Global Alternative Propulsion Outlook & Analysis

Home , Beijing Benz, Beijing Hyundai, BMW Brilliance, Changan PSA, Dongfeng Renault, Dongfeng Yueda Kia

Brian Maxim, Vice President, Global Powertrain Forecasting 855.734.4590 ext. 1004

Automotive Outlook Symposium June 1, 2018 2 Automotive Outlook Symposium June 1, 2018 Global Light Vehicle Production by Fuel Type Other Fuels EREV Fuel Cell 2010 0.45% 2020 0.15% Hybrid - Gas EV 0.01% Hybrid - Gas 0.95% 0.03% Diesel Diesel 3.70% 18.94% 16.98% Other Fuels 0.42%

EREV 0.00% Gas Hybrid - Diesel 79.63% Fuel Cell Gas Hybrid - Diesel 0.00% EV 0.00% 76.55% 0.25% 1.93%

Fuel Cell EREV Other Fuels 2025 2017 0.00% 0.16% 0.47% Fuel Cell Diesel Hybrid - Gas Hybrid - Gas 0.01% 18.45% 2.72% EREV Diesel 4.82% 0.15% 16.30% Other Fuels 0.48%

Hybrid - Diesel Gas 0.22% Hybrid - Diesel EV 77.15% Gas 0.31% EV 74.98% 2.94% 0.83%

Source: AutoForecast Solutions – May 2018

3 Automotive Outlook Symposium June 1, 2018 Global Engine Volumes -By Major Configuration

120 Top 4 Engine Configurations

100

Volume (Millions) Volume 20

I4 I3 V6 V8

I3 Total I3 By Region 14 8 12 +41% 10 6 8 4 6 4 2 Volume (Millions) Volume

2 (Millions) Volume 0 0 4 AP WE EE NA SA Source: AutoForecast Solutions – May 2018

4 Automotive Outlook Symposium June 1, 2018 Global Engine Trends • Programs gravitating down similar paths • Smaller engine programs looking fairly similar • 2.0L I4 GDI Turbo • Still replacing smaller V6s • Offered as upgrade to non-turbo 2.0L • 1.5L GDI Turbo • Some are 1.4L or 1.6L • Replacing larger I4s • 1.0L GDI Turbo • Replacing medium and small I3/I4s • 3.0L 6-cylinder with GDI • 3.0L is a global approach • Fiat Chrysler (FCA), GM and Ford differ slightly • V8s diverge • Reserved more for sports cars and truck based vehicles • Non-NA assemblers were first to choose GDI • NA assemblers going different paths, embracing different technologies 5

5 Automotive Outlook Symposium June 1, 2018 Accelerated Global GDI Adoption

14 Turbocharged GDI Adoption 12 10 8 6 4

VOLUME (MILLIONS) 2 0

AP NA WE EE ME/A SA

GDI Adoption Gasoline Turbo Adoption 15 20 10 10 5

0 0 VOLUME (MILLIONS) VOLUME (MILLIONS)

AP NA WE EE SA ME/A AP NA WE EE ME/A SA

Source: AutoForecast Solutions – May 2018

6 Automotive Outlook Symposium June 1, 2018 Light Vehicle Diesel Volume Analysis

Global Diesel 20 18 Growth in Asia and North 16 America 14 • India and China lead the way 12 • Europe now shrinking 10 • Growth in North America 8 6 Volume (Millions) Volume 4 2 North America 0 1,150

1,100

AP WE EE NA ME/A SA 1,050

1,000

North America adding applications Volume (000) 950 • Small diesels on full-sized pickups • Car applications now shrinking 900 Fuel and purchase price cost pressures still a factor 7 Source: AutoForecast Solutions – May 2018

7 Automotive Outlook Symposium June 1, 2018 8 Automotive Outlook Symposium June 1, 2018 Global Transmission Trends - By Type

TRANSMISSION TYPE Manuals still dominate, but 2025 shrinking Manual • Europe and developing markets now 2017 40% shifting to non-manual options 2010 Automatic 43% 28% • DCTs and CVTs gaining ground 31% 55% 35% • Traditional automatics hang on by using newer technologies 3%7% 11% 15% 17% DCT 15% CVT

50% Global Share by Type

40%

30%

20%

Global Share 10%

Man Auto DCT CVT 9 Source: AutoForecast Solutions – May 2018

9 Automotive Outlook Symposium June 1, 2018 Global Automatic Adoption - Traditional Automatics

Regional Consumption Volumes 14 Influenced by North America and 12 Europe 10 • Asia Volumes mostly from China • North America prefers the traditional 8 automatic 6 • Europe prefers manuals and DCTs, 4 keeping volumes low 2 VOLUME (MILLIONS) 0 Automatic Share of Region 30% AP NA WE EE SA ME/A 25% 20%

15%

10% Global Share Global 5%

AP NA WE EE SA ME 10 Source: AutoForecast Solutions – May 2018

10 Automotive Outlook Symposium June 1, 2018 Global CVT Adoption

Regional Consumption Volumes 14 Strong Japanese Influence 12 • Asia volumes initiated with Japan but 10 now significantly growing due to China 8 • North America is a result of Japan • Europe prefer DCTs and automatics 6 4 2 VOLUME (MILLIONS) 0 CVT Share of Region 25%

AP NA EE WE ME/A SA 20%

15%

10% Global Share Global 5%

NA AP EE WE ME/A SA 11 Source: AutoForecast Solutions – May 2018

11 Automotive Outlook Symposium June 1, 2018 Global DCT Adoption

12 Regional Consumption Volumes Strong European Influence 10 • Asia Volumes mostly from China 8 • Europe volumes fairly low due to preferring manuals 6 • North America influenced some by 4 Europe

VOLUME (MILLIONS) 2

0 DCT Share of Region 25%

AP WE EE NA SA ME/A 20% 15%

10% Global Share Global 5%

WE EE AP NA SA ME/A 12 Source: AutoForecast Solutions – May 2018

12 Automotive Outlook Symposium June 1, 2018 Future of Traditional Powertrains

• Engines Become More Efficient • Revolution in Transmissions • Gasoline Direct Injection (GDI) Growing • Traditional Automatics With Up to 10 Gears • Growing from less than 5% (2002) to more than 43% (2025) of • 7-, 8- and 9- speed FWD units global market • 8-, 9- and 10-speed RWD units • Significant Expansion of Turbocharging • Increase in Continuously Variable Transmissions (CVTs) • Especially combined with GDI • More Japanese influenced vehicles and many hybrids • Increasing Electrification • Growth in China by specific vehicle assemblers • Stop/Start and BAS Systems Solidify IC engines • Growth in Dual-Clutch Transmissions (DCTs) • Electrified turbochargers • More for Europe, South America and China • Starting to show up in limited applications • Special Versions Being Developed for Hybrid Applications • Electric Superchargers on the Horizon • Electric motor integration into automatics • Replacing mechanical turbochargers • Transmissions Beginning to Grow on EVs • Compressed Ignition, Direct Injection Gasoline Engines • Allowing for better performance on both highways and city streets • Around 2019 – Mazda leading the way • Electronic Valvetrain • Expected after 2023CY

13 Automotive Outlook Symposium June 1, 2018 14 Automotive Outlook Symposium June 1, 2018 North America Engine Volumes -By Major Configuration

20 Top 3 Engine Configurations

5 Volume (Millions) Volume

I4 V6 V8

H4 I3 500 800

400 +299% +180% 600 300 400 200 Volume (000) Volume Volume (000) Volume 100 200

0 0 15 Source: AutoForecast Solutions – May 2018

15 Automotive Outlook Symposium June 1, 2018 North America Transmission Trends Automatic Transmission Trends DCT 5.6% 14 CVT DCT 23.2% 12 4.1% 2025 CVT 10 A8 A10 19.4% CVT DCT 8 A6 6.7% 1.7% 2017 A9 6 Manual Manual 2010 A6 7.6% 4 A5 5.3% Auto A8 Manual 84.0% 2 Consumption Volume (Millions) A4 5.1% Auto 0 71.2% Auto 2010 2017 2025 66.1% A10 0 637,323 3,929,446 A9 0 883,835 2,181,068 A8 13,350 2,635,423 4,453,881 A7 124,585 283,330 61,099 A6 5,217,244 7,116,474 894,539 A5 Auto Manual CVT DCT 2,331,816 305,228 95,936 A4 2,362,300 189,389 6,248 A1 1,219 30,530 12,931

Source: AutoForecast Solutions – May 2018

16 Automotive Outlook Symposium June 1, 2018 Fuel Price Effect on Powertrain • Falling fuel prices – fuel economy less important • Consumers choosing larger engines again • Choosing different vehicles with larger engines Small diesel programs • Hybrid and EV growth limited being revived for pickups • More difficult to justify added costs and/or compromises • China is bucking the trend and growing • Higher fuel prices in Europe and possible city bans of IC engines generating more interest

Monthly US Fuel Economy, Weighted by New Vehicle Sales* 27.0 26.0 25.0 24.0 MPG 23.0 22.0 21.0 20.0

Sales of fuel efficient vehicles in North America are driven

more by government incentives and mandates than by * From the Transportation Research Institute, consumer preferences University of Michigan

17 Automotive Outlook Symposium June 1, 2018 18 Automotive Outlook Symposium June 1, 2018 New Electrified Vehicles

19 Automotive Outlook Symposium June 1, 2018 New Electric Platforms

Volkswagen’s MEB Platform Daimler’s EVA Platform

20 Automotive Outlook Symposium June 1, 2018 Dedicated Electric Platform Production Volume 2.5

2.0

1.5

Millions 1.0

0.5

0.0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 EV Platform volumes

Source: AutoForecast Solutions – May 2018

21 Automotive Outlook Symposium June 1, 2018 EV Market Sizing • Conservative Forecast EV Market Outlook • Who wants to build what AFS Forecast vs. VM Announced Plans • Each individual program is scrutinized • What is the likelihood the program will be 12 built and then survive 2025 BEV Market • What other factors come into play 10 AFS = 3.3 Million Variance to • Consumer preferences Optimist Announced Plans = 6.4 Million • Government mandates 8 Viewpoint Optimist View = 10.7 Million • Fuel prices and availability 6 • Materials scarcity Variance to Battery Price Parity Millions 4 Outlook • What If the Optimists Are Right? BEV 63 Brand Owners 2 • MaintainBuilding the “Hockey BEVs Stick” growth Production • EVs represent 10% of global market 0 Outlook • Battery price parity will change everything! • This time it is different!

AFS Legacy VMs AFS Start-Up Legacy - Plan Variance Start-Up Variance Optimist Adds Source: AutoForecast Solutions – May 2018

22 Automotive Outlook Symposium June 1, 2018 Global EV Analysis • Global EV market will remain highly Available EV Nameplates fragmented in 2025 300 • Several OEMs command bulk of the volume • Top 5 OEMs account for 48% 250 • Top 10 OEMS account for 64% • Top OEMs still have significant proliferation of EVs 200 Just under 11k units • Top 5 OEMs account for 82 nameplates, per nameplate averaging 18k units per nameplate 285 EV Nameplates Top 10 OEMS account for 114 nameplates, 150 • in 2025 in 2025 averaging 17k units per nameplate Count • Top 3 OEMS 100 • Volkswagen expected to produce the most • 372k units in 2025, with 31 nameplates 50 88 EV OEMs in 2025 • Tesla expected to be a close second • 340k units in 2025, with 5 nameplates 0 • Geely expected to be third • 296k units in 2025, with 22 nameplates Calendar Year

Source: AutoForecast Solutions – May 2018

23 Automotive Outlook Symposium June 1, 2018 Great Deal of Confusion About Electrification

• Not All “Hybrids” Are Created Equal • Differences Among Mild Hybrids • Full Hybrids • Audi A8 and A7 • Electric motor can move the car alone, without IC engine • Very sophisticated stop-start systems • Plug-In Hybrids • Does not help move the vehicle • Consumer can plug vehicle in like a BEV • All Volvo vehicles 2019+ • Mild Hybrids • Helps move the vehicle a little bit • Electric motor helps move the car but can not power the car alone • New future strategy after fading safety path • Micro Hybrids • 48 Volt Hybrids • Generally, a stop-start system which does not help move the • Most will be non-hybrids, being stop-start systems vehicle, thus, not a real hybrid • Most real hybrid versions will most likely be mild • 48 Volt Hybrids • Some hybrid versions will offer some minimal physical power, • Many are not actual hybrids making them a full hybrid • True versions are usually mild hybrids • Battery Alternator Starters (BAS)

24 Automotive Outlook Symposium June 1, 2018 Electrification Is Usually Pushed By Mandates

• Strategies Driven More by Mandates • Proper Strategies • Renault/Nissan • Tesla • Leaf • Exclusive and expensive performance vehicles • General Motors • First new auto manufacturer in NA in decades • Volt and Bolt • Volvo • Ford • Trying to raise already upmarket vehicles • Focus EV • Maserati • Fiat/Chrysler • Improving performance on exclusive vehicles • Fiat 500 • BMW • Volkswagen • i3, i8 • VW brand, adding ID sub-brand • Volkswagen • Most Chinese Manufacturers • Bentley, Porsche, Audi • Adding EVs • Adding PHEVs

New technologies are almost always rolled out on luxury vehicles and then migrate down to less expensive vehicles. (Air conditioning, electric windows and locks, heated seats, blind spot detection, automatic headlights, etc.)

25 Automotive Outlook Symposium June 1, 2018 Differing OEM Viewpoints

• Electrification Adopters • The Resistance • Renault/Nissan • Mazda • Nissan Leaf and NV200 EVs • No EVs or hybrids • Renault Kangoo, Zoe and Twizy EVs • Rather refine current technologies • Volkswagen • CIDI gasoline engines • New direction to avoid past diesel issues • Growing diesel volumes • Creating ID sub-brand to Volkswagen • Fiat/Chrysler • “Electrifying” Audi, Porsche and Bentley • Losing money on each hybrid and EV • Most Chinese Manufacturers • Marchionne has come out said not to buy Fiat 500 EVs • Adding EVs • Toyota – Sort of • BAIC, BYD, Changan, Chery, Dongfeng, Geely, Jianghuai, Jiangling, SAIC, • Fully embracing hybrids Zotye • Avoiding EVs as much as possible • Adding PHEVs • China forcing production • BYD, Chery, Dongfeng, FAW, GAC, Geely, SAIC

26 Automotive Outlook Symposium June 1, 2018 Future Hybrid Trends

• Most future programs will follow two separate • Hybrid strategies are advancing, morphing with paths some becoming much more refined • 48 Volt Hybrids • Instead of many different engine combinations, BMW • Most cost effective way to provide a hybrid is settling on a couple for PHEV systems • Usually a Belt Alternator System (BAS) • Mainly a 2.0L gasoline turbo • Significant increase in 48 volt vehicles expected • Many more systems will be brought to market under • Makes it a lot easier to add a mild hybrid later the “hybrid” title • Plug-In Hybrids (PHEVs) • Some will not be genuine hybrids • Government mandates forcing traditional HEVs to be • Much like the Audi system replaced by PHEVs • Many will try to green-wash a brand • Over 90% of consumers rather have an HEV over a • Some brands see mild hybrids as a way to PHEV differentiate themselves • PHEV costs more than a traditional HEV • Audi, Volvo, Lincoln, Maserati • Most consumers who will buy PHEVs will use them as • Proliferation of mild hybrids can ease consumers into HEVs accepting more sophisticated electrified vehicles • PHEVs usually have a greater battery capacity, allowing for more government incentives • Stepping stone to PHEVs and EVs

27 Automotive Outlook Symposium June 1, 2018 Light Vehicle Hybrid Volume Analysis Global growth expected Global Hybrid Production • China is driving most of the growth 6 • Many new hybrids planned 5 • Many near luxury models • Toyota is currently the clear leader 4 Regional volumes are based on vehicle production 3 • Many hybrids are exported from

Millions OEM’s home market 2

1 North America 1,400 0 1,200

1,000

AP NA WE EE ME/A 800

600

400 North America is planning to add applications and volume (000) Volume • Attempting to meet future fuel economy related mandates 200 • Adding hybrids to full-sized pickups 0 Significant pressure from low fuel prices and fickle consumers 28 Source: AutoForecast Solutions – May 2018

Automotive Outlook Symposium June 1, 2018 Light Vehicle AWDe Volume Analysis

Global AWDe Vehicles Global growth expected 2,000 • Current volumes are conservative 1,800 • More programs expected to be announced 1,600 • All major OEMs adding applications and volume 1,400 • Some are dabbling 1,200 • Others, like Geely, plan to fully embrace 1,000 AWDe 800 Volume (000) Volume 600 North America AWDe 400 500 200 450 0 400 350 300 AP WE NA EE 250 200 Volume (000) 150 Significant Growth in Asia, Western Europe and North America 100 Greatly helps justifying added costs 50 • 0 • Vehicle receives AWD and a hybrid system for the same price • Additional applications and volumes expected toward end of the forecast window 29 Source: AutoForecast Solutions – May 2018

29 Automotive Outlook Symposium June 1, 2018 eAxle Hybrid Systems • Huge growth area expanding now • Modular design • Flexible enough for multiple vehicles and platforms • Greater ROI • Provides Electronic All Wheel Drive (AWDe) • The cost of the systems come with two benefits, not just one • Better consumer pricing • Many suppliers will offer systems • GKN • American Axle • Dana • ZF • Bosch • Magna 30

30 Automotive Outlook Symposium June 1, 2018 China – The Wild Card • North America has moderate growth • China • Strong steady growth • Strong push by government to increase sales of EVs • Greatly dependent on fuel prices and PHEVs • Greatly dependent on government mandates • Incentives for consumers to purchase electrified vehicles • Mandates for local assemblers to offer EVs and PHEVs • Trump effect may reduce overall volumes • Easy to acquire license plates for EVs and PHEVs • Europe will have more vigorous growth • Government has the ability to use “stick” methods • Strong push from regional governments • Other countries and regions must rely on just using “carrots” • Push to invoke quotas and ICE bans • Can’t strong-arm any regulations into place • Much higher fuel prices than the Americas • Huge market and population • Payback on HEVs and EVs is much faster • A small percentage of the market can add up to significant • Recent bad publicity for diesel making consumers volumes reconsider electrified options • Population broken up into either strongly rural or completely urban groupings • Little to no electricity in rural areas • Number of cities much larger than other countries

31 Automotive Outlook Symposium June 1, 2018 China HEV Market Sizing

• Government push for PHEV started after an earlier, TOP 10 HEV ASSEMBLERS - 2025 stronger push for EVs Karma • Chinese government didn’t want local manufacturers to play Automotive 2% Top 5 HEV assemblers catch-up to foreign HEV programs SAIC GM 3% account for 70% in 2025 • Wanted to leap-frog technologies and go right to EVs, in OTHER hopes to command dominance Great Wall 13% Geely Group • After poor sales and strong push back from manufacturers, Automobile 33% 3% the Chinese governments allowed provisions for PHEVs FAW • Regular HEVs are considered the same as other ICE Volkswagen FAW Changan Ford vehicles 4% 14% Toyota BYD • As a result of the late allowances for PHEVs, many more EV Zotye Auto 7% 10% 5% programs are currently planned than PHEVs GAC Toyota • More PHEV programs expected, as time goes on 6% • PHEVs tend to have an easier fit than EVs • Rural areas lack electricity, in general • Having a charging station near your apartment or condo may be difficult at times China accounts for over 1M HEV vehicles in 2025 Source: AutoForecast Solutions – May 2018

32 Automotive Outlook Symposium June 1, 2018 China HEV Market Sizing (cont’d)

2025CY HEV Manufacturers

• Beijing Hyundai (1) • Dongfeng Nissan (1) • Jiangxi Hanteng (2) • Beiqi Foton (5) • FAW Car (3) • Karma Automotive (1) • BMW Brilliance (5) • FAW Toyota (3) • Nanjing Iveco (1) Total HEV models in • Brilliance Jinbei (1) • FAW Volkswagen (7) • Renault-Brilliance (1) 2025 = • BYD (7) • GAC Hino (1) • SAIC GM (7) • Changan Auto (1) • GAC Honda (1) • SAIC GM Dongyue (1) 100 • Changan Ford (8) • GAC Motor (2) • SAIC GM Norsom (3) • Changan PSA (3) • GAC Toyota (4) • SAIC Motor (2) • Chery (3) • Geely Group (16) • SAIC VW (3) • Dongfeng Honda (2) • Great Wall (1) • SAIC-GM-Wuling (2) • Zotye Auto (2)

33 Automotive Outlook Symposium June 1, 2018 China EV Analysis • Chinese EV market will remain highly fragmented in 2025 EV Nameplates Produced Locally • Several OEMs command bulk of the 180 volume • Top 5 OEMs account for 47% 160 • Top 10 OEMS account for 67%

140 • Top OEMs still have significant proliferation of EVs 120 Just over 9k units • Top 5 OEMs account for 47 nameplates, 165 EV Nameplates averaging 15k units per nameplate per nameplate 100 in 2025 • Top 10 OEMS account for 71 in 2025 nameplates, averaging 14k units per

Count 80 nameplate • Top 3 OEMS in China 60 • Geely expected to produce the most 40 • 292k units in 2025, with 22 nameplates 63 EV OEMs in 2025 • BAIC expected to be a close second 20 • 187k units in 2025, with 10 nameplates

0 • GAC Motors expected to be third • 81k units in 2025, with 5 nameplates

Calendar Year 34 Source: AutoForecast Solutions – May 2018

34 Automotive Outlook Symposium June 1, 2018 China EV Market Sizing

• TOP 10 EV ASSEMBLERS - 2025 Substantial Growth Expected For EVs in China • Plans were being formulated before PHEV concepts • Due to government mandates • Many new manufacturers have received approval

Geely Group • Chinese government may issue more for EVs 20% • Has led to a very fragmented landscape OTHER BAIC Motor 32% 12% • Not all programs will come to fruition or survive • Most programs greatly aided by non-domestic partners GAC Motor • Chinese government wants an injection of EV technology to 5% help domestic manufacturers NEVS • Bulk of growth from license plate strategy 3% Guojin Auto 63 Brand Owners Jiangling 5% • Cheap and easy to get license plates for EVs and PHEVs, where BYD Building BEVs Holdings Jianghuai 5% as traditional IC engine vehicles and regular HEVs must go to Beijing Benz 4% 4% Future Mobility an expensive and limited auction process 5% 5% • Previous incentives had fallen flat, even when they brought EV purchase prices below that of a comparable ICE vehicle • China will account for over half of the EV volumes in 2025 China accounts for roughly 1.5M EV vehicles in 2025

Source: AutoForecast Solutions – May 2018

35 Automotive Outlook Symposium June 1, 2018 China EV Market Sizing (Cont’d)

Manufacturers Adding EVs (# of EVs in 2025CY) • BAIC Motor (10) • Dongfeng Nanchong (1) • Hawtai (2) • South-east Automobile (2) • BAIC-Yinxiang (2) • Dongfeng PV (2) • HK Motors (1) • WM Motor (1) • Beijing Benz (4) • Dongfeng Renault (1) • Hozon Auto (3) • Youxia (1) • Dongfeng Yu’an (1) Jianghuai (8) • Beijing Hyundai (1) • • Yudo Auto (2) • Dongfeng Yueda Kia (1) • Jiangjuai-VW (1) • Beiqi Foton (2) • Zhengzhou Nissan (2) • BMW Brilliance (5) • Dongfeng –Luxgen (1) • Jiangling Holdings (7) • Zotye Auto (6) • Brilliance Jinbei (1) • Faw Haima (1) • Kandi Electric Vehicles (1) • BYD (7) • FAW Toyota (1) • LeapMotors (1) • FAW Volkswagen (3) • BYD Daimler (1) • LeEco (2) Total EV models • CH Auto (1) • FDG Electric Vehicles (1) • Nanjing Iveco (1) • Changan Auto (5) • Fujian New Longma (1) • NEVS (2) in 2025 = • Changan PSA (1) • Future Mobility (3) • Qoros (2) • Changhe Suzuki (1) • GAC Changfeng (2) • SAIC Commercial (1) 165 • Chehejia (1) • GAC Honda (1) • SAIC GM (1) • Chery (4) • GAC Motor (5) • SAIC Motor (2) • Geely Group (22) • SAIC VW (4) • Chongqing Lifan (2) Red Entries are OEMS that • Dongfeng Honda (1) • Guojin Auto (3) • SAIC-GM-Wuling (1) • Dongfeng Liuzhou (1) • Haima Zhengzhou (2) • Shanghai Maple (2) will only produce EVs • Dongfeng Motors (3) • Harmony Futeng (1) • Sichuan Auto (3)

36 Automotive Outlook Symposium June 1, 2018 Light Vehicle EV Volume Analysis Global EV Production Global growth expected 3,500 • China is starting to drive AP and global growth 3,000 • Many high-end sporty car models being 2,500 added • All major OEMs adding applications and 2,000 volume 1,500 North America

Thousands 1,000 600 500 500

0 400

300

Asia-Pacific Western Europe North America Eastern Europe 200 Volume (000) Volume 100 Strong North American growth, but following Asia and Europe • Tesla and Renault/Nissan lead the way 0 • Smaller volumes from traditional manufacturers Low fuel prices hurt budget market vehicles 37 Source: AutoForecast Solutions – May 2018

Automotive Outlook Symposium June 1, 2018 Growth of EVs depends on:

• If gas prices continue to rise • If government EV mandates increase • If battery prices continue to fall • If government EV incentives • If precious metal prices don’t increase continue/increase • If charging infrastructures greatly expand • If cities exclude combustion powered • If vehicle distances increase vehicles • If electricity rates remain low • If taxes on EVs don’t exist or remain lower than ICE vehicles • If consumers can come up with a daily driving plan • If government actions use “sticks” rather than “carrots” • If consumers can accept new concepts and if technology • If Trump doesn’t have his way

We are currently in the age of convenience. EVs require thinking ahead and planning your daily route to make sure you have enough fuel to easily make it back home. How does this fit into a society that gives up quality for convenience? (MP3s vs CDs, phone cameras, fast food restaurants)

38 Automotive Outlook Symposium June 1, 2018 The EV Double Standard

• Optimist’s Arguments • In Reality • Fuel prices will always rise • Fuel prices fluctuate greatly • Scarcity and taxes • If EVs take off and eat into IC engine vehicles, fuel prices will actually drop, evening things out a bit • Battery prices will continue to fall leading to vehicle price • Battery prices will drop and may become less expensive than parity IC engine vehicles • Technology and material improvements • Material scarcity may drive up battery prices during significant EV growth • Governments are banning internal combustion engines • Governments will have an extremely hard time actually banning the internal combustion engine • Paris, various cities in China and India, the UK • China can be a wild card and actually successfully mandate this • Most other cities and countries will meet strong opposition • Charging infrastructures continue to grow • Charging infrastructures will continue to improve • A sufficient infrastructure already exists – you just have to find it • Easing fears of range anxiety • Range anxiety is not a rational fear • No emissions vs ICE vehicle • Emissions shifted from tailpipe to smokestack • In general, still cleaner, but not eliminated

“If you build it, they will come,” doesn’t always work

39 Automotive Outlook Symposium June 1, 2018 Severe Socio-Economic Disruption

• Huge Shift In Jobs • Significant Geographic Impact • Much fewer parts • Reliance on Middle East Oil will diminish some • Most assembly jobs will simply be eliminated • Reliance on South American countries and China will greatly • Eliminating 7 out of every 8 jobs, roughly, in a plant increase • Remaining jobs will be very different than ICE based ones • Due to importance of lithium and other rare substances • Different type of engineers and developers • Will South America be the new OPEC of lithium? • Different type of line workers • Some of these countries have a history of governments raiding • Replacing about half the engineers foreign businesses and then nationalizing them to grab control • Employment locations will also shift • With significant Chinese push for EVs and PHEVs, they may • Battery and electric motor factories will most likely open in states become the global leaders in the technology south of Michigan • Europe, namely Germany, also making a strong push for EV and • Many electric motors may be imported PHEV production • Battery pack assembly expected to stay in North America due to • Could US engineering and manufacturing slide even further size, weight and percentage of vehicle origin rules behind the rest of the world?

40 Automotive Outlook Symposium June 1, 2018 Global Light Vehicle Production by Power Type

• Substantial Investment into EVs 2025 AFS Forecast • Billions of dollars going into many 2025 Optimistic Forecast By Power Type programs at many manufacturers By Power Type • Volkswagen – 31 EVs 10.7 Million 3.3 Million 3% • Geely – 22 EVs EVs EVs • Renault/Nissan – 14 EVs 10% • BAIC & Daimler – 10 EVs, each • BMW – 9 EVs • Some OEMs say that they will stop investing into IC engines 102.3 Million IC • Other OEMs are resisting EVs 94.9 Million IC Engines • Mazda Engines • FCA • Toyota IC Engine EV Significant amount of IC Engine EV Rhetoric and Puffery Source: AutoForecast Solutions – May 2018

41 Automotive Outlook Symposium June 1, 2018 What Should the OEMs Build?

Unprofitable Vehicles Profitable Vehicles

500e F-150 Volt Silverado Mirai Tacoma RAV EV Ram Pickup Leaf Wrangler Model S Pilot Focus EV Anything with the Hellcat engine

42 Automotive Outlook Symposium June 1, 2018 Global Alternative Propulsion Outlook & Analysis

Brian Maxim, Vice President, Global Powertrain Forecasting 855.734.4590 ext. 1004

Automotive Outlook Symposium June 1, 2018