continued at a monthly rate of between 5,000 and 7,000 units. However, by July 2009, despite the launch of the new Insight leading to Japanese sales leadership for Honda, the launch of the Prius 3 has bought about sales leadership for three consecutive months (see Figure 84) with sales increasing emphatically since April 2009.

Overall forecasts for hybrid sales vary considerably and are generally highly inaccurate as the global market recovers from the recent economic downturn and re‐engages with the longer term issues of improving fuel efficiency and reducing CO2 output.

Figure 83: Number of Toyota's clean‐energy vehicles sold in Japan

Source: Toyota

Figure 84: monthly Prius sales since 2007 – Japan


The Hybrids Report


After the US, Japan is the most important hybrid market in volume terms overall, and the two key OEMs remain Toyota and Honda. To date Toyota has enjoyed a first mover advantage and the beginnings of economy of scale. Honda however, showed with the Insight that new models can bring about rapid changes in consumer behaviour.

The next few years will see the hybrid vehicle finally cease being a niche vehicle choice and enter the mainstream as a legitimate powertrain choice. All over the world the consumer needs to become more accustomed to making an informed choice in powertrain based on the kind of use the vehicle is put to, and there is no doubt that urban Japanese drivers are responding by selecting a higher proportion of hybrids. However, the choices are also likely to become more complex, with the range increasing by 2015 to include a significant number of plug‐in hybrid offerings and later a significant number of electric vehicles.

The Hybrids Report


Aisin AW

Hybrid systems

Address Aisin AW Co. Ltd. 10, Takane, Fujii-cho, Anjo City, Aichi 444-1192, Japan Tel: +81 566 73 1111 Internet: http://www.aisin-aw.co.jp Senior Officers Tsutomu Ishikawa, President Kazumasa Tsukamoto, Executive Vice-President Kazuo Nishida, Executive Vice-President Mutsumi Kawamoto, Executive Vice-President Yoshikazu Noguchi, Senior Managing Director Tadashi Nakamura, Senior Managing Director Toshihiro Shintani, Senior Managing Director Yasunobu Ito, Managing Director Kozo Yamaguchi, Managing Director Masahiro Hayabuchi, Managing Director Akira Takeuchi, Managing Director Shigeo Omura, Managing Director Makoto Hirano, Managing Director Products Hybrid transmissions Plants Japan (4) Sales Group: ¥748.9bn (US$7.69bn, 31 March 2009) (Year to 31.03.09) Employees Group: 17,061 (2009)

Aisin AW, a subsidiary of Aisin Seiki, is a leading supplier of automatic transmissions, hybrid systems and car navigation systems for passenger cars and commercial vehicles. The company supplies transmission systems, hybrid systems, car navigation systems, intelligent transport systems, catalyst air purifiers and filters. Its major customers include OEMs such as Mazda, Nissan, Suzuki and Toyota. Ford and Toyota are two main customers of the company for hybrid systems. Recent Developments Corporate strategy In light of the increasing awareness and demand for hybrid vehicles, Aisin AW is concentrating on expansion of its hybrid vehicle business. The company is primarily targeting an increase in its manufacturing presence in North America and Asia, along with expansion of its marketing capabilities. The company has established itself as one of the leading suppliers for hybrid systems in the world. In line with this strategy, the company expanded its production capacity for automatic transmission and core components for hybrid vehicles in Japan. It also set up a new plant in Aichi (Japan) to manufacture automatic transmissions for hybrid vehicles in 2005. Like many other suppliers across the globe, Aisin AW is also facing pressure due to rising costs. In order to offset this, the company plans to develop new technologies which will help it improve margins and expand its geographical presence. Joint-venture • In November 2008, Aisin AW announced plans to establish AW Hangzhou

Software Development Co., Ltd., in the city of Hangzhou in China’s Zhejiang Province. The new software development joint-venture was formed with Totyu Software Co., Ltd., in response to growing demand for the development of control software for automatic transmissions.

Investments • In January 2006, Aisin AW invested ¥6bn (€42.2m) to increase the production

capacity of torque converters. The company also made investments to upgrade the production lines for parts such as shafts used in hybrid cars.

• In January 2006, Aisin AW started operations at its Okazaki, Aichi (Japan) plant which supplies automotive transmissions and core components for hybrid vehicles.

• In February 2005, Aisin AW invested ¥20bn (US$190.1m) in the construction of a new automatic transmission plant to supply Toyota. The plant produces 200,000-300,000 six-speed automatic transmissions annually.

Contracts • In January 2006, Aisin AW started production of gasoline-electric hybrid

systems for a Toyota Lexus model. • In 2006, Aisin AW commenced supply of (rear-wheel drive) RWD hybrid

system for Toyota Lexus GS450h model. • In 2003, Aisin AW started supply of electric-motors to Ford for application in

gas-electric hybrid vehicles. The company supplies 10,000 to 20,000 units annually.

New Product Developments As Aisin AW is privately-held, it does not disclose its research and development (R&D) expenditure. In April 2005, Aisin AW developed ‘HD-10’, a new full hybrid transmission for front wheel drive vehicles. The hybrid transmission helps improve fuel economy and performance. Financial Overview In the financial year ended 31 March 2009, Aisin AW sales were ¥748.9bn (US$7.6bn, 31 March 2009) compared with ¥958.3bn (US$9.66bn, 31 March 2008) in the preceding year. Further financial details were not available as the company is privately-held.

The Hybrids Report


Year Sales (¥bn)

Operating Income (¥bn)

No. of Employees

2009 748.9 - 17,061 2008 958.3 - 16,750 2007 777.5 42.2 11,520 2006 723.2 40.0 9,979 2005 566 - 8,774

Year Sales

(US$bn) Operating Income

(US$m) No. of Employees

2009 7.7 - 17,061 2008 9.7 - 16,750 2007 6.6 358 11,520 2006 6.2 245 9,979 2005 5.3 - 8,774

Outlook The increasing popularity of hybrid vehicles and the company’s growing presence in this segment is expected to open new growth opportunities for the company in the years to come. Aisin AW is currently focusing on developing a range of next generation of transmission systems to grow its hybrid business. After opting for the organic route to growth in North America, Aisin AW made significant investments in Asia in an effort to enhance its geographical diversity. This would help the company lower its costs and benefit from the growing Asian market. Aisin AW’s strategy to explore the growing hybrid vehicles market, along with increased sales to its largest customer, Toyota, is expected to help the company perform well in the long-run.

The Hybrids Report


Axeon Holdings Batteries

Address Axeon Holdings Nobel Court, Wester Gourdie Dundee, DD2 4UH Scotland UK Tel: +44 1382 4000 40 Fax: +44 1382 4000 44 Internet: http://www.axeon.com Senior Officers Lawrence Berns, CEO David Campbell, CFO Jim Ferguson, Group COO Don Newton, Group Technical Director Products Batteries, chargers, lithium ion cells, battery management systems Plants Poland, UK Sales Group: £61m (US$88.3m, 31.12.2008) (Year to 31.12.2008) Employees Group: 570 (31 December 2008)

Axeon Holdings is a lithium ion battery systems supplier to electric and hybrid electric vehicles. The company supplies over 70 million cells a year and supplies volume production of batteries for global markets. Axeon Holdings is headquartered in Dundee (UK) where operations include manufacturing, commercial and engineering departments. The company manufactures batteries for a wide range of applications from low capacity batteries for industrial, leisure and medical uses to high capacity batteries for use in electric and hybrid electric vehicles. In April 2009, AG Holdings acquired the entire business of Axeon Holdings Plc and are backed by funds managed by Ironshield Capital Management LLP. Axeon has a manufacturing facility in Poland, a commercial and engineering base in Switzerland and a sales facility in Germany. Axeon currently produces batteries for leading electric vehicles (EVs) suppliers, Modec and Allied Vehicles. Recent Developments Corporate strategy Axeon is in the process of expanding its customer base and trying to secure a strong foothold in the hybrid market. The company has secured new customers in the automotive industry. In 2008, Axeon won contracts for electric buses and taxis. In May 2008, the company secured a major contract from Allied Vehicles Ltd. where the contract was valued at £17.3m (US$ 33.8m, 13 May 2008). Axeon continues to work on prototype opportunities with new customers however; they are now shifting their focus to those customers where the company gets the chance to go into volume production. Axeon initiated a restructuring program in September 2008 to reduce cost and stabilise cash flow. The board decided to reduce the overhead of the business. The company reduced the headcount across its locations in Dundee (UK) and Poland. The decision is in response to the slump in the production for powertool and automotive business. Simultaneously, with the thrust of government aid Axeon increased its R&D allocation in the automotive sector to become a technology led business. In February 2009, Axeon unveiled a new lithium ion battery, a result of a two year development program which was aided by Department for Transport under the Energy Savings Trust’s low carbon R&D program. However, currently the company has decided to reduce it to reflect a better balance between sales contribution and investment cost. Acquisition • In July 2007, Aexon Holdings acquired Swiss battery pack maker Ristma in

£7.4m (US$15.03m, 14 July 2007). Axeon paid £5.11m (US$10.38m) in cash and a deferred share issue worth £2.25m (US$4.57m). The added value part of the deal came from the Ristma’s European infrastructure. Ristma has an engineering and sales operation in Germany and manufacturing plants in Poland. The Polish plant turned out to be important because it has a good location to supply European automotive customers with electric and hybrid vehicle battery packs.

• In February 2006, Axeon Holdings acquired Advanced Batteries for £1.5m (US$2.6m, 17 February 2006). The strategic move was to create a reliable electrical energy source for cars and buses which in turn aided to reduce carbon-dioxide emissions.

Contracts • In July 2008, Axeon Holding secured a contract from an Italian electric bus

manufacturer, Technobus, to provide a 72kWH prototype battery. The two companies are in the process of evaluating the battery. After successful completion of the evaluation, the production program is set to begin in 2009. Further information on the production is not yet provided by the company.

The Hybrids Report


• In May 2008, Axeon won a contract from Transteq, a US customer for the supply of five prototype battery packs for an HEV bus application.

• In May 2008, Axeon Holdings won a major contract from Allied Vehicles Ltd. The contract was valued at £17.3m (US$ 33.8m, 13 May 2008). The company established a long term supply agreement followed by the delivery of prototype batteries along with 25 production units.

• In November 2007, Axeon won a contract from Veicoli, an Italian vehicle converter, to supply ten prototype battery sets for taxi and minibus demonstration vehicles. This order was followed by the swift delivery of a proof of concept battery which was announced in July 2007.

New Product Developments • In February 2009, Axeon Holdings unveiled a new lithium ion battery, result

of a two-year development program. In early 2007, the company received funding from the Department for Transport under the Energy Savings Trust’s low carbon R&D program, to develop and improve performance of automotive batteries at lower costs. The new lithium ion is cheaper, safer and offers a threefold increase in life compared with earlier lithium-ion batteries.

Financial Overview For the year 2008, the company reported sales of £61m (US$88.3m, 31 December 2008), compared with £29m (US$57.9m, 31 December 2007) due to an acquisition in Germany in mid-2006. Axeon was expecting an operating loss of around (£3m) (US$4.34m) in 2008, compared to an operating profit of £140,000 (US$279,623) in 2007. Cash in December 2008 was £2m (US$2.89m), down from £12m (US$23.9m) in 2007. Axeon received a covenant waiver by its bank which was valid till the end of February 2009 after losses in the fourth quarter of 2008. However, it plans to seek a continuation of the waiver beyond February 2009. With the support of its principal lender, the company has sufficient working capital for its expected levels of activity and can reach a minimum of a cash break-even position in 2009. Outlook For 2009, Axeon is anticipating sales considerably lower than its expectations. The demand at its small battery division has been hit by an unprecedented change in the general economic environment. The company has experienced further deterioration in its markets since their interim results on 24 September 2008. Axeon’s restructuring program led to reduce overheads and headcounts in all locations with annualised savings of £2m (US$2.86m, 3 February 2009). The move will assist the company to reserve cash and secure higher margin sales. The company is banking on the rising prices of oil, which will eventually accelerate the demand for electric vehicles. The aid from government and global policy is also moving in favour of electric and plug-in hybrid vehicles.

The Hybrids Report


Azure Dynamics Hybrid electric components

Address Azure Dynamics, Inc. 14925 Eleven Mile Road Oak Park, MI 48237-1013 USA Tel: +1 248 298 2403 Fax:+1 248 298 2410 Internet: http://www.azuredynamics.com Senior Officers Scott T. Harrison, CEO Curt Anthony Huston, Chief Operating Officer Ronald V. Iacobelli, Chief Technology Officer Ryan S. Carr, Chief Financial Officer Jay A. Sandler, Vice-President, Sales Ricardo Espinosa, Vice-President, Engineering Michael L. Elwood, Vice-President, Marketing Products DC-DC converters, electric motors, batteries, parallel hybrid-electric powertrain, series hybrid-electric powertrain, motor controllers, traction motors and ultracapacitors Plants Canada, US Sales US$7.7m (Year to 31.12.08) Employees 125 (September 2008)

Azure Dynamics is a manufacturer of hybrid vehicle technology for light to heavy-duty commercial vehicles, including delivery vehicles and shuttle buses. The company develops control software, power electronics and helps in vehicle systems engineering and integration. The company manufactures series and parallel hybrid electric powertrains and hybrid components including motor controllers, custom battery packs, ultracapacitors, DC-DC converters, traction motors and generators. The company has manufacturing plants in Boston (US) and Vancouver (Canada). The company primarily has four hybrid platforms and products: • G1 is a series hybrid platform for delivery vans and shuttle buses. • P1 is a parallel hybrid platform for Class 3 to 5 trucks and buses. Azure

Dynamics has an agreement with Ford to develop parallel hybrid powertrain on the Ford E-350 and E-450 commercial vehicle chassis.

• P2 is the parallel hybrid platform for Class 7 and 8 trucks, such as delivery vans and buses.

• Low Emission Electric Power system (LEEP) is a source of power for on-board vehicle auxiliary loads and off-vehicle power requirements.

The company supplies to Canada Post, FedEx, Purolator Courier, Smith Electric Vehicles, StarTrans, Utilimaster and United States Postal Services. Recent Developments Corporate strategy During 2008, Azure Dynamics worked towards positioning itself to become a major player in the hybrid electric commercial vehicle business in the future. Its partnership with Ford to hybridise their E-450 commercial vans continued to grow stronger, the manufacturing arrangement with Utilimaster progressed smoothly, and the new agreement with Johnson Controls-Saft resolved potential future battery supply problems. Azure continued to form significant relationships with industry leaders to increase penetration into its target markets and advance its product development programs. Along with Ford Motor, StarTrans (a business division of Supreme Corporation), Utilimaster Corporation and Kidron, Azure also formed relationships with Altec and launched new products with key customers such as FedEx Express, AT&T and Purolator. Azure’s restructuring, announced in January 2009, included a 25% workforce reduction, cuts in discretionary spending, and a focused effort to share its product development costs with its partners. It also involved rationalisation of the product line to allow the company to concentrate its efforts on existing products and product programs. Additionally, the company is planning to access low cost loan from the US and Canadian governments to support the development of more fuel efficient vehicles. Acquisition • In January 2005, Azure Dynamics acquired Solectria Corporation, a US based

hybrid electric powertrain and components supplier.

Joint-venture • In January 2009, Azure Dynamics and Johnson Controls-Saft formed a joint-

venture (JV) to supply lithium-ion hybrid batteries for commercial trucks in the North American market. The supply agreement extends for the next five years. Financial terms of the deal have not been disclosed. Under the

The Hybrids Report


agreement, Johnson-Saft will supply 20,000 battery systems to Azure Dynamics, which will be the part of Azure Dynamics’ Balance Hybrid Electric system and other future hybrid platforms. The batteries will be produced at the Johnson Controls headquarters at Glendale, Wisconsin (US). Production is expected to be increased in 2009 and 2010 and the trucks equipped with hybrid batteries are expected to roll out by end of 2010.

• In March 2008, Azure and Altec signed a Memorandum of Understanding to develop LEEP Lift™ systems for electric utility and telecom aerial lift trucks. According to the agreement, Altec integrated Azure’s LEEP Lift™ systems into their utility and telecom truck bodies and Altec promised to market the systems through their existing sales and service network.

Investment • In February 2004, Azure Dynamics established a new facility in Burnaby,

British Columbia (Canada) to support its engineering and testing operations. Divestment • In May 2007, Azure Dynamics closed its head office in Toronto (Canada) and

another office and service centre in Kenilworth (UK). The company opened its headquarters in some location in North America. This was done to better serve its customers, mainly Ford Motors.

Contracts • In April 2009, Azure Dynamics received sixteen orders for its Low Emission

Electric Power (LEEP™ Freeze) system, which is an integral part of Kidron's UltraTemp cold plate transport refrigeration solution. Kidron is a division of VT Specialised Vehicles Corporation.

• In August 2008, Azure Dynamics won an initial order for three units from Con Edison of New York for its Balance™ Hybrid Electric system integrated on Ford’s E450 chassis.

• In July 2008, Azure Dynamics received orders for two Hybrid Electric CitiBus’s from the West Harlem Art Fund, Inc (WHAF). WHAF is a ten-year old community-based, cultural arts and preservation organisation serving northern Manhattan in New York City.

• In June 2008, Azure Dynamics secured an order from the Pennsylvania Department of Transportation for 10 hybrid buses with an option for 15 additional buses at a later date. The powertrain, with a GM Vortec 4.8L engine, offers over a 40% improvement in fuel economy, and a 30% reduction in carbon emissions in city conditions.

• In May 2008, Azure Dynamics received an order from AT&T for 15 gasoline parallel hybrid electric Ford E-450.

• In February 2008, Azure Dynamics entered into an agreement with Utilimaster Corporation. Under the agreement, Azure will provide P1hybrid electric powertrain which Utilimaster will integrate into the Ford E-series.

• In May 2007, Azure signed an agreement with FedEx to supply a parallel hybrid-electric test vehicle. Azure will supply 20 pre-production parallel hybrid electric Ford E-450 delivery vans to FedEx.

• In April 2007, Azure Dynamics signed a supply agreement with Electro Autos Eficaces of Mexico. The company will supply 1,000 drive systems which will be integrated into Nissan Tsuru platform. Tsuru, which is generally used as municipal fleet in Mexico City, is being converted from gasoline power vehicles to electric vehicles.

• In October 2006, Azure Dynamics signed an agreement with Ford to jointly develop hybrid electric drive technology for Ford’s E-350 and E-450 commercial vehicle chassis. Ford agreed to assist Azure in powertrain development.

• In August 2006, Azure entered into an agreement with StarTrans, a division of Supreme Corporation, to develop hybrid electric CitiBus for urban transit applications. The company will supply its hybrid cab-chassis on which StarTrans will assemble its shuttle bus body. StarTrans will use its HD Senator Series model line of shuttle buses.

• In May 2006, Azure Dynamics received a purchase order from Smith Electric Vehicles, a part of the Tanfield Group Plc, for 20 electric powertrain systems. The order is a follow-on order to the supply agreement between Azure and Smith Electric Vehicles signed in June 2005.

The Hybrids Report


• In 2006, Azure received a purchase order from Canada-based Purolator Courier Ltd for 115 hybrid electric delivery vehicles. This is a result of a five-year supply contract that was signed between these two companies in 2003. The five year contract was valued at about US$90m.

New Product Developments In 2008, Azure Dynamics engineering and R&D expenses totalled US$21.5m (including US$11.6m in product development costs) compared with US$17.8m in 2007 (including US$10m in product development costs). Financial Overview For the financial year ended 31 December 2008, Azure Dynamics sales increased to US$7.7m compared with US$2.8m in the same period in 2007. Net loss was US$38.9m over a net loss of US$30.2m in 2007. As at 31 December 2008, the company’s cash and cash equivalents totalled US$13.8m and working capital totalled US$19.8m compared with cash and cash equivalents of US$24.1m and working capital of US$32.3m as at 31 December 2007. Azure Dynamics sales for the first quarter ended 31 March 2009 totalled US$0.6m compared with US$0.4m in the first quarter of 2008, mainly attributable to the sale of one Azure Citibus™ shuttle bus recorded in 2008 compared to six Balance™ Hybrid Electric systems and one LEEP™ Freeze system recorded in 2009. Net loss was US$7.4m compared with a net loss of US$7.9m in the first quarter of 2008. During the first quarter, the company continued to focus on the development of its Balance™ Hybrid Electric program and component development, as well as ongoing production activities associated with the Series Hybrid shuttle buses and electric components. As at 31 March 2009, the company's net cash and cash equivalents reached US$7.9m and working capital totalled US$13.1m over cash and cash equivalents of US$13.7m and working capital of US$25.1m as at 31 March 31 2008.

Year Net Sales

(US$m)

Operating Income (US$m)

Net Income (US$m)

R & D Expenditure

(US$m)

No. of Employees

2008 7.7 - (38.9) 21.5 125 2007 2.8 - (30.2) 17.8 - 2006 5.8 (23.8) (23.4) 13.5 112 2005 4.6 22.2) (21.9) 11.4 109 2004 - - (8.2) - -

Outlook Azure Dynamics has not attained financial viability yet. The company has been incurring losses since its inception, mainly due to high product development costs. The company believes that its products will qualify for federal funding assistance from a variety of programs announced by the Obama administration in 2009. The addition of federal support could greatly accelerate the company’s production ramp. In the future, demand for hybrid vehicles is expected to grow as environmental and fuel-saving concerns rise among consumers as well as numerous OEMs. Azure Dynamics is a leading supplier of hybrid systems for commercial vehicles, with clients such as AT&T, Con Edison, FedEx Express and Purolator Couriers. The new supply agreement with Johnson Controls-Saft will further strengthen Azure’s position in the hybrid drives market.

The Hybrids Report


Cobasys Batteries

Address Cobasys LLC 3740, Lapeer Road South Orion, Michigan 48359 USA Tel: +248 620 5700 Fax: +248 620 5702 Internet: http://www.cobasys.com Senior Officers Tom Neslage, President & CEO Scott Lindholm, Vice-President, Systems Engineering & Chief Sales Officer Joseph S Crocenzi, Vice-President, Finance Jim Greiwe, Vice-President, Manufacturing Gary Absher, Vice-President, Product Development Products Nickel metal hydride batteries Plants USA Sales US$14.4m (Year to 30.06.2007) Employees 380

Cobasys is a leading manufacturer and supplier of nickel metal hydride (NiMH) batteries for hybrid electric vehicles (HEVs), and medium-heavy duty vehicles. The company also supplies to the telecommunication, UPS and distributed generation sectors. In 2001, Cobasys was formed as Texaco Ovonic Battery System, but was later renamed as Cobasys in 2004. It is a joint-venture between ChevronTexaco Technology Ventures LLC and Energy Conversion Devices, Inc. For the HEV segment, Cobasys offers NiMH advanced battery systems for passenger cars, SUVs, buses and trucks. The company is working towards development of lithium-ion batteries for plug-in hybrid vehicles (PHEV) as the hybrid industry has moved forward. Recent Developments Corporate strategy Owners of Cobasys are exploring strategic alternatives to capitalise on opportunities for energy storage solutions in the growing HEV and stationary power industries. Cobasys is working with OEMs to develop batteries and energy storage systems for HEVs, heavy-duty vehicles and plug-in HEVs applications. The company is developing lithium technology and energy system solutions for rechargeable plug-in HEVs. These include providing battery systems for the Saturn Vue Green Line, Saturn Aura Green Line, the Chevrolet Malibu hybrid and a contract to develop lithium battery systems for the new General Motors plug-in hybrid vehicle (PHEV) development program. The company is focusing on the commercialisation of NiMH batteries for the HEV market. The company’s strategy is to conceptualise, design and develop materials, products and production processes and commercialise them internally and through third-party relationships, such as licences and joint-ventures. In January 2007, the company signed an agreement with A123Systems to use its lithium technology to develop products for the HEV market. In 2007, the company also announced investments of over US$30m in plant and equipment to meet the growing demand for NiMH battery systems at its Springboro, Ohio (US) module manufacturing and system assembly plant. In February 2008, partners of the company planned to provide substantial capital contribution which was necessary to fund approved operations in proportion to their membership percentage interests. At the beginning of 2009, the company restructured its business due to the reduction in the production level. The company laid off 119 people. The move was in response to lower orders from its clients. Investments • In April 2007, Cobasys announced the expansion of its headquarters with an

additional 18,860ft2 at Michigan to facilitate development of NiMH and lithium systems.

Joint-ventures • In January 2007, Cobasys and A123Systems signed an agreement to form a

partnership to develop lithium-ion energy storage systems for HEV applications.

• In August 2005, Cobasys signed an agreement with Motorola to manufacture battery control system components for HEV battery systems.

• In July 2005, Cobasys signed a technical cooperation agreement with Panasonic EV Energy, a joint-venture between Matsushita Electric and Toyota

The Hybrids Report


Motor Corporation. Under the agreement, Panasonic will sell NiMH battery products for North American transportation applications. Cobasys will receive royalties from Panasonic on North American sales of NiMH battery products through 2014.

Contracts Cobasys has contracted for the majority of its capacity through 2010. • In May 2007, Cobasys supplied its NiMHax® battery systems to Enova

Systems for integration into hybrid service vans for Verizon. • In March 2007, Cobasys and A123Systems signed a contract with General

Motors to develop batteries for the Saturn Vue. • In March 2007, Cobasys started supplying the 2008 Chevrolet Malibu Hybrid

Sedan with the 36V NiMH battery system. • In March 2007, Cobasys started supplying NiMHax® Nickel Metal Hydride

(NiMH) battery systems for integration in the Lotus Engineering EVE (efficient, viable and environmental) vehicle.

• In December 2006, Cobasys received a contract from General Motors to supply NiMHax® NiMH battery system for Saturn Aura Green Line hybrid mid-size saloon..

• • In June 2005, Cobasys received an order from Denver Regional Transport

District (RTD) to convert ten hybrid buses from lead batteries to its NiMH battery systems.

New Product Developments • In November 2004, Cobasys, in cooperation with Azure Dynamics, developed

NiMhax 336-70 NiHM battery packs for HEVs. • In August 2004, Cobasys introduced NiMHax battery packs for all

transportation applications. Its packs range from 144volts and 30KW for light duty automotive applications to 672 volts and 280KW for large commercial applications.

Financial Overview: In the financial year ended 30 June 2007 Cobasys’s sales were US$14.4m, 778% higher than the previous year’s figure of US$1.64m.

Year Sales (US$m)


Net Income (US$m)

2007 14.4 (64.5) (75.35) 2006 1.64 (41.5) (45.32) 2005 1.17 (41.1) (41.27)

Outlook Cobasys has been facing loses since its inception. The partners plan to sell Cobasys because of its uncertain financial conditions. GM had plans to acquire Cobasys, but the process has been put on hold. The members of Cobasys OBS and CTV did not approve of 2008’s business plan and budget because of its lower growth prospects. In 2008, due to a breach of contract the company was sued and jeopardised its relationship with Daimler AG, which further impacted the prospects of the company. Cobasys’ future will depend on developing new products such as the lithium technology and energy system solutions for rechargeable PHEVs that the company is currently exploring. The company might perform better in the future as it has signed major contracts for HEVs up until 2010. Further, the investments that the company is making to increase production capacity at its manufacturing locations are likely to ensure future growth.

The Hybrids Report


Continental

Mild hybrid systems

Address Continental AG Vahrenwalder Straße 9 D-30165 Hannover Germany Tel: +49 511 938 01 Fax: +49 511 938 81770 Internet: http://www.conti-online.com Senior Officers Rolf Koerfer, Chairman Karl-Thomas Neumann, CTO, Chassis & Safety, Interior and Powertrain divisions Jorg Grotendorst, Head, Hybrid Electric Vehicle business unit Heinz-Gerhard Wente, COO, ContiTech Division Ralf Cramer, COO, Chassis & Safety Products Electronic powertrain and chassis components and system, electronic safety system, electronic suspension systems, hybrid system, integrated control unit for double clutch transmission, transmission control unit Plants Powertrain Division: Australia, Brazil, China (4), Czech Republic (4), France (2), Germany (9), Hungary, India, Italy, Korea (2), Malaysia, Mexico (3), Philippines, Romania, Russia, Thailand, UK, USA (7) Sales Group: €24.3bn (US$34.2bn, 31 December 2008) (Year to 31.12.2008) Automotive group: €14.9bn (US$21bn, 31December 2008) (Year to 31.12.2008) Powertrain division: €4bn (US$5.6bn, 31 December 2008) (Year to 31.12.2008) Employees Group: 139,155 (December 2008) Powertrain Group: 25,244 (December 2008)

Continental is a leading supplier of tires and automotive components. The group manufactures brake systems, chassis components, vehicle electronics and powertrain controls. The Continental Group is made up of the Automotive group and the Rubber group. Each group has three divisions. The company has 200 sites for production and R&D in 36 countries. The headquarters are situated in Hannover (Germany). Continental Rubber group is divided into three main divisions: Passenger & Light Truck Tires, Commercial Vehicle Tires and ContiTech. Continental Automotive Systems (CAS) is divided into three divisions: Chassis & Safety, Powertrain and Interior. The Continental Automotive group had sales of approximately €15bn (US$21bn) in 2008. The Powertrain division is further divided into five divisions: Engine Systems, Transmissions, Sensors & Actuators, Fuel Supply and Hybrid Electric Vehicles. The Hybrid Electric Vehicles business unit offers all the basic components for a complete hybrid system. The company develops components such as power electronics, electric machines and energy storage devices for hybrid drives. Siemens VDO, which is now part of Continental, is active in developing and manufacturing propulsion solutions and control units in the hybrid segment,. The Powertrain division has presence in 62 locations in 20 countries. In 2008, approximately 25,000 employees achieved sales of €4bn (US$5.6bn). Region wise, in 2008 the Powertrain division had 28% sales from Germany, 13% from Asia, 36% from Europe (excluding Germany), 22% from NAFTA and 1% from rest of the world. Continental supplies to almost all major vehicle manufacturers. Its major customers include BMW, Chrysler, Daimler, Fiat, Ford, General Motors, Toyota, Volkswagen and Volvo. Recent Developments Corporate strategy Continental is focusing on integrating several acquisitions it has made over the last few years, the most recent being Japanese lithium ion specialist, Enax in June 2008, where the company acquired 16% holding in Enax, Continental acquired Siemens VDO, the automotive electronics business of the Siemens group in July 2007. The company paid €11.4bn (US$15.6m) for the takeover. The acquisition placed Continental among top five global suppliers. The takeover was closed in December 2007. In the last ten years, the company acquired businesses of Teves, Temic and the automotive electronic business of Motorola. These buyouts have transformed Continental from a tire manufacturer to an automotive systems supplier. In addition, these strategic acquisitions are helping it broaden its product portfolio and global presence in the hybrid market. Continental is expanding its customer base in hybrids where the company had contracts from Mercedes, Volkswagen and GM to supply mild hybrid systems and batteries for electric and hybrid vehicles. Simultaneously, Continental is maintaining a strong grip in the market through the alliances it has formed. Recently, the company joint ventured with ZF, Enax, Siemens VDO, and GM. In April 2009, Continental and ZF concluded an agreement to cooperate in the development and production of commercial vehicle hybrid drives. Then, in June 2008 Continental and Enax came together for the development of lithium ion cell technology for future hybrid and electric drives in automobiles. Continental is in the process of restructuring its businesses and removing overlapping functions. The job cuts will be made as part of the company’s restructuring plan in powertrain components division that merged with Siemens VDO last year. Continental AG reduced its workforce by 6,000 employees in March 2009. The supplier cut 8,000 jobs globally last year, following the economic crisis and slump in automotive demand. The company did not specify the division from which the job reductions were made. Continental is consolidating its operations by shutting down its tire-manufacturing plants. Continental is cutting jobs in UK, France by 1,500, 10% of workforce or 1,600 employees in North America over the the few months.

The Hybrids Report


Continental is laying a strong focus on the OE (original equipment) market in Europe. In 2008, the company increased its European share from 30% to 32% and withdrew unprofitable contracts in NAFTA states (reduced 14% market share in 2008) and South America. Continental anticipates fewer sales to vehicle manufacturers in 2009, and assumes the market will pick up again in the fourth quarter this year. Despite the current downturn in vehicle sales, Continental expects its OE market to remain as an important aspect of its business. The company aims to maintain its strong presence in both the OE and replacement market. The group is also expanding its presence in low cost countries including Czech Republic, Malaysia, Mexico, Philippines, Romania and Slovakia where it plans to shift its production from high-cost countries. Acquisitions • In June 2008, Continental acquired shares of Japanese lithium ion specialist,

Enax. The company acquired 16% holding in Enax. The two companies intend to improve safety, service life and performance of lithium ion batteries.

• In July 2007, Continental acquired Siemens VDO, the automotive electronic division of Siemens group. The company paid €11.4bn (US$15.6m) for this takeover. The acquisition placed Continental among the top five global suppliers. The takeover was closed in December 2007.

• In December 2006, Siemens VDO acquired Ballard Power System Inc’s Electric Drive Business located in Dearborn, Michigan (USA) for US$4m. Ballard Power System develops electric drive technology for hybrid and fuel cell vehicles.

Joint-ventures • In April 2009, Continental and ZF concluded an agreement to cooperate in the

development and production of commercial vehicle hybrid drives. ZF will develop and produce the drive system and is in charge of the system integration for the hybrid system. Continental is to supply the energy accumulator and system electronics. Volume production is scheduled for 2011.

• In June 2008, Continental and Enax agreed on a cooperative venture for the development of lithium ion cells for future hybrid and electric drives in automobiles.

• In December 2007, Continental and ZF Sachs announced their decision to jointly develop hybrid drive systems. The two suppliers have selected SupplyOn AG for web-based collaboration solutions.

• In September 2007, Siemens VDO and Lotus Engineering of UK formed a collaboration to develop a demonstration vehicle which will showcase an integrated systems approach for reducing CO2 emissions. Both companies are working on direct fuel injection systems, hybrid drives, integrated powertrain management, emission after-treatment systems and system components.

• In June 2007, Continental secured a contract from GM for advance development of lithium ion batteries for the GM Chevrolet E-Flex propulsion system to be used in the Chevy volt concept car. The plan is to launch the car in late 2010. In the process, Continental used battery cells designed by A123Systems. In May 2008, GM tested two competing battery packs for use in the GM Chevrolet Volt, one provided by Continental and another by LG Chem. However, in January 2009 LG Chem won the contract to supply lithium ion batteries to GM.

• In January 2006, Continental formed a joint-venture with Volkswagen AG to develop and supply power electronics for future hybrid drive projects.

• In September 2005, Continental formed a partnership with ZF Friedrichshafen AG to develop hybrid vehicle technology for passenger cars and light commercial vehicles. The partnership provides hybrid solutions including brakes, electric accessories and electronics brakes.

Investments • In April 2009, Continental AG opened a new automotive technical centre in

Jiading Industrial Zone, Shanghai (China). The technical centre will undertake engineering activities related to electronic brake systems, hydraulic brake systems and engine management & system control. Two major product divisions of Continental, Chassis & Safety and Powertrain, have invested in the technical centre. The centre will conduct vehicle application development and system test of new technologies and products developed by Continental customised for the Chinese OEM market.

• In September 2008, Continental started series production of lithium ion batteries to be used in hybrid drive cars. The company initiated planning to start the production from December 2007. In 2007, Continental started pre-series production of lithium ion batteries in Berlin (Germany). The powertrain division invested over €3m (US$4.3m, 30 September, 2008) in building a manufacturing capacity at Nuremberg site (Germany). The plant can produce

The Hybrids Report


15,000 units each year in a production facility covering 300m2. This capacity can be doubled at short notice.

• In September 2008, Continental opened a second manufacturing plant at Calamba (Philippines). The Chassis & Safety Division of the plant will produce inertial, speed and advanced sensors, chassis components, passive safety and advanced driver assistance systems (ADAS) components. The Powertrain Division will manufacture ECUs, transmission controllers, sensors and actuators.

• In April 2008, Continental’s Powertrain division announced that it is increasing the production capacity of diesel injection pumps at its facility in Trutnov (Czech Republic). The company is constructing a new plant near its existing one. It will include a production area of 8,500m2 and a logistics building spanning 3,500m2. In order to achieve the desired expansion, Continental will invest €18m (US$28.09m). The facility’s construction is expected to be complete by 2010 and will employ 450 people. Currently, the existing plant has a workforce of 100 people. The plant is expected to be fully operational by 2011, with an annual production capacity of 900,000 pump cylinders and two million injection pumps.

• In November 2007, Continental invested US$60m to open its first automotive electronics parts facility in Costa Rica. The new facility, which manufactures electronic parts for transmission systems of cars, started operations in 2008. Continental will primarily export the products of the new facility to the US market, taking advantage of the Free Trade Agreement between Central America, the US and the Dominican Republic.

• In August 2007, Continental set up a research and development centre (R&D) in Yokohama (Japan) to strengthen its relations with Japanese and Korean OEMs. The centre will be the R&D hub for the company in Japan, integrating four other R&D centres at Yokohama, Chiba, Hamamatsu and Hiroshima (Japan).

• In January 2006, Siemens VDO invested around €20m (US$25.9m, 31 January 2007) to establish a research and development centre in Iasi (Romania).

• In September 2005, Siemens VDO Automotive invested €7m (US$8.4m, 30 September 2005) in expanding its research and development facility in Singapore.

• In September 2005, Continental inaugurated a new electric drive development centre in Berlin (Germany). The company grouped together all the units including electric motors, actuators and control electronics at the centre.

• In February 2004, Siemens VDO established regional headquarters and a research and development centre for the Diesel Systems North America group in Columbia, South Carolina (USA).

Divestments • In December 2007, Brose agreed to acquire the electric motor operations of

former Siemens VDO from its current owner, Continental. The financial details of acquisition have not been disclosed and the transaction is subject to approval from antitrust authorities.

• In April 2007, Continental decided to close its small electric motor facility in Haldensleben, Saxony Anhalt (Germany) due to the loss of some crucial customers. The decision includes shifting the production of electrical motors to Temic Automotive Electric Motors GmbH in Berlin (Germany).

• In November 2006, Continental decided to close its facility in Buffalo, New York (USA) by the end of 2009. Production from the plant, which manufactures sensors for engine and transmission controls, will be shifted to Asia, resulting in the loss of 380 jobs.

• In November 2006, Continental decided to close its car electronics facility in Elma, New York (USA) which it bought from Motorola. The company plans to close the unit by the end of 2009.

Contracts • In March 2008, Continental signed a contract to supply lithium ion batteries to

Daimler for Mercedes S 400 BlueHYBRID. Johnson Control supplied battery cells to Continental to supply lithium ion batteries to Daimler. In September 2008, the company developed the first production ready lithium ion battery for hybrid vehicle. Mercedes Benz planned to launch S 400BlueHybrid in the early 2009. In line with the plan, Mercedes introduced S 400BlueHybrid, the world’s first lithium ion battery car in April 2009.

• In January 2006, Continental and ZF won an order from Volkswagen to develop hybrid drive module consisting of an electric drive including the power electronics.

• In 2006, Continental commenced supplies of mild hybrid system (ISAD system) to General Motors for Silverado/Sierra pick-up trucks.

New Product Developments In 2008, R&D expenses climbed by 79.5% to €1.49bn (US$2.11bn) compared with €834.8m (US$1.23bn) in 2007. The expenses

The Hybrids Report


accounted for 6.2% of sales compared with previous year’s 5%. This was mainly due to changes in the scope of consolidation after the acquisition of Siemens VDO and the automotive electronics business of Motorola. In Powertrain division R&D expenses increased by 189.9% to €420.1m (US$592.2m) compared with €144.9m (US$213.4m) in 2007. The expenses accounted for 10.4% of the divisions sales compared to previous year’s 12.3%. • In April 2008, Continental announced the launch of a new-generation

electronic brake system, MK100, by 2011. The new brake system will be based on a modular structure and hence will make scalability possible. The product will facilitate the installation of Anti-Lock Braking System/Electronic Stability Control (ABS/ESC) in all vehicle categories, ranging from a motorcycle ABS system with or without an integral braking function to high-end ESC designs with extremely powerful, low-pulsation pump variants.

• In March 2008, Continental AG showcased the latest version of power electronics in the concept vehicle BMW Vision Efficient Dynamics at the 2008 Geneva Autosalon. The hybrid modular assembly allows the components to be used flexibly for different power categories and in different installation circumstances. The power electronics control the flow of energy from the engine to the energy accumulator and vice versa.

• In March 2007, Continental and ZF announced development of power electronics modular systems for hybrids. The modular system can work in hybrid drive systems with different power ratings, from high voltage applications to those using less than 60-volts.

Financial Overview Continental AG has reported growth in net sales for fiscal year ended 31 December 2008. The company registered a growth of 45.8% in net sales from €16.6bbn (US$24.4bn) in 2007 to €24.3bn (US$34.2bn) largely aided by the acquisition of Siemens VDO. Continental’s adjusted EBIT (before amortisation and depreciation of acquired assets) was €1.83bn (US$2.57bn), a decrease of €296m (US$417.2m, 31 December 2008) from last year. The company reported net loss of €1.07bn (US$1.52bn) in 2008. Segment wise, Continental’s Automotive Group witnessed extremely adverse market conditions and restructuring initiatives. Net sales of the Group were recorded at €14.9bn (US$21bn) while adjusted EBIT was €908.9m (US$1,281.3m). Sales in the Powertrain division increased by 243.2% to €4bn (US$ 5.6bn) from €1.1bn (US$ 1.6bn) in 2007. The increase resulted from the acquisition of Siemens VDO. In the first quarter of 2009, Continental predicted large deviations, particularly in the first half, with the comparative figures in 2008. Continental AG reported a 35.2% drop in sales for the quarter ended 31 March 2009. Sales dropped to €4.3bn (US$5.67bn) compared with €6.64bn (US$10.49bn) in the same period in 2008, primarily due to the reduction in global automotive demand. Sales of the Automotive group registered a 42% decline to €2.52bn (US$3.32bn) while the sales of the Rubber group declined 22.2% to €1.78bn (US$2.35bn). Rubber group sales were supported by demand in the replacement market. Net loss for the quarter was €267.3m (US$353m) compared to a net income of €166.8m (US$263.5m) in the comparable period. Despite the loss in the quarter, the company was able to comply with financial covenants. The company expects business conditions to improve in the subsequent quarters and thus expects to comply with the covenants for the rest of the year as well. Continental anticipates substantial free cash flow in the full year 2009 by suspension of the dividend, substantial cuts in capital spending and further reductions in fixed costs and debts in 2009.

Year Net Sales (€bn)

EBIT (€bn)

Net Income (€m)

R&D Expenditure

(€m)

No. of Employees

2008 24.3 (0.29) (1,077) 1,498.2 139,155- 2007 16.6 1.67 1,049.9 834.8 151,654 2006 14.8 1.60 1,004.6 677 85,225 2005 13.8 1.51 952.2 589 79,849 2004 12.5 1.16 716.2 524 80,586

Year Net Sales

(US$bn) EBIT

(US$bn) Net Income

(US$m) R&D

Expenditure (US$m)

No. of Employees

2008 34.2 (0.40) (1,518.29) 2,112.07 139,155- 2007 24.45 2.46 1,546.35 1,229.54 151,654 2006 19.66 2.11 1,326.34 893.82 85,225

The Hybrids Report


2005 16.39 1.79 1,127.83 697.64 79,849 2004 17.05 1.58 977.18 714.95 80,586

Outlook Continental's take-over of Siemens VDO has positioned it among the leading automotive suppliers. The acquisition has not only increased its global presence and product offerings but also strengthened its technological capability. Continental AG expects cost savings from the acquisition of Siemens Automotive (SI) VDO to reach around US$450m per year beginning 2010. This is more than double what the company first expected. The savings will add an additional justification to the US$15.7bn deal made in 2007. Continental foresees high growth potential in the emerging market especially in BRIC countries, (Brazil, Russia, India and China) mainly driven by volume. However, the developed automotive markets in Europe and North America will continue to be strategically important due to high margins. Continental has come up as one of Europe’s best fuel efficient product suppliers due to a strong position in fuel injection and hybrid technologies. The acquisition of VDO has positioned Continental as one of the leading three players in the fuel-efficiency field. The acquisition is further expected to strengthen Continental’s capabilities in efficiency technologies, including direct fuel-injection systems, micro, mild and full hybrids, energy management systems, telematics and low rolling resistance tires. In the future, stricter emission norms and rising oil prices require new approaches to drive systems with minimal environmental and climatic impact. This will increase the demand for fuel-efficient and hybrid vehicles. Simultaneously, the interest in hybrid drives is growing not just in North America and Asia, but in Europe as well. This will offer a huge market of opportunities for Continental’s Powertrain division, which sees hybrid and electric drives as the proper route for those vehicles which are economical yet dynamic.

The Hybrids Report


Denso Hybrid vehicle components

Address Denso Corporation 1-1, Showa-cho Kariya Aichi 448-8661 Japan Tel: +81 566 25 5511 Fax: +81 566 25 4537 Internet: http://www.globaldenso.com Senior Officers Akihiko Saito, Chairman Nobuaki Katoh, President & CEO Koichi Fukaya, Vice-ChairmanHiromi Tokuda, Executive Vice-Presiden Mitsuharu Kato, Senior Managing Director Kenji Ohya, Senior Managing Director Koji Kobayashi, Senior Managing Director Kazuo Hironaka, Senior Managing Director Sojiro Tsuchiya, Senior Managing Director Hikaru Sugi, Senior Managing Director Shinji Shirasaki, Senior Managing Director Shoichiro Toyoda, Director Products Battery-monitoring unit, DC-DC converter, electric compressor, electronic control unit (ECU), current sensors Plants Argentina, Australia, Belgium, Brazil, Canada, China, Czech Republic, France, Germany, Hungary, Italy, India, Japan, Korea, Malaysia, Mexico, Netherlands, Philippines, Poland, Portugal, Saudi Arabia, Singapore, Spain, Sweden, Taiwan, Thailand, Turkey, UK, US, Vietnam Sales ¥3,142.7bn (US$32.31bn, 31 March 2009) (Year to 31.03.09) Employees 119,919 (March 2009)

Denso is one of the largest automotive components suppliers in the world and ranks first in Japan. It manufactures powertrain control systems, electronic systems, electric systems, thermal systems, and information and safety systems for the automotive industry. In fiscal 2008-09, 96.8% of sales were from the automotive business. Denso manages the group's automotive businesses through the following product groups: • Powertrain Control Systems: fuel injection products, engine control

components and systems control components. • Electric Systems: electrical systems and Electric Hybrid Vehicle (EHV)

components. • Electronic Systems: electronic products and electronic devices. • Thermal Systems: air-conditioning products, cooling systems & components. • Information & Safety Systems: Intelligent Transport System (ITS) products,

driver assist & safety products and body electronics components. The company also manufactures products for industries other than automotive. The Industrial Systems division manufactures industrial systems products such as automatic identification products (bar-code readers, two-dimensional code readers, and IC card-related products), industrial robots and programmable logic controllers. As on 31 March 2009, Denso has 187 consolidated subsidiaries, out of which 68 are in Japan, 38 in the US, 33 in Europe and 48 in Asia-Oceania. The company’s major Japanese customers are Toyota, Honda and Mitsubishi. It also supplies to Audi, BMW, Chrysler, Cummins, Daewoo, Daimler, Fiat, Ford, Hyundai, Jaguar, PSA Peugeot-Citroën, Renault, Saab, Volkswagen and Volvo. Recent Developments Corporate strategy In its Hybrids business, Denso has followed organic expansion. Over recent years, the company has been investing in setting up new facilities to supply its key customers, especially Toyota. In an effort to expand its hybrid components business, Denso expanded its plant in Anjo, Aichi Prefecture (Japan) in January 2008, which manufactures components for hybrid vehicles. At present, the supplier intends to concentrate its hybrid components manufacturing operations in Japan where it can closely monitor quality. In September 2008, Denso announced that although Toyota plans to build its Prius hybrid car in the US, it will not immediately follow the OEM for supplying its hybrid components in North America. In 2006, the company reorganised its business groups, which included transferring operations related to hybrid electric vehicles (HEVs) from the Powertrain Control Systems business group to Electric Systems Business group. This move was to reinforce its position in the power electronics field for HEVs. It has also boosted capacity for gasoline fuel injectors by adding capacity at production sites in Japan, North America, Hungary and China. Investments • In January 2008, Denso announced plans to invest nearly ¥6bn (US$55.02m)

to expand its plant in Anjo, Aichi Prefecture (Japan) which manufactures components for hybrid vehicles. The company is planning to increase the plant area by 25% which would result in an additional 1.2 million ft2.

• In June 2005, Denso established an additional facility in Kota (Japan) to produce integrated circuit (IC) wafers for ECUs and electric control components. The facility started operations in June 2006 with an initial investment of ¥17bn (US$146.2m).

The Hybrids Report


Contracts • In May 2007, Denso won a contract to supply a power control unit and battery

cooling system to Toyota Lexus LS 600h and Toyota Lexus LS600hL. • In April 2006 Denso started supplying DC-DC converter, a battery-monitoring

unit and a system main relay to the Toyota Lexus GS450h model. • In March 2005, Toyota launched Harrier hybrid and Kluger hybrid vehicles in

Japan. Denso supplies these models with hybrid control computers, battery-monitoring units, DC-DC converters and electric compressors for air-conditioning systems.

• In April 2005, Toyota introduced Lexus RX400h and Toyota Highlander hybrid vehicles in the US.

• Denso has the contract to supply hybrid control computers, battery-monitoring units, DC-DC converter and electric compressors for air-conditioning systems.

New Product Developments In 2009, the company invested ¥297.1bn (US$3.04bn, 31 March 2009) on research and development activities compared with ¥311.5bn (US$3.14bn, 31 March 2008) in the preceding year. The recent developments are: • In May 2007, Denso developed a high output power control unit (PCU) that

can produce higher output power by about 60% per unit volume as compared with the company's conventional technology.

• In May 2007, Denso developed a battery cooling system that can use air from the cooling unit of the rear air-conditioning system and cabin air to cool the main battery.

• In September 2006, Denso, in cooperation with Toyota, introduced a new power supply management ECU. The ECU calculates battery charge rate and internal resistance using battery voltage and current.

• In April 2006 Denso developed a power conversion circuit for DC-DC converter. It reduces greater energy loss as compared to a conventional DC-DC converter, improves fuel consumption and decreases the amount of heat generated by using power conversion.

• In April 2006 Denso introduced three new hybrid vehicle components: DC-DC converter, a battery-monitoring unit and a system relay unit.

• In April 2006 Denso introduced boost converters used for inverters and electric compressors.

Financial Overview For the financial year ended 31 March 2009, Denso reported net sales of ¥3,142.7bn (US$32.31bn, 31 March 2009), a decline of 21.9% compared with ¥4,025.1bn (US$40.58bn, 31 March 2008) in the previous year. The company’s operating loss was ¥37.3bn (US$383.48m) against an operating profit of ¥348.7bn (US$3.51bn). Net loss for the year was ¥84.1bn (US$864.64m) compared to a net income of ¥244.4bn (US$2.51bn). The decrease in sales was largely due to decline in worldwide sales of cars in the second half of the financial year. The results were negatively impacted by foreign currency fluctuations. Segment wise, the company’s sales in Japan decreased 21.3% to ¥2,145.6bn (US$22.05bn) from ¥2,725.89bn (US$27.48bn) in the previous year. Operating loss was ¥114.7bn (US$1.18bn) against an operating income of ¥197.51bn (US$1.99bn). Decrease in car sales in Japan coupled with a dramatic decrease in exports to North America and Europe and negative currency fluctuations impacted the financial results. In America, Denso reported a 32.7% decrease in sales to ¥559.8bn (US$5.75bn) from ¥832.3bn (US$8.39bn). The sales decreased due to decline in demand mainly from Toyota and three other American automakers. Although the company made efforts to reduce cost, the lower production volumes resulted in a 87.8% decline in operating income to ¥5.1bn (US$52.43m). In Europe, Denso’s sales declined 25.4% to ¥462.5bn (US$4.75bn) from ¥620.8bn (US$6.25bn) in the previous year. The region reported a 86.4% decrease in operating income to ¥3.6bn (US$37.01m). The sales and operating income declined due to lower car production of Japanese auto manufacturers. In Asia and Oceanic, the company’s sales declined 17.6% to ¥507.7bn (US$5.21bn) from ¥616.15bn (US$6.21bn) in the previous year. Operating income for the region declined 24.8% to ¥60.5bn (US$622m). Although there was an increase in car production volumes for Japanese auto manufacturers in China, the slowdown in car

The Hybrids Report


production in the ASEAN countries and an unfavourable foreign exchange resulted in decrease in sales and operating income.

Year

Net Sales (¥bn)

Net Income (¥bn)


R&D Expenditure

(¥bn)

No. of Employees

2009 3,142.7 (84.1) (37.3) 297.1 119,919 2008 4,025.1 244.4 348.7 311.5 118,853 2007 3,609.7 205.2 303.1 279.9 112,262 2006 3,188.3 169.6 266.6 256.3 105,723 2005 2,799.9 132.6 213.89 235.2 104,183

Year Net Sales

(US$bn) Net

Income (US$bn)

Operating Income (US$bn)

R&D Expenditure

(US$bn)

No. of Employees

2009 32.3 (0.9) (0.4) 3.0 119,919 2008 40.6 2.5 3.5 3.1 118,853 2007 30.61 1.74 2.57 2.37 112,262 2006 27.3 1.44 2.3 2.18 105,723 2005 26.04 1.23 1.98 2.18 104,183

Outlook With the growing requirements to improve fuel economy and reduce emissions, car manufacturers are responding by developing more hybrid electric vehicles and fuel cell hybrid vehicles (FCHVs). The company’s hybrid business is expected to expand further in the near future, especially in the light of strict emission and safety regulations and Toyota’s vision of manufacturing one billion units of hybrid vehicles by 2010. Other domestic and overseas automakers are poised to follow the OEM’s lead and accelerate their growth in the hybrid vehicle market. Denso expects that by 2020 the market for hybrid vehicles will expand from 12 million units (in 2008) to 22 million units, and the market for related products will grow from ¥1.8 trillion (in 2008) to around ¥3 trillion.

The Hybrids Report


Eaton Diesel-electric hybrid systems

Address Eaton Corporation 1111 Superior Avenue Cleveland Ohio 44114-2584 USA Tel: +1 216 523 5000 Fax: +1 216 523 4787 Internet: http://www.eaton.com Senior Officers Alexander M. Cutler, President, Chairman & CEO Richard H. Fearon, Vice Chairman and Chief Financial and Planning Officer Craig Arnold, Vice Chairman and COO, Industrial Sector Thomas S. Gross, Vice Chairman and COO, Electrical Sector Joseph P. Palchak, President, Automotive Group William R. Van Arsdale, President, Hydraulics Group Richard D. Holder, Executive Vice-President, Eaton Business System Products Hybrid power systems Plants Automotive: Brazil, Canada, China, France, Germany, India, Indonesia, Japan, Korea, Mexico, Monaco, Netherlands, Poland, Spain, Taiwan, Turkey, UK, USA

Sales Group: US$15.4bn (Year to 31.12.08) Employees Group: 75,000 (2008)

Eaton Corporation is a global supplier of engineered products for the aerospace, automotive, commercial vehicle, construction, industrial and semiconductor markets. It manufactures diesel-electric hybrid and hydraulic hybrid power systems for truck, bus and other commercial applications. Eaton’s business which was initially categorised into four divisions, was divided into five different divisions in the first quarter of 2008. The Fluid Power segment was divided into the Hydraulics segment and the Aerospace segment. Electrical (accounted for 45% of 2008 sales), Hydraulic (16.4%), Aerospace (11.8%), Truck Components (14.6%) and Automotive Components (12.16%). Eaton manages its operations through its facilities in 150 countries with 75,000 employees. The US continues to be the largest market for Eaton, where it generated 52.8% of the total sales in 2008. Europe contributed 24% to the total sales followed by Asia-Pacific at 11.8%, Latin America at 8.8% and Canada at 2.6%. In the automotive components business, Eaton supplies to nearly 70 OEMs. Some of its major clients include BMW, Chrysler, Daimler, Ford, GM, Honda, Mazda, Nissan, Suzuki, Toyota and Volkswagen. In the truck components segment, its major customers include PACCAR, Navistar and Volvo. The company’s HEV and HVV systems are used by FedEx Express, UPS, Coca-Cola Enterprises and PepsiCo delivery vehicles. Recent Developments Corporate strategy Eaton is focusing on expanding its product capability, especially in hybrid technology. It is looking for deploying its hybrid electric technology to the utility, telecom and commercial vehicle market. The company is also working closely with the truck fleet owners by developing a program to assist them in applying for grants of US$156m from American Recovery and Reinvestment Act for diesel hybrid truck. This would help the company to continue good relations with the fleet owners as well as create an opportunity to integrate its hybrid electric technology in commercial vehicles. The company has already streamlined its Fluid Power segment into Hydraulic and Aerospace, through which more emphasis will be given on hydraulic systems which are gradually gaining importance in the automotive industry. The company has set itself a target of achieving an annual growth rate of 10% over a span of five years (up to 2010). During this period the company intends to gain partly from organic growth and partly from future acquisitions. Eaton wants to focus on improving margins and reducing fixed and working capital intensity. In addition, the company will diversify its business into non-automotive sectors such as electrical devices and pumps in order to reduce its exposure to automotive business environment in North America. Joint-ventures • In August 2007, Eaton and PACCAR signed an agreement to jointly develop

hybrid technology for heavy-duty commercial vehicles in North America. The products will be introduced in Kenworth and Peterbilt trucks, targeted for initial production by 2009.

• In 2006, the company partnered with Beiqi Foton Bus to develop a hybrid diesel-electric city bus that entered China’s clean bus competition for the 2008 Beijing Olympic Games and Shanghai World Expo 2010.

Investments • In November 2008, Eaton bought a new building in International Business

Park of Changning District, Shanghai. The new building will be addressed as the headquarters of Asia-Pacific region.

The Hybrids Report


Contracts • In February 2008, Coca-Cola Enterprises announced its decision to purchase

120 new trucks powered by Eaton’s hybrid electric drivetrain systems. New Product Developments Eaton generally spends 2.5–3% of its sales on R&D. In financial year 2007, it spent US$335m, up 6.3% from US$315m in 2006. Eaton is working in close collaboration with its customers and universities to come out with new products. The company has created an Engineering Research Centre (ERC) for fluid power technology, including development of a hydraulic-hybrid passenger car. • In March 2009, Eaton’s plug-in hybrid electric system was integrated in

Southern California Edison’s plug-in hybrid truck. The technology is developed by Electric Power Research Institute (EPRI) and manufactured by Eaton Corporation.

• In October 2008, UPS announced the purchaces of Hydraulic Hybrid Vehicles (HHVs). Eaton will help monitor the vehicle’s fuel economy performance and emissions in the Minneapolis where the vehicles will be deployed in the first quarter of 2009.

• In January 2008, Eaton introduced its first commercially available hybrid power system in China with Beiqi Foton Bus Company, deploying the hybrid system in 30 city buses for Guangzhou Yiqi Bus.

• In December 2007, Eaton announced plans to develop digital hydraulic hybrid drive system for US army vehicles in collaboration with Western Michigan University (WMU).

• In September 2005, Eaton and International Truck and Engine Corporation introduced their diesel-electric hybrid powertrain at the pilot truck program, a hybrid commercialisation project for truck fleet users, truck makers and technology companies.

Financial Overview For the financial year ended 31 December 2008, Eaton reported a 18.5% increase in net sales to US$15.4bn compared with US$13bn in the preceding year. The company recorded higher sales in all business divisions except its Automotive division. Electrical segment reported a sales growth of 45.4% to US$6.9bn, Hydraulics segment 5.5% to US$2.5bn, Aerospace segment 13.6% to US$1.8bn Truck segment 4.8% to US$2.3bn. Automotive segment reported a decline in sales of 12.7% to US$1.9bn. Income from continuing operations before tax improved by 8.4% to US$1.13bn compared with US$1.04bn in the previous financial year. Net income at US$1.06bn, was 6.4% higher than US$994m achieved in the previous fiscal. In the first quarter of 2009, Eaton’s sales declined 20% to US$3.46bn compared with US$2.81bn for the same period in the preceding year. The company reported an operating loss of US$26m in the first quarter compared with operating income of US$256m for the same period in 2008. Net loss was recorded at US$50m in first quarter of 2009 compared with net income of US$247m in the previous year. For the current financial year ending 31 December 2009, Eaton expects ongoing slowdown to continue in its major markets in 2009, at least till the second and possibly the third quarter. The company expects its markets to record a decline of 7% to 8% during 2009. However, the company hopes to outgrow its end markets during the year by approximately US$300m.

Year Sales (US$bn) Pre Tax Income (US$m)

Net Income (US$m)

2008 15.4 1,128 1,058 2007 13 1,041 994 2006 12.4 969 950 2005 11.0 964 805 2004 9.8 749 648

Outlook The company has already taken a step forward in the hydraulic hybrid systems by refining and developing hydraulic systems for HHV bought by UPS. Focus on the new technology is the need of every company in the time of global slowdown. Eaton seems to have taken a similar path to keep its focus on its five year plan which finishes in 2010.

The Hybrids Report


Hitachi Lithium ion battery

Address Hitachi Ltd 6-6 Marunouchi 1-chome, Chiyoda-ku Tokyo 100-8280 Japan Tel: +81 3 3258 1111 Fax: +81 3 3258 2375 Internet: http://www.hitachi.com Hitachi Vehicle Energy Ltd. 1410 Inada, Hitachinaka-shi, Ibaraki-ken 312-8505 Japan Internet: http://www.hitachi-ve.co.jp/en/ Senior Officers Hidetaka Kawamoto, President, Hitachi Vehicle Energy Ltd Takashi Kawamura, Representative Executive Officer, Chairman, President & CEO Kazuo Furukawa, Representative Executive Officer, Vice-Chairman & Executive Officer Hiroaki Nakanishi, Representative Executive Officer, Executive Vice-President & Executive Officer, Automotive Systems Business Taiji Hasegawa, Representative Executive Officer, Senior Vice-President & Executive Officer, General Manager, Battery Systems Division Yasuhiko Honda, (to be transferred to Hitachi’s new Automotive Systems Company, effective from 1 July 2009) Kunihiko Ohnuma, President & Director, Automotive Systems Group (effective from 1 July 2009) Akira Maru, Vice-President & CEO, Power Systems Business Division Products Lithium ion battery Plants China (6), Germany (2), Japan (13), Mexico, Singapore, Taiwan, Thailand (3), UK, US (5) Sales Group: ¥10,000.3bn (US$102.8bn, 31 March 2009) (Year to 31.03.09) Employees

Hitachi is one of the world’s leading electronics manufacturers. The company’s product line includes electricity generation systems, consumer products and electronic devices. Hitachi’s automotive business is a part of Power & Industrial Systems segment. The company operates its business through seven segments: Information & Telecommunication Systems, Electronic Devices, Power & Industrial Systems, Digital Media & Consumer Products, High Functional Materials & Components, Logistics, Services & Others and Financial Services. Hitachi's Automotive Systems Business is focused on the development of technologies for four types of system – engine management, electronic powertrain, drive control and car information systems. Hitachi’s major automotive customers include Ford, General Motors, Suzuki and Toyota. Recent Developments Corporate strategy Hitachi has decided to separate its Automotive Systems Group and Consumer Business Group from the parent company, effective 1 July 2009, in an effort to operate more efficiently as well as fuse automotive and electronics technologies. In the automotive business, the company will concentrate on developing automotive systems that address environmental and safety demands. Specifically, in the environmental field, it will produce lithium-ion batteries, compact inverters, small motors and other key devices for hybrid vehicles. The company will establish Battery Systems Division to enhance the lithium-ion battery business. The company also aims to work with its subsidiary Hitachi Vehicle Energy, related business groups and laboratories to develop batteries for hybrid vehicles and other markets. Hitachi is planning research and development strategies to expand in the areas of lithium-ion battery and renewable energy-related businesses as it sees significant opportunities in the environmental and energy saving-related areas over the medium and long terms. Workforce reduction and manufacturing base consolidation are another part of Hitachi’s reorganisation plan. The company plans to restructure the manufacturing bases both in Japan and overseas by the end of fiscal 2009. Hitachi is on track with its “Environmental vision 2025” plan, where the company is using the expansion of its systems business, starting with its battery operations, to combat environmental issues such as global warming and simultaneously reinforce the company’s social innovation business. Additionally, in order to improve margins, the company initiated a plan in 2008-09 named “Strengthening The Base '08-'09” which is focused on cutting fixed costs, including personnel expenses, as well as other costs such as procurement. As per the plan, the company targets reduction of fixed costs by around ¥200bn (US$2.04bn, 16 March 2009) and procurement costs by around ¥300bn (US$3.06bn) for the year ending 31 March 2010. In an effort to improve cash flows, Hitachi will postpone capital expenditures except for certain investments, reduce inventories and expedite the collection of accounts receivable. Acquisition • In March 2004, Hitachi acquired its affiliates Tokico and Hitachi Unisia

Automotive aiming at stronger automotive products business. Joint-venture • In June 2004, Hitachi formed a joint-venture (JV) Hitachi Vehicle Energy Ltd.

The JV was formed with Shin-Kobe Electric Machinery Co Ltd and Hitachi Maxell Ltd, to manufacture lithium batteries for hybrid electric vehicles

The Hybrids Report


Group: 389,752 ( 2008)

(HEVs). Investment • In April 2005, Hitachi established “Research & Development Corporation” in

China, which is used as a research and development (R&D) base for all Hitachi Group businesses including Hitachi Automotive Systems (HAS).

Contracts • In October 2008, Hitachi secured a contract from Eaton for the supply of

motors, inverters, lithium-ion batteries and other components for Eaton's hybrid power systems through 2011.

• In March 2008, Hitachi received an order from GM to supply lithium ion batteries for more than 100,000 hybrid cars. The batteries are being produced for the Chevrolet Malibu and the Saturn Vue.

New Product Developments Hitachi’s Research & Development group operates six laboratories in Japan and some overseas facilities. Overall, the Hitachi group has a staff of approximately 6,000 worldwide in its R&D activities. For the year ended 31 March 2009, the group’s expenditure on research and development decreased by 3% to ¥416.5bn (US$4.2bnbn, 31 March 2009). • In May 2009, Hitachi developed a new lithium-ion battery specifically for use

in hybrid and other eco-friendly vehicles. These fourth-generation batteries have high power density of 4,500W/kg, 1.7 times the output of the company's mass-produced, automotive lithium-ion batteries. Hitachi will begin to supply these new batteries to domestic and foreign auto makers before 2009-end, with mass production expected to start in 2013.

Financial Overview For the financial year ended 31 March 2009, Hitachi reported an 11% decline in its net sales to ¥10,000.3bn (US$102.8bn, 31 March 2009) compared with ¥11,226.73bn (US$113.2bn, 31 March 2008) in the preceding year. The company’s operating income declined from ¥345.5bn (US$3.48bn) to ¥127.1bn (US$1.3bn). Net loss widened to ¥787.3bn (US$8.1bn) from ¥58.12bn (US$585.9m) in 2008. Power & Industrial System sales declined from ¥3,568.1bn (US$35.9bn) to ¥3,310.5bn (US$34.1bn). Geographically, Japan accounted for 59% of the total sales, followed by Asia at 19%, North America and Europe at 9% each and other areas 4%.

Year Sales (¥bn)

Operating income (¥bn)

Net Income (¥bn)

R&D Expenditure

(¥bn)

No. of Employees

2009 10,000.3 127.1 (787.3) 416.5 - 2008 11,226.7 345.5 (58.1) 428.1 389,752 2007 10,247.9 182.5 (32.7) 412.5 384,444 2006 9,465 256 37.3 405 355,879 2005 9,027 279 51.5 389 347,424

Year Sales

(US$bn) Operating

income (US$bn)

Net Income (US$m)

R&D Expenditure

(US$bn)

No. of Employees

2009 102.8 1.3 8,092.2 4.2 - 2008 113.18 3.4 (585.9) 4.3 389,752 2007 86.9 1.5 (277.3) 3.4 384,444 2006 80.5 2.1 317.2 3.4 355,879 2005 83.9 2.5 479 3.6 347,424

Outlook After incurring losses for 2007 and 2008, Hitachi has taken certain measures to improve margins. The company’s existing hybrid contracts with GM and Eaton will help it to secure more such contracts with other suppliers and OEMs. Owing to stricter environmental regulations and rising concern about fuel economy worldwide, Hitachi expects the global market for commercial vehicle and passenger car HEVs to continue expanding from the 690,000 unit level recorded in 2007 to 1.5 million units by 2010. In light of the growing popularity of HEVs, Hitachi projects significant growth opportunities in the years to come.

The Hybrids Report


JATCO Hybrid systems

Address JATCO Ltd 700-1 Imaizumi Fuji City Shizuoka 417-8585 Japan Tel: +81 545 51 0047 Fax: +81 545 51 5976 Internet: http://www.jatco.co.jp Senior Officers Shigeo Ishida, President & CEO Yo Usuba, Executive Vice-President Akira Hasenaka, Senior Vice-President Toru Akiba, Senior Vice-President Minoru Kurosawa, Senior Vice-President Masami Matsuoka, Senior Vice-President Toshihiko Okumura, Senior Vice-President Hitoshi Nagakura, Senior Vice-President Koujirou Miyoshi, Corporate Vice-President Tatsuya Hirokawa, Corporate Vice-President Takashi Shibayama, Corporate Vice-President Akira Ishii, Corporate Vice-President Yoshiaki Nishikawa, Corporate Vice-President Takeshi Kitajo, Corporate Vice-President Kazutoshi Noma, Corporate Vice-President Products Hybrid system for front-wheel drive (FWD) and rear-wheel drive (RWD) vehicles Plants China, France, Japan (7), Mexico, US Sales ¥515.04bn (US$5.19bn, 31 March 2008) (Year to 31.03.08) Employees 7,265 (March 2008)

JATCO is one of the leading suppliers of transmissions worldwide. The company is an affiliate of Nissan Motors which is JATCO’s largest shareholder and also its biggest customer. JATCO produces a full line-up of transmission products including manual transmissions (MTs), automatic transmissions (ATs), continuously variable transmissions (CVTs), toroidal CVTs, and high performance transmissions for hybrid electric vehicles (HEVs). In the HEV segment, the company produces transmissions for both front wheel drive (FWD) and rear wheel drive (RWD) vehicles. JATCO supplies hybrid systems that use both step ATs and CVTs. JATCO has manufacturing presence across China, France, Japan, Mexico and the US. JATCO serves numerous OEMs, including Chrysler, Ford, GM, Mazda, Mitsubishi, Nissan, Renault, Suzuki and Volkswagen. Recent Developments Corporate strategy JATCO is primarily focused on increasing supplies to its stakeholders. The company is raising its production capacities in response to the planned expansion of CVT-equipped vehicles by its customers, Nissan Motors and Suzuki Motors. JATCO supplies all CVTs used by its major shareholder, Nissan, and also caters to Mitsubishi Motors Corp., which holds 15% of JATCO, and Suzuki Motor Corp., which bought a 10% stake in 2007. Increasing demand for CVTs for small cars has prompted JATCO to increase its annual production of CVTs from 1.6 million in 2008 to two million by 2011. In addition to increasing production capacity in Japan, the company strengthened its foothold in overseas markets. For instance, in order to supply the North American markets the company increased its capacity to 700,000 CVTs per year by opening a second production line in Aguascalientes city (Mexico) in 2008. In an effort to supply Nissan's local partner in China, Dongfeng Motor China, JATCO has recently set up a manufacturing plant in the country. Investments • In October 2008, JATCO started the construction of a new transmission

facility in Guangzhou (China). The facility produces steel belt CVTs. Nearly ¥6bn (US$879.8m) was invested in the facility which has a production capacity of 140,000 units per year. Initially, the plant will produce CVT fitted to front-wheel-drive car with 2.0 litre engine capacity. The Chinese facility is JATCO’s second overseas manufacturing facility after Mexico.

• In April 2008, JATCO opened a second production line for CVT in Aguascalientes city (Mexico) which increased the plant capacity to 700,000 units per year. The company invested US$200m in the expansion of the building and production facilities.

• In October 2006, JATCO invested in its Yagi Plant in Nantan, Kyoto prefecture (Japan). The plant’s space was doubled to 66,000m2 to produce 300,000 next generation CVTs for small and mid-size front wheel drive cars.

• In January 2006, JATCO expanded annual production capacity of its Mexico plant from 300,000 units to 400,000 units. The Mexican facility is JATCO’s first production unit outside Japan to produce CVTs. The company invested ¥2bn (US$17m) in the capacity expansion.

The Hybrids Report


http://www.jatco.co.jp/�

Divestment • In September 2006, JATCO’s Fuji AT joint-venture (JV) was strategically

dissolved. The JV was established in 2003 to develop CVTs for mini cars and sub-compact cars. Post divestment, Fuji manufactures CVTs and JATCO distributes them.

Contracts • JATCO supplies front wheel drive 6-speed automatic transmission to the

Renault Laguna III. The company manufactures variable transmission (with manual 6-speed mode) for the Nissan Altima Coupé.

New Product Developments JATCO has four research and development centres. These R&D centres are based in Atugi, Kyoto, Okazaki and Shin-Yokohama (all in Japan). • In March 2008, JATCO developed a new stepped seven-speed automatic

transmission for rear-wheel-drive applications. The transmission consists of two torque applications, medium and large, and can be used in a variety of applications. The transmission shares components with an existing five-speed automatic transmission that has helped to reduce costs. The technology consists of adaptive shift control and synchronised revolution control, which improves driver control. The JR710E and JR711E transmissions are produced in JATCO’s manufacturing plant in Fujinomiya City (Japan). The transmissions are supplied to Nissan Infiniti EX37 and Infiniti FX50 sports-utility vehicles (SUVs).

Financial Overview For the financial year ended 31 March 2008, JATCO reported an increase of over 5% to ¥515.04bn (US$5.19bn, 31 March 2008) in net sales, from ¥490bn (US$4.15bn, 31 March 2007) in the same period in 2007. Being a privately-owned company, JATCO is not obliged to publish its financial reports. Outlook With increased production capacities, JATCO is well positioned to grow with an expected increase in market penetration of CVTs in North America and Asia. In these markets, an increasing number of OEMs are shifting towards more efficient transmission systems. The company expects to do well in the hybrid systems business in the coming years as the technology is likely to gain more acceptance with the increasing awareness of fuel efficiency and vehicle emission norms. The company’s major customers, including Nissan Motors, are likely to strengthen their presence in the hybrid vehicles market.

The Hybrids Report


Johnson Controls Batteries

Address Johnson Controls Inc. 5757 N. Green Bay Avenue P.O. Box 591 Milwaukee, WI 53201 USA Tel: +1 414 524 1200 Fax: +1 414 524 2070 Internet: http://www.johnsoncontrols.com Senior Officers Stephen A. Roell, Chairman, CEO Keith E. Wandell, President, COO R. Bruce McDonald, Executive Vice-President, CFO Beda Bolzenius, Vice-President & President, Automotive Experience Alex A. Molinaroli, Vice-President & President, Power Solutions Jeffrey S. Edwards, Vice-President & General Manager, Japan & Asia Pacific, Automotive Experience Mary Ann Wright, Vice-President & General Manager, Hybrid Systems for Johnson Controls, CEO, Johnson Controls-Saft Brian Kesseler, Vice-President & General Manager, Americas, Power Solutions Walther Wever, Vice-President & General Manager, Europe, Power Solutions Shu Yang, Vice-President & General Manager, Asia, Power Solutions Products Lead acid batteries, nickel metal hydride, lithium ion batteries. Plants Power Solutions: China, Czech Republic, France (2), Germany (3), India, Mexico (5),South America (2), Spain (2), South Korea (3), US & Canada (8). Sales Group: US$38.06bn (30 September 2008) (Year to 30.09.08) Power Solutions: US$5.85bn (30 September 2008) (Year to 30.09.08) Employees Group: 140,000 (2008) Power Solutions: 12,000 (2008)

Johnson Controls Inc. (JCI) is a leading supplier of automotive interior systems, seating and batteries. The company’s product portfolio includes seating, instrument panels, overhead components & systems, floor consoles & storage systems, door systems, electronics, cargo management and battery & power management. JCI operates 1,300 locations in 125 countries worldwide. The company organises its operations into three business groups: • Automotive Experience (48% of sales in fiscal 2008): seats including foam

cushions, seat covers, metal frames and mechanisms. • Power Solutions (15% of 2008 sales): automotive batteries for the replacement

and original equipment markets. • Building Efficiency (37% of 2008 sales): facility systems and services

including comfort, energy and security management for the residential and non-residential buildings market.

In the financial year 2008, US generated US$13.3m sales; Europe contributed US$14.9m, and the rest of the world generated US$9.7m. JCI’s customers include BMW, Chrysler, Daimler, Ford, General Motors, Honda, Isuzu, Mazda, Mitsubishi, Nissan, PSA-Peugeot-Citroën, Renault, Toyota and Volkswagen. Recent Developments Corporate strategy JCI is aiming for a long-term sustainable growth by focusing on improving efficiency, new product and technology development and expansion in emerging markets. Besides acquisitions, the organisation plans to prioritise its organic growth. The company has been restructuring its businesses in North America and Europe so that it becomes more profitable. It also wants to focus on product lines that are profitable to the company. The company’s Power Solution division supplies batteries for both original equipment market as well as aftermarket. The high-margin business division accounted for just 15% of 2008 sales but contributed 26% to the company’s total earnings. The company has 36% of global market share in lead acid batteries. The company is aiming to be the leading supplier of lithium-ion battery technology for the next generation hybrid vehicles. In the area of hybrid batteries, JCI has a joint-venture with Saft SA of France. The joint-venture is diversifying into the commercial vehicles segment. In January 2009, Johnson-Controls Saft (JCS), entered a five-year agreement with Azure Dynamics to supply batteries to power its commercial vehicles in North America. The joint-venture, entered into a development collaboration agreement with Maxwell Technologies in April 2008 to develop a new technology on electrode manufacturing in order to reduce the cost and environmental impact of automotive batteries on hybrid vehicles. It secured several supply contracts in 2008 from global OEMs including Ford, GM, Daimler, Chery and SAIC. JCI plans to shift operations from high cost to low cost regions such as in Asia and eastern Europe, and increased low cost sourcing to 54% by 2013.The company plans to grow its battery business in China. The Chinese hybrid vehicles market will grow as several domestic OEMs have announced plans to launch these in the next three to five years. In an attempt to reduce cost and improve efficiency, Johnson Controls announced a restructuring plan in the second quarter of 2009 and incurred US$230m as restructuring charge. The company expects the restructuring process to complete in 2010 and anticipates positive returns in 2009 financial figures. JCI has been strengthening its electronics expertise and integrating electronics into nearly every system during development. It has also integrated electronics into its batteries, developing the first anti-theft battery and power-saving battery.

The Hybrids Report


Acquisitions • In July 2005, JCI acquired Delphi’s global automotive battery business for

US$202.5m. Under the agreement, JCI received a long-term contract to supply GM with original equipment and original equipment service batteries. Delphi’s automotive battery business includes operations in more than 10 countries with joint-venture interests in China and South Korea.

• In July 2004, JCI acquired its joint-venture partner’s, Group IMSA, automotive battery business in Mexico and South America. For the remaining 51% share of the Group IMSA Johnson Controls paid approximately US$525m.

Joint-ventures • In April 2008, Johnson Controls-Saft (JCS) and Maxwell Technologies

entered into an agreement to test and evaluate Maxwell’s lithium-ion battery electrodes for hybrid vehicles.

• In July 2007, JCI entered into a joint-venture with a Chinese company, Fengfan Ltd. of Baoding, to manufacture maintenance-free lead acid batteries for the automotive market in China.

• In January 2006, JCI and Saft Groupe formed a joint-venture to supply advanced-technology batteries for current and future-generation hybrid-electric vehicles (HEVs) and electric vehicles (EVs). Saft Groupe holds a 49% stake and Johnson Controls holds the rest.

Investments • In April 2009, JCS announced plans to invest US$220m to open its first US

based lithium-ion battery cell manufacturing facility in Holland, Michigan (US). The plant will recruit around 500 employees. The plants’s initial capacity is measured to around 15 million lithium-ion cells. JCS will receive a combination of tax credits and incentives from the state of Michigan amounting to US$148.5m as part of the state’s strategy program for advanced battery.

• In December 2008, JCI planned to set up a plant Changxing Economic Development Zone of Zhejiang province (China) to produce a lead acid battery. The plant will be operational by June 2010.

• In January 2008, Johnson Controls-Saft Advanced Power Solutions opened its first lithium-ion battery facility in Nersac (France). The company initially invested €15m (US$22.28m) in the plant which is the world’s first lithium-ion battery manufacturing facility. In November 2007, JCI opened a new Automotive Business Centre in Bratislava (Slovakia). The company created 170 new jobs by the end of 2008 in order to help it grow in the eastern European markets.

• In July 2007, JCI planned to expand and remodel its headquarter campus in Glendale (US). The company anticipated completion of the project by mid 2009.

Contracts • In February 2009, JCS received a contract from Ford Motor Company to

supply complete battery system. It will be introduced in 2012 in its first series of plug-in hybrid electric vehicle (PHEV). In June 2008, JCS was the battery supplier for the Ford test fleet of Plug-in Hybrid Electric Vehicles.

• In January 2009, JCI entered into a supply agreement to provide automotive batteries to O’Reilly Auto parts.

• In January 2009, JCS and Azure Dynamics Inc. (AZD) entered into a supply agreement. The agreement incorporates provision of the advanced lithium-ion (Li-Ion) hybrid battery technology to power commercial vehicles in North America. The agreement will expire in 2014.

• In October 2008, JCS received the second production contract to provide lithium-ion batteries for BMW’s 7-Series Active Hybrid Car.

• In August 2008, JCS was awarded a second contract of US$8.2m by United States Advanced Battery Consortium (USABC). It focuses on the development of lithium-ion battery systems for plug-in hybrid electric vehicles (PHEVs). The contract will expire in 2010.

• In January 2008, JCS was selected by SAIC Motor Corporation Ltd, China to supply lithium-ion batteries for its demonstration fleet of new energy vehicles.

• In January 2008, JCS received a production contract from Chinese auto manufacturer, Chery Automobile, to provide a hybrid battery system for its latest vehicle, A5 ISG sedan.

• In September 2007, JCS signed a contract with Daimler to supply cell module and cooling system for the hybrid battery for the Mercedes-Benz S-Class 400

The Hybrids Report


hybrid sedan. The project will commence in June 2009. • In August 2007, JCS received an order to supply nickel-metal hydride (NiMH)

and Li-ion battery packs for the Dodge Sprinter plug-in hybrid delivery vans. • In March 2007, JCI and Federal-Mogul signed an agreement to market

Federal-Mogul’s famed Champion Brandin in the lead-acid storage battery category. In January 2007, the JCS signed a contract with GM to supply Li-ion batteries for the Saturn Vue Green Line plug-in hybrid SUV.

• In August 2006, JCS received a two-year contract from United States Advanced Battery Consortium (USABC) to supply advanced, lithium-ion (Li-lon) batteries for hybrid-electric vehicles (HEVs).

• In September 2006, JCS was awarded a development contract for lithium-ion batteries from a major OEM for its late model 2008 hybrid vehicle. Post the development phase, the contract is expected to lead to volume production.

New Product Developments In the financial year 2008, JCI spent US$829 on research & development (R&D) activities compared with US$767m in 2007. • In January 2009, JCI introduced re3 concept vehicle as part of its product and

technology at the 2009 North American International Auto show (NAIS). It features plug-in hybrid battery system among others.

• In September 2005, JCI started an advanced Li-ion battery development laboratory in Milwaukee, Wisconsin (US). The US$4m facility located at the company’s Battery Technology Center, develops power-storage and power-management concepts based on Li-ion technology.

• In January 2005, JCI launched dual-purpose new Group 75/25 and Group 35 YellowTop™ batteries.

• In January 2005, JCI introduced NiMH battery technology at the North American International Auto Show. The NiMH was developed using technologies from its Varta Battery Automotive business.

Financial Overview For the financial year ended 30 September 2008, JCI’s sales amounted to US$38.06bn, a 10% increase from US$34.6bn in 2007. The increase was thanks to higher net sales in all three business segments as well as favourable impact of foreign currency. Income from continuing operations decreased by 24% and reached US$0.97bn. Net income was US$0.97bn, a 22% decrease over last year’s figure of US$1.25bn. This was mainly due to a restructuring charge which was recorded in the fourth quarter and lower volumes in automotive experience in North America and Europe. Excluding the restructuring charge, net income was US$1.4bn, a 12% increase over the prior year. For the fiscal year 2008, the company projected sales to increase 10% to about US$38bn, which they have successfully achieved.

For the fiscal year 2009, the company expects that the forecasted estimates will not match the actual estimates in 2009, due to the uncertain economic conditions.

For the six months ended 31 March 2009, Johnson Controls reported sales of US$13.65bn compared with US$18.89bn for the same period in 2008. Loss from continuing operations before income taxes and minority interests stood at US$761m. The company reported a net loss of US$801m compared to a net profit of US$524m in 2008.

Power solutions reported sales of US$2.02bn compared with sales of US$3.1bn for the same period in 2008. The segment reported 58% decrease in income to US$106m compared with US$254m in 2008.

Automotive experience posted sales of US$5.57bn, down 40% for the six months ended 31 March 2009. The segment incurred loss of US$604m compared to a profit of US$233m for the same period a year ago.

Johnson Controls expects that the loss in the Automotive Experience in the third fiscal quarter would be less than US$50m and forecasts the business to achieve break-even results in the fourth fiscal quarter.

The Hybrids Report


Year Net

Sales (US$bn)

Net Income (US$bn)

Operating Income (US$bn)

R&D Expenditure

(US$m)

No. of Employees

2008 38.06 0.97 0.97 829 140,000 2007 34.6 1.25 1.29 767 140,000 2006 32.2 1.02 1.03 743 136,000 2005 27.5 0.90 0.75 817 130,000 2004 24.6 0.81 0.76 844 123,000

Outlook JCI’s investment in the developing markets of Asia and eastern Europe will help the company in its future developments. Also, the company’s investments in the Li-ion R&D activities, are expected to drive the future growth. The company is making significant progress in its development of advanced batteries for fuel-efficient, environmentally friendly hybrid vehicles. In 2008 JCI increased its presence in hybrids, as it opened a Li-ion battery manufacturing plant in France and plans to open the second unit in the US. The company is expanding its traditional lead-acid car batteries to next-generation batteries which provide better fuel efficiency. These efforts are likely to help the company to win development or production contracts for hybrid vehicle batteries in Europe, North America and China. The government grants, such as a combination of tax credits and incentives from the state of Michigan as part of the state’s strategy program for advanced battery, and a grant awarded to the company for the development of hybrid battery technology, as well as lithium-ion battery systems for plug-in hybrid electric vehicles, increase the prospects for the company in the field of batteries. JCI had forecasted stability and recovery in 2009 compared to the challenges put forth by the automotive industry in 2008. However, the company had to announce restructuring plans after the second quarter of 2009 results. The company anticipates break-even results in fourth quarter of 2009.

The Hybrids Report


Keihin

Address Keihin Corporation Shinjuku Nomura Bldg. 39F, 1-26-2 Nishi-Shinjuku Shinjuku-ku Tokyo 163-0539 Japan Tel: +81 3345 3411 Fax: +81 3345 3414 Internet: http://www.keihin-corp.co.jp Senior Officers Kunimichi Odagaki , President & CEO Kazuyuki Sasa, Senior Managing Director Kazuoki Ukiana, Senior Managing Director Masami Watanabe, Managing Director Fumio Yamagata, Managing Director Hiroshi Irino, Managing Director Products Electronic control units (ECUs) Plants Brazil, China (2), India (2), Indonesia, Japan (9), Philippines (2), Taiwan, Thailand (2), UK, USA (5) Sales Group: ¥288.34bn (US$2.96bn, 31 March 2009) (Year to 31.03.09) Employees Group: 14,642 (2008)

Keihin is a leading manufacturer of fuel-control systems and related components. The company also produces electronic control units (ECUs) for hybrid vehicles. Keihin’s operations are categorised into four main divisions. Fuel Supply Systems for Motorcycles, Recreational Vehicles and Power Products accounted for 24.1% of the total sales in 2008, Mechanical Products for Automobiles (34.5%) Electronic Control Unit (ECU) (22%) Air-conditioning Systems (19.4%). In 2008, Japan contributed 40.4% to the total sales followed by America with 31.7%, Asia with 24.7% and Europe contributed 3.2%. The company has 27 manufacturing plants and three research and development centres across the world. Recent Developments Corporate strategy With a growing concern for the environment, the popularity of hybrid vehicles is gradually increasing. Keihin, in response to this phenomenon, has increased its focus on hybrid components. The company is currently developing components for fuel-cell vehicles and expects a significant growth in demand for these vehicles. Also, the company is increasing its research and development efforts for exhaust systems and emission controls systems. It is working on the development of fuel injection systems that meet emission controls. Keihin is strengthening its global supply system, primarily by increasing production capacity. In line with this strategy, Keihin established a new subsidiary in USA in April 2007 to manufacture fuel-supply systems and air-conditioning products. In fiscal 2008 the company continues to keep its focus on the global supply system. The production of the new plant in Thailand was completed and the mass production of fuel supply systems products for automobiles started in March 2008. Investments • In November 2007, Keihin invested ¥1.6bn (US$14.4m) to construct a new

building at its existing facility in Thailand. The new building will be used to assemble fuel supply parts along with exhaust gas recirculation (EGR) valves and production of engine air intake manifolds and throttle bodies.

• In April 2007, Keihin established a new subsidiary in USA. The facility manufactures fuel-supply systems and air-conditioning products. Operations started in March 2008.

• In March 2006, Keihin completed construction of a plant to manufacture automobile ECUs. This plant is located in Thailand.

New Product Developments Keihin generally spends 4-5% of its total sales on research and development. In 2008 it reported 5.78% decrease in R&D expenditure to ¥14.9bn (US$151.02m, 31 March 2008). Keihin’s core R&D centre is located at Tochigi (Japan). In addition, the company operates two more R&D centres in Japan and China. Financial Overview For the financial year ended 31 March 2009, Keihin’s sales declined 15% to ¥288.34bn (US$2.96bn) compared with ¥339.32bn (US$3.42bn) in 2008. The company recorded a net loss of ¥5.63bn (US$57.88m) compared to ¥11.2bn (US$112.9m) in fiscal 2008. Operating income declined 51.6% to ¥11.61bn (US$119.36m) compared with ¥24bn (US$241.9m) in 2008. For financial year 2010, the company has forecast further decline of 16.8% in net sales to ¥240bn. The company expects operating income to decrease by 98.3% to ¥200m and consolidated net loss of ¥6.2bn.

The Hybrids Report


Year Sales

(¥bn) Operating

Income (¥bn)

Net Income (¥bn)

R&D Expenditure

(¥bn)

No. of Employees

2009 288.34 11.61 (5.63) - - 2008 339.32 24 11.20 14.98 14,642 2007 330.6 22.11 12.85 15.9 13,949 2006 300.9 24.84 17.50 14.2 - 2005 271.4 20.87 10.85 12.1 -

Year Sales

(US$bn) Operating

Income (US$m)

Net Income (US$m)

R&D Expenditure

(US$m)

No. of Employees

2009 2.96 119.36 (57.88) - - 2008 3.42 241.9 112.9 151.02 14,642 2007 2.80 187.5 108.82 134.8 13,949 2006 2.56 211.2 148.86 120.7 - 2005 2.53 194.1 100.96 12.5 -

Outlook In the future, growing environmental awareness across the world is expected to give rise to stricter emission norms. This changing trend is also likely to increase the demand for hybrid vehicles which are efficient in reducing emissions and increasing fuel-economy. The company’s established presence in manufacturing ECUs for hybrid vehicles and efforts to develop high-end components for fuel-cell vehicles are expected to provide future growth opportunities. The company is also shifting its focus from the American markets, as the demand has decreased due to the global slowdown. Instead the company is expanding its operations in Asian markets that are doing relatively good in the current situation. Thus, the company is focused on its growth plan with constant focus on the upcoming hybrid vehicle demand in the future.

The Hybrids Report


Maxwell Technologies Ultracapacitors

Address Maxwell Technologies 9244 Balboa Avenue San Diego, CA 92123 USA Tel: +1 858 503 3300 Fax: +1 858 503 3301 Internet: http://www.maxwell.com Senior Officers David J. Schramm, President & CEO Richard D. Balanson, Senior Technical Advisor Tim T. Hart, Vice-President, CFO & Treasurer George Kreigler III, Senior Vice-President, Operations Alain R. Riedo, Senior Vice-President, General Manager, Maxwell Technologies SA John M. Miller, Vice-President, Systems, Applications & Integration Michael J. Liedtke, Vice-President, Business Development, Sales & Marketing Michael A. Everett, Vice-President, CTO Products Electrochemical double layer capacitors (EDLC) Plants China, Switzerland, US Sales Group: US$82.19m (31.12.2008) (Year to 31.12.2008) Employees Group: 346 (31 December 2008)

Maxwell Technologies is a leading manufacturer of ultracapacitors, high-voltage capacitors and radiation-mitigated microelectronic products. The company supplies these products to various industries such as transportation, industrial electronics and telecommunications. Maxwell Technologies business is divided into three product lines of ultracapacitors (35% of total sales in 2008), high-voltage capacitors (46%) and radiation-mitigated microelectronic products (19%). Geographically, sales in the US accounted for 28%, while rest of the world contributed the remaining 72% of sales in 2008. In the automotive sector, Maxwell Technologies manufactures BOOSTCAP® ultracapacitors, cells, multi-cell packs and modules with applications in powertrain, chassis and interior. Ultracapacitors are used by hybrid vehicles and trucks. Recent Developments Corporate strategy Maxwell is working with OEMs and suppliers to strengthen its position as the leading supplier of ultracapacitor-based solutions. Maxwell is increasing production capacity to meet the future anticipated demand for ultracapacitors. The company has formed numerous strategic alliances with other suppliers for its expansion in the market. In order to boost its position in the hybrid vehicles market, the company collaborated with Johnson-Controls Saft in 2008 to test the lithium-ion battery electrode for hybrid vehicles. Also, in 2007, Maxwell formed an alliance with Tianjin Lishen Battery Joint-Stock Co., Ltd to supply hybrid energy storage products. Maxwell broadened its customer focus by supplying its BOOSTCAP ultracapacitors to hybrid vehicles. Recently, the company added China’s three leading transit bus producers and Vanner Inc. to its list of customers in 2009. Golden Dragon Co. Ltd used Maxwell’s BOOSTCAP ultracapacitors for integration into diesel-electric hybrid buses in 2008. In 2007, Maxwell collaborated with Mercedes car to develop ultracapacitors for an advanced engineering hybrid-electric drive train program. Azure Dynamics Corporation used Maxwell’s BOOSTCAP 390-volt heavy transportation ultracapacitor module (HTM) for the latest hybrid shuttle bus powertrain. For Maxwell, China is one of the important markets to expand its presence in the automotive industry. Maxwell has a cost advantage by expanding in the low cost countries. The company formed an alliance with Belton Technology Group, through which it is making inroads in the Chinese market. In April 2007, the company also opened a sales office in China for its ultracapacitor products and it expects to serve the Asian market through this office. Joint-ventures • In April 2008, Maxwell Technologies and Johnson Controls-Saft entered into

an agreement to evaluate and test Maxwell’s lithium-ion battery electrodes for hybrid vehicles.

• In November 2007, Maxwell formed an alliance with Tianjin Lishen Battery Joint-Stock Co., Ltd to supply hybrid energy storage products. The two companies combined their respective capabilities in ultracapacitor and lithium-ion battery technologies to develop hybrid energy storage products. The new products have applications such as quick-charge cordless tools and electric vehicles. Production and delivery of initial product samples began in early 2008.

• In July 2007, Maxwell entered into an agreement with Valeo to incorporate its BOOSTCAP ultracapacitors in Valeo’s stop-starts and regenerating braking systems.

• In May 2007, Maxwell and Argonne National Laboratory entered into an agreement for a collaborative research project. The project intended to

The Hybrids Report


demonstrate the compatibility of ultracapacitors with hybrid vehicle batteries. • In September 2006, Maxwell Technologies and Kromberg & Schubert GmBH

& Co. KG formed an alliance to incorporate Maxwell’s BOOSTCAP ultracapacitors into engine starting system for automobiles.

• In April 2006, Maxwell Technologies signed a contract and granted a licence to Shanghai Urban Electric Power Investment Development Corporation (SUEP). The contract will expire in 2012. SUEP can manufacture and market ultracapacitor products based on Maxwell’s proprietary large cell and multi-cell module technology under its own brand in mainland China. With this alliance, Maxwell targeted the Chinese market. In April 2006, Maxwell Technologies started a toll manufacturing alliance with China-based Belton Technology Group for the production of BOOSTCAP ultracapacitors. Post the production of carbon powder electrode material, Maxwell sends it to Belton for final assembly. In March 2006, Maxwell Technologies and Yeong Long Technologies Co. Ltd (YEC) expanded their alliance to supply carbon powder-based ultracapacitor electrode material to assist YEC’s small cell ultracapacitor products. Additionally, Maxwell facilitated YEC in setting up worldwide marketing and distribution. The alliance was initiated in February 2003, to commercialise BOOSTCAP ultracapacitors in China.

Investments • In April 2007, Maxwell Technologies opened a sales office in Shanghai

(China) to market its BOOSTCAP ultracapacitor products, service customers and support its distribution channel partners throughout Asia.

Contracts • In April 2009, Maxwell Technologies received purchase orders of US$13.5m

from three of China’s leading transit bus producers. The contract incorporates Maxwell to supply BOOSTCAP ultracapcitor modules to support braking energy recuperation and torque assist functions in diesel-electric hybrid transit buses.

• In January 2009, Maxwell Technologies supplied its BOOSTCAP ultracapacitor modules to provide burst power for a retrofit diesel engine starter system to Vanner Inc.

• In July 2008, Maxwell Technologies supplied its BOOSTCAP ultracapacitors to Golden Dragon Bus Co. Ltd. for integration into diesel-electric hybrid buses.

• In July 2008, Maxwell Technologies supplied its 125-volt BOOSTCAP ultracapacitor modules for braking energy recuperation and torque assist in emission free electric buses to Vossloh Kiepe GmbH.

• In January 2008, Maxwell Technologies supplied BOOSTCAP ultracapacitors to Continental AG as the energy storage component for a broadnet stabilisation system.

• In September 2007, Maxwell Technologies signed a contract with Mercedes Car group. Maxwell has to design and produce ultracapacitors for an advanced engineering hybrid-electric drive train. It incorporates a braking energy recuperation system that enables it to increase fuel efficiency and reduce emissions.

• In June 2007, Maxwell Technologies and Azure Dynamics Corporation came together to use Maxwell’s BOOSTCAP 390-volt heavy transportation ultracapacitor module (HTM) for the latest hybrid shuttle bus powertrain. The product works as the energy storage and power delivery component.

• In January 2007, Maxwell Technologies received a purchase order for 100,000m2 from Shanghai Sanjiu Electric Equipment Company Ltd. (Sanjiu). Sanjiu planned to introduce a line of ultracapacitor products based on Maxwell’s cell architecture and high-performance electrode for transportation and other markets in mainland China. Additionally, the alliance helps Maxwell to expand its market in China.

New Product Developments In the financial year 2008, Maxwell Technologies spent US$14.8m on R&D activities, an increase of 30.97% over the previous year’s figure of US$11.3m. • In March 2007, Maxwell Technologies and AFL Automotive introduced a

cold start system for the commercial truck market. The cold start system integrates Maxwell Technologies BOOSTCAP ultracapacitors with AFL's power management system.

• In March 2007, Maxwell Technologies introduced the 390-volt BOOSTCAP ultracapacitor module. It increases the efficiency level, energy storage and power-delivery solutions for heavy hybrid, electric vehicles and heavy duty industrial applications.

The Hybrids Report


• In November 2006, Maxwell Technologies launched a 125-Volt BOOSTCAP ultracapacitor module for heavy hybrid and electric vehicles. The module, HTM BMOD0063-P125, is based on 2.7-volt BOOSTCAP® BCAP3000 power cells.

• In May 2006, Maxwell Technologies introduced the C-Cell BOOSTCAP ultracapacitor for various industrial and transportation applications. The new ultracapacitor cells are also applicable in distributed power nodes for automotive subsystems. The new 2.5-volt cells weigh two-thirds less than an ordinary C-size battery and are easily mountable on circuit boards and other electrical devices and systems.

• In May 2006, Maxwell Technologies developed D-Cell ultracapacitors for automotive electric power network stabilisation. The new product provides low-cost backup power solutions and avoids microprocessor malfunctions through better management.

• In March 2006, Maxwell Technologies introduced 16 new power-type BOOSTCAP ultracapacitor cells and modules for the automotive market. The new ultracapacitors increase the power and longevity of batteries by ten times.

• In June 2005, Maxwell Technologies introduced large cell BOOSTCAP ultracapacitor cells and multi-cell modules. The product stores more energy and delivers more power per unit volume. The life of the product is longer than any other commercially available ultracapacitors products.

Financial Overview For the financial year ended 31 December 2008; Maxwell has reported growth in net sales by 43.28% to US$82.19m over US$57.36m in 2007. The company reported an operating loss of US$12.24m from operations compared with US$16.08m in 2007. It shows the impact of less credit availability and volatile security prices due to slump in the global financial markets. Full-year interest expense was US$4.81, resulting in a loss from continuing operations of US$14.8m in 2008. However, the company gained on embedded derivatives and warrants which was US$1.2m in 2008. The company incurred a net loss of US$14.8m in 2008 down from US$15.7m posted in 2007. For the first quarter of 2009, Maxwell reported increase in total sales of 31% to US$22.5m for the first quarter of 2009 compared with US$16.5m in the first quarter of 2008. This was due to the stable sales growth in electric utility infrastructure, wind energy, and public transport and space programs. Operating loss decreased to US$1.7m in the first quarter of 2009 compared with US$3.4m in 2008. Net loss decreased to US$2.9m in2009 compared with US$5.5m in 2008. Cash and restricted cash amounted to US$15.4m by the end of the first quarter of 2009. Ultracapacitor revenue increased 34% to US$7.6m in first quarter of 2009 compared with US$5.3m in 2008. High voltage capacitors together with microelectronics recorded 66% increase in total revenue to US$14.8m in the first quarter of 2009 compared with US$11.8m in 2008. The year-on-year sales growth in the company was attributable to ultracapacitors, private and public investments in wind energy, and hybrid and electric transit vehicles. In 2009, the company is anticipating positive cash flows from operations sufficient enough to finance its operations. The company is undertaking numerous programs to avoid the situation of negative cash flow from operations, such as product cost reductions, improved gross margin from the company’s BOOSTCAP product line, manufacturing & quality improvement.

Year Sales (US$m)

Operating income (US$m)

Net Income (US$m)

R&D Expenditure

(US$m)

No. of Employees

2008 82.19 (12.24) (14.80) 14.8 346 2007 57.36 (16.08) (15.73) 11.3 302 2006 53.88 (14.13) (16.49) 10.06 377 2005 45.43 (7.38) (6.29) 7.17 241 2004 32.21 (8.94) (9.07) 5.52 222

Outlook Maxwell Technologies’ future growth in the global automotive market

The Hybrids Report


depends on the successful commercialisation of applications of ultracapacitors. The company’s effort to team up with suppliers and OEMs is expected to help in the future. Ultracapacitor and electrode technologies are clearly the main drivers for the company’s future growth. The main properties are to increase the fuel efficiency and reduce emissions which draw lot of attention in favour of better prospects of the company. The company foresees growth opportunities in the Asian automotive markets as vehicle production increases. Particularly, the demand for its BOOSTCAP ultracapacitors and multi-cell modules is expected to rise, with OEMs looking for cost-effective, reliable and durable power delivery solutions. Expansion in China will open further avenues for growth, apart from reducing its dependence on few selected markets in Switzerland and the US. For 2009, Maxwell is expecting to have positive cash flows, with the numerous measures the company is taking for a strong financial growth.

The Hybrids Report


NessCap Ultracapacitors

Address NessCap Co., Ltd. 750-8, Gomae-dong Giheung-gu Yongin-si Gyeonggi-Do Korea Tel: +82 31 289 0721 Fax: +82 31 286 6767 Internet: http://www.nesscap.com Senior Officers M.Cho, CEO & President Sunwook Kim, Chairman Robert Tressler, Senior Vice-President & General Manager Products Electric double layer capacitor, pseudocapacitor Plants Korea Employees c. 65 (2005)

NessCap is a Korea-based manufacturer of ultracapacitors for hybrid electric vehicles. Globally, the company ranks as one of the four leading producers of ultracapacitors. Apart from automotive applications, ultracapacitors produced by the company are also used in other applications such as power, audio and electronics. Besides being used in hybrid electric vehicle, ultracapacitors are used in other automotive applications such as cold cranking in extremely cold weather. NessCap products are available in both cells and modules for transportation, power and consumer markets. In 2001, Ness Capacitor Co., Ltd was spun off from NESS Corp and was later renamed as NessCap Co, Ltd in May 2002.The company serves numerous OEMs such as Chrysler, Ford and GM. The company currently supplies start-stop systems, mild & full hybrid motor-generator systems and DC/DC converter and control electronics to these OEMs. Recent Developments Corporate strategy NessCap started operations with an aim to develop ultracapacitors for various applications. For hybrid vehicles, NessCap has developed products that can be used for multiple hybrid platforms. In March 2009, NessCap introduced a series of new ultracapacitor cylindrical cells that can be used in multiple hybrid platforms for automobiles, buses, trucks and trains. The company has also focused its efforts on building strong relationships with automakers such as GM. NessCap signed a deal with GM in May 2008 to supply its 6 100F supercapacitors for GM’s E-Flex series of extended range electric vehicles. Separately, NessCap in September 2005 secured a contract from United States Advanced Battery Consortium to develop ultracapacitors for an automotive research program. Contracts • In May 2008, NessCap signed a deal with GM to supply its 6 100F

supercapacitors for the automaker’s E-Flex series of extended range electric vehicles. Terms of the contract were not disclosed.

• In September 2005, NessCap received a US$4.5m contract from United States Advanced Battery Consortium to develop ultracapacitors for an automotive research program. The program is run by a cooperative research consortium of Chrysler, Daimler, Ford and GM.

• New Product Developments NessCap has a focus on R&D initiatives to

develop products for the hybrids market. Being a private company, NessCap does not disclose its research and development (R&D) expenditure. In March 2009, NessCap introduced five new ultracapacitor cylindrical cells that range in capacitance from 650 farads to 3000 farads with operating voltage of 2.7 volts and standard screw or welded terminal connections. These new cells can be used in multiple hybrid platforms for automobiles, buses, trucks and trains, industrial telecommunications buffering and back-up as well as windmill shaving and large solar energy systems.

• The company has developed an electric double layer capacitor (EDLC) which comes in 25 models ranging from 2.5Volt to 2.7Volt (3000 to 5000 farads). These capacitors are used in 14Volt/42 Volt hybrid electric vehicles. The company has also developed EDLC Module which comes in more than 10 models ranging from 4.6Volts to 120Volts and are used in electric and hybrid electric vehicles, besides having other applications.

Financial Overview NessCap, being privately held, is under no obligation to publish its financial results. Outlook When seen in the light of the growing popularity for hybrid drives, demand for ultracapacitors is likely to increase in the years to come. The company will benefit from its strong clientele such as Chrysler, Ford and GM, as these automakers have plans to introduce hybrid and electric vehicles in future.

The Hybrids Report


Saft Batteries

Address Saft Groupe 12 rue Sadi Carnot 93170 Bagnolet France Tel: +33 1 4993 1918 Fax: +33 1 4993 1950 Internet: http://www.saftbatteries.com Senior Officers John Searle, Chairman & CEO Mary Ann Wright, CEO, Johnson Controls-Saft Advanced Power Solutions Xavier Delacroix, Director & General Manager Industrial Battery Group Dr Richard Doisneau, Chief Technology Officer Products Lithium-ion batteries, nickel cadmium batteries, nickel metal hydride batteries Plants France (JCS) Sales Group: €609.4m (US$859.09m, 31 December 2008) (Year to 31.12.08) Employees 4000 (2008)

Saft manufactures batteries including nickel-cadmium (Ni-Cd), rechargeable lithium-ion (Li-ion) and nickel-metal hydride (Ni-MH) batteries. Saft categorises its business in three divisions: Industrial Battery Group (generated 48% of 2008 net sales), Specialty Battery Group (40%) and Rechargeable Battery Systems (12%). Industrial Battery Group segment manufactures rechargeable lithium-ion batteries, nickel cadmium batteries and nickel metal hydride batteries which are used in hybrid electric vehicles as well as other industries. Saft has 17 manufacturing sites worldwide and is present in 10 countries. Recent Developments Corporate strategy Saft automotive business is currently focused on developing batteries for the hybrid vehicles market through its joint-venture (JV) with Johnson Controls. The JV named as JCS, was formed in January 2006 to develop solutions for hybrid and electric vehicles. In February 2008, JCS set up a plant in Nersac (France) to produce lithium-ion batteries for hybrid vehicles There are further expansion plans for this facility. To cater for the increasing demand of hybrid vehicles, JCS collaborated with Maxwell Technologies in April 2008 to develop lithium-ion automotive batteries. Additionally, JCS invested in Wisconsin (US) to get the benefit of the Bio Energy Grant awarded by the Wisconsin government. The grant was for the innovation and advancement of hybrid vehicle batteries which contributes to the state’s clean energy agenda. Saft has reviewed its operations and cost base. The company planned to merge the Industrial battery group and Rechargeable battery systems by July 2009. The cost synergies to be put into effect would include elimination of duplicate production assets, and technical resource for nickel technologies would be merged. The synergies would be adopted by end of 2010. Raw materials would be obtained from low cost suppliers and there are plans to transfer final assembly plant of Special Battery Group to low cost countries. Joint-ventures • In April 2008, Johnson Controls-Saft (JCS) and Maxwell Technologies

established a development collaboration to evaluate the integration of Maxwell’s electrode process into the mass production of Saft’s lithium-ion batteries for hybrid vehicles.

• In January 2006, Saft and Johnson Controls established a joint-venture, Johnson Controls-Saft Advanced Power Solutions (JCS), to develop batteries for current and future generation hybrid electric vehicles (HEV) and electric vehicles (EV). The joint-venture is involved in production of nickel-metal hydride and lithium-ion batteries. With this joint-venture the company intends to become a leading supplier in North America for hybrid and electric vehicles. Johnson Controls has 51% stake and the remaining 49% stake is held by Saft.

Investments • In April 2009, JCS announced plans to invest US$220m to open first US based

lithium-ion battery cells manufacturing facility in Holland, Michigan (US). The plant will recruit around 500 employees. The plants’s initial capacity is measured to be around 15 million lithium-ion cells. JCS will receive a combination of tax credits and incentives from the state of Michigan amounting to US$148.5m as part of the state’s strategy program for advanced battery.

• In February 2008, JCS opened its first lithium-ion battery facility in Nersac (France). The company invested €15m (US$22.3m, 1 February 2008) in the plant which is the world’s first lithium-ion battery manufacturing facility.

The Hybrids Report


Contracts • In February 2009, JCS secured a contract from Ford to supply battery systems

for its plug-in hybrid electric vehicle (PHEV) which were tested on a fleet of 20 cars in June 2008. The PHEV will be introduced in 2012.

• In January 2009, JCS won a contract from Azure Dynamics to supply lithium-ion hybrid batteries for commercial trucks for the North American market. The agreement is extended till 2014. The production will begin in the fourth quarter of 2010.

• In October 2008, JCS won a contract from BMW to supply lithium-ion batteries for BMW’s 7 series active hybrid car. This is the second lithium-ion production contract for JCS. The project will commence in 2010.

• In August 2008, JCS got a second contract from United States Advanced Battery Consortium (USABC) valued at US$8.2mn to produce lithium-ion battery systems for PHEV. In 2006, JCS secured a 24-month contract from USABC to develop advanced, lithium-ion batteries for HEVs. USABC is a project run by United States Department of Energy, Daimler Chrysler, Ford and GM.

• In January 2008, JCS won a contract from Chery Automobile to supply nickel metal hydride batteries for its A5 ISG hybrid saloon. The cells for these batteries will be produced at Saft’s Nersac (France) plant.

• In January 2008, JCS won a contract to supply lithium-ion batteries for a demonstration fleet of new energy vehicles to SAIC Motor Corporation Ltd.

• In September 2007, JCS won a contract with Daimler to supply lithium-ion batteries for the Mercedes S Class 400 hybrid. The project will commence in June 2009.

• In January 2007, JCS was awarded an advanced battery development contract by GM to design and test lithium-ion batteries for use in the Saturn Vue Green Line plug-in hybrid SUV.

New Product Developments The company’s R&D expenditure was 5.6% of the company’s sales or €30.47m in financial year 2008 compared with 5.5% to €30m in 2007. In addition to the plant in Nersac, Johnson Controls-Saft has research and development centres in Milwaukee (US) and Bordeaux (France). Some of its recent developments include: • Saft has developed new advanced high energy lithium-ion battery systems

based on its VLE module, VL45E (45 Ah) and VL 41M (41 Ah) cells range. These cells are used in assembled battery systems which in turn are used in electronics and thermal management units. Saft has developed VH series nickel-metal hydride batteries that offer high power, constant voltage during discharge, long life cycle (over 500 charge discharge cycles) and are used in hybrid vehicles, electric vehicles, electric bicycles, scooters and wheelchairs.

• The company has also developed nickel cadmium and lithium-ion batteries for electric bus applications and hybrid bus applications.

Financial Overview In the financial year ended 31 December 2008, Saft’s consolidated net sales increased by 4.9% to €609.4m (US$859m, 31 December 2008) compared with €600.5m (US$884.4m, 31 December 2007) in 2007. In the Industrial Battery Group, sales increased by 6.8% to €292.1m (US$411.7m) from €282.4m (US$415.9m) in 2007. The profits could be achieved due to control on the pricing. In Specialty Battery Group, sales increased by 6.7% to €240.8m (US$339.4m) compared with €334.7m (US$492.9m). This was possible due to strong performance in the civil market. For Rechargeable Battery Systems, sales declined by 6.8% to €76.5m (US$107.8m), over €83.4m (US$122.8m). The negative impact was due to the falling nickel price throughout the year. Saft’s net sales in the first quarter ending 31 March 2009 declined 2.9% to €145.6m (US$192.3m, 31 March 2009) compared with €149.9m (US$236.8m) in the first quarter of 2008. Industrial Battery Group sales declined 11.1% to €64.5m (US$85.18m) in the first quarter of 2009 compared with €72.6m (US$114.7m) in 2008. Speciality Battery Group sales increased 15.7% to €66.0m (US$87.17m) compared with €57m (US$90.06m) in first quarter of 2008. Rechargeable Battery Systems recorded substantial decline of 25.8% to €15.1m (US$19.9m) in the first quarter of 2009 compared with €20.3m (US$32.07m) in 2008.

The Hybrids Report


Year Sales (€m) EBIT (€m) Net Income (€m) 2008 609.4 80.8 35.1 2007 600.5 68.4 26.9 2006 560.2 73.5 37.9 2005 566.2 85.7 34.9 2004 586.1 71.3 -

Year Sales (US$m) EBIT (US$m) Net Income

(US$m) 2008 859 113.9 49.4 2007 884.4 100.7 39.6 2006 739.6 97 50 2005 670.6 101.5 41.3 2004 799.6 97.2 -

Outlook Global demand for lithium batteries is expected to grow as hybrid vehicles become popular in response to increasing environmental awareness. Saft is positive about the demand for high energy advanced batteries in the future and expects growth in this segment. In the future, the joint-venture between Saft and Johnson Control is expected to improve the market presence of Saft in hybrids. The recent opening of the world’s first lithium-ion batteries manufacturing facility and new hybrid contracts signed in 2006-2008 present the company with future growth opportunities. Furthermore, JCS has successfully acquired contracts from three continents in the period 2008-2009. This includes second contract from USABC and a five-year contract from Azure Dynamics. JCS would also be working with the State of Wisconsin on their clean energy plan in which JCS would get an incentive of US$500,000 for further innovation in hybrid vehicle batteries. The new plant project in Michigan (US) will help the company to supply products to the new contracts secured by the company. JCS would also receive funds from the American and French governments. The US would be providing a stimulus package of US$2bn for advanced batteries and renewable energy storage and with the new plant project the JV will receive a combination of tax credits and incentives of US$148.5m from the state of Michigan (US) as part of the state’s strategy program for advanced battery. France would be providing automotive industry aid package of €450mn (US$566.2mn, 19 February, 2009) in support of clean vehicles. All these are expected to boost the growth of the company in the area of providing batteries for hybrid vehicles.

The Hybrids Report


Sanyo Batteries

Address Sanyo Electric Co Ltd 5-5, Keihan-Hondori 2-chome Moriguchi City, Osaka 570 8677 Japan Tel: +81 6 6991 1181 Fax: +81 6 6992 0009 Internet: http://www.sanyo.co.jp Senior Officers Seiichiro Sano, President Koichi Maeda, Executive Vice-President Kazuhiko Suruta, Executive Vice-President Kentaro Yamagishi, Executive Vice-President Mitsuru Honma, Vice-President Hidetoshi Arima, Vice-President Hiromoto Sekino, Vice-President Satoshi Inoue, Vice-President Osamu Kajikawa, Vice-President Hiroshi Ono, Vice-President Akira Kan, Vice-President Teruo Tabata, Vice-President Products Lithium-ion & nickel metal hydride batteries Plants China, Japan, Mexico, Singapore, UK, USA Sales Group: ¥2,017.8bn (US$20.3bn, 31 March 2008) (Year to 31.03.08) Employees Group: 99,875 (2008)

Sanyo Electric is one of the leading suppliers of electronic products. The company’s product portfolio includes consumer electronic appliances, audio & video equipment, batteries and home appliances. The company supplies electronic components such as navigation systems and rechargeable batteries to the automotive sector. Sanyo organises its operations into four segments: Consumer (generated 37.5% of 2008 sales), Components (47.2%) Commercial (13%) and Others (2.3%). The Components division manufactures lithium-ion batteries and nickel-metal hydride (Ni-MH) batteries and other commercial rechargeable batteries for various markets. Apart from rechargeable batteries, the division also manufactures capacitors, motors, optical pick ups, semiconductors and solar cells. Sanyo and Panasonic have an agreement with Capital and Business Alliance which was signed in December 2008. Sanyo will become a subsidiary of Panasonic. Decisions are pending as Panasonic is seeking antitrust approval from all the 11 countries where Sanyo is operational. By April 2009, two firms present in five countries had given their approval for the same. In 2008, the company generated 36.8% of net sales from Japan, 35.3% from Asia, 12.8% from North America, 11.9% from Europe and 3.2% from rest of the world. Its major automotive customers include Chrysler, Daimler, Ford, Honda and Volkswagen. . Recent Developments Corporate strategy In November 2007, Sanyo developed a new mid-term business strategy which will guide it from April 2008 to March 2010. The plan aims to achieve operating income of ¥100bn and net sales of ¥2,380bn by the end of fiscal 2010. Sales target for energy business area is set at approximately ¥610bn till 2010. The new mid-term plan from 2009-2010 is a shift in the company’s strategies from the Business Reconstruction strategy to Path to Growth. Here, the company plans to make a record-scale capital investment of ¥360bn (US$3.6bn), 70% of which would be put into component business. This includes an investment of ¥125bn (US$1.2bn) for rechargeable battery business. The plan has been made keeping the goal of financial year 2010 in mind. The company’s focus on batteries for hybrid electric vehicles which include rechargeable lithium-ion batteries and nickel-metal hydride HEV battery sytems has bought them in collaboration with OEMs, such as Volkswagen. The company plans to invest ¥80bn (US$771.2mn) to develop a new plant for lithium-ion batteries for the HEV business by 2015. A new plant location considered by the company would be chosen according to the infrastructure that provides appropriate production logistics and human resources. The new initiative is in order to create a new customer base by fiscal year 2010. ‘Think GAIA’ is the brand vision of the company used to accelerate development of next generation rechargeable batteries which would cater to HEV as well as plug-in hybrid electric vehicle (PHEV). The vision also contributes to the corporate social responsibility of the company as it talks about providing environmental friendly global energy solutions. Joint-ventures • In January 2006, Sanyo and Volkswagen entered into an agreement to start co-

development of the next generation of Ni-MH battery systems for hybrid electric vehicles.

Investments • In May 2009, Sanyo announced the plan to construct a new facility in its

The Hybrids Report


already existing Kasai Plant, Japan. The facility will be used to manufacture lithium-ion batteries for HEVs and help meet the growing demand for the same.

• In March 2009, Sanyo completed the construction of mass production line for lithium-ion batteries for HEV at its Tokushima plant (Japan). This production capacity would be able to supply batteries for 15,000 to 20,000 cars per year.

Divestments • In December 2008, Sanyo agreed to the Panasonic Capital and Business

Alliance agreement. Panasonic declared in March 2009 that it plans to sell bonds worth ¥400bn (US$4.1bn) to acquire Sanyo as the subsidiary. The total deal would be of ¥806.7bn (US$9.1bn). Panasonic requires approval from antitrust clearance from 11 countries where Sanyo is operational which would delay the acquisition till May 2009.

Contracts • In 2004, Sanyo entered into an agreement with Daimler to develop batteries

for Mercedes gasoline hybrid cars. • In 2004, Sanyo commenced supplies of Ni-MH for the 2005 Honda Accord

hybrid model in the North American Market. Sanyo delivers over 20,000 batteries to Honda for this program annually.

New Product Developments In the financial year 2009, Sanyo’s expenditure on research and development was ¥75.43bn (US$775.50m), an increase from ¥71.79bn (US$723.75m) in the previous year. In hybrids, the company is developing rechargeable batteries for hybrid electric vehicles and their control systems. The company would be supplying plug-in hybrid electric vehicles battery systems by 2011. Financial Overview Sanyo’s sales decreased 12.2% in the financial year ended 31 March 2009 to ¥1,770.7bn (US$18.20bn) compared with ¥2,017.8bn (US$20.3bn) in the preceding year. The company reported a 89.1% decrease in operating profit to ¥8.3bn (US$85.33m) in financial year ended 2009 compared with ¥76.1bn (US$767.2m) in the previous fiscal. It recorded a net loss of ¥93.22bn (US$958.40m) in 2009 compared with ¥28.7bn (US$289.3m) in the previous year. Component division sales decreased to ¥508.99bn (US$5.23bn) in fiscal year ended 31 March 2009 compared with ¥571.11bn (US$5.75bn) in the previous year. Overseas sales decreased 13.8% to ¥1,099.9bn (US$11.30bn). Sales decreased in Japan by 9.7% to ¥670.8bn (US$6.89bn) compared with ¥742.5bn (US$7.4bn) in the previous year. North America sales decreased 11.2% to ¥229.83bn (US$2.36bn) in 2009 compared with ¥258.86bn (US$2.60bn) in the previous year. Europe sales decreased 19.5% to ¥192.47bn (US$1.97bn) compared with ¥239.15bn (US$2.41bn) in the previous year. Asia reported decrease of 14.7% to ¥608.46bn (US$6.25bn) compared with ¥713.32bn (US$7.19bn) in previous fiscal year.

Year Sales (¥bn)

Operating Income

(¥bn)

Net income (¥bn)

R&D Expenditure

(¥bn)

No. of Employees

2009 1,770.65 8.27 (93.22) 75.43 86,016 2008 2,017.8 76.14 28.70 71.79 99,875 2007 1,882.6

1 42.60 (45.4) 90.09 94,906

2006 2,031.65 (35.90) (205.7)

94.26 106,389

2005 2,089.79 4.85 (171.5)

114.15 96,023

Year Sales

(US$bn) Operating

Income (US$m)

Net income (US$m)

R&D Expenditur

e (US$m)

No. of Employees

2009 18.20 85.33 958.40 775.50 86,016 2008 20.3 767.2 289.3 723.75 99875 2007 15.96 361.30 385 764.08 94,906

The Hybrids Report


2006 17.28 (305.37) (1,749.7) 801.78 106,389 2005 19.43 45.11 (1,595.0) 1061.66 96,023

Outlook Sanyo has set a long-term goal of securing 50% of the global market share for hybrid vehicle batteries by 2010. In the future, the company aims to capitalise on its technical know-how and to develop the next generation of Ni-MH batteries for new hybrid electric vehicles. The company has taken one step forward towards its contribution to the increasing demand for hybrid vehicle batteries. They have collaborated with Volkswagen once again to produce lithium-ion battery systems which would cater to 15,000 to 20,000 hybrid cars per year. The company also plans to supply plug-in hybrid electric vehicle (PHEV) batteries till 2011 as they sense a great demand of PHEV. This collaboration is not only expected to increase its product development capability but also provide access to the European market. The Capital and Business agreement between Sanyo and Panasonic which is expected to be completed by May 2009 would be adding to the capital expenditure that the company is planning. Some new technology could be expected in the years to follow. The company will have to concentrate on its new-mid term plan as the forecasts for fiscal year 2008 show a substantial decrease in net sales. This is mainly due to the global crisis especially in US market. The decline can be observed from the fourth quarter of the year ending 31 March 2009.

The Hybrids Report


Sumitomo Wiring Wire harnesses

Address Sumitomo Wiring Systems Ltd 1-14 Nishisuehiro-cho Yokkaichi, Mie, 510 8503 Japan Tel: +81 59 354 6200 Fax: +81 59 354 6318 Internet: http://www.sws.co.jp Senior Officers Fumikiyo Uchioke, President & CEO Mamoru Sato, Senior Managing Executive Officer Osamu Inoue, Senior Managing Executive Officer Masaoshi Fuse, Managing Executive Officer Hiromi Yabutani, Managing Executive Officer Hiroshi Yasuno, Managing Executive Officer Products Electronic and electrical distribution systems, wire harnesses Plants Bulgaria, China (18), Germany, Hong Kong, Hungary (3), India (3), Indonesia (2), Italy, Japan (15), Malaysia (2), Morocco (3), Philippines (5), Poland (5), Portugal, Romania, Slovakia (2), South Africa, South Korea, Taiwan, Thailand (3), Turkey, UK, Ukraine, US (10), Vietnam (4) Sales ¥511.96bn (US$4.32bn, 31 March 2007) (Year to 31.03.07) Unconsolidated: 3,480bn (US$35.78bn, 31 March 2009) Employees 106,244 (March 2009) Unconsolidated:3,993 (March 2009)

Sumitomo Wiring Systems is one of the leading suppliers of electric wires, cables and related products. In the automotive sector, its products include wiring harness and components such as connectors, junction blocks, exterior parts and engine cables. In May 2007, the board of directors at Sumitomo Wiring Systems (SWS) and Sumitomo Electric Industries (SEI) agreed to merge their business through a stock swap. Now, SWS operates as a wholly-owned subsidiary of SEI. Sumitomo Wiring has global market presence with 120 subsidiaries. The company supplies to Ford, GM, Honda, Renault-Nissan and Toyota. Its customers for hybrid electronic and electrical distribution systems are Honda and Toyota. Recent Developments Corporate strategy Sumitomo Wiring is focused on a mid-term business plan called 12Vision for 2008-2012 period, whereby the company aims to achieve consolidated sales of ¥600bn and global market share of 25% by the end of the plan. In order to achieve this target, the company is focused on increasing its international presence and reducing production costs. In an effort to improve profitability, Sumitomo has expanded its manufacturing presence in low cost countries. The company has restructured its domestic production system and increased the proportion of products supplied to customers in Japan from low cost locations. The company has focused on maximising production in China, Vietnam, Thailand, amongst others. . In the hybrids segment, the company has developed high-voltage wiring harness for hybrid electric vehicle (HEV) applications and has developed supplier contracts with Honda and Toyota. The company is capitalising its expertise in the wiring harness domain to develop new wiring harnesses for hybrids. In the hybrids segment, the company has developed high-voltage wiring harness for hybrid electric vehicle (HEV) applications and has developed supplier contracts with Honda and Toyota. The company is capitalising its expertise in the wiring harness domain to develop new wiring harnesses for hybrids. Acquisitions • In March 2006, Sumitomo Wiring and Sumitomo Electric acquired

Volkswagen Bordnetze, a leading manufacturer of wiring harnesses in Germany.

• In 2004, Sumitomo Wiring acquired a stake in South Korean wiring harness manufacturer Kyungshin Industrial Co. Ltd. The company supplies wiring harness components to South Korean automotive companies.

Joint-ventures • In May 2008, Sumitomo Wiring Systems signed a technical assistance

agreement with Pasdec Automotive Technologies, South Africa’s leading supplier of wiring harnesses to the automotive manufacturing industry. The technical assistance agreement will have a beneficial impact on a number of Nissan models including the Hardbody, Livinia, Acenta and Visia.

• In November 2006, Sumitomo Wiring and Suzuki entered into a joint-venture (JV) agreement to produce harness terminals used in automotive wiring harnesses. The JV company, S&S Components Co., Ltd., was capitalised at ¥80m (US$0.68m) with 51% funding from Suzuki and the remaining 49% from SWS.

Investments • In February 2008, Sumitomo Wiring announced its intention to establish a

manufacturing subsidiary in Ha Nam (Vietnam) to increase production capacity of automotive wiring harnesses. The subsidiary was capitalised at US$1.7m, all funded by the parent company, SWS. The plant became operational in January 2009 and is expected to employ 2,500 by the end of

The Hybrids Report


2011. • In May 2006, Sumitomo Wiring completed the construction of the SWS

Headquarters Technical Centre at Yokkaichi (Japan) which was started in April 2005. This technical centre acts as a hub for global technological development activities.

• In January 2006, Sumitomo Electric and Sumitomo Wiring established an automobile wiring manufacturing plant in Hai Duong Province (Vietnam) to increase its production capacity in Asia.

• In November 2005, Sumitomo Wiring established a logistics subsidiary in Hizhou City (China), to strengthen its logistics support systems and to expand in China.

• In September 2005, Sumitomo Wiring established automobile wiring harness development centres in Bangkok (Thailand) and Shanghai (China).

Contracts • In November 2005, Sumitomo Wiring started supplying high-voltage AC

wiring to the Honda Civic Hybrid. The wiring harness connects the inverter with the motor in engine compartment. Sumitomo Wiring developed this wiring harness with Auto Network Ltd.

• In 2005, Sumitomo Wiring won a contract to supply high voltage wiring harness for traction and power generation motors for the Toyota Prius model.

New Product Developments: In the financial year ended on 31 March 2007, the company spent ¥21.2bn (US$179.80m, 31 March 2007) on its research and development activities compared with ¥21.01bn (US$178.71m, 31 March 2006) in the preceding year. • Sumitomo Wiring, along with Auto Networks Ltd, has developed a new

electromagnetic shielding construction and compact connector for high-voltage wiring harnesses used in HEV applications. The new wiring harness uses aluminium pipe armouring that functions both as shield and protector for three cables in a bundle.

• Sumitomo Wiring has developed a compact 9.5 level type connector for the new wiring harness, which is used in the Honda Civic Hybrid. Use of this connector improves work efficiency at the automaker’s assembly line and makes the service and maintenance of vehicle easier.

Financial Overview: In the financial year ended 31 March 2007, Sumitomo Wiring reported a 15.9% increase in net sales to ¥511.96bn (US$4.32bn) compared with ¥441.5bn (US$3.75bn) in preceding fiscal. Net profit grew 35.7% from ¥8.12bn (US$69.07m) in 2006 to ¥11.02bn (US$93.46m) in 2007. The company reported a 63% increase in operating income to ¥15.87bn (US$134.60m) from ¥9.73bn (US$82.76m). Unconsolidated sales for the year ended 31 March 2009 were ¥3,480bn (US$35.78bn, 31 March 2009) compared with ¥4,285bn (US$43.19bn, 31 March 2008) in 2008. In May 2007, Sumitomo Wiring became wholly-owned subsidiary of Sumitomo Electric Industries. The company is not obliged to publish its financial information.

Year Sales (¥bn)

Operating Income

(¥bn)

Net Income (¥bn)

R&D Expenditure

(¥bn) 2007 511.96 15.87 11.02 21.20 2006 441.49 9.73 8.12 21.01 2005 372.83 10.06 9.06 17.85 2004 345.59 6.96 8.92 14.67 2003 308.63 5.07 3.79 -

Year Sales

(US$bn) Operating

Income (US$m)

Net Income (US$m)

R&D Expenditure

(US$m) 2007 4.32 134.60 93.46 179.80 2006 3.75 82.76 69.07 178.71 2005 3.47 93.56 84.26 166.02 2004 3.27 65.90 84.46 138.91 2003 2.57 42.31 31.63 -

The Hybrids Report


Outlook Automotive wiring harness business has been growing over the past few years as electronics content per vehicle continues to increase across the world. Following the global trend, Sumitomo Wiring has also experienced growth in sales during the period. The company’s merger with Sumitomo Electric is expected to further consolidate its worldwide presence and improve its competitiveness. Global demand for HEVs is projected to grow 20% per year through 2010. Growth is expected to be driven by increasing fuel prices and emissions regulations. This would also fuel demand for high-voltage wiring harness used on these HEVs. The company’s strength in the wiring market positions it well to record higher growth in the hybrids business in coming years.

The Hybrids Report


TDK Hybrid Systems

Address TDK Corporation 1-13-1, Nihonbashi, Chuo-ku Tokyo 103-8272 Japan Tel: +81 5201 7102 Fax: +81 5201 7114 Internet: http://www.tdk.co.jp Senior Officers Hajime Sawabe, Chairman & CEO Takehiro Kamigama, President & COO Shinji Yoko, Senior Vice-President Takeshi Nomura, Senior Vice-President Takaya Ishigaki, Senior Vice-President, General Manager, Capacitors Business Group Minoru Takahashi, Senior Vice-President Seiji Enami, Director Raymond Leung, Senior Vice-President Shiro Nomi, Senior Vice-President Shinichi Araya, Senior Vice-President Takeo Suzuki Senior Vice-President Products Ceramic capacitors, DC/DC Converters, Plants Group: Germany, Hungary, Japan (11), Korea (4), Taiwan (4), US (5) Capacitors: Japan (3) Sales Group: ¥727.4bn (US$7.47bn, 31 March, 2009) (Year to 31.03.09) Employees Group: 66,429 (31.03.2009)

TDK Corporation is a leading manufacturer of electronic components, which includes electronic media, ferrite products, recording devices, hard disk drives and other components. In the hybrid electric vehicle segment, the company provides capacitors for battery control units. TDK organises its business into four segments: • Electronic Materials (capacitors), Ferrite Cores and Magnets (20% of 2009

sales) • Electronic Devices (inductive devices), DC-AC inverters, DC-DC converters

and other high frequency components (22.8%) • Recording device manufacturing (HDD) (34%) • Other electronic component segment (electroluminescent (EL) displays and

equipment) (23.2%) In 2009, overseas sales accounted for 84% of consolidated net sales compared with 82.4% in the previous fiscal year. In 2009, TDK had 16% of total sales from Japan, 10.9% from Americas, 9.9% from Europe and 63.2% from Asia & Others. Recent Developments Corporate strategy The company is concentrating mainly on the electronics materials and components sector. TDK has made an acquisition in this segment, EPCOS AG will be operating as TDK’s subsidiary and the existing components business of TDK will be diverted to the new subsidiary. This will make its electronic materials and components business strong in the market. Earlier, TDK made two acquisitions in this segment, Amperex Technology Limited (polymer lithium batteries) and Lambda Power Division (power supply business) to strengthen its position in the hybrids and electronics market. TDK has also been expanding its overseas production. The company’s overseas sales now account for more than 80% of the net sales. The company considers capacitors as one of the earning drivers in electronics material segment. The demand for the same was high this fiscal year which the company was unable to meet. The company is developing DC-DC converters for electric vehicles and highly durable heat-resistant multilayer ceramic chip capacitors. In the past the company developed high efficiency DC-DC converters for hybrid electric cars, which help in reducing power loss. Acquisitions • In October 2008, TDK acquired Germany based EPCOS AG as a subsidary.

The company owns 94.35% shares of EPCOS. After the Annual General Meeting in June 2009, TDK will be merging its component business with EPCOS under a new company name TDK EP Components KK.

• In July 2005, TDK signed an agreement to acquire Invensys Plc’s Lambda Power division, for ¥26bn (US$231.2m) which develops power supplies such as inverters and converters. The Lambda Power consists of Lambda US, Lambda Europe, Densei-Lambda KK and conducts business in 13 countries around the world.

Contract • In November 2005, TDK Corporation enetered into a contract with Honda to

supply DC/DC converter for the civic hybrid model. New Product Developments: In 2009, R&D expenditures rose 0.4% year- on- year to ¥57.6bn (US$592.6m), 7.9% of net sales. In fiscal 2010, the company plans to invest ¥53bn on R&D. In the area of hybrids the company is focusing its R&D activities to develop converters & inverters for hybrid electric cars.

The Hybrids Report


• In August 2008, TDK Corporation planned to construct a large scale anechoic

chamber at its Technical Centre in Ichikawa City (Japan), Chiba Perfecture. It is scheduled to complete in October 2009. The facility will consist of a 10-metre room, a three-metre room, an antenna room and a shielded room. In conjunction to existing facilities, TDK will be able to perform electromagnetic wave measurements of all products that it handles as well as measurements tailored to customer requirements.

• In January 2008, TDK Corporation began mass production of the industry’s first automotive clamp filter, the ZCAT08V-BK, ZCAT12V-BK.

• In March 2006, TDK and Densei-Lamda KK launched a unified brand called TDK-Lamda for power supply products. The brand covers AC-DC switching power supplies, DC-DC converters, DC-AC inverters and power module.

Financial Overview TDK posted consolidated net sales of ¥727.4bn (US$7.47bn, 31 March 2009), down 16% from ¥866.2bn (US$8.73bn, 31 March 2008). Operating income fell from ¥87.1bn (US$878.1m) to operating loss of ¥54.3bn (US$558.2m). TDK faced net loss of ¥63.1bn (US$648.7m) compared to net income of ¥71.4bn (US$719.8m) in 2008. The downturn in automotive electronics market was due to the impact of higher oil prices, which affected the auto market in the first half and a large drop-off in demand in the auto market due to the global recession in the second half of fiscal 2009. During second half of fiscal 2009, prompt production cuts were initiated. TDK’s net sales are made up of four product sectors electronic materials, electronic devices, recording devices and others. All the business segments of TDK faced slump in sales. Electronic materials sector dropped 27.5% to ¥145.1bn (US$1.49bn) from ¥200.1bn (US$2.01bn). The reason is the lower sales of multilayer ceramic chip capacitors which are used in car electronics amongst others. In a similar fashion, Electronic devices and recording devices faced decline in sales by 20.5% and 26.1% to ¥166.1bn (US$1.7bn) and ¥209bn (US$2.14bn) from the previous fiscal year’s sales. Others sector includes all TDK products which are not included in the above three sectors. This sector’s sales increased 38% from ¥122.3bn (US$1.23bn) to ¥168.8bn (US$1.73bn). This included the net sales of the EPCOS Group of ¥67.9bn (US$698m). Geographically, overall sales declined in Japan, America and Asia except Europe where sales increased due to the recording devices and others sectors. Japan observed a drop in sales by 27.4% to ¥283.2bn (US$2.91bn) from ¥390.3bn (US$3.93bn) in 2008. In America, sales were down by 17.7% from ¥103.2bn (US$1.04bn) to ¥84.9bn (US$872.8m). Similarly in Asia, sales declined by 15.4% to ¥583.5bn (US$5.9bn). However, Europe observed a whopping increase in sales by 75% to ¥95.1bn (US$977.7m) from ¥54.4bn (US$548.4m). For fiscal year 2010, TDK has forecasted 1.3% rises in sales to ¥717.8bn from ¥727.4bn (US$7.47). The operating income forecasted at ¥13.5bn compared to the operating loss of ¥54.3bn (US$558.2m). TDK forecasted net income for fiscal year 2010 to be ¥5.2bn compared to the net loss of ¥63.1bn (US$648.7m) in 2009. The company has prepared its sales plans for electronic materials and electronic devices assuming lower year-on-year demand for key finished products such as PCs, mobile phones and automobiles.

Year Sales (¥bn)


Net Income (¥bn)

R&D Expenditure

(¥bn)

No. of Employees

2009 727.4 (54.3) (63.1) 57.64 66,429 2008 866.28 87.17 71.46 57.38 60,212 2007 862.02 79.59 70.12 50.1 51,614 2006 795.18 60.52 44.10 45.52 53,923 2005 657.85 59.83 33.30 36.34 37,115

Year Sales (US$bn)


Net Income (US$m)

R&D Expenditure

(US$m)

No. of Employees

2009 7.47 (558.2) (648.7) 592.6 66,429 2008 8.73 878.8 720.4 578.4 60,212 2007 7.31 675.0 594.7 424.9 51,614 2006 6.76 514.4 374.8 386.9 53,923 2005 6.11 556.4 309.7 338 37,115

The Hybrids Report


Outlook TDK has been improving its profitability every year since 2003. The company is striving to consolidate its position in the market. TDK’s capacitor sales remained flat this fiscal year, but both the new plant commencing production from March 2009 and the new acquisition of EPCOS AG will help the company to increase the profitability in the electronics material and component segment. The company has a unique position in the hybrid electric vehicle market supplying electric inverters and converters. But for growth, the company needs to increase its customer base to include major OEMs Overall sales did not increase significantly but the amount of investments the company has made to strengthen its core electronic component business might prove to be profitable for the next financial year. The increasing demand for capacitors as the hybrid market is increasing will add on to the existing 94.4% share of the net sales for electronics materials and component business.

The Hybrids Report


Toyota Industries Power electronic devices

Address Toyota Industries Corporation 2-1 Toyota-cho, Kariya-shi Aichi-ken 448 8671 Japan Tel: +81 566 222511 Fax: +81 566 275650 Internet: http://www.toyota-industries.com Senior Officers Tadashi Ishikawa, Chairman Tetsuro Toyoda, President Akira Imura, Executive Vice-President Norio Sato, Executive Vice-President Tatsuo Matsuura, Executive Vice-President Masafumi Kato, Senior Managing Director Toshiyuki Sekimori, Senior Managing Director Shigetaka Yoshida, Senior Managing Director Yasuharu Toyoda, Senior Managing Director Yutaka Murodono, Senior Managing Director Kazunori Yoshida, Senior Managing Director Kosaku Yamada, Senior Managing Director Kimpei Mitsuya, Senior Managing Director Hiroshi Sakai, Senior Managing Director Plants Automotive: China (4), Germany, India, Japan (6), US (4) Products Batteries, DC-DC converters, DC-AC inverters, electric motors, power control units Sales Group:¥ 1584.25bn (US$16.28bn, 31 March 2009) (Year to 31.03.09) Automotive:¥ 755.9bn (US$7.77bn, 31 March 2009) (Year to 31.03.09) Employees 39,916 (March 2009)

Toyota Industries is a leading supplier of automotive components, including hybrid vehicle components. In 2009, the automotive segment generated 47.7% of the total sales. The company’s operations include five major divisions: Automobile (generated 47.7% of 2009 net sales), Materials Handling Equipment (39.1%), Logistics (5.9%), Textile Machinery (3.3%) and Others (3.2%). The Automobile segment is further divided into four divisions: • Vehicle division – Vitz (Yaris outside Japan), Mark X Zio and RAV4 • Engine division – Diesel & gasoline engines • Compressor division – Air-conditioning compressors for conventional

vehicles and hybrid vehicles as well • Electronics division – Automobile-related electronic components and devices,

such as DC-DC converters for hybrid vehicles and vehicle-mounted AC inverters

In the financial year 2009, Toyota Industries generated 69% of total sales from Japan, 12% from North America, 16.44% from Europe and 3.41% from rest of the world. Toyota Industries’ largest customer is Toyota Motors which accounts for most of its hybrid component sales. Recent Developments Corporate strategy Toyota Industries’ is focusing on the development of new products and technologies to meet the requirements for hybrid vehicles. Toyota Motors is one of the important OEMs for the company in the hybrids market. The company is focusing on the development and manufacturing in the car electronics business segment as it caters to the hybrid vehicle market which is expected to grow even in the present situation of global downturn. Along with this the company plans to supply lithium-ion battery packs for plug-in cars to other OEMs like GM, Nissan and Ford. These battery packs developed by the Toyota and Panasonic joint-venture, Panasonic EV Energy Co, were supplied exclusively for the Toyota cars, but as the economic slowdown hit the automotive industry the company is in search of additional opportunities by which selling to competitors seems to be a viable decision. Investments • In September 2008, Toyota announced that it will start production of batteries

for its hybrid vehicles in North America. The OEM, to date, produces batteries for hybrids in Japan. Toyota will start production of its hybrid vehicle, Prius, at Mississippi (US) in 2010. Through a manufacturing presence in the North American market, Toyota is aiming to reduce its production costs and at the same time improve its profitability.

• In May 2008, Toyota announced its plans to build two new plants and expand an existing facility along with its JV partner Matsushita Electric. Toyota will spend ¥70bn (US$677.46m) on the capacity expansion. The company will establish a new facility in Shizuoka (Japan) to produce the next generation lithium-ion batteries, while the second facility will come up in northern Japan to make nickel metal hydride (NiMH) batteries. The company will also expand its existing facilities in Shizuoka that produces NiMH batteries.

• In November 2006, Toyota Industries’ subsidiary, Panasonic EV Energy Ltd, started the construction of a new factory in Kosai (Japan). The facility started operations in March 2007. Panasonic EV Energy supplies nickel metal hydride batteries and lithium ion batteries for hybrid electric vehicles (HEVs) and pure electric vehicles. Panasonic EV Energy in turn has an agreement with Cobasys Corporation for battery technology information.

New Product Developments In 2009 Toyota Industries spent ¥23.61bn (US$242.74m, 31 March 2009) on research and development activities. • Toyota Industries has developed DC-DC converters for Prius and Camry

The Hybrids Report


hybrid models for Toyota. The DC-DC converter converts high voltage DC current from the main battery to a lower voltage to recharge the auxiliary battery and supply power to the lights, wipers and horn.

• Toyota Industries has developed a compact, low cost DC-DC converter for electric power steering (EPS) systems for hybrid cars which are installed in Toyota Harrier Hybrid (RX 400h) and Kluger Hybrid (Highlander Hybrid) models.

• In 2006, Panasonic EV Energy launched prismatic nickel metal hydride (Ni-MH) batteries for the Toyota Camry hybrid, Lexus GS450h and Hino Dutro hybrid models.

• In September 2005, Panasonic EV Energy launched a Ni-MH battery pack system for Hyundai/ Kia MC/JB hybrid and for Daihatsu HIJET Cargo hybrid vehicles.

• In March 2005, Panasonic EV Energy developed Ni-MH battery system for Toyota Rx400h and Toyota Highlander Hybrid models.

• At CeMAT 2005, an international trade fair for intra logistics held in Hanover, Germany, Toyota Industries exhibited the Toyota FCHV-F lift truck, which incorporates fuel-cell hybrid system. The truck was jointly developed by Toyota Industries and Toyota Motor Corporation.

Financial Overview For the financial year ended 31 March 2009, Toyota Industries’ sales decreased by 21% to ¥1584.25bn (US$16.28bn,) compared with ¥2,000.53bn (US$20.16bn, 31 March 2007) in the previous year. The company recorded operating loss of ¥6.62bn (US$68.06m) compared to operating income of ¥96.85bn (US$976.40m) in the previous year. Toyota Industries recorded extraordinary losses arising from losses on impairment of property, plant and equipment due to a decrease in production volume as well as from losses of discontinuing production electronics parts. This led to a net loss of ¥32.7bn (US$336.19m) in 2009 compared to ¥80.46bn (US$811.16m) in the previous year The Automobile segment’s sales decreased by 22% to ¥755.9bn (US$7.77bn) compared with ¥969.2bn (US$9.77bn) in the previous year. Vehicle business decreased 24% to ¥378.1bn (US$3.88bn) as the unit sales of Vitz (Yaris Overseas), RAV4 and Mark X Zio decrease. Engine business decreased 12% to ¥156.6bn (US$1.61bn) as the unit sales of AD diesel engines installed in RAV4 declined. Car air-conditioning compressor business decreased 26% to ¥186.3bn (US$1.91bn) due to decrease in production volume by automakers in North America, Europe and Japan. The company’s forecast for the second quarter ended 30 September 2009 has been revised. The company’s projected net sales amounts to ¥620bn, operating loss might increase to ¥15bn. Net loss is projected to amount to ¥9.5bn. The company’s forecast for fiscal year 2010 might amount to decrease in net sales to ¥1,300bn. Operating loss might increase to ¥10bn and net loss might decrease to ¥10bn.

Year Sales (¥bn)


Net Income (¥bn)

R&D Expenditure

(¥bn)

No. of Employees

2009 1,584.25 (6.62) (32.76) 23.61 39,916 2008 2,000.53 96.85 80.46 22.36 39,528 2007 1,878.4 89.9 59.4 34.54 36,096 2006 1,505.95 64.04 47.07 31.12 32,977 2005 1,241.54 53.12 43.35 30.05 30,990

Year Sales

(US$bn) Operating

Income (US$m)

Net Income (US$m)

R&D Expenditure

(US$m)

No. of Employees

2009 16.28 (68.06) (336.81) 242.74 39,916 2008 20.16 976.40 811.16 225.42 39,528 2007 15.93 762.4 503.7 292.9 36,096 2006 12.80 544.7 400.3 264.7 32,977 2005 11.54 494.05 403.1 279.4 30,990

Outlook Toyota Industries’ is optimistic about the hybrid markets, as the demand for HEVs is increasing globally. The association with Toyota Motor is expected to be beneficial for the company. Toyota Motor commands more than 50% of the global hybrid market, and this figure is expected to grow further in the medium-term. Considering the strong relationship between Toyota Industries and Toyota

The Hybrids Report


Motor, the future is likely to be strong for Toyota Industries. The company’s decision to open new plants in America and expand its facility in Japan is a step forward into the hybrid market. The company will also benefit by supplying its battery packs to other OEMs. This will increase its market share and bring it closer to achieving its targets and market share. By 2010, the company expects to see itself as leading manufacturer of power electronics devices and systems for hybrid vehicle. The company has consistently developed innovative technologies for the hybrid markets and continues to do so. Toyota Industries has already established itself as a leading supplier of hybrid components. Its efforts to now produce key hybrid components apart from auxiliary components should enable it to expand its market share globally.

The Hybrids Report


UQM Electric Power Systems

Address UQM Technologies, Inc. 7501 Miller Drive, PO Box 439 Frederick, Colorado 80530 USA Tel: +303 278 2002 Fax: +303 278 7007 Internet: http://www.uqm.com Senior Officers William G Rankin, President & CEO Donald A. French, CFO Ronald M Burton, Senior Vice-President, Operations Jon Lutz, Vice-President, Technology Products Control systems, converters, electric motors/generators, inverters Plants USA Sales US$8.72bn (Year to 31.03.09) Employees Full-time 59 (2009)

UQM Technologies manufactures electric motors, generators and power electronic controllers. The company is also active in developing electric power systems for battery management, hybrid electric and fuel-cell electric vehicles. UQM operates in two business segments: Technology (76% of 2009 net sales) and Power Products (24%). The Technology segment does core research for the development of company’s technologies, applications, software and product engineering while the Power Products segment manufactures magnet motors and electronic controllers. The company supplies its products mainly to the commercial vehicle industry with a number of truck and bus builders as its customers. Recent Developments Corporate strategy The company is focusing on commercialisation of its various hybrid technologies in both existing and emerging segments for electrically powered propulsion systems and auxiliary systems for hybrid vehicles. The company is trying to make its presence in all the hybrid vehicle market, be it the electrical vehicles or hybrid transit buses. The company has a constant watch on the hybrid vehicle market and analyses the performance and growth of the market. Currently, the company is involved in vehicle electrification programs in order to replace internal combustion engines (ICE) with full electric propulsion such as in a battery or fuel cell powered vehicle. This includes development of technologies in the area of parallel hybrids, series hybrids and plug-in hybrids. UQM has developed propulsion systems for hybrids ranging from power levels of 0.5kilowatt to 120kilowatt which are suitable for passenger cars, large trucks and military vehicles. The company is also working with customers in the bus and truck market to develop hybrid propulsion system. Divestments • In February 2004, UQM announced that it has completed the sale of its 38.3%

interest in Taiwan UQM Electric Co Ltd to a private investor for US$0.4m. Joint-ventures • In February 2007, UQM formed a strategic alliance with Altair

Nanotechnologies Inc., a supplier of advanced novel and ceramic nanomaterial, to jointly develop technologies in advanced transportation and other high potential markets. The alliance pairs UQM’s electric motor, power generator and power electronic products with Altairnano’s NanoSafe™ battery packs.

Contracts • Golden, C.O. based Proterra LLC, with funding from the Federal Transit

Administration’s National Fuel Cell Bus Program, is using a UQM 150 kW permanent magnet propulsion motor to power a fuel cell hybrid electric bus. The 150 kW system was specifically designed to meet the higher power requirements of larger vehicles, such as this bus. There are two buses that have been powered by UQM’s PowerPhase® propulsion systems. In February 2009, EcoRide BE35 battery-electric transit bus was showcased in a four city California clean bus tour starting from San Jose, California (US). In May 2009, FCBE 35 transit bus was tested by Pennsylvania Transportation Institute at Pennsylvania State University to measure its fuel economy equivalency which resulted in to 20 miles per gallon.

• In December 2007, UQM announced a contract with Flint Michigan Mass Transportation Authority for a hybrid bus development project. The company will supply 150 kW propulsion system for the project. In July 2007, UQM

The Hybrids Report


announced that its 150 kW propulsion system will be used in fuel cell hybrid electric bus under development by Mobile Energy Solutions, LLC.

• In May 2007, UQM won a contract from Denver Regional Transportation District for 35 kW UQM® generators and two UQM® power electronic motor controllers to be fitted in hybrid electric mall shuttle buses to control the operation of the electric propulsion motors already installed in each bus.

• In October 2006, UQM announced that it had received a follow-on production order worth US$3m for the supply of vehicle electric auxiliary motors. The new order is in addition to the previously announced orders for 30,000 motors. The name of customer was not disclosed.

• In August 2006, received a contract from Chitron Inc, to supply UQM® propulsion systems which will be used by Chitron in its advanced vehicle development program, to develop a hybrid electric bus in China.

• In July 2006, UQM announced that it has received an order from Phoenix Motorcars, Inc for UQM® PowerPhase 100 propulsion system for a freeway-speed all-electric pickup truck program.

• In June 2006, UQM received a production order worth US$1.9m for electronic auxiliary products for hybrid electric vehicles. The name of the customer was not disclosed.

• In March 2006, UQM announced that it had received a contract from General Dynamics Corporation, to supply motors and electronic controllers, to be used in the hybrid electric reconnaissance, surveillance and targeting vehicle (RST-V).

• In September 2005, UQM received an order for additional UQM® permanent magnet generators from DRS Technologies Inc, for use in technology demonstration hybrid electric High Mobility Multipurpose Wheeled Vehicles (HMMWVs). In August 2005, UQM announced that it had been awarded a contract by UT-Battelle, LLC to develop advanced traction motor for the US Department of Energy’s (DOE) Freedom CAR and Vehicle Technologies Program.

• In August 2005, UQM received an order from Regional Transportation District (Denver RTD) for UQM® generators and motor controllers to retrofit seven hybrid electric mall shuttle buses.

• In July 2005, UQM won an order for permanent magnet motor and control systems from Eaton Corporation for integration into Eaton’s hybrid electric propulsion systems for trucks and other heavy duty vehicles.

New Product Developments In 2009, UQM spent US$593,209 on research and development activities compared with US$461,791 in the previous year. • In April 2009, UQM announced release of a new motor/generator system for

use in electric propulsion applications. The new PowerPhase® 145 system extends the peak power available in the company’s smaller 280 mm diameter frame size from 125 kW to 145 kW, has a continuous power rating of 85 kW, delivers peak torque of 400 N-m and weighs only 50 kg. It was developed for high performance passenger automobiles and has proved to be an ideal generator for hybrid electric and plug-in hybrid electric vehicles

• In June 2007, UQM introduced 150 kW propulsion system suitable for high performance automotive applications and heavy-duty commercial and military vehicles.

• UQM has developed a technology for electrification of the engine driven auxiliaries such as engine belts, pulleys, alternators and gears. The company has developed a UQM® generator and has also introduced power generators for hybrid vehicles.

• The company has introduced higher power parallel hybrids which incorporate regenerative braking, automatic engine shutdown and electronic propulsion. The company is developing series hybrids with greater propulsion from electrical power when compared to parallel hybrids. A series hybrid vehicle has battery charging capacity to be self sustaining, which in turn eliminates the need to plug the vehicle to an electric power grid.

Financial Overview For the financial year ended 31 March 2009, the group’s consolidated net sales increased by 16% to US$8.72m compared with US$7.5m in the previous year. The positive result was due to the increase in product sales. Net loss decreased to US$4.4m compared with US$4.58m in the previous year. The decrease in net loss was mainly due to higher levels of product sales revenue, expanded gross profit margins on product sales, and lower selling, general and administrative expenses.

The Hybrids Report


In the same period, Technology segment’s sales increased 52.2% to US$2.73m compared with US$1.79m in the previous year. This was due to increased shipments of low volume propulsion systems, while the sales of Power Products segment increased 5% to US$3.27m compared with US$3.11m in the previous year. This was mainly due to increased shipments of DC-to-DC converters and electric propulsion systems.

Year Sales (US$m)

Income from continuing operations

(US$m)

Net Income (US$m)

R&D Expenditure

(US$ )

No. of Employee

s

2009 8.72 - (4.40) 593,209 59 2008 7.50 (4.57) (4.58) 461,791 54 2007 6.65 (3.4) (3.43) 321,160 53 2006 4.32 (2.8) (2.78) 241,563 47 2005 4.76 (1.8) (1.86) 171,918 39

Outlook UQM’s future growth is dependent on advancement and commercialisation of its technology. The company is expected to gain from the hybrid markets, in the face of rising prices of fossil fuels and stringent regulations to lower vehicle emissions. The company is also positive about the growth prospects for DC-to-DC converters since nearly all electric and hybrid electric vehicles need one or more DC-to-DC converters. The company’s electric propulsion systems are gradually picking up pace in the hybrid markets. They have a number of contracts in their hand for their PowerPhase® propulsion systems especially for hybrid buses and trucks. The company is slowly penetrating into various niche markets such as trucks, off-road-vehicles, military vehicles, aircraft, aerospace, boat and marine markets.

The Hybrids Report


Visteon Interiors, climate, electronic and lighting products

Address Visteon Corporation One Village Centre Drive Van Buren Township Michigan 48111 USA Tel: +1 800 847 8366 Fax: +313 755 7983 Internet: http://www.visteon.com Senior Officers Donald J Stebbins, Chairman & CEO, President & COO William G Quigley, Executive Vice-President, CFO John Donofrio, Senior Vice-President Joy M. Greenway, Vice-President, Climate Product Group Michael J. Widgren, Vice President, Corporate Controller & Chief Accounting Officer Products Battery management modules, alternators, starters, hybrid powertrain cooling systems Plants Argentina (2), Belgium, Brazil (2), Canada, China (24), Czech Republic (4), France (8), Germany (3), Hungary, India (5), Ireland, Japan, Korea (6), Mexico (10), Poland, Portugal (3), Slovakia (2), South Africa, Spain (6), Thailand (3), Turkey, UK (6), US (20) Sales Group: US$9.5bn (Year to 31.12.08) Employees Group: 31,000 (2008)

Visteon is one of the world’s largest automotive component suppliers, including hybrid powertrain cooling systems. The company serves both OEMs and automotive aftermarket. Visteon’s business is categorised into the following four divisions: • Climate (30% of 2008 sales): manufactures air handling modules, powertrain

cooling modules for hybrid and conventional vehicles, heat exchangers, compressors, fluid transport and engine induction systems.

• Electronics (32.6%): produces audio systems and components, infotainment, driver information, powertrain controls and lighting.

• Interiors (27.6%): develops instrument panels, cockpit modules, door trim and floor consoles.

• Others (5.1%): supplies fuel products, chassis products, powertrain products, alternators, starters and products for the automotive aftermarket.

• Services (4.7%): provides various transition services in support of divestiture transactions, mainly related to the ACH transactions and Chassis divestiture.

In 2008, the company achieved 24% of the consolidated sales from North America, 41% from Europe, 30% from Asia and the remaining 5% from South America. With corporate offices in Van Buren Township, Michigan (US), Shanghai (China) and Basildon (UK), the company employs about 33,500 people. In May 2008, Visteon, along with some of its US units, filed for Chapter 11 protection with the Bankruptcy Court for the district of Delaware. The company’s UK unit, Visteon UK Ltd, had filed separately for bankruptcy protection in April 2009 resulting in the closure of three plants. The company’s major customers include BMW, Ford, GM, Honda, Hyundai, Mazda, Nissan, Peugeot, Renault, Toyota and Volkswagen. Ford is one of the largest customers of the company for hybrid products. Product sales to customers other than Ford were 66% of total product sales for the year ended 31 December 2008. Recent Developments Corporate strategy Visteon’s current strategy is primarily focused on lowering manufacturing costs and restructuring its business by identifying under-performing and non-strategic businesses to improve profitability. In 2006, Visteon started a multi-year improvement plan to restructure its business, which was later modified in 2007. Earlier, the company had announced a list of 23 facilities which were to undergo restructuring. In 2007, Visteon increased the number of these facilities to 30. The multi-year improvement plan was completed during 2008 and addressed a total of 30 facilities and businesses, including seven divestitures and 14 closures. With growing popularity of hybrid vehicles, Visteon intends to expand its presence in this sector. The company has a strong presence in hybrid powertrain cooling systems. Visteon is currently developing future applications for supporting hybrid vehicles and is also working with various OEMs to develop a modular compressor, which can be easily adapted to mild and full-hybrid applications. Visteon, along with some of its US units, sought the Chapter 11 protection in May 2008. The company’s UK unit had filed separately for bankruptcy protection in April 2009. After being spun off from Ford, Visteon found it hard to maintain a strong grip as an independent company in the market, and has found itself having to deal with mounting debt. Ford remained one of the company's key OEMs, which acted as a backbone for Visteon. The company managed to carry on under the 2005 bailout agreement. The agreement incorporated Ford utilising most of Visteon’s North American factories as well as hourly employees represented by the United Auto Workers (UAW). Since then, Ford has tried to sell off the properties, whereas Visteon tried to secure customers to replace its losses. The company tried to return to profitability but failed in doing so and added additional debt into its account.

The Hybrids Report


In March 2009, Visteon managed to avoid bankruptcy by making a US$16m interest payment. The interest payment was made for bonds worth about US$450m, which mature in 2014. In May 2009, Ford provided financial assistance in the form of a revolving line of a credit from its lenders, worth US$163m. In line with the agreement, Visteon was required to maintain at least US$264m in cash or cash equivalents. However, this was not sufficient for the supplier in the wake of the ongoing credit crunch. Joint-ventures • In August 2005, Visteon formed a partnership with Chinese automaker,

ChangAn. The joint-venture (JV), Chongquing ChangAn Visteon Engine Control Systems develops engine management system and manufactures electronic control units, air-induction systems, intake manifolds and various powertrain components.

• In June 2005, Visteon formed two 50:50 JV with Tata AutoComp Systems (TACO) of India. Taco Visteon Automotive Products (TVAP) manufactures lighting systems, powertrain components and air induction systems, while Taco Visteon Engineering (TVEC) provides Computer Aided Design (CAD), Computer Aided Engineering (CAE) and other engineering services for Visteon's global operations. The two ventures were started with an investment worth US$12.5m.

• In August 2004, Visteon announced an 80:20 JV with Halla Climate Control Dalian Company to build a compressor factory in Dalian (China) with an investment of US$80m. The facility started operations in May 2006.

Investments • In March 2009, Halla Climate Control, a subsidiary of Visteon that

manufactures automotive climate control systems and components, opened a testing laboratory in Shanghai. With this new facility, Visteon and HCC offer automakers full components testing capability in China, helping reduce product development cycle time. The lab is adjacent to Visteon’s China Technical Center. The 400m2 laboratory has four major pieces of advanced testing equipment. It include two air flow test stands – one for heating, ventilation and air-conditioning and one for cooling modules; one sound room for noise vibration and harshness tests; and testing equipment for evaporator, heater, and airflow development (EHAD).

• In October 2008, Visteon Climate Control (Nanchang) Co., Ltd (VCCN), a JV between Visteon and Jiangling Motors Company Ltd. (JMC), announced plans to expand its Nanchang (China) plant to accommodate the growing needs of locally based vehicle manufacturers. The collaboration manufactures climate control systems components such as automotive fluid transport and air-conditioning assemblies. The plant expansion allows VCCN to double its yearly production capacity and better service customers such as JMC, Chang’An Ford, Geely, Dongfeng Nissan and Beijing Benz Daimler Chrysler (BBDC).

• In October 2008, Visteon opened an office in St. Petersburg (Russia) in an effort to expand its services to its customers operating in the Russian market. Key priorities for the office are to provide Visteon’s customers with a local interface to Visteon’s global engineering and manufacturing resources, and to be a centre for new business development activities. Visteon is also in the process of building a manufacturing facility in the Kaluga region in Russia, scheduled to start production in 2010.

• In February 2007, Visteon invested HUF1bn (US$5.1m) in expanding its production and technological base in Szekesfehervar (Hungary). Visteon Hungary produces instrument panels, fuel injection systems and compressors for climate control systems. The company also has an R&D centre in Hungary.

• In March 2006, Visteon started production at its facility in Gebze, Kocaeli province (Turkey). The plant produces automotive climate control components and systems and is operated by Visteon’s affiliate Halla Climate Control Corporation (HCC).

• In August 2004, Visteon announced the opening of a new automotive technical centre and office facility in Chihuahua (Mexico). The 5,000 m2 facility designs vehicle components and also carries out administrative operations in the region.

• In July 2004, Visteon opened a technical centre with an investment of US$1.5m for developing climate control and engine cooling components located at its Czech subsidiary Autopal in Novy Jicin (Czech Republic).

• In August 2004, Visteon opened an air-conditioning and engine cooling modules manufacturing plant, Visteon Climate Control (Beijing) Co. Ltd in Beijing (China), with an investment of US$29.8m. This facility strengthens

The Hybrids Report


Visteon's position in China as a climate control supplier. Visteon owns 80% of the facility and Beijing Automotive Industry Holding Corporation (BAIC) owns the remaining 20%.

Divestments • In December 2007, Visteon closed its facility in Connersville, Indiana (US).

The Connersville facility produced automotive heating and cooling systems. • In September 2007, Visteon completed the sale of Visteon Powertrain Control

Systems India (VPCSI) to Adyar River Ltd. The agreement includes VPCSI operations in Chennai (India) which produces starters and alternators for global car makers. This divestment was part of the company’s restructuring operations to focus on its key products and core technologies.

Contracts • In June 2004, Visteon entered into a contract with Ford, to supply components

and systems for the Escape Hybrid, the first hybrid-electric vehicle introduced by Ford. Visteon currently supplies navigation systems to the Ford Escape Hybrid.

New Product Developments During 2008 Visteon spent US$434m on its research and development (R&D) activities compared with US$510m in the previous year. Some of its recent developments are as follows: • In November 2008, Visteon developed an internal heat exchanger (IHX) that

increases cooling power in a vehicle up to 14%. It uses coaxial tube design integrated in the refrigerant circuit for enhanced automotive air-conditioning system performance and efficiency. The new internal heat exchanger, which replaces a part of the suction and liquid refrigerant lines in a traditional R134a system, exchanges energy in a counter-flow arrangement.

• In October 2008, Visteon supplied its electrically driven air-conditioning compressor to BMW's hybrid demonstration vehicle, first presented at the 2008 Paris Motor Show. It fits into the package space of a belt-driven compressor used in conventional powertrains, which helps OEMs to minimise the complexity of integrating the electric compressor into hybrid derivatives. It also provides full thermal occupant comfort in hybrid vehicles during engine-off modes. The modular approach allows the same basic packaging dimensions for the electric motor and power electronics to be designed for either 120V DC or 288V DC applications, making Visteon’s compressor suitable for mild (lower voltage) or full/plug-in hybrid (higher voltage) applications. Visteon will start series production end of 2009.

• In September 2007, Visteon launched R744 (CO2) climate technology which consumes less fuel and enables a reduction of CO2 tailpipe emissions while operating the air-conditioning system.

• In the North American International Auto Show, held in January 2005, Ford Motors unveiled its 2005 Scientific Research Vehicle. Visteon provided an air cleaner system for the 2.7-liter, twin turbo hybrid electric vehicle. Visteon integrated two mass air flow sensors to function as one which delivered the required engine performance.

Financial Overview Visteon Corporation has reported a higher net loss of US$663m for the financial year ended 31 December 2008, compared with a loss of US$372m in the previous fiscal. The company witnessed a 15.9% decline in net sales from US$11.3bn to US$9.5bn. Operating loss widened from US$168m to US$403m. Nearly half of the company’s full-year loss was reported in the fourth quarter only. During the quarter the company reported a net loss of US$323m, the tenth straight quarterly loss, on net sales from continuing operations of US$1.7bn, down 43% over US$2.7bn in 2007. The net loss includes a non-cash asset impairment charges of US$200m recorded in the Interiors business division. The fourth quarter sales were impacted by widespread cut in vehicle production in all major markets. Full-year product sales at US$9.1bn, was down by around US$1.6bn from 2007, primarily due to divestures and closures of facilities under its three-year restructuring plan which was completed during the fiscal. Services sales declined by US$87m to US$467m. As on 31 December 2008, the company had a cash balance of US$1.18bn compared with US$1.76bn in 2007. In 2008, the company’s product sales were down across all regions including 33% in North America, 11% in Europe and 4% in Asia. The company’s product sales in

The Hybrids Report


North America were significantly impacted by lower Ford and Nissan production in the region for 2008. In Europe, the company’s product sales were significantly impacted by lower PSA production in the region for 2008. The decline in the company’s product sales for Asia was primarily due to overall softening of the global economy driven by the global credit crisis. Like many other US suppliers, Visteon has not provided any outlook for the current financial year ending 31 December 2009, in light of the ongoing industry slowdown worldwide. The company will continue to implement its cost-saving plans in response to the current business environment. In 2008, the company laid off 9,300 manufacturing jobs. In 2009, the company will cut 1,000 salaried jobs (of the total 5,900 at the end of 2008) which would result in annual savings of US$90m. Visteon has reported lower sales for the quarter ended 31 March 2009. Sales declined to US$1.35bn in the latest quarter, down 53% from US$2.86bn in the first quarter of 2008. However, operating income for the quarter stood at US$67m compared with an operating loss of US$15m. Net income also turned positive to US$2m compared with a net loss of US$105m in the same period last year. Sales in the first quarter were negatively affected by the global reduction in vehicle production. Divestments, facility closures and foreign currency movements reduced sales by US$380m. During the quarter, Visteon placed its subsidiary, Visteon UK Ltd., into administration including three UK based facilities. The company recorded lower sales in all geographical regions. However, Visteon won contracts worth US$240m in new business in the latest quarter. The majority of new business wins came from Europe and Asia with a combined share of 73% while North America accounted for 27% of the new business. Visteon had a cash balance of US$767m as of 31 March 2009. The cash balance included US$163m of restricted cash.

Year Net Sales (US$bn)


Net Income (US$m)

R& D Expenditure

(US$m)

No. of Employees

2008 9.5 (403) (663) 434 31,000 2007 11.3 (168) (372) 510 41,500 2006 11.4 29 (163) 594 45,000 2005 16.9 (58) (270) 804 49,000 2004 18.6 (488) (1,536) 896 70,200

Outlook Visteon does not expect its finances and profitability to turn positive in the near future. The bankruptcy protection recently sought by the company will worsen its financial condition. The company is in the process of expanding presence in the emerging countries, such as Asia and eastern Europe, which in turn are expected to develop their market presence and help it get new contracts from OEMs in these areas, including Japan. Rapidly expanding auto demand in the region led by China and increased investments in the Asia region can help the company offset declining automotive sales in Europe and North America. In the future, Visteon is expected to grow its presence in the hybrid market. Although hybrid sales are currently very small in numbers, considering their growth potential, this segment is expected to yield significant results in the long-term. Visteon is designing plans to work with OEMs to develop future technologies for hybrid applications.

The Hybrids Report


Yazaki Wiring Harnesses

Address Yazaki Corporation 17th Floor, Mita Kokusai Building 4-28, Mita, 1-chome, Minato Ku Tokyo 108 0073 Japan Tel: +81 3 3455 8811 Fax:+81 3 3455 8808 Internet: http://www.yazaki-group.com Senior Officers Yasuhiko Yazaki, Chairman Shinji Yazaki, President Volker Heuzeroth, CEO, Yazaki Europe Ltd Max Yamashita, Chairman, Yazaki North America Inc. George Perry, President & CEO, Yazaki North America (YNA) Nobuhiro Onishi, Executive Vice-President, YNA, President, Business Unit Bob Crumley, Vice-President, Technology, Engineering and Advanced Development, YNA Bryan Jinnett Executive Vice-President, Operations & Quality, YNA Products Wiring harnesses, High Voltage Components and Systems Plants Argentina, Australia, Brazil (2), Bulgaria, China (8), Columbia, Czech Republic, Germany (2), Japan (13), India (2), Indonesia (5), Lithuania, Mexico (11), Morocco, Nicaragua, Philippines (4), Portugal (2), Romania (2), Samoa, Slovakia (2), South Africa, , Taiwan, Thailand (4), Turkey (2), UK, Ukraine, Uruguay, USA (4),Vietnam (2) Sales Group: ¥1,447.5bn (US$11.75bn, 20 June 2007) (Year to 20.06.07) Employees Group: 200,073 (June 2007)

Yazaki holds a leading position in the global wiring harness market. In the hybrid segment, the company offers specialised high voltage cable assemblies, connectors and other products for high voltage electric vehicles. Yazaki’s business is mainly organised into two segments: Automotive and Environmental Systems. The Automotive segment is further divided into High Voltage Components and Systems and Wire Harness which caters to the hybrid market. The Environmental Systems manufactures gas equipment, air-conditioning and household equipment. In fiscal 2007, Yazaki generated 84.1% of total sales from Automotive Parts, followed by Electrical Cables at 11.2%, Gas Equipment at 3.7% and Air-conditioning at 0.8%. Remaining 0.1% was made up by Other business. The company has manufacturing operations in 29 countries employing 200,000 people and 13 R&D offices. Yazaki supplies components to BMW, Chrysler, Daimler, Ford, GM, Honda, Mitsubishi, Renault-Nissan, Toyota and Volvo. Recent Developments Corporate strategy In order to combat the recession in the market, Yazaki has taken restructuring measures. Recently, in January 2009, Yazaki laid off 469 workers in Romania due to a 20% fall in orders at its unit in the country. The auto industry is facing a slump in demand forcing OEMs to resort to production cuts which is impacting on suppliers. Due to the credit crisis, Yazaki is being vigilant regarding its capital, as in May 2009 Yazaki corporation appeared on the list of Chrysler’s top 19 unsecured creditors in southeast Michigan (USA). Chyrsler owes Yazaki Corporation US$18.3m.. However, Yazaki has obtained assurance from the federal government as a back-up in case Chrysler defaults to pay the supplier. Simultaneously, Yazaki is investing and expanding its facilities in Uruguay, Gafsa (Tunisia) and Turgovishte (Bulgaria) despite the current financial crisis. The move has been taken to meet the current demand and strengthen its foothold in the market. Yazaki is streamlining operations through relocating some of its operations to low cost countries. In 2007, the company shifted its two facilities from the US to Mexico in a bid to reduce manufacturing costs. It also established new plants in low cost countries such as Bulgaria and Slovakia. In the wiring harness business, Yazaki is working on reducing wire diameter. This would help carmakers to deal with space related issues and reduce vehicle weight and ultimately costs. The company also works in collaboration with vehicle manufacturers to shorten production lead time. Yazaki is focusing on the hybrid electric vehicle (HEV) market. As a strategic move, the company shifted its high voltage manufacturing base from Japan to the US. This is expected to help the company establish a stronghold in the HEV market in North America. The company already has supply agreements with Ford for components used in HEVs. It has also secured another order for high voltage connection system and wiring for the 2009 Ford Fusion Hybrid. Acquisition • In December 2005, Yazaki acquired a 25% interest in Hesto Harnesses (Pty)

Ltd, an operating subsidiary of Metair Investments Ltd., based in South Africa. Yazaki paid around ¥380m (US$3.3m, 31 December 2005) for the stake.

The Hybrids Report


Divestments • In January 2007, Yazaki decided to close its two injection moulding plants in

southern America. The first one, which is under Elcom Inc., closed operations in El Paso, Texas (US). The second plant in Griffin, Georgia (US) closed in 2008. Production at both plants is being shifted to a new facility in Durango (Mexico).

• In January 2007, Yazaki Wiring Technologies started curtailing its operations in Lithuania and relocating its businesses to Turkey and Bulgaria.

Investments • In December 2008, Yazaki set up a production plant in Uruguay despite the

financial crisis. The new company will be known as Yazaki Uruguay S.A. It will make electronic auto parts to export to Mexico and Brazil. The company invested US$4.3m.

• In August 2008, Yazaki set up a second facility in Turgovishte (Bulgaria) to manufacture equipment for Renault’s Mégane brand of cars. The leading electrical components and automotive spare parts manufacturer is investing €8m (US$, 27 August 2008) in the plant which will become operational in the summer of 2009.

• In July 2007, Yazaki announced investments of SKK1.75bn (US$71.7m, 30 July 2007) in Slovakia to increase the production of wiring harnesses by 2009. The facility is expected to employ 531 more people by 2011. The output of the upgraded facility is projected to be SKK17.7bn (US$71.6m) during 2008-2016.

• In May 2007, Yazaki started construction of a car cables facility in Yambol (Bulgaria), with an investment of €31.8m (US$42.73m, 31 May 2007).

• In January 2006, Yazaki announced completion of the second phase of its three-phase plan to transfer its high-voltage production and manufacturing capabilities from Japan to North America. The transfer is aimed at building on its leadership in Japan of high-voltage connection systems and components for HEV, in the North American market.

• In January 2004, Yazaki began production at its Gemlik facility in Turkey. This plant is operated by Yazaki’s subsidiary Yazaki Otomotiv, which invested ¥5,471.2m (€41.6m, 31 January 2004) in Turkey. The plant employs 2,500 people and most of its output is exported to Europe.

Contracts • In January 2007, Yazaki was awarded the contract to supply high voltage

wiring for the 2009 Ford Fusion Hybrid vehicle. Yazaki has been supplying electrical components for Ford vehicles such as 2006 Ford Fusion, Ford Escape Hybrid and Ford F150 over the last three years.

• In February 2006, Yazaki signed a contract to supply wiring for the Toyota Camry hybrid.

• In January 2006 Yazaki won a contract to supply high-voltage electrical distribution system (EDS) for 2006 Mercury Mariner hybrid to Ford Motors. The Yazaki EDS components are used for point-to-point transfer of power and data to the entire vehicle electric powertrain.

• In October 2004, Yazaki won a contract to supply electrical components for the 2005 Ford Escape Full Hybrid Technology gasoline-electric vehicle. The components include two four-pole high-voltage connection systems and an adapter terminal. The two connection systems include wiring harness connectors, electromagnetic interference (EMI) shielded copper cables and header connectors. The systems connect the vehicle’s battery pack and DC-DC converter to the transaxle unit that provides power to the vehicle.

• In March 2004, the company began supplying wiring harness, two-pole inverter connection system, service plug and virtual instrument cluster for the Toyota Prius gasoline-electric hybrid.

New Product Developments Yazaki has two primary research centres located in Japan and USA. The company does not disclose its annual expenditure on R&D. Some of its recent developments include: • In October 2006, at the SAE Commercial Vehicle Engineering Congress &

Exhibition held in Chicago (USA), Yazaki displayed high-voltage under-floor, motor and generator cables which featured integrated shielding from electromagnetic interference (EMI) and durability in environments with high voltage and high currents.

• In January 2005, Yazaki launched automotive high-voltage products that include connection systems for motors, inverter, battery packs, service plugs, battery bus bar modules, high-voltage cables and high-voltage junction blocks. These components are used in gasoline-electric hybrids and other vehicles

The Hybrids Report


employing electric drive technology. • In Convergence 2004, held at Cobo Conference and Exhibition Center in

Detroit (USA), Yazaki displayed its HEV technology, which was used in Toyota Prius and the 2005 FHT Ford Escape model.

Financial Overview For the financial year ended 20 June 2007, Yazaki reported net sales of ¥1,447.5bn (US$11.75bn) compared with ¥1,281.2bn (US$10.37bn, 20 June 2006) in the previous fiscal. Sales in Japan amounted to ¥653.5bn (US$5.29bn), up 10.5% from ¥590.6bn (US$5.11bn) in the preceding financial year. However, overseas sales recorded higher growth of 15.1% to ¥794.7bn (US$6.43bn) over ¥690.6bn (US$5.98bn) in 2006. Automotive segment is the largest product segment for the company contributing 84.1% to the total sales in fiscal 2007, compared with 86% of 2006 sales. As Yazaki is a privately-held company, it is not mandatory for the company to disclose full financial information. Detailed financial results for the company are not available. Outlook Yazaki has taken steps to help it to sustain its level in these uncertain times, as the slump in the demand is affecting the company’s growth. However, Yazaki is sanguine in its future prospects and is investing to expand its operations. Simultaneously, Yazaki is exploring business opportunities in the overseas market as the domestic market becomes less attractive. This includes the latest move to shift high-voltage production base from Japan to the US which is likely to help the company in the future. The company aims to explore the HEVmarket, especially in North America which is expected to grow. Yazaki has the opportunity to form ties with the carmakers in North America, including the Japanese OEMs such as Toyota, Nissan and Honda, who are developing plug-in hybrid vehicles. Yazaki’s business is also expected to grow on the back of increasing electronic content per vehicle globally. The company hopes to realise higher growth in China and European markets. It has also shifted some production in the low cost locations in Europe such as Bulgaria, Romania and Slovakia which will help it to become a more cost-effective supplier.

The Hybrids Report


ZF

Hybrid systems & components

Address ZF Friedrichshafen AG Graf-von-Soden-Platz 1 88046, Friedrichshafen Germany Tel: +49 7541 770 Fax: +49 7541 77908000 Internet: http://www.zf.com Senior Officers Hans-Georg Härter, CEO Willi Berchtold, Executive Vice-President Finance, Controlling & Information Technology Michael Paul, Executive Vice-President, Technology (Research and Development, Production, Quality), North America, Electronic Components Business Unit Products Car transmissions, chassis technology, commercial vehicle special transmissions, off-road driveline technology, powertrain systems, electric power steering systems Plants Algeria, Argentina, Austria (2), Australia (2), Brazil (5), Canada, China (20), Czech Republic (2), France (7), Germany (31), Hungary (2), India (4), Iran, Italy (3), Malaysia, Mexico (4), Russia, Slovakia (3), Spain (5), South Africa (5), South Korea (2), Taiwan, Thailand, Turkey (2), UK (3), USA (15) Sales Group: €12.5bn (17.6bn, 31 December 2008) (Year to 31.12.08) Employees 61,156 (31 December 2008)

ZF Friedrichshafen is a leading manufacturer of chassis components, transmissions, steering systems, axles and complete modules for the automotive industry. In the hybrid segment, the company supplies hybrid drive systems and components for passenger cars and light commercial vehicles. The company operates through three sectors sectors: • Cars and light commercial vehicles – 56% of 2008 sales • Commercial Vehicles – 29% • Construction and agricultural machinery, Marine craft, Aircraft, Special and

Rail Vehicles – 15% The company has a global presence. Geographically, ZF earned in western Europe (63.8% of 2008 sales), eastern Europe (5.2%), North America (NAFTA) (10%), South America (4.5%), Asia-Pacific (15%) and Africa (1.5%). For hybrid electric vehicles (HEV), ZF’s product portfolio includes brake and electric auxiliaries. ZF operates at 125 plants in 26 countries worldwide. The company’s main automotive customers include BMW, Chrysler, Nissan, Iveco and Volkswagen. Recent Developments Corporate strategy The ZF group, as part of its corporate strategy, will continue to expand and maintain its grip in the market. The group recently signed a joint-venture agreement with Continental Automotive Systems on the development and production of commercial vehicle hybrid drives. The company is also partnering with a number of OEMs such as Chrysler, Nissan, Futon and Iveco for hybrid development projects. Despite the turmoil in the auto industry and weak economy, ZF is continuing to invest in the future of its business. ZF inaugurated its first European manufacturing facility in 2008. The group will continue making necessary investments in research and development in order to strengthen the strategic position as a technology leader. ZF has taken measures to restructure by withdrawing unprofitable products from the markets. Currently, ZF is scrutinising the situation for plant closures and site mergers as well. Capital expenditure and cutbacks are going to be a priority for the company since they have a direct impact on the liquidity level. ZF is concentrating on the development of hybrid technologies and hybrid modules consisting of electric motors, clutches and vibration dampers. The company plans to launch a hybrid drive system within the next few years. In its hybrid activities, ZF focuses more on the mild and full hybrids where the electric drive is integrated into the driveline as opposed to micro hybrids. With a complete product portfolio, ZF extends its lead as hybrid technology supplier for commercial vehicles. The spectrum ranges from the core hybrid component, ie., the electric motor, to complete hybrid systems. Joint-ventures • In April 2009, Continental and ZF concluded an agreement to cooperate in the

the development and production of commercial vehicle hybrid drives. Under the terms of joint-venture, ZF will develop and produce the drive system and be in charge of the system integration for the hybrid system. Continental will supply the energy accumulator and system electronics. Volume production is scheduled for 2011.

• In December 2007, Continental and ZF Sachs announced their decision to jointly develop hybrid drive systems. The two suppliers have selected

The Hybrids Report


SupplyOn AG for web-based collaboration solutions. • In September 2005, ZF and Continental formed a consortium to jointly

develop hybrid vehicle technology. The focus is on production of systems and components involving hybrid technologies for passenger cars and light commercial vehicles.

Investments • In October 2008, ZF Friedrichshafen AG started construction on an

engineering centre in Shanghai (China). The centre plans to start operations in 2009 and has been set up with an investment of CNY150m (US$21.98m, 22 October 2008).

• In May 2008, ZF inaugurated Germany’s first production location for the industrial production of hybrid drive modules. ZF launched volume production in Schweinfurt (Germany) from the fourth quarter of 2008. The company plans to supply the products to car, bus and delivery vehicle manufacturers. Mercedes-Benz is the first customer and ZF is the first European automotive supplier to produce hybrid modules in volume production.

• In November 2006, ZF set up a new research and development centre in Miskolc (Hungary).

• In December 2005, the company expanded its engineering centre in Shanghai (China). The number of employees will be increased from 22 to 70 by 2010. This technical centre mainly meets the demands of the domestic vehicle manufacturers in China.

Contracts • In April 2009, ZF secured a contract from BMW to supply 8-speed automatic

transmission to feature in the BMW 760i. The transmission covers all the functions of a mild and full hybrid with an electric motor which is incorporated in the same installation space. On 9 April 2009, the OEM introduced two new sedans, 760i and 760Li, as part of its 7 series line-up. The new transmission enhances fuel economy by 6% over ZF’s second generation 6-speed transmissions and by 14% over the 5-speed automatic transmissions. The 8-speed automatic transmission can also be used on hybrid vehicles, by replacing the torque converter with an electric motor. Apart from hybrids, BMW intends to introduce the new transmission on its other vehicles by 2011.

• In September 2008, ZF signed an agreement with Beiqi Foton Motor Co. Ltd. on strategic cooperation in China. The agreement incorporates ZF to supply driveline technology for a newly developed delivery truck which is expected to be launched in the Chinese market in 2009. Moreover, the agreement is planned for further commercial vehicle projects. In the context of the agreement, cooperation is also planned for automated transmissions and hybrid vehicles.

• In September 2006, ZF announced that for the hybrid concept of the Mercedes-Benz Sprinter, it is providing a module ready for installation that integrates clutch, actuators, and electric motor.

• In October 2006, ZF was awarded a contract by Nissan to propose plans for a hybrid variant of Nissan’s 3-liter Cabstar truck. ZF also supplies clutch actuators and control software.

• In January 2006, ZF and Continental won a contract from Volkswagen for the development of hybrid drive module consisting of an electric drive including power electronics. Volkswagen plans to introduce a hybrid version of its Jetta model in the USA.

New Product Developments In 2008, ZF’s total R&D expenditure was €697m (US$982.5m). The company employs around 1,537 people for ZF Research and Development worldwide. The main R&D centres are located in Friedrichshafen, Dielingen, Passau, Schweinfurt and Schwäbisch Gmünd (Germany), Czech Republic, Shanghai (China), Tokyo (Japan) and Northville (USA). • In September 2008, many commercial vehicles exhibited ZF’s driveline and

Chassis technology at the 2008 IAA International Motor Show in Hanover (Germany). MAN TGL equipped its new distributor truck with ZF HyTronic. The new distributor truck celebrated its world premier at IAA. The hybrid transmission is based on the ZF-AS Tronic lite and is supplied as a package including ZF energy management. Inside this automatic transmission, an electric motor with 60KW supports the combustion engine. The overall system consists of transmission, electric motor, inverter, high-voltage battery, and power routing. Simultaneously, Mercedes Benz Citaro G Blue Tec-Hybrid is equipped with the independent wheel suspension RL 75 EC and the ZF

The Hybrids Report


electric portal axle. Another OEM, Nissan, displayed a total number of two hybrid transmissions based on the eTronic by ZF. The hybrid transmission offers all of the functions of a full hybrid system and has been optimised for use in light commercial vehicles in delivery traffic.

• In September 2008, ZF Sachs offered hybrid modules with the product DynaStart at IAA Commercial Vehicles 2008. With up to 120 KW, this main component of a parallel hybrid drive is very powerful and provides an additional torque of up to 1,000 Nm. ZF has extended its lead as hybrid technology supplier for commercial vehicles. The group’s performance spectrum ranges from the core hybrid component i.e. the electric motor to complete hybrid systems. At the IAA Commercial Vehicles in Hanover, ZF displayed, for the very first time, hybrid transmissions ready for volume production. The hybrid version of the eTronic has been optimised for use in light commercial vehicles in delivery traffic. Such advantages are also offered by the HyTronic, the hybrid variant of the ZF-AS Tronic lite for light trucks. ZF hybrid transmissions fully cover all functions of a full-scale hybrid system.

• In July 2008, ZF Passau GmbH, the ZF Off-Road Driveline Technology and Axis Systems division developed electrically driven low-floor axle for city buses with serial hybrid drive. Two electric motors are integrated into the axle and simultaneously used for energy recuperation during braking. Hybrid drives are economical and resource-preserving alternative.

• In July 2008, ZF planned to offer automatic 6-speed transmissions - EcoLife for commercial vehicles as well as hybrid version. The automatic 6-speed transmission which is utilised in city buses, buses in line service and other transportation modes, has optimally adapted to higher torque. It transmits torque up to 2,000 Nm and will soon be available as a hybrid version. ZF is in the process of developing a hybrid version of EcoLife Transmission. Instead of the torque converter, hybrid module will be integrated into the converter housing. And the electric motor will provide an additional power of up to 120KW.

• In September 2007, ZF announced that its new 8-speed automatic transmission which was introduced in May 2007 can be combined with hybrid modules for greater fuel efficiency. Additionally, ZF is developing the operational functions for the hybrid transmission with the electric motor, clutch, torsional damper, dual-mass flywheel, and hydraulics.

• In March 2007, Continental and ZF announced development of power electronics modular systems for hybrids. The modular system can work in hybrid drive systems with different power ratings, from high voltage applications to those using less than 60-volts.

• In September 2006, ZF developed a new generation of 6-speed automatic transmissions, which reduce fuel consumption. It is available for BMW 3-Series coupé and X3 SUV models.

• In September 2006, ZF developed a hybrid system in collaboration with Nissan for a 3-litre version of the Nissan Cabstar light duty truck that combines an eTronic transmission with a 40 kW electric motor. The system reduces the overall operating costs and allows the vehicle to be powered entirely by electricity.

• In September 2006, ZF designed a hybrid system for vans and light commercial vehicles, based on an eTronic automatic transmission system and a dual clutch full-hybrid module.

• In the IAA Commercial Vehicle Show held in September 2006, in Hannover (Germany), ZF presented the parallel hybrid concept for commercial vehicles. The system is based on electrodynamic starting element (EDA).

Financial Overview ZF Friedrichshafen reported a 1% sales decrease in 2008 to €12.5bn (US$17.6bn) ended at 31 December 2008. The market remained positive in the first nine months of the year, but the car, truck and construction machinery markets declined significantly in the last quarter of 2008. The operating income of the company was €768m (US$1,082.6m) compared with €917m (US$1,350.6m) in 2007. After-tax net profits declined 19.3% to €434m (US$611.8m) down from €518m (US$762.9m) the previous year. Sales from the automotive industry decreased to €10.62bn (US$14.97bn) from €10.87bn (US$16bn) in 2007. The share of the passenger car business in group sales fell 62% in 2007 to 56% in 2008, while that of the commercial vehicle business rose to from 24% to 29%. Car Driveline Technology sales were down 3% to €2.01bn (US$2.83bn), Car Chassis Technology sales were down 15% to €1.95bn (US$2.74bn) and Commercial Vehicle & Special Driveline Technology sales increased 7% to

The Hybrids Report


€2.23bn (US$3.14bn). Powertrain & Suspension Components sales were the same at €2.38bn (US$3.35bn) and Steering Technology sales were marginally down at €1.29bn (US$1.81bn).. The world economic crisis is expected to lead to a decline in business for ZF in 2009. The company anticipates a significant reduction in sales and earnings in 2009.

Year Net Sales (€bn)

Operating Income

(€m)

Net Income

(€m)

R&D Expenditure

(€m)

No. of Employees

2008 12.5 768 434 697 61,156 2007 12.6 917 518 694 57,372 2006 11.7 668 296 606 55,050 2005 10.8 512 247 550.0 53,940 2004 9.90 440 231 525.0 54,587

Year Net Sales

(US$bn) Operating

Income (US$m)

Net Income (US$m)

R&D Expenditure

(US$m)

No. of Employees

2008 17.6 1,082.6 611.8 982.5 61,156 2007 18.5 1,350.6 762.9 1,022.16 58,000 2006 15.4 882 390.8 800.1 55,050 2005 12.8 606.4 292.5 651.4 53,940 2004 13.5 600.3 315.2 716.3 54,587

Outlook In 2009, ZF’s core industries are in a deep recession. Since the fourth quarter of 2008, the markets have entered in a phase of economic downturn across all industries, with an unexpectedly sharp decline. The sectors most severely affected by this downturn are the truck and construction-machinery industries. In this critical environment, a decisive competitive factor is to maintain financial stability for the better prospects and healthy running of the business. For future sustainability, ZF is relying intensively on an environmentally-friendly product portfolio and focusing on innovations that provide great customer benefit. ZF’s focus on developing hybrid transmission systems is expected to increase the company’s presence in the growing hybrids market. The company’s venture with Continental to develop commercial vehicle hybrid drive is expected to benefit both the players in the long-run. The venture is likely to expand their hybrid technology product line at a faster pace. The difficult economic situation facing the global economy in 2009 will also translate into a sharp decline in business for ZF. For the current year, ZF is assuming substantial downturn in sales and results.

The Hybrids Report


Date post:	02-Dec-2014
Category:	Documents
Upload:	philip-mulliner
View:	304 times
Download:	2 times

Hybrid Report 2009

Documents