2018 Outlook

New Mobility 2025

Youngho Park Yeonju Park Inwoo Park +822-3774-1743 +822-3774-1755 +822-3774-3763 [email protected] [email protected] [email protected]

Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. Contents

I. Intro 3

II. Electrification (pace of EV evolution) 10

III. Autonomous driving 30

IV. Mobility as a service (from ownership to sharing) 50 Need for changes in mobility & evolutionary direction

• Changes in the mobility environment have become inevitable to address traffic accidents, air pollution, traffic congestion, and accessibility for the transportation-disadvantaged • Electrification, automation, and MaaS will gradually converge to provide a more comprehensive solution to these social issues

Social issues to prompt changes in mobility Evolutionary direction for mobility

Air pollution Electrification Tighter vehicle emission - "Diesel gate" scandal and China’s stimulus policies standards prompt automakers to accelerate their shift to green cars - Future market growth hinges on production cost cuts

Traffic accident 1.2m road traffic deaths per year Automation - Tighter safety regulations  rapid growth of ADAS market - Aggressive moves to commercialize ADAS to generate greater profits - Institutional/infrastructure development to determine the Accessibility pace of future growth 30% of the world’s population with no access to a car

Mobility-as-a-Service (MaaS) - Business model changes from ownership to sharing Traffic congestion - Various biz models (e.g., car sharing, car hailing services) Reduce time spent on travel & air pollution - Integration into on-demand autonomous mobility service over long term

Source: Mirae Asset Daewoo Research

3| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research New mobility environment

New industrial ecosystem bound for convergence of MaaS, autonomous driving, and xEV

Mobility business (as is) Convergence of xEV and autonomous driving (2025)

Autonomous xEV Autonomous xEV

Mobility Mobility as a Service as a Service

Synergy between xEV, autonomous driving, MaaS (2050) Evolution of mobility business areas (2035)

Autonomous xEV Autonomous xEV

Mobility as a Service Mobility as a Service

Source: IHS Automotive, Mirae Asset Daewoo Research

4| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Three trends to gradually converge

Release of 3rd- Arrival of cost generation EV parity

Full-fledged convergence of partial autonomous driving & EV

Fast Partial integration Rapid penetration by partially Rapid penetration by fully autonomous cars with ADAS autonomous cars autonomous cars in mainstream functions

Convergence of fully autonomous cars and MaaS

On-demand autonomous mobility Demand for shared cars service to accelerate changes in driven by car sharing business mobility environment

2015 2020 2025 20302035 2040 Future

5| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Snapshot of changes in EV market (~2025)

Arrival of cost parity

Release of 3rd- Mass-marketability generation EV Penetration rate(%)

10 Large-scale investments - Full-fledged economies of scale - More than 400km driven - Next-generation battery technology - Affordable prices and development marketability - Metal prices stabilizing at lower level - Validation of safety

VW: EUR20bn investments 5

- "Diesel gate" scandal - Development/deployment of - China policy stimulus exclusive platforms for EVs - Tesla Model 3 - 3G battery development/application - Improvements in system efficiency - Cost cuts via economies of scale

2015 2017 2020 2025

6| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Snapshot of changes in EV market (~2025)

Growth driven by new core technologies (e.g., LiDAR sensors, HD map, V2X, HVI) Penetration of Self-driving- Level 3 related market vehicles size (%) (US$bn)

Growth driven by ADAS sensor/system companies “Self-driving EV” as standard hardware for new mobility

Full-fledged market penetration by partial autonomous cars

Mass-production of partial Rapid autonomous cars deployment of ADAS in new cars

7| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Notable stocks in new market environments: Korea

PER Stock Code Investment points 17F 18F 19F

Top-tier battery manufacturer; potential beneficiary of EV market growth and LG Chem 051910 KS 14.4 14 13.1 favorable chemical cycle

In-house portfolio of autonomous driving technologies; greater presence in captive Hyundai Mobis 012330 KS 10.4 8.5 7.8 market

Aggressive positioning in Korean HD map and 5G V2X markets; possible evolution SK Telecom 017670 KS 8.2 7.9 8 into platform operator

Potential beneficiary of EV market growth as top-tier battery manufacturer; strong Samsung SDI 006400 KS 23.2 14.2 11.9 earnings leverage by battery business

Camera business’ expansion to software segment; potential beneficiary of V2X LG Electronics 066570 KS 9 9.4 8.7 communication control system market growth

Hyundai Motor Group’s ADAS system supplier; early beneficiary of ADAS market; Mando 204320 KS 18.2 13.3 11.7 possible expansion of customer base

POSCO Korea’s only manufacturer of anode materials; potential beneficiary of market 003670 KQ 17.3 12.1 11.4 Chemtech growth, thanks to high entry barriers

Producer of cathode materials (cathode choice a major factor for determining L&F 066970 KQ 44.8 - - battery energy density); potential beneficiary of market growth as leading player

Halla Holdings 060980 KS 8 9.3 8.6 Robust sales growth of ADAS cameras and radar (subsidiary MHE)

Note: In the order of market cap; PER based on the closing price of November 3, 2017 Source: Bloomberg, Mirae Asset Daewoo Research

8| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Notable stocks in new market environments: Global

PER Country Stock Code Investment points 17F 18F 19F Tesla TSLA US - - 61.5 Leader in EV era driven by technology innovation

Albemarle ALB N 32 27.7 24.5 Major supplier in global lithium market; potential beneficiary of fast growing market demand No. 1 player in global camera image sensing chip market (in terms of market share); expansion ON Semiconductor ON US 15.5 13.5 12.3 into software market System company with most aggressive investments; equity investments in Quanergy, a LiDAR US Delphi DLPH US 14.3 13.5 12.4 module maker Most advanced technology developer; central computer platform for autonomous driving Nvidia NVDA US 71 52.1 45.6 (using GPU parallel computing) Potentially dominant player in communication module market, regardless of V2X standards, Qualcomm QCOM US14.8 17.5 16.3 thanks to acquisition of NXP Semiconductor Organic expansion to mobility service business via cruise automation, equity investments in Lyf GM GM US 6.7 7.3 7.3 t, and EV production BYD 1211 HK 34.6 23.4 19.5 China’s largest EV maker; potential beneficiary of government support

Tianqi Lithium 002466 SZ 37.2 32.9 22.7 Potential beneficiary of fast-growing lithium demand with expansion of global EV market Potential beneficiary of growing cobalt demand, as Chinese battery manufacturers increasingly China Huayou Cobalt 603799 SS 37.6 29.9 21.7 adopt NCM cathode materials China’s leading cathode material supplier; potential beneficiary of EV market expansion and Beijing Easpring 300073 SZ 52.3 40 28.4 increasing use of domestically-produced cathode material in China China’s leading separator supplier; potential beneficiary of EV market expansion and increasing Cangzhou Mingzhu 002108 SZ 22.7 19.5 17.2 use of domestically-produced separator in China No. 1 player in global radar chip market; acquisition of Innoluce (leading supplier of LiDAR Infineon IFX GR 28.6 25.7 22.9 MEMS mirrors) Most extensive portfolio of autonomous driving technologies (incl. proprietary technologies in Continental AG CON GR 13.9 12.6 11.7 core senor modules) Germany Daimler DAI GR 8 8.1 8 Advance into car sharing business via Car2Go (largest car rental company in Europe)

BMW BMW GR 8.1 8.1 7.8 Expansion of car sharing business in US and Europe via DriveNow/ReachNow platforms

Volkswagen Group VOW GR 7.1 6.5 6.2 Acquisition of Quicar and Gett (an Israeli startup) to further expand car sharing business

DENSO 6902 JP 21.5 17 15.9 System company with competitiveness in ADAS sensors, V2X communication system, and HVI Japan Major Japanese map publisher; singlehandedly building Japan’s HD map ecosystem; largest Zenrin 9474 JP59.8 44.1 38.2 beneficiary Note: Based on the closing price of November 3, 2017 in respective countries Source: Bloomberg, Mirae Asset Daewoo Research

9| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research 2018 Outlook

New Mobility 2025 Electrification (pace of EV evolution)

[Analyst] Yeon-ju Park +822-3774-1755 [email protected]

Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. I. 2017 marks the start of change

Automakers embark on • Automakers have embarked on large-scale investments in EVs in 2017 large-scale investments • Volkswagen plans to launch 80 new EV models by 2025 and double its investments to W27tr through 2030 in EV • European automakers (e.g., Daimler, BMW) have stepped up investments in EVs; US automakers have followed suit

VW chairman unveils large-scale investments in green cars VW’s EV investment plan double the original size

(EURbn, units) 25 Investment scale (by 2030) Number of models (by 2030)

20

15

10

5

0 기존 신규

Source: Media report Source: Media report, Mirae Asset Daewoo Research

11| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research I. 2017 marks the start of change

Key drivers of change • European diesel car sales have decreased sharply ① Dieselgate scandal • EU pledges to cut its carbon emissions by 20% by 2020: The target is unachievable with ICE cars alone • EV conversion is seen as imperative to enhance competitiveness over the medium and long-term

German diesel car sales EU CO2 emission regulation

(units) Diesel car sales volume in Germany (L) (%) (g/km) 160,000 % YoY (R) 50 140

140,000 120

25 120,000

100

100,000 0

80 80,000

60,000 -25 60 09 10 11 12 13 14 15 16 17 18 2015 2021 Source: Bloomberg, Mirae Asset Daewoo Research Source: Industry data, Mirae Asset Daewoo Research

12| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research I. 2017 marks the start of change

Key drivers of change • EVs are gaining importance in China: Environmental protection, a new growth industry, global competitiveness ② China • Potential leadership in the rising EV market (vs. the established ICE car market) • The introduction of NEV (New Energy Vehicle) makes EVs essential for global automakers to do business in China

EVs are part of “Made in China 2025” policy Global automakers' EV investments in China (2017)

Priority sectors identified by the Made In China 2025 plan Company EV investments in China

New advanced information technology A 50-50 EV joint venture with JAC Volkswagen (RMB6bn investments) Numerical control tools Daimler Equity investments in BAIC’s new energy business Automated machine tools and robotics EV joint venture with Great Wall Automotive BMW Aerospace and aeronautical equipment (JV with Brilliance China Automotive) EV joint venture with Dongfeng Motor Maritime equipment and high-tech shipping Renault-Nissan (annual production capacity of 120,000 units; production start in 2019) Modern rail transport equipment Joint EV development with Neusoft Honda EV joint venture with Dongfeng Motor New Energy vehicles and equipment Partnership with SAIC GM Power plant (plan to release W6mn-range EV) Ford EV joint venture with Zotye Agricultural equipment

New materials Toyota EV production in China from 2019

Biopharma and advanced medical products Tesla Plans to establish EV plant in China

Source: Media report, Mirae Asset Daewoo Research Source: Media report, Mirae Asset Daewoo Research

13| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research I. 2017 marks the start of change

Key drivers of change • Preorders for Tesla’s mass-market Model 3 exceed 1,800 units per day: Strong demand vs. production capacity ③ Tesla issues • Marketable EV: Fuel cost cuts, quick zero-to-60-mph times, comfortable and smooth driving, low maintenance/repair expenses • Automakers should respond to growing EV demand

Tesla Model 3, a mass-market EV Prospective buyers in line to preorder Model 3

• Long range spec - Price: USD44,000 - Range: 499km - 0-60 mph: 5.1 seconds - Max. speed: 225km/h

Source: Media report Source: Media report

14| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research I. 2017 marks the start of change

Evolution to 3G • The EV market has been held back by a lack of commitment by automakers and low product marketability • However, changes in the market environment are prompting automakers to plan to manufacture more marketable, economically feasible 3G EVs • All automakers have to do is implement their production plans

Evolution to 3G EV

(Range, km) 1st-generation 2nd-generation 3rd-generation 800

GM Volt GM Bolt 600 Volkswagen I.D. Short range of 80km; Decent range of 300km; Range of 500-600km; sluggish sales, due to sluggish sales, due to autonomous driving; lack of marketability lack of marketability US$20,000 price point

400

200 - Model 3 - Model S launch - Diesel gate - Battery price decline - Chinese market

0 2011 2016 2020 (Release year)

Source: Mirae Asset Daewoo Research

15| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research II. EV cost outlook

EV cost structure • It costs US$16,000 more to produce a 2G EV (released in 2016) than an ICE vehicle with equivalent performance • Key cost drivers include indirect expenses (e.g., R&D expenses) and components, such as powertrain/battery cells

Cost comparison: 2G EV vs. ICE equivalent 2G EV production cost breakdown

(US$/unit) 40,000 Indirect costs SG&A Other direct costs Depreciation 4% Powertrain 5% Battery cells 23% 30,000 R&D 18%

20,000 Battery packs 9%

10,000 Other powertrain Other direct costs costs 32% 9%

0 EV ICE

Source: Industry data, Mirae Asset Daewoo Research Source: Industry data, Mirae Asset Daewoo Research

16| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research II. EV cost outlook

Economies of scale • Economies of scale are critical in the process-intensive automotive industry • Notably, economies of scale lead to a sharp decline in R&D expenses (18% of total costs) • Automakers such as Volkswagen plan to apply EV-exclusive platforms across the groups • Cost-savings effects: Lower R&D expenses per unit, productivity improvement (EV-optimized design), fewer parts

Volkswagen’s EV platform to enable economically feasible EVs

Source: Volkswagen

17| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research II. EV cost estimation

System efficiency to • Over the past five years, driving range per battery unit (kWh) has improved 30% improve • We expect further improvement (+over 10%) by 2020, supported by developments in motor and power electronics, as well as thermal management systems

Potential drivers of further improvement in energy efficiency EV energy efficiency has exceeded 6km/kWh for some models of 60kWh EV batteries (km/kWh) (km/kWh) 8 Range 7.5

7.0 6.4 7.0 6 6.4 4.9 6.5

4 6.0

5.5 2

5.0 Current Motor efficiency Power Thermal Mid-term target electronics' management 0 conversion 2011 Nissan Leaf 2016 GM Bolt efficiency

Source: EPA, Mirae Asset Daewoo Research Source: Mirae Asset Daewoo Research

18| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research II. EV cost estimation

Battery cell cost to • Scale advantage and technological innovation should drive a drop in battery cell cost production costs decline • LG Chem’s EV battery revenue is projected to grow four-fold, from W1.7tr in 2017 to W7tr in 2020 • The share of R&D expenses (in total production costs) will likely decline by more than half (from the current 15%)

Estimates of battery cell product costs LG Chem: EV battery revenue and share of R&D in the revenue

(US$/kWh) (Wbn) (%) 200 Other fixed costs 8,000 Revenue (L) Contribution of R&D (R) 15 Depreciation costs R&D Material costs 12 150 6,000

9

100 4,000

6

50 2,000 3

0 0 0 2017 2025 17F 20F

Source: Industry data, Mirae Asset Daewoo Research Source: Industry data, Mirae Asset Daewoo Research

19| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research II. EV cost estimation

Battery cell production • Recently, prices of metals for use in EV batteries have risen, due mainly to a surge in demand amid limited supply costs to decline growth • There exist worries that recent metal price hikes may slow the pace of EV market growth going forward • Over the medium term, however, investments should increase, thus leading to stabilization in prices

Lithium and cobalt price trends Metal prices as % of total battery production costs (2017F)

(US$/MT) (US$/MT) (%) 30,000 Lithium (L) 70,000 6 Cobalt (R)

60,000 25,000

50,000 20,000 4

40,000 15,000 30,000

10,000 2 20,000

5,000 10,000

0 0 0 12 13 14 15 16 17 18 Lithium Nickel Cobalt Manganese

Source: Bloomberg, Mirae Asset Daewoo Research Source: Industry data, Mirae Asset Daewoo Research

20| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research II. EV cost estimation

Battery cell production • Technology development should bring down battery production costs costs are falling • Battery makers plan to mass-produce NCM 811 batteries starting in 2020, which should improve energy density by 20-25% and reduce cobalt use by 60%

Volkswagen’s battery development roadmap Energy density by type of cathode materials

(Wh/kg) 300

250

200

150

100

50

0 NCM 111 NCM 622 NCM 811 LFP NCA Source: Volkswagen Source: Industry data, Mirae Asset Daewoo Research

21| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research III. Competitiveness of domestic players

Battery market outlook • The global EV market is projected to take off from 2020 onwards, driven by aggressive investments by automakers, from 1.25mn units in 2017 to 4.96mn units in 2020 and to 15.39mn units in 2025 • Europe and China are expected to serve as dual driving forces for EV market growth • The global EV battery market is projected to expand from 38GW in 2017 to 248GWh in 2020 and to 924GWh in 2025

EV market outlook Battery market outlook

('000 units) (GWh) 1,000 20,000 US Mobile Europe Commercial vehicles (China) China ESS Others Passenger cars 800 15,000

600

10,000

400

5,000 200

0 0 14 16 18 20 22 24 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Source: Mirae Asset Daewoo Research Source: Mirae Asset Daewoo Research

22| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research III. Competitiveness of domestic players

Competitiveness of • Korean players are expected to take the lead in the growth of the global EV battery market domestic players • EV battery producers’ competitiveness, in terms of prices and performance, varies widely • At BYD, most of its batteries are still based on lithium iron phosphate (LFP); it plans to expand the production of NCM batteries from 2018, but energy density is believed to be low • CATL is believed to apply NCM 523 cathodes to its cylindrical batteries; Korean players have already adopted NCM 811 cathodes in cylindrical batteries

EV battery shipments in 2016 (GWh) Battery density of BYD and LG Chem

For For (kWh/kg) Country Volume commercial passenger 300 vehicles vehicles BYD China 7.9 4.0 3.8

Panasonic Japan 7.3 - 7.3 250

CATL China 6.6 4.4 2.2

OptimumNano China 2.5 2.5 0.0 200

AESC Japan 1.6 - 1.6

LG Chem Korea 1.9 - 1.9 150 Samsung SDI Korea 1.2 - 1.2

Guoxuan HighTech China 1.9 0.4 1.5 100 Lishen China 1.1 0.9 0.3

BAK China 0.9 0.1 0.8 50 SK Innovation Korea 0.6 - 0.6

Others Others 9.6 6.6 3.1 0 Total 43.2 18.9 24.3 BYD LFP BYD NCM ('18) Korea Source: Industry data, Mirae Asset Daewoo Research Source: Industry data, Mirae Asset Daewoo Research

23| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research III. Competitiveness of domestic players

• Battery production procedures become more complicated as energy density increases Competitiveness of • To apply NCM 811 cathodes to its batteries, SK Innovation carries out following procedures: domestic players - Coating ceramics on both sides of separators to resolve heating issues - Using binders with strong thermal resistance to improve tolerance to heat (150~200℃) - Coating cathodes with special materials like aluminum to reduce the generation of gas and extend battery life. • Competition in the EV battery market is expected to intensify going forward; production costs and product qualities are key factors that will eventually separate the industry winners from the losers • Korean players with long tracks records and robust competitiveness are expected to fare well

Development of battery technology

Component Technology

Cathode NCM or NCA with higher nickel content

Anode Blending of high-density graphite and silicon

Separator Reducing thickness for greater safety and density; coating with ceramics

Development of new types of additives or LiPF6 electrolyte for greater safety and Electrolyte durability

Conductor Application of carbon black, CNT, graphene, etc.

Pouch Improving tensile strength, while reducing thickness

Binder Improving adhesive strength and weight

Source: LG Chem, Mirae Asset Daewoo Research

24| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research III. Competitiveness of domestic players

Next-generation • All-solid-state batteries are emerging as next-generation batteries for following reasons: batteries - 1) By using a solid electrolyte, the batteries boast greater resistance to external shocks or heat, compared with lithium iron batteries - 2) The use of high-voltage cathode materials sharply improves energy density - 3) The volume of a battery pack is only 25% of the levels of lithium ion batteries, as all-solid-state batteries do not require the cooling system. • The development of solid electrolyte in 2010 spurred the technological advancement of all-solid-state batteries

Strengths of all-solid-state batteries All-solid-state batteries reduce battery pack volume by 75%

Source: Korea Electronics Technology Institute Source: Korea Electronics Technology Institute

25| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research III. Competitiveness of domestic players

Next-generation • Toyota announced that it would introduce an EV with an all-solid-state battery in the early-2020s batteries • Currently, all-solid-state batteries lag behind lithium-ion batteries in terms of performance and life • Recently, Korean players began to develop all-solid-state batteries • If all-solid-state batteries are mass-produced, the EV market’s growth should accelerate  Whether Toyota succeeds in the mass-production of all-solid-state batteries or not is worth investors’ attention

Toyota unveiled plans for EV with all-solid-state battery

Source: Media report

26| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Top Pick LG Chem (051910 KS)

Battery leader in EV era

Investment points (Maintain) Buy • As the leading EV battery producer in the world, LG Chem is expected to be the biggest beneficiary of the EV market growth Target Price (12M, W) 530,000 • The company is expected to maintain a strong lead for at least upcoming several years. • The prospect for the chemicals market for the next two-three years is positive: The PE upcycle will likely continue, and the downstream market, namely ABS, is also forecast to improve on the back of limited capacity Share Price (11/3/17, W) 414,000 additions

Expected Return 28% Risk factors • The EV market’s growth might be slower than expected OP (17F, Wbn) 3,051 • The chemicals market might slow in the short term, largely due to Chinese government’s policies Consensus OP (17F, Wbn) 2,986 EPS Growth (17F, %) 61.3 Market EPS Growth (17F, %) 46.4

P/E (17F, x) 14.8 Market P/E (17F, x) 10.5 KOSPI 2,557.97

180 Market Cap (Wbn) 29,225 LG Chem FY (Dec.) 12/14 12/15 12/16 12/17F 12/18F 12/19F 170 Shares Outstanding (mn) 78 KOSPI Revenue (Wbn) 22,578 20,207 20,659 25,898 27,596 30,746 160 Free Float (%) 64.3 OP (Wbn) 1,311 1,824 1,992 3,051 3,294 3,732 150 Foreign Ownership (%) 38.9 OP margin (%) 5.8 9.0 9.6 11.8 11.9 12.1 140 Beta (12M) 1.19 NP (Wbn) 868 1,153 1,281 2,188 2,512 2,860 130

52-Week Low 219,500 120 EPS (W) 11,745 15,602 17,336 27,961 32,094 36,531

52-Week High 420,000 110 ROE (%) 7.3 9.2 9.5 14.5 14.6 14.7 (%) 1M 6M 12M100 P/E (x) 15.4 21.1 15.1 14.8 12.9 11.3 Absolute 5.6 50.5 69.090 P/B (x) 1.1 1.9 1.4 2.0 1.7 1.5 80 Relative -1.1 30.6 31.016.10 17.2 17.6 17.10 Div.Yield (%) 2.2 1.4 1.9 1.4 1.4 1.4 Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: LG Chem, Mirae Asset Daewoo Research estimates

27| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Top Pick LG Chem (051910 KS)

Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) Forecasts/Valuations (Summarized)

(Wbn) 12/16 12/17F 12/18F 12/19F (Wbn) 12/16 12/17F 12/18F 12/19F 12/16 12/17F 12/18F 12/19F

Revenue 20,659 25,898 27,596 30,746 Current Assets 9,227 10,178 11,408 13,366 P/E (x) 15.1 14.8 12.9 11.3

Cost of Sales 16,595 20,524 21,978 24,690 Cash and Cash Equivalents 1,474 2,494 3,213 4,027 P/CF (x) 6.2 7.8 6.6 5.8

Gross Profit 4,064 5,374 5,618 6,056 AR & Other Receivables 3,729 4,393 4,685 5,338 P/B (x) 1.4 2.0 1.7 1.5

SG&A Expenses 2,072 2,324 2,324 2,324 Inventories 2,965 3,292 3,511 4,001 EV/EBITDA (x) 5.8 7.2 6.4 5.5

Operating Profit (Adj) 1,992 3,051 3,294 3,732 Other Current Assets 1,059 -1 -1 0 EPS (W) 17,336 27,961 32,094 36,531

Operating Profit 1,992 3,051 3,294 3,732 Non-Current Assets 11,260 13,422 14,600 15,633 CFPS (W) 41,765 53,137 63,145 71,045

Non-Operating Profit -332 -204 -73 -66 Investments in Associates 261 314 335 381 BPS (W) 188,807 210,991 238,384 269,038

Net Financial Income -37 -81 -73 -66 Property, Plant and Equipment 9,680 10,853 12,085 13,128 DPS (W) 5,000 6,000 6,000 6,000

Net Gain from Inv in Associates -4 -63 0 0 Intangible Assets 832 1,753 1,672 1,599 Payout ratio (%) 25.7 18.4 16.5 14.5

Pretax Profit 1,660 2,847 3,221 3,666 Total Assets 20,487 23,600 26,008 28,998 Dividend Yield (%) 1.9 1.4 1.4 1.4

Income Tax 379 603 709 807 Current Liabilities 5,447 5,048 5,287 5,821 Revenue Growth (%) 2.2 25.4 6.6 11.4

Profit from Continuing Operations 1,281 2,244 2,512 2,860 AP & Other Payables 1,723 1,775 1,893 2,157 EBITDA Growth (%) 8.1 35.2 9.8 12.5

Profit from Discontinued Operations0000Short-Term Financial Liabilities2,2131,4541,4541,454Operating Profit Growth (%)9.253.28.013.3

Net Profit 1,281 2,244 2,512 2,860 Other Current Liabilities 1,511 1,819 1,940 2,210 EPS Growth (%) 11.1 61.3 14.8 13.8

Controlling Interests 1,281 2,188 2,512 2,860 Non-Current Liabilities 989 2,243 2,268 2,324 Accounts Receivable Turnover (x) 6.1 6.7 6.3 6.4

Non-Controlling Interests 0 56 0 0 Long-Term Financial Liabilities 678 1,869 1,869 1,869 Inventory Turnover (x) 7.8 8.3 8.1 8.2

Total Comprehensive Profit 1,275 2,177 2,512 2,860 Other Non-Current Liabilities 311 374 399 455 Accounts Payable Turnover (x) 11.5 11.7 12.012.2

Controlling Interests 1,278 2,121 2,444 2,782 Total Liabilities 6,436 7,291 7,555 8,145 ROA (%) 6.6 10.2 10.1 10.4

Non-Controlling Interests -3 56 68 78 Controlling Interests 13,937 16,162 18,306 20,706 ROE (%) 9.5 14.5 14.6 14.7

EBITDA 3,329 4,501 4,944 5,562 Capital Stock 370 391 391 391 ROIC (%) 11.2 15.3 14.6 15.2

FCF (Free Cash Flow) 1,118 1,177 1,115 1,337 Capital Surplus 1,158 2,274 2,274 2,274 Liability to Equity Ratio (%) 45.8 44.7 40.9 39.1

EBITDA Margin (%) 16.1 17.4 17.9 18.1 Retained Earnings 12,463 13,943 16,088 18,487 Current Ratio (%) 169.4 201.6 215.8 229.6

Operating Profit Margin (%) 9.6 11.8 11.9 12.1 Non-Controlling Interests 114 147 147 147 Net Debt to Equity Ratio (%) 4.7 5.1 0.6 -3.4

Net Profit Margin (%) 6.2 8.4 9.1 9.3 Stockholders' Equity 14,051 16,309 18,453 20,853 Interest Coverage Ratio (x) 25.9 28.0 29.9 33.8

Source: LG Chem, Mirae Asset Daewoo Research estimates

28| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research [Conclusion] New era of EVs

Cost parity

3rd generation EV Penetration to take off

Large-scale investments Penetration rate(%)

10 - Economies of scale - Next-generation battery - Metal price stabilization -Safety Range of over 400km; Reasonable prices

Volkswagen: Investments of EUR20bn Top pick 5 - Dieselgate - China’s economic stimulus Leader in - Tesla’s Model 3 cost effectiveness and safety - EV-dedicated platform -3rd generation battery - System efficiency - Cost reduction via economies of scale

2015 2017 2020 2025

29| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research 2018 Outlook

New Mobility 2025 Autonomous driving

[Analyst] Inwoo Park +822-3774-3763 [email protected]

Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. Autonomous driving: Irreversible trend

Automakers aims to • Autonomous vehicles replace the roles of drivers with sensors, computers, and programs meet stricter safety • Factors helping to accelerate the advent of autonomous driving include the move towards stricter safety regulations and increasing focus on environmental issues regulations and create • Automakers and parts suppliers are aggressively commercializing advanced driver assistance system (ADAS) additional profits via features to move in line with the trend and create additional profits autonomous vehicles

Concept of autonomous driving ADAS market growing on stricter safety regulations

(US$bn) V2V / V2X Parking 40 Night Vision LDWS Head-Up-Display Front Corner Alert E-Call Telematics Drowsiness Monitor 35 Distance Warning Central ADAS Processor Camera Mirror Replacement Blindspot 30 Adaptive Front Lighting

25

20

15

10

5

0 2015 2016 2017F 2018F 2019F 2020F 2021F Source: Roland Berger Source: Strategy Analytics, Mirae Asset Daewoo Research

31| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Strengthening global safety regulations

Seeking to regulate or • With most of the world's 1.2mn annual deaths from car accidents linked to careless driving, governments are provide incentives for seeking to regulate or provide incentives for the adoption of certain autonomous safety features on automobiles • A key example is the adoption of autonomous emergency brake (AEB) systems the adoption of • With the technology helping to notably reduce rear-impact and pedestrian accidents, the adoption of AEB autonomous safety systems gains additional points on the Euro New Car Assessment Program (NCAP) in Europe and will become a features mandatory feature on all new cars offered in the US by 2022 • Hyundai Motor Group (HMG) plans to apply AEB systems to its new models for the Korean and North American markets

Country/Region NCAP/Mandate System 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

China NCAP Proposal AEBS 5*+ (****) 5*+ (****)

China NCAP Proposal ESC 5*+ (****) 5*+ (****) European Union Mandate ABS European Union Mandate ESC European Union Mandate AEBS (HCV) European Union Mandate LDWS (HCV)

European Union NCAP AEBS 5* Pedestrian Bicycle Crossing, Junction & Head-On

European Union NCAP LDWS 5* Lane Keeping Road Edge & Evasive Steering European Union NCAP BSD European Union NCAP Speed Alert-TSR European Union Mandate ABS (Motorcycles) Japan Mandate ESC Japan Mandate AEBS (HCV) Japan Mandate LDWS (HCV)

Japan NCAP AEBS 5* Update

Japan NCAP LDWS 5* South Korea Mandate ESC

South Korea NCAP AEBS 5* Update

South Korea NCAP LDWS 5*

USA NCAP AEBS 5* (**)

USA NCAP AHB 5* (**)

USA NCAP BSD 5* (**)

USA NCAP FCW Recommend only

USA NCAP LDWS Recommend only 5* (**) USA Mandate ESC

USA Mandate Backup Camera New Models All Models USA Mandate Proposal FCW

USA NHTSA Agreement AEBS (***)

Source: Strategy Analytics, Mirae Asset Daewoo Research

32| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Outlook for autonomous vehicle penetration

Level 3 vehicles to • Current-2020: Level 1 to 2 vehicles are entering mass production; full-fledged mass-production of Level 3 vehicles account for 13% of new to begin from 2020 • 2021-2025: Percentage of Level 1 to 2 vehicles to remain high; Level 3 vehicles to see full-fledged penetration of car sales in 2025 the market; according to Strategy Analytics, Level 3 vehicles will account for 13% of new car sales in 2025 • 2026-2030: The penetration of Level 3 vehicles is expected to accelerate, accounting for more than 40% of new car sales in 2030; mass-production of Level 4 vehicles will likely begin in 2030

Global new car market outlook by level of autonomous driving Levels of autonomous driving (in terms of sales volume) Level Definition Specifications - The driver is in complete and sole control of the primary vehicle controls at Level 4 Level 3 Level 2 Level 1 Level 0 0 No Automation all times 100% - Certain functions are automated to enhance driver safety - e.g., ESC (electronic stability control), SCC (smart cruise control), AEB Function-specific (autonomous emergency braking system), and LKAS (lane-keeping assist 1 Automation system) 80% - Specific control functions are collectively referred to as ADAS (Advanced Driver Assistance System) - Automation at this level involves one or more specific control functions Combined designed to work in unison to take control over the vehicle 2 Function - e.g., SCC+LKAS, SCC+LKAS+AEB 60% Automation - Vehicles are capable of autonomous highway driving - The driver is liable for any accidents - The vehicle controls all safety functions under certain traffic and environmental conditions 40% Limited Self- - However, the system may signal the driver to reengage in the driving task 3 driving at some points, providing the driver with an appropriate amount of Automation transition time to safely regain manual control - The driver is expected to be behind the wheel; a car accident may lead to disputes over who is legally responsible for the accident 20% - The vehicle is designed to perform all safety-critical driving functions for an entire trip Full Self-driving - The driver provides destination or navigation input, but the vehicle will be 4-5 Automation in control end to end on the trip 0% - No one has to be in the driver’s seat; the vehicle is held responsible for any accidents 2015 2020 2025 2030 2035 2040 2045 2050 Source: NHTSA, Mirae Asset Daewoo Research Source: Strategy Analytics, Mirae Asset Daewoo Research

33| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Five major autonomous driving technologies

Five major autonomous • 1) Sensor technology, which perceives external data, such as obstacles, road signs, and traffic signals driving technologies • 2) Location recognition and mapping technology, which perceives the absolute and relative locations of vehicles via HD maps, GPS, and a combination of sensors • 3) Decision technology, which efficiently process data needed to make driving decisions • 4) Technology, which controls steering, acceleration, and deceleration based on computed results • 5) Interaction technology, which allows information exchange between vehicles and drivers (HVI), and between vehicles and the driving environment (V2X)

HVI, which stands for human- machine interface, refers to interaction technology between drivers and vehicles

V2X, which stands for vehicle-to- everything, is the technology that allows information exchange between vehicles and other vehicles/roads/mobile devices (V2X)

Source: McKinsey

34| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Timing of application of core autonomous driving technologies

Level 1-2: Sensor • Level 1-2: Sensor technology (cameras and radars) is used to enhance the driver’s safety technology • Level 3-4: Sensors vs. mapping/telecom technology? - For the driver’s safety, a “redundancy” approach is necessary; sensor and mapping/communication technologies will likely be converged Level 3-4: Sensors vs. • Promising technologies in 2020-25: LiDAR, HD map, V2X, HVI, etc. mapping/telecom technology? Timing of application of core autonomous driving technologies (conceptual)

Redundancy is the duplication of critical components or functions V2X communication of a system with the intention of Interaction increasing reliability of the HVI system

Control Smart actuator DCU stands for domain control unit: In a high level of autonomous driving, individual Positioning software Integrated software electronic control units (ECUs) Decision need to be integrated to ensure ECU ADAS DCU Integrated DCU an integrated control of each Location recognition domain; in limited autonomous HD map + High-precision, satellite location determination system and mapping driving, ADAS DCU technology is used, and in full autonomous LiDAR driving, integrated DCU Recognition of driving technology is adopted environment Camera and radar sensors

2015 2020 2025 2030 Future

Source: Mirae Asset Daewoo Research

35| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research LiDAR sensor technology

LiDAR sensors are • LiDAR sensors measures the distance to a target by emitting a pulsed laser; they are provided for 3D scanning provided for 3D scanning; and locate targets more precisely than radar sensors • LiDAR sensor trend companies are focused on - LiDAR system companies are focusing on lowering prices and reducing sizes for 3D scanning systems lowering prices - Recent products tend to adopt solid state sensors and feature limited horizontal FoVs - The prices of 3D scanning systems are projected to fall below US$300 by 2020

Velodyne’s 3D scanning LiDAR systems Quanergy’s development of LiDAR sensors

Source: Velodyne Note: For the S3, horizontal FoV of 120°, maximum range of 150m, and distance accuracy of +/-5cm Source: Quanergy

36| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research LiDAR system market

LiDAR system market to • Demand for LiDAR sensors: 2.9mn units in 2016  10.6mn units in 2020 31.2mn units in 2025; LiDAR market to expand to US$1.4bn in grow rapidly on falling prices • Market size: US$300mn in 2016  US$1.4bn in 2020  US$6bn in 2025 2020 and US$6bn in 2025 • Module makers that design the structure of the entire LiDAR system modules and develop/install signal- processing software algorithms are promising, but they are all unlisted

Automotive LiDAR market outlook Value chain in automotive LiDAR module industry

(mn units) (US$bn) 35 3D LIDAR demand (LHS) 7 2D LIDAR demand (LHS) LIDAR chip LIDAR module System 30 Automotive LIDAR market (RHS) 6 Sensing technology Structural design and signal Integrated 25 5 processing technology Lasor light source Optics/Detection technology

20 4

15 3

10 2

5 1

0 0 '15 '16 '17F '18F '19F '20F '21F '22F '23F '24F '25F

Source: Strategy Analytics, Mirae Asset Daewoo Research Source: Mirae Asset Daewoo Research

37| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research HD map technology

Navigation maps • The deployment of Level 3-and-higher capabilities and enhancing the safety of autonomous vehicles require  ADAS HD maps robust location determination technologies • Methods of location determination: Navigation maps + GPS sensors  HD maps + high-precision GPS sensors +  autonomous driving dynamic information sensors HD maps • HD maps for ADAS are built by producing static driving data with 10-cm accuracy in a 3D format • HD maps for autonomous driving take a step further from HD maps for ADAS by including not just static information, but also dynamic information within a radius of 2-3km

Four layers of HD map for autonomous driving

Dynamic information (updated every one hour or in real time)

Localization layer (updated every one month to one week)

Lane model (updated every one month to one week)

Source: Mobility Research Center @ Doshisha University, Mirae Asset Daewoo Research

38| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Development of HD maps

ICT companies vs. map • ICT companies: With Google leading the pack, Apple, Alibaba, Tencent, and Uber are also strengthening their own service providers map services; at end-2016, a three-party consortium of NavInfo, Tencent, as well as Singapore’s sovereign wealth fund, GIC, and Intel acquired 10% and 15% in HERE, respectively • Map service providers: Leading players HERE and TomTom both released HD maps for ADAS covering the entire German highway network, and all interstate roads in California and Michigan; HERE and TomTom are jointly developing HD maps that reflect the dynamic driving environment with Mobileye and NVIDIA, respectively • Japan: The government is jointly developing an autonomous-driving-use HD map with the private sector (DMP)

Google’s HD map and map-data-acquiring DMP’s flow of information and Zenrin’s HD maps of HERE and TomTom cars HD map

Source: Google Source: HERE, TomTom Source: Dynamic Map Planning, Zenrin

39| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research HD map market

• The global ADAS/autonomous driving-use HD map market: US$400mn in 2020  US$3.7bn in 2025 US$400mn in 2020; • Korean players could gain the upper hand in the domestic market US$3.7bn in 2025 - Hyundai MnSOFT’s strengths: Captive market (HMG), real-time updating of dynamic information and connection of its algorithm with HMG’s autonomous driving system, cooperation with Mobileye - SK Telecom’s strengths: Success of T-map services, expansive communication network, massive R&D budget, and cooperation with NVIDA • HD maps could emerge as the key advertising platform  The O2O business could also become a lucrative profit model for HD map suppliers Hyundai MnSOFT’s HD map (above) and SKT’s cooperation with ADAS/autonomous driving-use HD map market outlook NVIDA (below)

(US$bn) 5 Automotive HD map market

4

3

2 3.7

1

0.4 0 2020F 2025F

Source: Strategy Analytics, Mirae Asset Daewoo Research Note 1: (Above) HD map demonstrated by HMC at the 2017 CES Note 2: (Below) SKT and NVIDIA agreed to jointly develop autonomous-driving-use HD map (May 2017) Source: Hyundai MnSOFT, SKT

40| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Importance of V2X communication

Essential for the safety of • For the safety of self-driving cars, information should be exchanged and shared via: 1) vehicle-to-vehicle (V2V); 2) self-driving cars vehicle-to-infrastructure (V2I); and vehicle-to-nomadic device (V2N) communications • For the communication of information on the external environment, autonomous vehicles require communication control units (CCU) • The US government made V2V communication system mandatory in all new automobiles by 2022 • The US’ National Highway Traffic Safety Administration (NHTSA) projects the total cost for a V2V system at US$341- 350 per new vehicle in 2020

Information network in automobiles Intelligent transportation system (ITS)

Source: Penta Security Source: Toyota

41| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Competing V2X telecommunication technologies

DSRC vs. cellular • DSRC (Dedicated Short Range Communication) vs. cellular (LTE/5G) V2X • DSRC refers to one-way or two-way short/medium-range wireless communication channels; the leading example of DSCR is WAVE - Strength: Lower mobile latency - Weakness: Need for establishing separate telecommunication infrastructure • Cellular V2X: Based on existing cellular networks - Strength: Reduction in infrastructure-related costs - Weakness: Longer mobile latency (which can be resolved through the application of 5G networks) • A growing number of companies are participating in the 5G Automotive Association (a proponent of cellular V2X)

Participants in 5GAA: Telcos/automakers/component suppliers/ chipmakers/infrastructure companies

Source: 5GAA

42| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research V2X telecommunication market

The V2X • The global V2X connected vehicle market is projected to grow to 10mn units in 2020, 20mn units in 2022, and 45mn units in 2025, driven in part by the proposed V2V communications mandate (US); Toyota is also looking to add V2V communications to telecommunication all new cars sold in the US and Japan, starting in 2020 market to grow to • The value of the market should expand to US$3.5bn in 2020, US$7bn in 2022, and US$15.8bn in 2025, which should benefit communication controller suppliers, security solution suppliers and telecommunication service providers US$3.5bn by 2020, • CCU modules: NXP Semiconductors and Cohda Wireless are garnering the largest market share (Qualcomm has acquired NXP US$15.8bn by 2025 semiconductors) • CCU system: Major automotive parts makers (e.g., Delphi, Denso, Continental, Bosch), LGE, etc. V2X module market outlook (CCU + installation cost + security V2X-connected vehicle market outlook tool + communication expenses)

(mn units) (US$bn) 20 V2X module market 50 V2X connected new vehicles

40 16

30 12

20 8 15.8

10 4 7.0

3.5

0 0 2020F 2022F 2025F 2020F 2022F 2025F Source: Visiongain, Mirae Asset Daewoo Research Source: NHTSA, Mirae Asset Daewoo Research

43| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research HVI technology

• Applications of existing human vehicle interface (HVI) technology have been limited to simple operations and display of Transition of manual information control holds the key in • HVI technology in the limited self-driving automation phase: near term • - In this phase, drivers need to receive the most relevant information in a timely manner - Stable and effective transition of control rights to be important • DMS: Driver Monitoring System • HVI technology in the full self-driving automation phase: In this phase, the importance of driving/safety information diminishes. • HUD: Head-up display • Significant changes in HVI input/output method: Multi-modal (voice, motion) input, augmented reality (AR) HUD output

Harman’s Etos concept: HVI proposal for partially-autonomous Infrared camera-based DMS: Real-time eye tracking system vehicles

Source: Harman Source: Volvo

44| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research HVI market outlook

Global HVI market • The HVI market can be divided into the: 1) display; and 2) component/software segments should grow to US$1.5bn • Stripping off the display segment, the value of the HVI market is projected to grow to US$1.5bn in 2020, and US$4.1bn in 2025 (versus US$800mn in 2016) in 2020, and US$4.1bn in • Leading players in the conventional cockpit electronics market, such as Continental, Bosch, Denso, and Visteon, 2025 are also vying for technology leadership in the HVI market • Automakers are now developing their proprietary integrated systems • Domestic HVI players include SEC (which acquired Harman), LGE, and Hyundai Mobis

Conventional cockpit electronics market leaders are also vying HVI market outlook (excluding display) for HVI market leadership (US$bn) 5 HVI market

4

3

2 4.1

2.5 1 1.5 1.0 0.8 0 2016 2018F 2020F 2022F 2025F

Source: Visteon Source: Industry data, Mirae Asset Daewoo Research

45| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research ~15% price premium to be fully justified

Unit cost of partially • The unit cost of manufacturing limited self-driving systems is forecast to be US$2,726 for 2025 autonomous driving - Cost breakdown: Sensors: US$596; HD map/location recognition: US$550; interaction: US$550; judgement: US$730; control: US$300 system is estimated at • The addition of the partial autonomous-driving option should drive up the vehicle’s price tag by an average of US$2,700 for 2025 US$4,000~5,000, a nearly 15% price premium versus conventional cars, which we believe can be fully justified by the actual benefits of the self-driving option • Self-driving EVs, which are expected to hit the road in earnest from 2025, should set a norm of new mobility hardware

Growing penetration of autonomous driving systems to push Breakdown of partially autonomous driving system down manufacturing cost manufacturing cost (2025F) (US$) (US$) 10,000 Level 3 3,000 Level 4 V2X 2,500 350 HVI 8,000 HD Map + GPS 200 Smart actuator 2,000 Software 550 6,000 ECU/DCU LIDAR 1,500 300 RADAR Camera 4,000 480 1,000

250 2,000 500 300 160 136 0 0 ~0% 10% 20% 30% 40% 50% 2025 Level 3 cost per vehicle Note: X-axis refers to the share of (limited) self-driving cars in total new vehicle units Source: Mirae Asset Daewoo Research Source: BCG ‘The Road to Autonomous Vehicle, Mirae Asset Daewoo Research

46| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research New opportunities for automotive industry

Value of the global • 2016: US$12.2bn Key market drivers include camera, radar, ECU, and software suppliers autonomous driving- • 2020: US$37.2bn (2016-20 CAGR of 32%)  Markets for relatively new technologies, such as LiDAR sensor, HD maps, V2X, HVI will likely begin to take shape related market to reach • 2025: US$88.8bn (2020-2025 CAGR of 19%)  Relatively new technologies should drive the entire market growth, US$88.8bn in 2025 (25% amid slowing growth of relatively conventional technologies CAGR)

Self-driving-related market to expand from US$12.2bn in 2016 to US$88.8bn in 2025

(US$bn) 100 V2X HVI 90 HD Map + GPS 80 Smart actuator CAGR 19% Software 70 ECU/DCU 60 LIDAR RADAR 50 Camera 40 CAGR 32%

30

20

10

0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Source: Mirae Asset Daewoo Research

47| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Stocks that deserve attention

Focus on beneficiaries of • ADAS sensor/system suppliers are already delivering stellar earnings growth autonomous driving - Sensor suppliers: Halla Holdings, LGE (Korea), ON Semiconductor, Infineon Technologies technology advance in - ADAS system suppliers: Mando, Hyundai Mobis (Korea), Continental, Delphi, Denso (Overseas) • Keep an eye on firms related to other self-driving technologies: SK Telecom (Korea), Nvidia, Qualcomm, and short/medium term Zenrin

Notable stocks

P/E (x) Stock Code Investment points 17F 18F 19F Subsidiary Mando-Hella Electronics posting rapid growth in sales of ADAS cameras Halla Holdings 060980 KS 8.0 9.3 8.6 and radars Supplies ADAS system for HMG; beneficiary of initial autonomous vehicle market growth; likely to further expand its no Mando 204320 KS 18.2 13.3 11.7 n-affiliated customer base

Domestic Korea Hyundai Mobis 012330 KS 10.4 8.5 7.8 Focusing on developing key autonomous driving technologies in-house; likely to play bigger role in captive market

LG Electronics 066570 KS 9.0 9.4 8.7 Expanded into camera software market; set to benefit from V2X communication control system market growth

SKT 017670 KS 8.2 7.9 8.0 Aggressive move into HD map and 5G V2X markets in Korea; possibility of transforming into platform player

ON Holds largest market share in camera image sensing chips; currently expanding ON US 15.5 13.5 12.3 Semiconductor into software market Equity investor and technology partner of major 3D scanning LiDAR module maker, Delphi DLPH US 14.3 13.5 12.4 Quanergy US Proposed central computer platform for autonomous driving using GPU parallel computation; currentlys holds a technol Nvidia NVDA US 71.0 52.1 45.6 ogical lead over rivals

Qualcomm QCOM US14.8 17.5 16.3 Recent acquisition of NXP Semiconductors should allow the firm to dominate telecommunication control module market Overseas Infineon Holds largest market share in radar sensing and processing chips; recently acquired IFX GR 28.6 25.7 22.9 Technologies LiDAR MEMS mirror market leader, Innoluce Germany Holds largest market share in radar modules; system supplier, with proprietary Continental CON GR 13.9 12.6 11.7 technology secured for all major sensor modules

Denso 6902 JP 21.5 17.0 15.9 Leader in most self-driving technologies, including ADAS sensor, V2X telecommunication system, and HVI Japan Zenrin 9474 JP59.8 44.1 38.2 Establishing HD map ecosystem in Japan, as Japan's leading map maker

Note: Based on closing prices of respective countries on November 3, 2017 Source: Bloomberg, Mirae Asset Daewoo Research

48| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research [Conclusion] Changes in market drivers over time

Key market-driving technologies: LiDAR sensor, HD Penetration of maps, V2X, HVI Self-driving-related Level 3 vehicles market size (%) (US$bn)

14 100

12 80 “Self-driving EV” to be the norm for 10 Market growth drivers: ADAS sensors/system ‘New Mobility’ hardware suppliers

60 8 Full-fledged penetration of partially autonomous cars

6 40

4 Production of partially autonomous cars ADAS functions begin to 20 be added to new cars 2

0 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

49| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research 2018 Outlook

New Mobility 2025 Mobility as a service (from ownership to sharing)

[Analyst] Youngho Park +822-3774-1743 [email protected]

Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. Conventional vehicles vs. New Mobility

New Mobility: Rise of • The new industry ecosystem is characterized by a service-oriented new mobility business, marking a departure car-sharing business from the traditional automotive industry, which has been driven by new car sales • Car-sharing is a representative business model for new mobility, which is defined as mobility-as-a-Service (MaaS) • The new ecosystem comprises both automotive industry players and new market participants; it will likely converge or generate synergy with driverless vehicles and eco-friendly cars (EVs)

Traditional automotive industry system vs. New Mobility

Traditional cars & Key elements New Mobility autonomous driving

Functionality - Driving mode selection - Single mode, without separate driving control - Autonomous or human driving - Self-driving only (Level 4 or higher)

- Automotive industry (including Proponents - Google, Uber, etc. automakers)

Business model - Car-as-a-Product (CaaP) - Mobility-as-a-Service (MaaS) - Ownership-centered model - Sharing-centered model

Key markets - Driver's license holders - Rapid growth via substitute goods - Limited growth in new car demand (massive market based on high TUO)

Implications - Stability in existing industries - Mobility concept in new industry ecosystem - Gradual consumer acceptance (self driving, xEV, smart infrastructure)

Source: IHS Automotive, Industry data, Mirae Asset Daewoo Research

51| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Overview of car-sharing business

Car-sharing (similar to rental car service) and ride-hailing service (a substitute for taxis) using service networks/apps

Types of car-sharing businesses

- Car-sharing service that enables car owners to rent out their own vehicles to other users for short Peer-to-peer car sharing periods of time

Car sharing - Similar to a conventional rental car business; hub-based and free-floating methods - The hub-based system is similar to a conventional rental car service; car-sharing companies rent out their own cars for short periods of time - The free-floating system allows users to select and pick up a vehicle and return it anywhere within a designated zone (the free-floating system helps increase the vehicle utilization rate of the shared-car fleet; Avis Budget’s Zipcar)

Peer-to-peer ride sharing - The service allows car owners to offer rides for a fare to others who wish to go in the same direction (including driver-rider matching apps)

Ride hailing - Drivers and service companies enter into a contract to provide a kind of taxi service (e.g., Uber, Didi Chuxing) - Service companies offer a full-range service, encompassing driver-rider matching, navigation service, and payment - Customers can use the service at designated pickup locations

Shared ride hailing - Like taxi-pool or van service, drivers pick up customers from different locations and drive them to their respective destinations - Major players include Uber Pool (Uber) and Lyft Line (Lyft)

Source: Strategy Analytics, Mirae Asset Daewoo Research

52| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Overview of car-sharing business

Car-sharing service player: Zipcar; ride -hailing service players: Uber, Didi Chuxing, Lyft

Major mobility service providers

Uber Gett

- EV valued at US$60bn - 1H15 gross bookings (total fares charged to app customers, - Major ride-hailing startup (Israeli) before drivers get their cut): US$3.63bn - Available in 60 cities around the world; No. 1 in Europe - 1H15 net revenue of US$663mn, up from US$495mn in - VW’s equity investment (US$300mn) 2014

Didi Chuxing Zipcar

- EV valued at US$15bn - Major car-sharing company, owned by Avis-Budget Group - Stakeholders include Alibaba and Tencent; 1.35mn drivers (US$500 acquisition in 2013) registered, as of May 2015 - Available in North America and Europe - 2015 gross profit of US$12bn; dominant player, with 80% of - 1mn car-sharing members across the world the Chinese market

Lyft Ola Cabs

- EV valued at US$4bn - Indian car-sharing company, worth US$5bn - Gross profit estimated at US$1bn in 2015 and US$1.2bn in - Gross profit of US$1bn 2016 - 80% market share in India - GM’s equity investment (US$500mn)

Source: Strategy Analytics, Mirae Asset Daewoo Research

53| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Car-sharing businesses by automakers

Automakers make forays • In response to competitive challenges from new entrants, such as Uber, Google, and Waymo, conventional into car-sharing business automakers are diversifying into the car-sharing market and other new businesses via the acquisition of startups • Conventional automakers have competitiveness in the car-sharing business, due to: 1) large captive demand bases from their own brands (high UIOs); and 2) ADAS technologies, which allow early access to the autonomous driving market

Car-sharing business by automakers

Source: Strategy Analytics, Mirae Asset Daewoo Research

54| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Car-sharing businesses by automakers

Automakers seeking to Automakers’ car-sharing businesses by region expand their car-sharing business beyond US and Automakers Car-sharing subsidiary/program Region

Western Europe into Quicar Germany (Hanover) Canada Audi Unite Sweden Audi at Home US Audi on Demand US (San Francisco) Car2Go Europe, US, Canada, Canada Mooval Europe Mooval North America US DriveNow Europe ReachNow US (Seattle) Citroen Multicity Carsharing Germany Mu by Peugeot France, Germany, Spain, UK

InMotion US, Europe, Asia (planned)

Sunfleet Sweden

Maven US Opel CarUnity Germany Ford Mobility Solutions LLC US, Europe GoDrive UK GoPark UK Dynamic Shuttle US (Dearborn, Michigan) Ford Credit Link US (Austin, Texas)

Ha:Mo Japan, Europe

Source: Strategy Analytics, Industry data, Mirae Asset Daewoo Research

55| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Car-sharing businesses by automakers

Automakers’ car-sharing services and programs are available in major cities around the world

GM’s car-hailing app, Maven Toyota’s car-sharing program, Cité lib by Ha:mo (France, hub-based)

Source: Strategy Analytics, Mirae Asset Daewoo Research Source: Strategy Analytics, Mirae Asset Daewoo Research

BMW’s car-sharing app, ReachNow (US, free-floating method)

Source: Strategy Analytics, Mirae Asset Daewoo Research

56| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Car-sharing business by automakers

Major automaker’s fee system for car-sharing services in the US

GM Maven Rate by car model Unit price (US$) Eco/compact/sedan Min. US$8 (per hour) SUV Min. US$14 (per hour)

Daimler Car2Go Service rate Unit price (US$) Registration (one-time sign-up fee) 35 Rate per minute 0.41 Rate per hour 14.99 Rate per day 84.99 Rate per minute (after 150 minutes) 0.45 Driver protection fee 1

BMW ReachNow Service rate Time Unit price (US$) Membership (registration) Lifetime 39 Model (Mini, BMW i3, 3-Series) 1 minute 0.49 Hourly rate 3 hours 50 12 hours 80 24 hours 110 Parking 1 minute 0.3

Source: Strategy Analytics, Company data, Mirae Asset Daewoo Research

57| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Car-sharing market landscape

Competition growing in • Automakers’ entry into the car-sharing market is accelerating car sharing, ride sharing, • China’s Didi Chuxing is aggressively expanding its stakes in leading car sharing service providers • The car sharing market, which has already been displaying sharp growth in the US and Europe, is now growing and ride hailing markets rapidly in China

Car-sharing and ride-sharing market landscape Competition in ride-hailing market

Investment Car2Go Maven DriveNow Uber Didi Chuxing

Zipcar Cambio Hertz 24/7

Car sharing Zoomcar

Lyft Grab

BlaBlaCar Chariot Scoop

SPLT Zimride Via 99 Ola Ride sharing Waze Carpool

Source: IHS Automotive, Industry data, Mirae Asset Daewoo Research Source: IHS Automotive, Industry data, Mirae Asset Daewoo Research

58| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Rise of car sharing: Evolution into a new mobility

Mobility-as-a-Service (MaaS), autonomous cars, and xEV to form a new mobility ecosystem

Synergies from MaaS, Autonomous, and xEV (2035) Synergies from MaaS, Autonomous, and xEV (2050)

Autonomous xEV xEV Autonomous

Mobility-as-a-Service

Mobility-as-a- Service

Source: IHS Automotive, Mirae Asset Daewoo Research Source: IHS Automotive, Mirae Asset Daewoo Research

Current mobility businesses Evolution of mobility businesses (2040)

Taxi, public transportation Autonomous on-demand mobility services Ride sharing(ride hailing) (Taxi/public transportation/rental car ＜ Rental vehicle Car sharing ＜ ride sharing (Ride Hailing)) Car sharing

Privately owned vehicle (owner/driver) Privately owned vehicle (owner/driver)

Source: IHS Automotive, Mirae Asset Daewoo Research Source: IHS Automotive, Mirae Asset Daewoo Research

59| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Car-sharing market outlook: Major assumptions

• Partially autonomous cars (level three and below) should not be able to spur the rapid shift to the complete ride sharing environment Inflection point for MaaS • Synergies from fully-autonomous cars (level 4 and over), V2X, and smart infrastructure should accelerate a shift to the sharing-oriented business environment

• Fully autonomous cars and xEVs should function more efficiently in smart infrastructure Synergies of MaaS, • The personally-owned vehicle market should be driven by high-performance/luxury autonomous cars, and xEV cars and hybrid cars • The MaaS, autonomous car, and xEV markets should display sharp growth after passing inflection points

• With the spread of shared vehicles, annual driving distance per car should increase sharply Increase in driving distances • When the car-sharing business sees full-fledged growth, the annual driving distance (higher per-vehicle utilization) of shared vehicles is projected to be 5.5 times longer than that of personally-owned vehicles (replacement cycle to decrease to five years or less)

• When the market reaches maturity, the car-sharing business’s ASP should fall to MaaS ASP US$0.11/km, about 10% of the current taxi business

60| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Car-sharing market outlook: New car demand

Full-scale production of • Car-sharing businesses (expected to eat into markets for rental car and taxi businesses) should continue to drive fully autonomous cars to ride-sharing market growth until the market for partially autonomous cars (Level 3 or below) takes shape • Once the mass-production of fully-autonomous cars (Level 4 or above) begins, the ride-sharing business (based enable car-sharing on smart infrastructure) should expand in earnest, thus sharply driving up the utilization of driverless cars in market to take shape in urban areas 2030 and beyond • The market for shared vehicles (led by fully autonomous cars) should begin to take shape in 2030, with shared- car demand likely to erode car-ownership demand from 2035 onwards

Long-term outlook for shared vehicles Shared vehicles as % of total new car demand

Level 4 Level 3 (%) (mn units) New vehicle demand fell Level 4 Level 3 Under level 2 Car ownership Under level 2 Car ownership 140 by annual average of 4.4% 100 0 0 0 0 0 0 1 2 2 3 3 2 7 120 11 90 18 14 100 80

80 13

70 60

60 40

20 50

0 40 15 16 17F 20F 21F 25F 30F 35F 40F 15 16 17F 20F 21F 25F 30F 35F 40F

Source: Strategy Analytics, IHS Automotive, Industry data, Mirae Asset Daewoo Research Source: Strategy Analytics, IHS Automotive, Industry data, Mirae Asset Daewoo Research

61| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Car-sharing market outlook: New car demand

Demand for car • Going forward, full-scale expansion of the ride-sharing market (led by fully-autonomous cars) should lead to a ownership to decline significant contraction of the market for car ownership; demand for car ownership is projected to decline sharply from 106mn units in 2035 to 7.38mn units in 2040 sharply from 2035 • For shared vehicles (mostly fully autonomous cars), the annual driving range is likely to rise sharply to 100,000- onwards 120,000km from the current 20,000km level • For fully autonomous cars, the ratio of car-sharing to car ownership could eventually reach up to 10:1

Changes in demand for car ownership and car sharing (for fully autonomous cars)

(mn units) 120.0 Car ownership Level 3 Level 4 100.0

Decrease in new vehicle demand for 80.0 ownership cars by annual average of 7%

60.0

40.0 Increase in demand for level 4 shared cars by annual average of 37% over 15 years from 2025

20.0

0.0 15 16 17F 20F 21F 25F 30F 35F 40F

Source: Strategy Analytics, IHS Automotive, Industry data, Mirae Asset Daewoo Research

62| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Car-sharing market outlook: UIO

Units of shared vehicles • Key market driver should shift from new car sales to car-sharing services in operation to rise to • In terms of units in operation (UIO), the shared vehicle market is projected to grow to 13.82mn units in 2025, 70.03mn units in 2030, 172.56mn units in 2035, 281.82mn units in 2040, and 316.38mn units in 2050 280mn in 2040, from • While new car demand (for ownership) is forecast to decline sharply from 2035, car demand for sharing purposes 14mn units in 2025 is projected to exceed demand for ownership by three times

Long-term demand outlook for shared vehicles (UIO) Shared vehicles as % of total vehicles (UIO)

(mn units) (%) Level 4 Level 3 Under level 2 Car ownership 2,000 Level 4 100 0 0 0 0 0 10 0 Level 3 2 4 5 Under level 2 1,800 Car ownership 8

90 11 1,600

1,400 80

1,200

70 1,000

800 60 15 16 17F 20F 21F 25F 30F 35F 40F 15 16 17F 20F 21F 25F 30F 35F 40F

Source: Strategy Analytics, IHS Automotive, Industry data, Mirae Asset Daewoo Research Source: Strategy Analytics, IHS Automotive, Industry data, Mirae Asset Daewoo Research

63| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Long-term car-sharing outlook

Car-sharing market • Annual average range of a shared vehicle to increase to 110,000 km by end-2040 forecast to expand from • Annual average revenue from a shared vehicle to rise to US$11,600 (US$0.11/km) US$197bn in 2025 to • The global car-sharing market to expand to US$197bn in 2025 and US$3.3tr in 2040 (when the market is expected to enter the maturation phase) US$3.3tr in 2040

Ride-sharing market outlook

(US$tr) 4.5 4% annual growth 4.0 4.0

3.5 3.3

3.0

15% annual growth 2.5

2.0 1.8

1.5

1.0 0.7 0.5 0.2 0.0 0.0 21F 25F 30F 35F 40F 50F

Source: Strategy Analytics, IHS Automotive, Industry data, Mirae Asset Daewoo Research

64| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Car-sharing market outlook- New vehicle sales vs. car sharing

Global automakers to • Fast-paced growth of the market for mobility as a service (MaaS) should continue for 15 years starting in 2020 continue to seek growth • Despite the slowdown in long-term growth potential of car-ownership demand, the automobile industry will likely enter a second period of strong growth in the medium/long term, supported by rapid growth of the car-sharing momentum in the new business mobility ecosystem • Meanwhile, the automobile industry is projected to suffer from sluggish growth (or even contraction in top-line) through 2035 from 2040, due to: 1) slower growth of the MaaS market; 2) an accelerated reduction in new car demand for ownership; and 3) growing competition from other industries

3)Car-sharing 새로운 산업 생태계로 market 대체에 outlook 따라 기존 자동차업계는 저성장 재현 또는 쇠퇴할 전망

(US$tr) MaaS market size (a) (L) Mid-to-long-term low growth (%) 8.0 New car sales (b) (L) Converting business environment to MaaS, 200 (a)/(b)*100 (R) Existing car business decline New competition system, including ICT companies

160 6.0 Automobile industry second long-term growth period High growth of MaaS market Supplementation of low growth of 120 existing automobile (sales) business 4.0

80

2.0 40

0.0 0 21F 25F 30F 35F 40F 50F

Source: Strategy Analytics, IHS Automotive, Industry data, Mirae Asset Daewoo Research

65| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research HMG’s responses to new mobility

• 2020-2022: Mass-production of Level 3 vehicles - Wider application of HDA (Highway Driving Assist), which is more advanced than Level 2 - Automatic lane changes, highway entry/exit, interchange entry/exit Mass-production of autonomous cars • 2030: Mass-production of fully autonomous cars (Level 4 or higher)

• Recruited Lee Jin-woo, former R&D head of GM's driverless car project • Partnerships with Mobileye, Nvidia, Intel, Cisco (sensor fusion, AI, Connected cars and V2X) Key autonomous driving technologies • Two-pronged approaches: Standardized open platform/affordable autonomous cars (incl. connected cars, V2X) • Development of HD map, a key autonomous driving technology, via Hyundai MnSOFT

• Lineup expansion from 14 models in 2017 (HEV: 6, PHEV: 4, BEV: 3, FCEV: 1) to 31 models in 2020 (HEV: 10, PHEV: 11, BEV: 8, FCEV: 2) Lineup of eco-friendly cars • Slower increase in the share of PHEV, BEV, and FCEV in the xEV lineup vs. European peers (HEV, xEV) • Responses to fuel economy improvements (wider application of hybrid and rapid mass- production of FCEVs); xEV strategy focused on China

• Incorporation of EV platform and autonomous cars to car-sharing business in Western Europe (e.g., the Netherlands) • Car-sharing service in partnership with Hyundai Capital in April 2017 (to meet car rental MaaS strategies demand) - Deployment of EVs (e.g., IONIQ) against domestic rivals, such as SOCAR and Green Car • Distinctive free floating model (greater flexibility in pickup and returns)

66| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Valuation: Traditional automotive industry

Valuation declines in • Automakers centered on ICE vehicles and their OEM part suppliers have seen a decline in valuations since the automotive sector: global financial crisis Differentiation hinges on • In contrast, Chinese automakers have enjoyed an increase in market caps and valuations since 2016 ability to ride growth • The robust medium- and long-term outlook for the eco-friendly cars (autonomous cars, EVs) indicates technology momentum over will be differentiating factor in the automobile and component markets • Automakers, which have successfully responded to new mobility, will likely demonstrate growth momentum from medium and long term around 2020

MSCI World Automobiles Index: 12M forward PER MSCI ACWI Components Index: 12M forward PER

(x) (x) 18 Global US 21 Global US Europe Japan Europe Japan Korea China Korea 15 18

15 12

12 9

9

6 6

3 3

0 0 10 11 12 13 14 15 16 17 18 19 20 10 11 12 13 14 15 16 17 18 19 20 Source: Thomson Reuters, Mirae Asset Daewoo Research Source: Thomson Reuters, Mirae Asset Daewoo Research

67| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Notable automakers in new mobility environment

European and US • 1) Technological leadership in autonomous driving and xEV; 2) competitiveness in car-sharing demand base automakers (GM, (high UIOs) • GM: Equity ownership in Lyft, a major US ride-hailing service provider Daimler, BMW, • Daimler: Advance to the car-sharing business via Car2Go (largest car rental company in Europe) VW) • BMW: Expand car-sharing business in Europe and North America via DriveNow/ReachNow platforms • VW: Expand car-sharing business through the acquisition of Quicar and Gett (an Israeli startup)

Notable automakers

PER(x) Company Country Code Investment points 2017F 2018F 2019F - Organic expansion to the mobility service business via cruise automation, equity GM US GM US 6.7 7.3 7.3 investments in Lyft and EV production - Early deployment of fully-autonomous Chevrolet Bolt (Level 4 or higher) in car- sharing business (early 2020) Daimler Germany DAI GR 8.0 8.1 8.0 - Leadership in autonomous driving technologies (e.g., ADAS) - Mass-production of fully autonomous cars and next-generation EVs in 2020 (via Generation EQ lineup) - Advance into car-sharing business via Car2Go (largest car rental company in Europe) - Expand car-sharing business in Europe and North America via its lineup (e.g., BMW Germany BMW GR 8.1 8.1 7.8 DriveNow/ReachNow platform) - Partnership with Intel, Mobileye, and Baidu; scheduled mass-production of eco- friendly autonomous car, iNEXT, for 2021 - Plans to build ID concept lineup converging EV, autonomous cars, and car-sharing VW Germany VOW GR 7.1 6.5 6.2 businesses - Scheduled mass-production of Level 4-or-higher autonomous cars in 2021 - Introduction of fully autonomous driving technology using AI, strategic partnership with NVIDIA - Well positioned to enter the car-sharing business (in terms of UIOs) like its peer GM

Note: VW is Volkswagen Group; Based on closing prices of respective countries on November 3, 2017 Source: Bloomberg, Industry data, Mirae Asset Daewoo Research

68| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research [Conclusion] Investment strategy in a new mobility environment

Growth momentum will likely reemerge during 2025 and 2035, preceded by share re-rating; promising players include GM, Daimler, BMW, and VW

(mn units) (pt) 160 Global new car demand (L) 280 MSCI World Automobiles Index (R) Car-sharing market 140 240

Fast-growing EMs in post-crisis period → 120 Recovery of DMs 200 (earnings turnaround effects)

100 160 Changes in industry Greater ‘economies of scale’ in ecosystem: Ownership car-sharing market  sharing → Renewed growth momentum 80 for automakers 120 GM (PER 17F 6.7x, 18F 7.3x) Daimler (PER 17F 8.0x, 18F 8.1x) BMW (PER 17F 8.1x, 18F 8.1x) Partial autonomous driving VW (PER 17F 7.1x, 18F 6.5x) 60 technologies 80 (Level 3 or lower) → Strong growth momentum for parts suppliers

40 40 2006 20162026F 2026 20362036F Note: VW refers to Volkswagen Group Source: Thomson Reuters, Mirae Asset Daewoo Research

69| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research APPENDIX 1

Important Disclosures & Disclaimers 2-Year Rating and Target Price History

Company (Code) Date Rating Target Price (W) LG Chem LG Chem(051910) 10/26/2017 Buy 530,000 600,000 07/19/2017 Buy 450,000 500,000 07/05/2017 Buy 410,000 09/11/2016 Buy 370,000 400,000 06/01/2016 Buy 400,000 300,000 03/22/2016 Buy 420,000 200,000 10/18/2015 Buy 400,000 100,000

0 Nov 15 Nov 16 Nov 17

Stock Ratings Industry Ratings Buy : Relative performance of 20% or greater Overweight : Fundamentals are favorable or improving Trading Buy : Relative performance of 10% or greater, but with volatility Neutral : Fundamentals are steady without any material changes Hold : Relative performance of -10% and 10% Underweight : Fundamentals are unfavorable or worsening Sell : Relative performance of -10%

Ratings and Target Price History (Share price (─), Target price (▬), Not covered (■), Buy (▲), Trading Buy (■), Hold (●), Sell (◆)) * Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months. * Although it is not part of the official ratings at Mirae Asset Daewoo Co., Ltd., we may call a trading opportunity in case there is a technical or short-term material development. * The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst’s estimate of future earnings. * The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic conditions.

Equity Ratings Distribution & Investment Banking Services Buy Trading Buy Hold Sell Equity Ratings Distribution 74.52% 12.50% 12.98% 0.00% Investment Banking Services 70.73% 19.51% 9.76% 0.00% * Based on recommendations in the last 12-months (as of September 30, 2017)

70| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research APPENDIX 1

Disclosures As of the publication date, Mirae Asset Daewoo Co., Ltd. and/or its affiliates do not have any special interest with the subject company and do not own 1% or more of the subject company's shares outstanding.

Analyst Certification The research analysts who prepared this report (the “Analysts”) are registered with the Korea Financial Investment Association and are subject to Korean securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws or regulations thereof. Each Analyst responsible for the preparation of this report certifies that (i) all views expressed in this report accurately reflect the personal views of the Analyst about any and all of the issuers and securities named in this report and (ii) no part of the compensation of the Analyst was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report. Mirae Asset Daewoo Co., Ltd. (“Mirae Asset Daewoo”) policy prohibits its Analysts and members of their households from owning securities of any company in the Analyst’s area of coverage, and the Analysts do not serve as an officer, director or advisory board member of the subject companies. Except as otherwise specified herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this report. Like all employees of Mirae Asset Daewoo, the Analysts receive compensation that is determined by overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading and private client division. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or Mirae Asset Daewoo except as otherwise stated herein.

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71| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research APPENDIX 1

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72| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research Mirae Asset Daewoo International Network

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73| 2018 Outlook [New Mobility 2025] Mirae Asset Daewoo Research