NA Motors Supply Chain Analysis

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North American Motor Supply Chain Assessment: Current State and Gap Analysis

Prepared for the Department of Energy

Synthesis Partners, LLC

This information is intended for public release.

Please contact Steven Boyd of the Department of Energy or Synthesis Partners, LLC with questions or comments.

Synthesis PartnersMarch is the2016 copyright holder.

A panel of industry sources reviewed this report before publication. Synthesis Partners is grateful for their suggestions, comments and edits but all remaining errors and omissions remain the responsibility of Synthesis Partners.

Collection Cut-Off Date: September 30, 2015

Contract No. DE-DT0006388.

Christopher Whaling, P.I. Richard Holcomb, Manager Steve Johnson, Senior Researcher Frieda Hanratty, Ph.D., Senior Analyst and Linguist

Synthesis Partners, LLC ©

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This information is approved for public release.

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Disclaimer

This document has been prepared in good faith on the basis of information collected mainly prior to the collection cut-off date. Synthesis Partners does not guarantee or warrant the accuracy, reliability, completeness or currency of the information in this publication nor its usefulness in achieving any purpose. Readers are responsible for assessing the relevance and accuracy of the content of this publication.

Synthesis Partners will not be liable for any loss, damage, cost or expense incurred or arising by reason of any person using or relying on information in this publication.

Any products and manufacturers discussed on this site are presented for informational purposes only and do not constitute product approval.

The information presented results from DOE-funded research; however, opinions or points of view expressed in this presentation do not represent the official position or policies of the U.S. Department of Energy.

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Executive Summary

Synthesis Partners (Synthesis) is a decision intelligence company that combines strategic thinking with innovative data collection and analysis techniques to enable customers, like the Department of Energy’s Vehicle Technologies Office (DOE VTO), to seize opportunities and mitigate risks.

In this research effort Synthesis collected information over a six-month period from thousands of sources, including from global sources in multiple languages, and integrated and analyzed it to provide VTO decision-makers with actionable intelligence regarding the state of the North American (NA) motors supply chain.

This report builds on more than five years of research for DOE VTO. The span of this work has generated more than ten public reports over the last five years, addressing topics such as rare earths supply, insulated gate bipolar transistors (IGBTs) supply, wide bandgap (WBG) manufacturing costs, inverter cost analyses, PE supply chain gap analyses and PE technology roadmap analyses.

This NA Motors Supply Chain Analysis report is designed by Synthesis to be actionable (intended to be used to make decisions), objective (provides assessments that have been subject to third party verification), repeatable (each research and intelligence production step is documented and can be re-applied, given similar settings), consistent (important results can be traced back to specific sources or metrics), and transparent (the rationale underlying each conclusion can be understood and independently evaluated.)

Key Findings

At the highest level, three categories of gaps1 dominate the attention of most participants in the NA motor supply chain. The following points are direct from sources and Synthesis. The comments are from credible participants regarding the NA motor supply chain.

 Strategic investment planning gaps, which include: o The need to leverage US Government (USG) resources against fewer challenges; for example, focusing on increasing manufacturing readiness levels; o The lack of attention to mid-level producers (i.e., those that work with manufacturing runs in the hundreds to low thousands of units) to achieve flexible manufacturing at low cost;

1. Gaps are defined as a critical missing action or capability, from within the business, technology, cultural, market, and/or economic environment which – if addressed in a concrete manner by an entity (e.g., VTO) – could, according to supply chain participants, catalyze the NA supply chain leading to expanded NA production and increased likelihood of NA motor successes.

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o The lack of capability among current NA suppliers, in terms of strategy, skill- sets and investments needed, to go "global" in support of automotive Tier 1s or OEMs; and o The lack of vision and understanding concerning technology innovation in NA for the purpose of supporting new motor manufacturing in NA (particularly as compared to actions by Japan and China).

 Situational awareness gaps, which include: o The lack of a NA supply chain database on firms, capabilities, technologies and partnership opportunities; o The need for increased transparency regarding criteria for USG contract awards focused on manufacturing know-how, e.g., more knowledge sharing regarding mfg. metrics; and o The issue of insufficient dialogue and technical information sharing with transplant suppliers (e.g., companies with overseas headquarters which are growing their manufacturing presence in NA).

 Critical materials manufacturing capacity gaps, which include concerns regarding: o Si steel (aka, E-steel or electrical steel); o Neodymium; o Magnetic copper (wire); and o Inductor core ferrite materials.

Regarding the market dynamics in the NA motor supply chain, this research generated the following conclusions.

 The market dynamics of niche markets for low-volume traction drive motors manufacturing (e.g., retrofitting internal combustion engine (ICE) vehicles to electric vehicles (xEVs)) could become increasingly relevant to the NA motor supply chain. Low-volume (i.e., at hundreds or at most several thousand units per year) producers could represent new and innovative entrants into the NA motors supply chain.

 Today’s dominant motor supply chain companies seek every opportunity to leverage their home regions and core technologies to achieve lower cost and higher value OEM supply chain arrangements. Synthesis assesses that strengthening the NA motor supply chain will require a regional, networked ecosystem approach.

 The weight of an xEV drive train being shipped is the most important factor in determining where it will be produced, rather than the complexity of manufacturing the item. Shipping costs and the time are key factors in determining the production location for NA customers.

 The recent anti-dumping case brought by AK Steel and subsequent imposition of tariffs on non-oriented grain electrical steel imported from certain countries by the

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International Trade Commission (ITC)/US Department of Commerce (DOC) has had a significant impact. AK Steel filed the anti-dumping (AD) action against non- oriented electrical steel from six countries on September 30, 2013. The case was decided in AK Steel’s favor in October 2014. As one example, ITC announced a 204.79% AD duty on Japanese milled non-oriented electrical steel. In conversations to-date with Synthesis, sources have expressed very strong views concerning the impact of the tariff.

 Silicon steel manufacturers see the ~25% per year growth rate in specialty steels anticipated for HEV/EV motors as being a key growth market. Given the current and expected growth rate in the hybrid and electric vehicle market in the U.S., there may be a shortage of high quality e-steel in 4-5 years.

Lastly, in terms of actionable input for government decision-makers, this effort generated a number of specific recommendations.

• Government planners should take a long-term view and do what they can to support policies that stay the course once the policies have been developed and to take a long-term view when providing input on policies. Innovation and investment will follow once suppliers are confident the plans and policies will be implemented.

• Beyond the early adopters of EVs, the majority of customers (which make up the mass market) want, above all else, a reliable product at a reasonable cost. Current EVs are not at this point yet, particularly concerning battery costs. If this point is reached, the market will evolve and suppliers like us (Tier 1) will respond.

• There is too little market volume to justify U.S.-based production to meet the requirements of the Buy American Act (BAA) (which requires the US government to prefer U.S.-made products in its purchases). A recommendation would be to suspend the BAA for about 10 years, until the EV market improves and sales volumes increase. Then, when market conditions warrant, the BAA can be imposed and there is likely to be sufficient volume to justify localized manufacture.

• The USG could make adjustments to the Advanced Technology Vehicles Manufacturing (ATVM) loan program to better assist US firms. This loan program focused on $100-$200 million loans that carried a loan cost of $10-$11 million. This is much too large of a loan for companies in the middle market.

• The emergence of the xEV market is lagging. The Leaf, Prius and Focus EVs account for most of the current market and will likely continue to do so until approximately 2020 when California's Zero Emissions Vehicle (ZEV) program will take effect and the CAFE standards are implemented on schedule. (Corporate Average Fuel Economy (CAFE) standards are regulations in the US to improve the average fuel economy of cars and light trucks produced for sale in the United States.)

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• There are many If’s to consider: For example, if CAFE regulations are implemented in their current form and if power/energy density and cost improvements continue for xEV batteries and if further ICE technological advancements are unable to keep pace with the environmental standards, at that point the xEV market may begin to experience sufficient demand to trigger NA Tier 1s to initiate NA R&D and manufacturing activity in traction drive electric motors for xEVs.

• Modularity is important and DOE-VTO could support efforts by manufacturers to increase their production volumes via modest research, development and engineering efforts. Suppliers would like to be involved in the development of the specifications for such a modular approach. The primary focus of these efforts should be to encourage flexible, mid-level manufacturing lines that support customer requirements.

• An important investment area would be to fund increased R&D and manufacturing at the mid-volume manufacturing levels. In this context, modularity was one of the objectives for early VTO support, but as the program evolved, it seems to have become more focused on a single size of motor or PE product. Now, more emphasis is needed on modularity and manufacturability.

• Taking a lead in the development of standards for electric motors is an area in which DOE-VTO might be most effective. Japanese firms dominate in traction drive electric motors for xEV applications. Implementing standards is one means that might leverage firms to localize manufacturing in NA, and this is the key for NA motor supply chain growth– localization.

Additional details regarding the NA motors supply chain, global motor supplier rankings and trends and specific R&D recommendations are included in the full report.

Synthesis appreciates the on-going support and guidance from the Office of Vehicle Technologies Office. Please contact Mr. Steven Boyd at the Office of Vehicle Technologies, DOE ([email protected] or Mr. Chris Whaling at Synthesis Partners ([email protected]) with any questions or comments,

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Table of Contents

1.0 Introduction ……………………………………………………………………………………………………...11

2.0 Tasking …………………………………………………………………………………………………….……….12

3.0 Research Methodology ……………………………………………………………………………….……...12

4.0 Definitions ……………………………………………………………………………………………….……….15

5.0 Organization………………………………………………………………………………………………………16

6.0 Key Findings..……………………………………………………………………………………….……………16

7.0 Key Players and Their Roles in the NA Motors Supply Chain………………………………...23

8.0 Analysis of Global Motor Supplier Rankings…………………..…………………………………….41

9.0 Analysis of Primary Source Information on Gaps in the NA Motor Supply Chain…...55

10.0 Other Trends, Issues and Topics……………………………...………………………………………….71

Bibliography …………………………………………………………………………………………………...…………...87

Appendices..……………………………………………………………………………………………………....………103

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Tables

Table 1: Secondary Source Research Statistics ……………………………………………………...……….14

Table 2: Primary Source Research Statistics Over 6 month timeframe (March - August 2015)…………………………………………………………………………………………………………………………...15

Table 3: Companies Actively Engaged or Seeking to Become Engaged in the NA Motors Supply Chain…………………………...…………………………………………………………………………..………..23

Table 4: Comprehensive List of Motor Supply Chain Participants…………………………..…….....27

Table 5: Global Motor Supplier Ranking, by 5-Year Approximate Total Number Of xEVs Supplied, From 2011-2015...……………………………………………………………..…..…………..44

Table 6: Global Motor Supply Market Shares……………………………………………………………...…..52

Table 7: Key NA Motors Supply Chain Gaps, Based on Primary Sources, From 2012 to 2015.…………………………………………………………………………………………………………………………....60

Figures and Charts

Figure 1: Approximate Number of xEVs Supplied, By City or Prefecture of Motor Supplier HQ, From 2011-2015..…………………………………………………………………….……..42

Figure 2: Approximate Total Number of xEVs Supplied, By Country of Motor Supplier HQ, From 2011-2015..……………………………………………………………….…………..43

Figure 3: Distribution of 2015 Primary Source Research Contacts ……………….…………………55

Figure 4: Top 10 Categories of Gaps in the NA Motors Supply Chain …………………….……...... 56

Figure 5: NA Motors Supply Chain ……………………………………………………………………………...... 64

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1.0 Introduction

This report responds to Task 1 of “Synthesis Partners’ FY15 Work Plan” dated 31 March 2015, executed in support of the US Department of Energy (DOE) Vehicle Technologies Office (VTO)-Electric Drive Technologies (EDT).

This report provides the results from Synthesis Partners’ (Synthesis) research on entities active in the North American (NA) traction drive motors supply chain. The focus of this report is on characterizing the NA motors supply chain, to include an assessment of sources’ views of gaps in the supply chain. Gaps are defined as a critical missing action or capability, from within the business, technology, cultural, market, and/or economic environment which – if addressed in a concrete manner by an entity (e.g., VTO) – could, according to supply chain participants, catalyze the NA supply chain leading to expanded NA production and increased likelihood of NA motor successes. Additional information is archived at Synthesis in the form of extensive databases that have been developed, extended and refined pursuant to this task and other tasking addressed in FY15.

This work is part of ongoing tasking by DOE VTO of Synthesis Partners to perform targeted research and analysis of the NA traction drive power electronics (PE) and motors supply chains. This tasking has generated more than ten public reports over the last five years, on topics ranging from rare earths supply, insulated gate bipolar transistors (IGBTs) and wide bandgap (WBG) developments, the motors market, inverter cost analyses, PE supply chain gap analyses and PE technology roadmap analyses.

In addition to this report, the following public reports were issued in FY15:

 North American PE and Motors Supply Chain Assessment (Jan. 2015);  Review of Public Data on Costs of WBG Substrate Manufacturing (Feb. 2015);  Clarifications to Jan2015 NA PE and Motors Report (May 2015); and  Clarifications to Feb2015 WBG Report (May 2015). Additionally, one non-public report was issued to DOE VTO in FY15:

 FY15 Task 2 – Specialized Manufacturing Skills and Summary Findings (July 2015).

The above Task 2 report was provided to aid decision-makers in addressing the specific manufacturing skill-sets that may be needed to produce components, processes, materials and related technical aspects of PE and motors manufacturing. It addressed topics of relevance to the global competitiveness of manufacturing skills training for automotive traction drive PE components and motors.

Please contact Chris Whaling at Synthesis Partners, LLC at [email protected] for a copy of any of the public reports that Synthesis has produced on behalf of DOE-VTO since 2009.

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2.0 Tasking Synthesis was tasked in FY15 by the VTO to undertake research to address the following specific questions regarding the NA supply chain of technologies for traction drive PE and traction drive electric motors (motors) for plug-in, hybrid and electric passenger vehicles (PHEVs, HEVs and EVs; referred collectively in this document as xEVs): 1. Continued PE and more in-depth motors NA supply chain research, analysis and reporting, to include identifying gaps in the motors supply chain. (The focus of this report.)

2. Limited scope research and analysis in support of Oak Ridge National Laboratory’s (ORNL) traction drive inverter cost model development. This resulted in the Task 2 Deliverable, “A Fast-Reaction Review of Public Information on Power Electronics Manufacturing Skill-Sets,” July 2015; provided for ORNL and VTO review.

3. Write a single final report and give presentations, individually and in collaboration with VTO, based on Synthesis-generated analytic products concerning SP’s PE and motors NA supply chain analyses.

Background data-sets covering newly collected information on company backgrounds and contacts, as well as quantified information on the number and size of suppliers of inverters, converters, motors and batteries, for all xEVs made globally, are retained at Synthesis. These data-sets are maintained, refined, extended and used to inform the public and private analyses produced for VTO. 3.0 Research Methodology

Synthesis employed a targeted primary- and secondary-source research strategy, including a narrowly scoped review of English, Japanese and Chinese language secondary sources, executed over a six-month time period. The time available dictated a targeted set of methods applied against a targeted set of sources.

The primary research supporting this document is built upon Synthesis’ prior efforts sponsored by DOE VTO. Hundreds of primary source contacts were made in 2015, which were built upon hundreds of past primary source contacts and relationships. Synthesis continues to expand and refine a growing archive of these confidential, open-ended, in- depth primary source interviews, dating from 2012 to present. Participants interviewed were from every aspect of the motors supply chain, from OEMs through Tier 4s, as well as selected research organizations. With sources anonymized, Synthesis produces analyses for use by VTO.

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While sources’ anonymity is protected, Synthesis maintains the ability to trace-back every quote and result in this report to the original data-source – be it a primary or secondary source – in order to ensure accuracy and trace-back for maximum validity.

In addition, as a quality control measure, before and after each report is issued, Synthesis invests time and effort to reach out to sources to ensure that all credible feedback is captured and maintained for review in future documents. A key caveat is that the primary research work reported here does not constitute a survey and therefore the results are not statistically valid. Rather, this primary source information represents a collection of case- and time-specific interview results which Synthesis developed to convey the priority concerns of the sources. Sources that do not engage in conversations with Synthesis do not have their views represented.

The questions employed to guide the open-ended conversations are contained in Appendix 1. Extensive searches were conducted utilizing primary and secondary sources to identify potential North American participants in R&D and/or manufacturing activities which contribute to the production of traction drive electric motors used in xEV passenger vehicle applications. Thousands of websites and articles were reviewed to identify potential participants. In addition, Synthesis employed phone conversations and in-person conversations at the Advanced Power Electronics Conference (APEC) 2015, DOE’s Annual Merit Review (AMR) and other venues, as well as conversations with contacts who agreed to be interviewed, to continuously elicit information on potential supply chain participants.

Once a potential participant was identified, Synthesis attempted to obtain independent confirmation as to the nature and extent of their participation in the supply chain by reviewing company websites, news articles, and other sources. Similar searches were also made to identify appropriate contacts within the company to confirm their participation and to elicit their comments on this year's topics. Prior to conversations with contacts, Synthesis reviewed websites and conducted a general search in order to identify any information made available from public sources that could assist in guiding the discussion. This is done to avoid asking questions that have already been addressed in the public realm and to focus our questions on the most timely and pertinent areas.

Often, 10-20 calls were made to a single company before an appropriate contact was made. Even at that point, it is understandable that contacts were either too busy or otherwise unwilling to provide information, offering reasons ranging from information request overload to concern over how the information would be viewed/shared, to internal company policies preventing discussion of these topics.

Synthesis attended and co-presented findings from FY14 research with Mr. Steven Boyd of DOE VTO at the 30th Anniversary APEC in Charlotte, NC from March 15-19, 2015. That participation enabled Synthesis to refine and build on knowledge for this report. Please note that in these types of market studies the information presented on companies, organizations, individuals or any entities is likely to change without notice.

Table 1 summarizes the secondary sources accessed in the course of this work.

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Table 1: Secondary Source Research Statistics

Secondary Source Research Statistics (All sources are English language unless otherwise specified.)

Web Sites reviewed 1,500+

English language websites 1,000+

Web Pages reviewed in depth

English language 3,000+

Companies initially identified and reviewed for 1,000+ relevance

Companies assessed for relevance based on 750 possible involvement in NA traction drive PE or motors manufacturing/R&D for xEV passenger vehicle applications.

OEMs 29

Tier 1 79

Tier 2 171

Tier 3 241

Tier 4 58

Other (Academic, Association, Consulting, 80 Engineering, USG Office, USG Lab, etc.)

Japanese and Chinese language Web Sites Reviewed

Foreign language websites reviewed in depth 250+

Key foreign language documents found 100+

Table 2 summarizes the primary sources accessed in the course of this work.

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Table 2: Primary Source Research Statistics Over 6-month timeframe (March - August 2015)

Primary Source Research Statistics (All sources are English language.)

Total companies vetted for contact 90 OEMs 12 Tier 1 24 Tier 2 15 Tier 3 27 Tier 4 5 Other (Association, Engineering, etc.) 7 (Association = 2; Engineering = 5) Total contacts made (multiple contacts 371 within many organizations) E-mails 224 Phone Calls 107 In-Person Conference Contacts 40 In-depth interviews (includes OEMs, Tier 1- Total >20 4s and Others)

4.0 Definitions

Synthesis makes use of the following terms of art to define companies and their role in the NA motors supply chain:

 Original Equipment Manufacturer (OEM): produces or assembles passenger xEVs for sale to consumers.

 Tier One: Company supplies traction drive electric motors to an OEM. Product = e.g., traction drive electric motor for passenger xEV

 Tier Two: Company supplies components to a tier one supplier. Products = e.g., rotor, stator

 Tier Three: Company supplies components to a Tier two company. Products include, for example, laminated e-steel, insulated copper wire windings, magnets, aluminum bars.

 Tier Four: Company supplies basic raw materials to a Tier three company. Products include, for example, e-steel plate for laminating, copper for wiring, aluminum for bars, insulation.

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 Other: Associations, engineering firms, government agencies and laboratories, and academia.

Of course the use and meaning of Tier classifications is not always clear-cut. For example, if the OEM produces the motor (as GM does), the Tier 1 supplies stamped steel, copper winding, and magnets. On the other hand, if a Tier 1 makes the rotor and/or stator, then Tier 2s supply the steel, copper windings and magnets. There are also cases where Tier 1s stamp steel in-house. Finally, a supplier may be a “Tier 1.5” in which case it only provides a part of the motor to the OEM (stator assembly for example) but the OEM retains manufacturing of the rotor and magnet (this is sometimes done to enable the OEM to leverage steel and magnet buying power). Nonetheless, Synthesis uses the generic definitions stated above to categorize the main activities of organizations in this report.

5.0 Organization The four sections of this report address major aspects of the NA motors supply chain.

First, the report provides annotated lists, figures and charts to depict the main players in the NA motor supply chain, including their roles and capabilities.

Second, a global ranking of motor suppliers is provided. This quantitative information provides detailed context to aid in assessments of current and future expected capabilities of participants in the NA motor supply chain. The NA motor supply chain is not exclusively a NA entity and is in fact better considered as the NA portion of a global motor supply chain.

Third, the results of an integrated analysis of primary source views on gaps in the NA motors supply chain are provided. This includes interviews conducted over a six-month period in 2015 as well as prior interviews dating to 2012. The trends and specifics from hundreds of primary source interviews are analyzed to produce the results contained in this section.

Fourth, information on other trends, issues and topics of direct relevance to the NA motor supply chain is provided. These findings are based on a combination of primary source interviews and secondary sources.

6.0 Key Findings

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NA motor supply chain will require a regional, networked ecosystem approach.

Top 10 Categories of Gaps in the NA Motors Supply Chain*

1. Strategic Investment Planning: 36%

2. Situational Awareness: All Types: 18%

3. Critical Materials Manufacturing Capacity: 10%

4. Training and Engineering Skills: 7%

5. Manufacturing Techniques and Tech.: 7%

6. Standards Development: 5%

7. Coordination and Collaboration: 5%

8. Applied R&D: 3%

9. Technology Transition Planning: 2%

10. Multi-/Single-Industry Collaborative Eng.: 2%

* Percentages do not add up to 100 because there are several gaps outside the Top 10 that are not included (see report) and rounding.

Source: Synthesis Partners, LLC (2015)

Synthesis draws the following conclusions about gaps in NA motors supply chain, by primary source organizational type: • The gaps that are most frequently raised, by organizational type: o OEMs: strategic investment planning and situational awareness. o Tier 1s: strategic investment planning, situational awareness, training and engineering skills development, and critical materials manufacturing capacity. o Tier 2s: strategic investment planning. o Tier 3s: strategic investment planning and situational awareness. o Others: strategic investment planning.

 The gaps that come in second, based on frequency of occurrence, by organizational type, are: o OEMs: critical materials manufacturing capacity and standards development.

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o Tier 1s: coordination and collaboration between and among all players and standards development. o Tier 2s: manufacturing techniques and technology, situational awareness, and training and engineering skill development. o Tier 3s: critical material manufacturing capacity and manufacturing techniques and technology. o Others: situational awareness.

 The gaps that have the lowest frequency of occurrence, but which are notable because they are raised, by organizational type, are: o OEMs: applied R&D, and capacity of Tier 1 to 4 automotive-level manufacturing quality control. o Tier 1s: manufacturing techniques and technology and multi- and single- industry collaborative engineering. o Tier 2s: applied R&D and technology transition planning. o Tier 3s: applied R&D, ability to navigate the NA market legal frameworks level of manufacturing, coordination and collaboration between and among all players, IP protection and training and engineering skill development. o Others: coordination and collaboration between and among all players, multi- and single-industry collaborative engineering, and technology transition planning.

 Of above-average concern to almost all organization types is the manufacturing capacity of critical materials. This points to single-string dependencies in the core advanced material inputs needed to produce motor magnets, copper windings, and other key components. This indicates that the supply chain is “brittle” at the bottom. This is depicted in the figure below.

 Tier 1s account for twice the share of the highest frequency gaps than any other organization type. Synthesis believes that this indicates that the supply chain is “brittle” at the top, in terms of the sheer number of high-level concerns raised, which suggests that Tier 1s face significant challenges. This is notable, given their critical role in participating in new developments in NA motors production. This is depicted in the figure below.

 Combining the top two gap categories, almost all organization types (OEMs, Tier 1- 3s) are concerned not only about strategic investment planning, situational awareness and critical materials manufacturing capacity, but also standards development. The combination of all of these gaps, and the role of standards development in particular in terms of planning initiatives, may help focus economic development policy-makers on items which present the greatest opportunity to catalyze the development of the NA motors supply chain.

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Source: Synthesis Partners, LLC (2015).

 In the short term, the weight of the xEV drive train being shipped is the most important determining factor about where it will be produced, rather than the complexity of manufacturing the item. Note: Another source states that motor OEMs will eventually bring motor manufacturing in-house.

 The recent anti-dumping case brought by AK Steel and subsequent imposition of tariffs on non-oriented grain electrical steel imported from certain countries by the International Trade Commission (ITC)/US Department of Commerce (DOC) has had a significant impact. AK Steel filed the anti-dumping (AD) action against non- oriented electrical steel from six countries on September 30, 2013. The case was decided in AK Steel’s favor in October 2014. As one example, ITC announced a 204.79% AD duty on Japanese milled non-oriented electrical steel. In conversations to-date with Synthesis, sources have expressed very strong views concerning the impact of the tariff.

 Silicon steel manufacturers see the ~25% per year growth rate in specialty steels anticipated for HEV/EV motors as a key growth market. (Source: Tier 2 interview, 2015).

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 Given the current and expected growth rate in the hybrid and electric vehicle market in the U.S., there may be a shortage of high quality e-steel in 4-5 years. (Source: Industry analyst interview, 2015).

 Silicon steel requires a very specific manufacturing pattern/process. Switching from motor laminated steel to silicon steel in the same plant requires an extensive recapitalization effort. (Source: Tier 1, 2 and 3 interviews, 2015).

 12-24 months are needed to install production equipment for thin steels, so companies need to move to address this potential gap. Both French and Austrian steel producers are currently considering at this potential market. (Source: Industry analyst interview, 2015).

 With silicon steel, after development and manufacturing is completed, evaluation and qualification takes about 1-2 years. Given the extremely conservative nature of the automotive industry, it is difficult for small or medium-sized firms (i.e., with revenues in tens to hundreds of millions of dollars) to complete this process without outside assistance. USG support in the evaluation/qualification of silicon steel could be a possible role for the DOE labs or an organization like the Small Motor & Motion Association. More attention needs to be paid to qualifying the materials used in motors for the automotive use-case. (Source: Tier 2 interview, 2015).

Selected Points for US Government Planners to Consider

The following views are direct from sources and Synthesis. These comments are from credible participants regarding the NA motor supply chain.

• The USG [should] do what they can to support policies that stay the course once the policies have been developed and to take a long-term view when providing input on policies. Innovation and investment will follow once suppliers are confident the plans and policies will be implemented and followed. (Source: Tier 1 interview, 2015.)

• Beyond the early adopters of EVs, the majority of customers (which make up the mass market) want, above all else, a reliable product at a reasonable cost. Current EVs are not at this point yet, especially vis-à-vis the battery. Once we reach this point (if we reach this point), the market will be there and suppliers like us will respond. (Source: Tier 1 interview, 2015.)

• Overseas suppliers note that the Buy American Act (BAA) can be more effective after the market reaches a higher volume, because – they argue – there is little incentive to invest in NA when market volumes are low, and the BAA simply adds a further constraint (at these low volumes) to investment in NA. That said, it is also

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true that without the BAA, there will be less incentive to invest in US capabilities, at any market volume.

• There is not sufficient market volume to justify U.S.-based production to meet the requirements of the BAA. A recommendation would be to suspend the BAA for about 10 years, until the EV market improves and sales volumes increase. Then, when market conditions warrant, the BAA can be imposed and there is likely to be sufficient volume to justify localized manufacture. (Source: Tier 1 interview, 2015.)

• Among the things that the USG, in particular DOE, could do to help firms [is] to make adjustments to the Advanced Technology Vehicles Manufacturing (ATVM) loan program. [This loan program] was focused on $100-$200 million loans that carried a loan cost of $10-$11 million. This is much too high of a loan for a company [in the middle market]. (Source: Tier 1 interview, 2015.)

• The emergence of the xEV market is lagging. The Leaf, Prius and Focus EVs take up most of the current market and will likely continue to do so until around 2020 when California's Zero Emissions Vehicle (ZEV) program will take effect and the CAFE standards are implemented. if such regulations are implemented in their current form and if power/energy density and cost improvements are made in the xEV battery and if further ICE technological advancements are unable to keep pace with the environmental standards, then the xEV market might start to experience high enough volume to trigger firms such as ours to initiate NA R&D and manufacturing activity in traction drive electric motors for xEVs. (Source: Tier 1 interview, 2015.)

• It is important for OEMs (and government) not to fall in love with their (EV) technology to the point where they forget that without a market for the technology, it will go nowhere. (Source: Tier 1 interview, 2015.)

• Modularity is important and DOE could support efforts by manufacturers to increase their production volumes without a lot of RD & Engineering development. We would like to be involved in the development of the specs for such a modular approach. The primary focus of all these efforts should be to encourage flexible, mid-level manufacturing lines that support customer requirements. (Source: Tier 1 interview, 2015.)

• Taking a lead in the development of standards for electric motors is where DOE VTO might be most effective. Japanese firms dominate in traction drive electric motors for xEV applications because they were subsidized and because of this currently

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have a leadership position. Implementing standards is one means that might leverage firms to localize manufacturing in NA, and this is the key [for NA motor supply chain growth] – localization. (Source: Tier 1 interview, 2015.)

Potential Motor R&D Focus Areas

The following are specific R&D recommendations developed during the course of this research.

• [USG should find ways to encourage more motor design innovation.] More interesting than leaving the drive and motor designers to innovate within existing constraints would be to remove the constraints. I'd love to ask motor designers, "How would you ideally generate torque if the constraints of switching frequency and power loss in the electronics were removed? [e.g., use GaN switches.] Would you use lower-inductance windings? Increase pole count?" I'm not sure what the reciprocal questions from the motor designers would be. The first step – and the challenge – is to get the motor designers and electronic-drive designers talking, with a goal of defining a spec for a demonstration prototype. Ideally the concepts to be tried would not require a lot of new development, just combining technologies which are more or less available. i.e. "Sure we can do that. I didn't realize it was an option". (Source: Tier 3 interview, 2014.)

• A commercialized sensorless traction drive system is missing and could produce sustainable gains in the North American industrial base. There is no commercialized sensor-less traction drive system on the road today. While this is an evolutionary rather than a revolutionary step, and probably would amount to only about a $100 savings in the drive system [but every dollar counts], this is an example of what has been talked about frequently, but towards which no concrete steps have been taken. (Source: Tier 1 interview, 2014.)

• Integrated motors/drives is an area for R&D focus. Toyota has done some work in this area on transaxles and this should be assessed. (Source: Tier 1 interview, 2014.)

• New materials are needed which offer negative permeability. (Source: "Electric Traction Machine Choices for Hybrid & Electric Vehicles", James R. Hendershot, 11- 20-14, pg. 69/71, http://sites.ieee.org/miami/files/2014/11/Hendershot-FIU- Lecture.pdf, accessed 06-23-15.) Note: The applicability of negative permeability materials to motor cores is an area for further research.

• One source suggests attention be paid to a significant skills shortage in motor design (esp. induction motor design.) This points to the need for USG encouragement of the training and education of more US motor designers (e.g., at universities).

March 2016 22 Synthesis Partners, LLC © NA Motors Supply Chain Analysis

7.0 Key Players and Their Roles in the NA Motors Supply Chain

The annotated list in Table 3 below includes entities that have stated publicly that they are active in the NA motors supply chain, or have been identified by Synthesis as attempting to become active in NA xEV vehicle assembly or production of motors through multiple independent sources.

Table 3: Companies Either Actively Engaged or Seeking to Become Engaged in the NA Motors Supply Chain

Manufacturer (HQ Electric Motor Components or xEV Applications North American Location) Type Materials Supplied Manufacturing Site

AK Steel, West Not available E-steel for Role re: NA-produced Pittsburg, PA Chester Township, (Unavailable) laminations for vehicles remains under OH stators and rotors research. (Note: Activities in support of the automotive sector are under research.)

China Steel 3-phase, 4- E-steel/ lamination Tesla Model S Possibly manufacturing Corporation, pole induction for stator and rotors E-steel in Mexico Kaohsiung, Taiwan w/ copper (Note: Expected to start a (under research). rotor new production line by the end of 2014 for 0.15 mm-thick non-oriented silicon-steel sheets to be used as core material for motors of electric vehicles such as Tesla Motors).

Eurotranciatura Unavailable E-steel/ lamination Role re: NA-produced Santa Rosa, Mexico; Mexico; and for stator and rotors vehicles remains under Paris, TN EuroUSA research.

Ford Motor Co., 8P - DC 400V Motor C-Max (see note on Ford Hermosillo, Mexico Detroit, MI PM following table)

March 2016 23 Synthesis Partners, LLC © NA Motors Supply Chain Analysis

Manufacturer (HQ Electric Motor Components or xEV Applications North American Location) Type Materials Supplied Manufacturing Site

JFE, Tokyo, Japan Unavailable E-steel/ lamination Role re: NA-produced No current NA for stator and vehicles remains under manufacturing rotors. research. (Note: The JFE joint venture, called “R. bourgeois JFE Shoji Magnets and Magnetic Lamination, magnetic wires. Inc.” based in Tijuana, Mexico may begin

offering stamping services to the EV/HEV market in 2016.

GM, Detroit, MI 3-phase AC Motor, Rotor & GM Spark EV; GM Volt Whitemarsh, MD PM Stator synchronous (Spark); AC Induction (Volt)

Hitachi Automotive AC induction Motor, Rotor & GM Volt Berea, KY Systems America, Stator Inc., Berea, KY

Hitachi Metals 8P - DC 400V Neomax Nd- Ford HEV (possibly, C- China Grove, NC North Carolina, PM sintered permanent Max) Ltd., China Grove, magnets; Magnetic NC wires for rotor

Kienle & Spiess, Unavailable Copper rotors Unavailable Not determined to Chicago, IL date.

(Note: Kienle & Spiess rep. publicly stated in April 2015 that the firm plans on initiating production of copper rotors for traction drive electric motors in NA in the next few years).

March 2016 24 Synthesis Partners, LLC © NA Motors Supply Chain Analysis

Manufacturer (HQ Electric Motor Components or xEV Applications North American Location) Type Materials Supplied Manufacturing Site

Magna AC PM Motor; (possibly Ford Focus Mt. Holly, MI International of synchronous rotor and stator) America, Ltd., Troy, (Note: Motor MI components under research.)

Mitsui High Tec - Unavailable Motor cores for Unavailable Ottawa, Canada Canada, Ottawa traction drive EVs (manufacturing (Note: Mitsui rep initially expected to publicly stated in 07-15 begin in 2017, now that the initiation of 2018.) operations has been delayed until 2018, confirmed subsidiary would manufacture motor cores.)

Molycorp, Inc., Unavailable Magnequench Unavailable California (Note: On Greenwood Village, subsidiary November 3, 2015 CO manufacturing PMs, Molycorp filed for incl. rare earth PMs Chapter 11 with the US (NdFeB) for xEV Bankruptcy Court for electric motors the District of Delaware.)

Nippon Steel & Unavailable E-steel/ lamination Unavailable No current NA Sumitomo Metal for stator and rotors manufacturing of e- USA Inc., Houston, steel. Tracking, but as TX of 04/15, company reps report they are not selling e-steel in U.S. only due to tariffs now in effect.

Nissan Decherd 3-phase AC Motor, rotor & Nissan Leaf Decherd, TN Powertrain Plant PM stator synchronous

March 2016 25 Synthesis Partners, LLC © Manufacturer (HQ Electric MotorNA Components Motors Supply or ChainxEV Analysis Applications North American Location) Type Materials Supplied Manufacturing Site

Remy International copper rotor Motor, rotor & As of 2010, Remy Pendleton, IN & Mexico Inc. induction and stator providing hybrid electric other types of motors to GM (including traction drive all of its SUV and truck- EV motors based hybrids), Daimler, Allison and BMW (through Daimler). Current role re: NA- produced vehicles remains under research.

Superior Essex, Ft. 8P - DC 400V Copper, Copper Ford HEV, Nissan Leaf Ft. Wayne, IN Wayne, IN PM wire for stator

TDK Ferrites Corp., 3-phase AC Rare earth magnets Nissan Leaf Shawnee, OK Shawnee, OK PM and processing of synchronous magnetic wires; magnetic wires for rotor.

Tempel Steel, Unavailable E-Steel/ lamination Unavailable Most manufacturing in Chicago, IL for stator and rotors Chicago, IL area; some in Mexico.

Tesla, Fremont, CA 3-phase, 4- Motor, rotor & Tesla Model S Fremont, CA pole induction stator w/ copper rotor

Toshiba 8P - DC 400V Motor, rotor & Ford HEV(s) e.g., C-Max, Houston, TX International Corp. PM motor stator Fusion and Escape (TIC), Houston, TX

Anonymous 3-phase, 4- Copper bars for Tesla Model S Note: This supplier pole induction rotors does not have a NA w/ copper manufacturing rotor presence, but is prepared to manufacture in U.S. if conditions warrant.

March 2016 26 Synthesis Partners, LLC © NA Motors Supply Chain Analysis

Note: In some databases that Synthesis uses, the supplier of a motor is different from the actual company manufacturing the motor, which is typically not an OEM, but a Tier 1. Synthesis finds this ambiguity is maintained in public records for branding reasons. For example, some sources suggest that Ford manufactures motors, when in fact a Tier 1 produces the C-MAX HEV and C-MAX Energi motors.

A second annotated list is provided below in Table 4.

This is a broader list, inclusive of the entities in the first list, and provides a full picture of over 130 organizations that Synthesis identified as making up the complete NA motors supply chain.

This second list covers entities determined by Synthesis to be a) actively engaged or seeking to become engaged in the NA traction drive motors supply chain, or b) indirectly engaged in the NA motors supply chain, with important perspectives to provide, or c) actively engaged with Synthesis in addressing issues regarding the NA motors supply chain.

Table 4: Comprehensive List of Motor Supply Chain Participants

# Organization Name HQ Website Capability Comment

1 A2Mac1 Vehicle Benchmarking Ypsilanti, MI http://www.a2mac1.com

xEV Motor R&D and 2 ABB US Corporate Research Raleigh, NC http://www.abb.us Manufacturing Center

Develop/Manufacture Copper 3 Rotor Induction and Liquid- AC Propulsion Inc. San Dimas, CA http://www.acpropulsion.com Cooled Motors for EVs

4 Motor Manufacturing Advanced Motors & Drives East Syracuse, NY http://www.adcmotors.com

Manufacturing Non-Oriented E- Steel and E-Steel Laminations for 5 AK Steel Corp. West Chester, OH http://www.aksteel.com Electric Motors, Etc.

March 2016 27 Synthesis Partners, LLC © NA Motors Supply Chain Analysis

# Organization Name HQ Website Capability Comment

Members as of 2014: BMW, Chrysler, Ford, GM, Jaguar, Mazda, Mercedes-Benz, 6 Alliance of Automobile Washington, DC http://www.autoalliance.org Manufacturers Mitsubishi Motors, Porsche, Toyota, VW and Volvo

Designs, Develops and Manufacturing Enduramax 7 Allied Motion Technologies, Motor-Drives for Small Electric Amherst, NY http://www.alliedmotion.com Inc. Vehicles.

Design/Manufacturing Hybrid Propulsion Systems, Components 8 http://www.allisontransmission.co Allison Transmission, Inc. Indianapolis, IN for Medium- And Heavy-Duty m Commercial & Military Vehicles.

Manufacturing Extended Range 9 ALTe Powertrain Auburn Hills, MI http://altept.com Electric Powertrain Systems Technologies, Inc.

Develops Standards for xEVs, Incl. 10 American National Standards Washington, DC http://www.ansi.org Motors Institute (ANSI)

Design/Manufacturing Solid State Electric Traction/Propulsion 11 American Traction Systems Fort Myers, FL http://www.americantraction.com Controllers and Accessories For xEVs

Critical materials needed for 12 Ames Laboratory Critical Ames, IA https://cmi.ameslab.gov magnets and related xEV Motors Materials Institute R&D

EV Manufacturing 13 AMP Electric Vehicles, Inc. Loveland, OH http://ampelectricvehicles.com

March 2016 28 Synthesis Partners, LLC © NA Motors Supply Chain Analysis

# Organization Name HQ Website Capability Comment

Dev./Manufacturing Signal 14 Processors for xEV Motor Control, Analog Devices, Inc. Norwood, MA http://www.analog.com Etc.

Develops Computer-Aided 15 Engineering Software for Traction Ansys Canonsburg, PA http://www.ansys.com Motors, Etc.

16 EV Research Apple, Inc. Cupertino, CA http://www.apple.com

Design/Manufacturing 3-Wheel 17 Arcimoto Eugene, OR http://www.arcimoto.com EVs

Arkansas Power Electronics Develops high efficiency motor 18 International, Inc. (APEI) n/k/a Fayetteville, AR www.wolfspeed.com drives for xEVs Wolfspeed (following 07-09- 15 acquisition by Cree)

Manufacturing Smco Magnets, E- 19 Arnold Magnetic Technologies Rochester, NY http://www.arnoldmagnetics.com Steel Corp.

20 EV Development Atieva Fremont, CA http://www.atieva.com

Automotive Industry Action 21 Global Supply Chain Issues Group (AIAG) Southfield, MI https://www.aiag.org

EV Research 22 BAIC EV R&D Center Silicon Valley, CA Under Research

March 2016 29 Synthesis Partners, LLC © NA Motors Supply Chain Analysis

# Organization Name HQ Website Capability Comment

23 EV Manufacturing BAIC Motor Silicon Valley, CA http://www.baicmotor.com

24 Under Research EV Manufacturing Beijing Electric Vehicle Co. Fremont, CA

Manufacturing Custom 25 Components for xEV Traction Bicron Electronics Co. Canaan, CT http://www.bicronusa.com Drive Systems

BMW Group - Design Works 26 http://designworksusa.com USA Newbury Park, CA Manufacturing EVs

Announced Intended Acquisition 27 BorgWarner Inc. Auburn Hills, MI http://www.borgwarner.com of Remy, Int. (07/15/2015)

Manufacturing Elec. Drives and 28 Bosch Rexroth Charlotte, NC http://www.boschrexroth.com Controls

EV/Motor Manufacturing Lancaster, CA http://www.byd.com 29 BYD America Corp.

30 Researching Bankruptcy Status Coda Automotive Santa Monica, CA Under Research

31 Under Research Cogebi, Inc. Dover, NH http://www.cogebi.com

NA Manufacturing Modules, 32 Continental Automotive Germany Manufacturing Electric Seguin, TX http://www.conti-online.com Systems US, Inc. Motors for xEVs

March 2016 30 Synthesis Partners, LLC © NA Motors Supply Chain Analysis

# Organization Name HQ Website Capability Comment

Promoting Copper Induction 33 Copper Development New York, NY http://www.copper.org Motors for xEVs Association, Inc. (CDA)

xEV Industrial Equip. 34 Deere & Co. Moline, IL https://www.deere.com Manufacturing

Traction drive electric motor R&D DENSO International America 35 includes magnetic steels and Southfield, MI http://www.densocorp-na.com copper (windings, etc.)

Dev. and Manufacturing of 36 EFI Automotive a/k/a Electric Motor Position Sensors Elkmont, AL http://www.electricfil.com/en Electricfil Corporation (Empos) For Control of Electric Motors

37 Electric Vehicles International EV Manufacturing Stockton, CA http://www.evi-usa.com

Manufacturing HEV Delivery 38 Emerald Automotive LLC http://www.emeraldautomotive.co Hazelwood, MO Vehicles m

xEV Solutions for Medium- 39 /Heavy-Duty Vehicles. Financial Enova Systems Torrance, CA http://www.enovasystems.com Status Uncertain.

E-Steel Laminations for Electric 40 Eurotranciatura Mexico Santa Rosa Jaureguí, Motors www.mx.eurotranciatura.com Mexico

Eurotranciatura USA LLC a/k/a E-Steel Laminations for Electric 41 Euro USA Paris TN http://euro-group.it/en/ Motors

42 Fairchild Semiconductor Mountaintop PA http://www.fairchildsemi.com Manufacturing Traction Drive

March 2016 31 Synthesis Partners, LLC © NA Motors Supply Chain Analysis

# Organization Name HQ Website Capability Comment

Electric Motor Components

43 EV R&D Faraday Future Gardena, CA Under Research

44 Motor Control Instruments Faria Corp. Uncasville, CT http://faria-instruments.com

FCA US LLC (Fiat Chrysler 45 xEV Manufacturing Automobiles) f/k/a Chrysler Auburn Hills, MI http://www.fcagroup.com Group LLC

Hybrid and Electric Vehicle 46 Development Center Completed FEV, Inc. Auburn Hills, MI http://www.fev.com in 2009.

47 xEV Manufacturing Ford Motor Co. Dearborn, MI http://www.ford.com

48 xEV Traction Drive Motor R&D GE Global Research Niskayuna, NY http://www.geglobalresearch.com

xEV Motors Manufacturing in 49 General Motors Detroit, MI http://www.gm.com White Marsh, MD.

xEV RDT&E Genovation Cars Rockville, MD http://www.genovationcars.com 50

51 xEV Bus R&D & Manufacturing Gillig Corporation Hayward, CA http://www.gillig.com

Members include Aston Martin, Ferarri, Honda, Hyundai, Isuzu, 52 Kia, Maserati, Mclaren, Nissan, Global Automakers Washington, D.C. http://www.globalautomakers.org Subaru, Suzuki, and Toyota.

53 xEV R&D & Manufacturing Horn Lake, MS http://www.wmgta.com GreenTech Automotive, Inc.

March 2016 32 Synthesis Partners, LLC © NA Motors Supply Chain Analysis

# Organization Name HQ Website Capability Comment

54 HINO Motors Manufacturing Heavy-Duty xEV Manufacturing Williamstown, WV http://hino.com USA

xEV Traction Drive Motor 55 Hitachi Automotive Systems Berea, KY http://www.hitachi-automotive.us Manufacturing America, Inc.

Manufacturing Motor 56 Hitachi Chemical Co. America, Cupertino, CA http://www.hitachi-chemical.com Components and Motor Brushes Ltd.

Manufacturing Neomax Neodymium Sintered PM and 57 Hitachi Metals North Carolina, China Grove, NC http://www.hitachimetals.com Ferrite Magnets for xEV Traction Ltd. Drive Motors

58 xEV Design Hybrid Design Services, Inc. Troy, MI http://hybriddesignservices.com

59 xEV Technical Analysis IEEE Piscataway, NJ electricvehicle.ieee.org

Promotes Copper Rotor Induction 60 International Copper New York, NY http://copperalliance.org Motor for XEVs Association, Ltd.

http://www.jfe- Manufacturing E-Steel for xEV 61 JFE Steel America, Inc. Houston, TX steel.co.jp/en/products/electrical/s Traction Drive Electric Motors upercore/index.html

http://www.jfe-shoji-steel- america.com/; Stamping of E-Steel/Laminations 61A R.Bourgeois JFE Shoji http://www.rbourgeois.com/en/rb Tijuana, Mexico for xEV motors Magnetic Lamination, Inc. ourgeois- group/locations/rbourgeois-jfe- shoji-magnetic-lamination-inc

62 Johnson Electric Automotive http://www.johnsonelectric.com/ Electric Motor Manufacturing Plymouth, MI Products Group en

March 2016 33 Synthesis Partners, LLC © NA Motors Supply Chain Analysis

# Organization Name HQ Website Capability Comment

xEV-Related Standards 63 Joint Electron Device Arlington, VA http://www.jedec.org Development Organization Engineering Council (JEDEC)

64 Karma Automotive f/k/a XEV Manufacturing Moreno, CA Under Research Fisker Automotive

Die Cast Copper Rotors, Steel 65 Laminations for xEV Electric Kienle & Spiess Chicago, IL http://www.kienle-spiess.com Motors

xEV Traction Drive Electric Motor 66 KLD Energy Technologies Austin, TX http://www.kldenergy.com Dev.

67 xEV Powertrain R&D Kleenspeed Technologies, Inc. Moffett Field, CA http://www.kleenspeed.com

Manufacturing Motors for 68 KollMorgen Radford, VA http://www.kollmorgen.com Medium- And Heavy-Duty xEVs

Electric Motor Lamination 69 Stamping, Manufacturing Tools & LH Carbide Fort Wayne, IN http://www.lhindustries.com Dies for Stamping

70 xEV Motor Manufacturing Magmotor Worcester, MA http://www.magmotor.com

Michigan Economic xEV R&DE & Manufacturing 71 Development Corporation Lansing, MI http://www.michiganbusiness.org Support (MEDC)

Manufacturing Traction Drive Motors for High Performance 72 xEVs (Ceased operations in May Mission Motor Co. San Francisco, CA http://ridemission.com 2015, but Synthesis is researching the individuals that grew this company and where they have gone).

March 2016 34 Synthesis Partners, LLC © NA Motors Supply Chain Analysis

# Organization Name HQ Website Capability Comment

Manufacturing Powertrain Parts, 73 Mitsubishi Electric Northville, MI http://www.meaa-mea.com Motor Control Units Automotive America

Manufacturing xEV Traction Drive

74 Motor Cores, Tools and Dies Used Mitsui High Tec – Canada Ottawa, Canada http://www.mitsuihightec.com to Manufacturing Cores

Subsidiary Magnequench Manufacturing Ndfeb Magnet Powders Used to Manufacturing Bonded Ndfeb Permanent Rare 75 Greenwood Village, Molycorp, Inc. http://www.molycorp.com Earth Magnets for xEVs (Facility CO Idled Due to Financial Constraints 2015 – current status remains under research).

Dev. Inductive Power 76 Momentum Dynamics http://www.momentumdynamics. Malvern, PA Transmission Technology for xEVs Corporation com

77 Nashville Area Chamber of xEV Manufacturing Support Nashville, TN http://www.nashvillechamber.com Commerce

National Aeronautics and 78 http://www.nasa.gov/centers/glen Electric Motor R&D Space Administration (NASA) - Cleveland, OH n/home/index.html Glenn Research Center

79 xEV R&D NextEV Silicon Valley, CA Under Research

R&D, Manufacturing E-Steel for 80 Nippon Steel & Sumitomo Houston, TX http://www.nssmc.com/en Electric Motors for xEVs Metal U.S.A., Inc.

http://www.nissan- 81 xEV Electric Motor Manufacturing Nissan North America Decherd, TN global.com/en/company/profile/e n_establishment/north_america/

March 2016 35 Synthesis Partners, LLC © NA Motors Supply Chain Analysis

# Organization Name HQ Website Capability Comment

Under Research: Capability to 82 Develop/Manufacturing E-Steel Nucor Corporation Charlotte, NC http://www.nucor.com for Electric Motors

Under Research: Manufacturing 83 of Windings for Traction Drive Odawara Automation Inc. Tipp City, OH http://odawara.com Electric Motors for xEVs

Manufacturing Hybrid Propulsion 84 Systems for Medium-/Heavy-Duty Odyne Systems LLC Waukesha, WI http://www.odyne.com xEVs

Manufacturing Traction Drive 85 Orchid International Monroe, WI http://orchidinternational.com Electric Motors

86 RD&E xEV Electric Motor Control Paice, LLC Baltimore, MD http://www.paicehybrid.com

R&D/Manufacturing Global 87 Vehicle Motor for xEV Traction Parker Hannifin Corp. Cleveland, OH http://parkerhybrid.parker.com Drive and Other Applications

Design/Manufacturing Low 88 Voltage Traction Motors (Up to 36 Peerless Electric Warren, OH http://www.peerlesselectric.com V, 7.5 HP)

Dev. In-Wheel Electric Drive 89 Protean Electric Auburn Hills, MI http://www.proteanelectric.com System for Light-Duty xEVs

Design/Manufacturing Heavy- 90 Proterra Greenville, SC http://www.proterra.com Duty xEVs

March 2016 36 Synthesis Partners, LLC © NA Motors Supply Chain Analysis

# Organization Name HQ Website Capability Comment

91 Electric Motor RD&E QM Power Lee's Summit, MO http://www.qmpower.com

92 Dev. xEV Amorphous Motors Radam Motors, LLC Otsego, MI http://www.radamllc.com

Design/Manufacturing Motors for Light-/Heavy-Duty xEVs (Borg 93 Warner Acquisition of Remy Remy International Inc. Pendleton, IN http://www.remyinc.com Expected to Conclude 4th Quarter 2015)

Analysis, Technical Benchmarking, 94 Van Buren Design and Dev. Electric Motors Ricardo Strategic Consulting http://www.ricardo.com Township, MI for Traction Drive xEVs

R&D/Manufacturing HEV/EV 95 Powertrain Systems and Robert Bosch, LLC Farmington Hills, MI http://www.bosch.us/en/us Components

Dev./Manufacturing Motor 96 Rockwell Automation http://www.rockwellautomation.c Milwaukee, WI Control Products Technologies om

Design/Manufacturing of Electric 97 http://www.rockymountaintechnol Rocky Mountain Technologies Basin, MT Motors for xEVs ogies.com

Molding, Assembly and Prototyping of Electronic and 98 Royal Die & Stamping Co., Inc. Carol Stream, IL http://www.royaldie.com Other Components, Incl. Copper Bus Bars, Etc.

99 xEV Standards Dev. SAE International Warrendale, PA http://www.sae.org

100 SAIC McLean, VA http://www.saic.com xEV Dev./Manufacturing

March 2016 37 Synthesis Partners, LLC © NA Motors Supply Chain Analysis

# Organization Name HQ Website Capability Comment

101 xEV R&D SAIC Motor Corp. Silicon Valley, CA Under Research

Manufacturing Automated Test 102 Instrumentation for xEV Electric Sakor Technologies, Inc. Okemos, MI http://www.sakor.com Motors

Manufacturing Elec. Components 103 Schunk Graphite Technology Menomonee Falls, http://www.schunkgraphite.com/e for xEV Motors LLC WI n

Design/Manufacturing High 104 http://www.nidec- Scott DC Power Products Alamogordo, NM Output Traction Drive Dc Motors ise.com/aboutus/index.php

Traction Drive Motor 105 Siemens Energy & Automation Alpharetta, GA http://www.siemens.com R&D/Manufacturing

106 Commercial xEV Manufacturing Smith Electric Vehicles Kansas City, MO http://www.smithelectric.com

Manufacturing Copper Wire for 107 Superior Essex Fort Wayne, IN https://www.superioressex.com xEV Motors

Manufacturing Magnets for xEV 108 TDK Ferrites Corp. Shawnee, OK http://www.tdk.com Motors

109 Finances xEV Start-Ups Techstars Austin, TX http://www.techstars.com

Stamping of Electrical 110 Steel/Laminations for xEV Electric Tempel Steel Co. Chicago, IL http://www.tempel.com Motors

111 Tesla Motors Fremont, CA http://www.teslamotors.com

March 2016 38 Synthesis Partners, LLC © NA Motors Supply Chain Analysis

# Organization Name HQ Website Capability Comment

xEV Manufacturing

R&D Motor Drive/ Sensor-Less 112 Texas Instruments Kilby Dallas, TX http://www.ti.com Motor Control Technologies Research Center

Design, Dev./Manufacturing xEV 113 Boucherville, TM4 Inc. http://www.tm4.com Motors, Controllers, Etc. Québec, Canada

114 Manufacturing xEV Motors Toshiba International Corp. Houston TX https://www.toshiba.com/tic/

115 xEV Manufacturing Toyota Motor N.A. Washington, D.C. http://www.toyota.com/usa

Toyota Research Institute of North America (TRI-NA), http://www.toyota.com/about/our R&D xEV Motors, E-Steel, Copper 116 Toyota Technical Center (TTC), Ann Arbor, MI _business/research_and_develop Wire and more. Toyota Motor Engineering & ment Manufacturing North America, Inc. (TEMA)

Acquires E-Steel for Toyota's NA 117 Toyota Tsusho America Georgetown, KY http://www.taiamerica.com Manufacturing Requirements

Manufacturing/Eng. Electric 118 Transportation Power, Inc. Poway, CA http://www.transpowerusa.com Motors for Heavy-Duty xEVs a/k/a Transpower

U.S. Department of Energy, 119 xEV Electric Motor-Related R&D National Renewable Energy Golden, CO http://www.nrel.gov Laboratory (NREL)

U.S. Department of Energy,

National Transportation xEV Electric Motor-Related R&D 120 Research Center, Oak Ridge Knoxville, TN http://www.ntrc.gov National Laboratory

121 xEV Electric Motor R&D Oak Ridge, TN http://www.ornl.gov U.S. Department of Energy,

March 2016 39 Synthesis Partners, LLC © NA Motors Supply Chain Analysis

# Organization Name HQ Website Capability Comment

Oak Ridge National Laboratory

U.S. Department of Energy, 122 xEV Electric Motor-Related R&D Pacific Northwest National Richland, WA http://www.pnnl.gov Laboratory (PNNL)

Collaborates On xEV Technology United States Council for (Full members include Chrysler 123 Automotive Research LLC Group, Ford Motor and GM; other Southfield, MI http://www.uscar.org (USCAR) automotive companies have participation.)

Processing, Testing Evaluating United States Steel Corp. Cold-Rolled Magnetic Lamination 124 Research and Technology Munhall, PA http://www.ussteel.com Steels Used in The Manufacture Center of Motors

Dev. 30-Kw Induction Motor Using Additive Manufacturing 125 United Technologies Research Hartford, CT http://www.utrc.utc.com W/O Rare-Earth Magnets for Center xEVs.

Dev./Manufacturing Electric

126 Motors for Medium-/Heavy-Duty UQM Technologies Inc. (a/k/a Longmont, CO http://uqm.com xEVs Unique Mobility)

Design/Dev. Integrated Motor 127 Drive Systems US Hybrid Torrance, CA http://www.ushybrid.com

128 Dev. Switched-Reluctance Motor Valeo Inc. Auburn Hills http://www.valeo.com/en

xEV Design, Prototyping & 129 Via Motors Orem, UT http://www.viamotors.com Engineering

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# Organization Name HQ Website Capability Comment

130 xEV Manufacturing Wanxiang America Corp. Elgin, IL http://www.wanxiang.com

Manufacturing Copper Rotors for 131 Wieland Copper Products LLC Wheeling, IL http://www.wielandcopper.com xEV Traction Drive Electric Motors

Dev. Hybrid Powertrain 132 Conversion Systems for Vans and XL Hybrids Inc. Boston, MA http://www.xlhybrids.com Trucks

Manufacturing Traction Drive 133 Electric Motors for xEV Yaskawa Americas Rochester, NY Under Research Applications

Manufacturing Electric Motors for 134 ZF Friedrichshafen AG Vernon Hills, IL http://www.zf.com xEVs

8.0 Analysis of Global Motor Supplier Rankings

As noted above, the NA motor supply chain is not exclusively a NA entity, but rather the NA portion of a global motor supply chain, and analyses must take this into account. As such, initiatives intended to strengthen the NA motor supply chain should leverage leaders in the global motor supply chain.

Following Figures 1 and 2, and Tables 5 and 6 below, Synthesis draws several inferences regarding the nature of the NA motor supply chain in the context of global supplier rankings.

March 2016 41 Synthesis Partners, LLC © NA Motors Supply Chain Analysis

Figure 1: xEVs Supplied

Source: Synthesis Partners, LLC (2015).

March 2016 42 Synthesis Partners, LLC © NA Motors Supply Chain Analysis

Figure 2: xEVs by Country

Source: Synthesis Partners, LLC (2015)

March 2016 43 Synthesis Partners, LLC © NA Motors Supply Chain Analysis

Table 5 provides a ranking of and additional context for motor suppliers, based on the total number of xEVs into which motors were installed by OEMs over a five-year period, from 2011-2015.

Table 5: Global Motor Supplier Ranking, by 5-Year Approximate Total Number Of xEVs Supplied, From 2011-2015

Rank Propulsion HQ Location of Motor Approximate Number Region of xEV Brands in Which Motors Motor Supplier (City, Country) of xEVs into Which Assembly or Have Been Installed Supplier Motors Have Been Production of Installed, xEVs [Note: This is From 2011-2015 [Note: not the same as the Numbers rounded to location of motor nearest 100; Based on assembly or original OEM installations manufacture.] only.]

1 Toyota Aichi, Japan 5,267,700 Greater China Camry, Corolla, Levin, Prius

Europe Auris, Yaris

Japan/Korea Daihatsu Mebius, Lexus CT, ES, HS, NX, RX, Scion, Alphard, AQUA, Corolla, Estima, Highlander, Mirai, Prius, Prius

Alpha, RAV4, SAI, Sienta, Voxy, Crown Royal, Harrier

Lexus ES, RX, Avalon, Camry, North America Highlander

South Asia Camry, Prius

2 Honda Tokyo, Japan 1,211,400 Europe Civic, Jazz

Greater China Accord, Fit

Japan/Korea Acura RLX, RL, Accord, City, CR- Z, Fit, Fit Shuttle, Freed, Grace,

Insight, Jade, Odyssey, Shuttle, Vezel

North America Acura ILX, NSX, Accord, Civic

South Asia Accord, Civic, Jazz

3 Toshiba Tokyo, Japan 363,800 Greater China Volvo S60

Ford C-Max, Mondeo

March 2016 44 Synthesis Partners, LLC © NA Motors Supply Chain Analysis

Europe Hino Dutro, Toyota Dyna

Japan/Korea Ford C-Max, Fusion, Escape, Lincoln MKZ North America

4 Hyundai Seoul, South Korea 307,500 Europe i30 Mobis Japan/Korea Hyundai Avante, Grandeur, Sonata, Kia K5, Kia K7, Kia Sportage R, Kia Forte

5 Aisin Seiki Aichi, Japan 280,300 Japan/Korea Toyota Camry, Crown Majesta, Crown Royal, D-Sedan, Lexus GS, Lexus IS, Lexus LS, Lexus RC, Mazda Axela

6 Renault/ Amsterdam, The 280,000 Greater China Murano, Venucia E30, Dongfeng Nissan Netherlands Ruiqi, Succe, Infiniti Q50

Europe Leaf, NV200

Japan/Korea Infiniti M/Q70, Q50, Q70L, E-

Sedan, Atlas, Cima, Fuga, Leaf,

Skyline, X-Trail

Middle East/ Africa Dongfeng Ruiqi

North America Infiniti JX/QX60, Altima, Leaf, Murano, Pathfinder, Rogue

South Asia Teana, X-Trail

7 Continental Hanover, Germany 249,600 Europe Renault Fluence, Kangoo LCV, Zoe, Samsung SM3

Buick LaCrosse, Buick Regal, North America Chevrolet Malibu, Ford Transit

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Connect

8 Valeo Paris, France 242,400 Europe Ford Focus

Japan/Korea Nissan Serena

9 Mitsubishi Tokyo, Japan 207,300 Japan/Korea Mazda Carol, Flair Crossover, Electric Corp. Flairwagon, Suzuki Alto, Hustler, (MELCO) Solio, Spacia, Wagon R.

10 Hitachi Tokyo, Japan 193,800 Europe Opel Astra

Greater China Buick LaCrosse

Japan/Korea Buick Alpheon, Isuzu Elf, Subaru XV

North America Cadillac ELR, Chevrolet Volt, Opel Ampera

11 Bosch Gerlingen, Germany 169,500 Greater China Maxus Datong V80, VW Lavida NF

Europe Audi A3, Q7, BMW 2-Series

Active Tourer, 2-Series Gran Tourer, Citroen DS5, Ferrari F12,

Ferrari FF, LaFerrari, Fiat Doblo,

Iveco Daily,MKB Vito, SLS, Peugeot 508, Porsche 918

Spyder, Porsche Cayenne, Ram ProMaster City, VW Golf, Passat, Touareg, up!, XL1

North America Fiat 500

South Asia Citroen DS5, Peugeot 508, VW Golf

12 ZF Friedrichshafen, Germany 160,500 Europe Audi A6, A8, Q5, BMW 3-Series, 5-Series, 7-Series, Jaguar XE,

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Jaguar XF, Jaguar XJ, Range Rover, Range Rover Sport, McLaren Ultimate Series, MB S- Class, MB CLS, MB E-Class

Coupe, MB GLK Greater China BMW 5-Series

Middle East/ Africa MB Sprinter

North America BMW X5, MB C-Class, Metris,

ML-Class/GLE, MB GL-Class, VW

Golf, Golf SportWagen, Jetta

South Asia BMW 3-Series GT, Jaguar XJ

13 EM-motive Hildesheim, Germany 154,900 Europe Citroen Berlingo Van, DS5, MB B-Class, C-Class, C-Class Coupe, Citan, E-Class, GLC, S-Class, S- Class Coupe, S-Class Pullman,

SLS, Sprinter, Vito, Peugeot 3008, Partner Van, Panamera,

Smart Forfour, Smart Fortwo

Greater China Denza Golf EV, MB E-Class

14 Meidensha Tokyo, Japan 135,000 Japan/Korea Citroen C-Zero, i-MiEV, Minicab Truck, Minicab Van, Outlander, Peugeot iOn

Europe Colt

15 BYD Shenzhen, China 120,000 Greater China E6, F3, Han, Qin, Shang, Song, Surui, Tang, Yuan

16 Tesla Motors Palo Alto, USA 110,100 North America Tesla Model S, Model X, Roadster, Toyota RAV4, and, according to a Tier 1 source, the

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Mercedes B-Class

17 Remy Pendleton, USA 69,300 North America GM Cadillac Escalade, Silverado, Tahoe, Sierra, Yukon

18 Fuji Aichi, Japan 48,900 Japan/Korea Subaru Impreza, XV Machinery

19 AC San Dimas, USA 43,500 Europe BMW i3, i8, 1-Series Propulsion

20 Siemens Munich, Germany 36,000 Europe Ford Transit Connect, Volvo XC90, C30

Greater China Emgrand EC7, EC7-RV, EC8, Gleagle Panda, Gleagle Panda Cross

21 Shanghai Shanghai, China 34,500 Greater China Chery QQ, QQ3, Chery A3, Edrive Englon TXN, Englon King Kong, Great Wall Voleex C20R, Riich G5, Roewe 550, Roewe 750, VW

Bora, Zhonghua H230, Zunchi, FSV

22 Dajun Shanghai, China 29,200 Greater China BAIC D70, E-Seres, Weiwang, FAW Besturn B50, B70, Oley, Weizhi, BAIC Foton Midi,

Luxgen 7 MVP

23 Magna Aurora, Canada 25,200 North America Ford Focus International Europe Volvo V60

24 Shenzhen Shenzhen, China 23,300 Greater China Zotye S-J, E20, TD100, Z100 Greatland Electrics

25 Ford Dearborn, USA 22,500 North America Ford Fusion

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26 General Detroit, USA 18,200 Europe Opel Adam Motors North America Chevrolet Colorado, Impala, Malibu, Silverado, GMC Canyon, GMC Sierra

Japan/Korea Chevrolet Spark

27 Denso Aichi, Japan 11,700 Greater China Chuanqi GA5

Japan/Korea Mitsubishi eK Wagon, Nissan DAYZ

28 Zhejiang Yongkang, China 11,400 Europe Jianghuai Heyue Unite Motor Co. Greater China Haima Aishang, Premacy, Wangzi, Jianghuai Heyue, Heyue A13, RS, Tongyue, Dongfeng A- Hatch

Middle East/ Africa Jianghuai Heyue

29 Shanghai Shanghai, China 9,800 Greater China Lifan Zhongke Shenjiang Electric Vehicle Co.

30 Zhejiang Zhejiang, China 8,900 Greater China Changan BenBen, BenBen Mini, Daker Auto Yuexiang, Chevrolet Sail Electro Technology

Co., Ltd. (Possibly

affiliated with Ningbo Yuanzhou Auto Electric Equipment

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Co., Ltd.)

31 Mahindra Mumbai, India 8,800 South Asia Mahindra Maxximo, Reva E20, Reva i, Verito

32 Hyosung Seoul, South Korea 6,600 Japan/Korea Kia Ray, Soul

33 Jiangsu Taizhou, China 4,200 Greater China Mitsubishi MG Soueast V3 Weiteli Motors- Manufacturin

g Co.

34 MHI Tokyo, Japan 2,400 Japan/Korea Mitsubishi Fuso Cante

Europe Mitsubishi Fuso Canter

35 Changan Chongqing, China 1,900 Greater China Changan EADO Automobile Group

36 Ningbo Zhejiang, China 1,200 Europe Great Wall TagAZ C30 Yuanzhou Auto Electric Greater China Changan CX30, Great Wall Equipment Voleex C30

Co., Ltd.

Middle East/ Africa Great Wall Voleex C30

37 Delta Taipei, Taiwan 1,100 Greater China Chevrolet Sail Electronics

38 Daihatsu Ikeda, Japan 1,100 Europe Toyota Piaggio Hijet/Porter

39 Huayu Shanghai, China 1,100 Greater China SAIC Roewe E50 Automotive Electric Drive

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System Co., Ltd.

40 Zhuzhou Zhuzhou, China 200 Greater China Iveco Daily, Fiat S2000 Nanche Electric Motor Co.

41 Sichuan Sichuan, China 200 Greater China Hafei Saibao 3 Dongfeng Electric Motor Co.

42 UQM Longmont, USA 200 North America Hafei Technologies

43 Zytek Lichfield, UK 60 Europe Lotus Elise Automotive

Source: Synthesis Partners, LLC (2015).

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Table 6 provides information on the relative percent shares of the global motor supply market held by each supplier, for the 2011-2015 time period.

Table 6: Global Motor Supply Market Shares Percent Share of Total xEVs Supplied Approximate 5-Year Total xEVs By All Motor Supplied (Incl. OEM motor Rank Motor Supplier Suppliers (Incl. OEM installations only, rounded to motor installations nearest 100), From 2011-2015 only), From 2011- 2015 1 Toyota 5,267,700 53.25% 2 Honda 1,211,400 12.24% 3 Toshiba 363,800 3.68% 4 Hyundai Mobis 307,500 3.11% 5 Aisin 280,300 2.83% 6 Renault/Nissan 280,000 2.83% 7 Continental 249,600 2.52% 8 Valeo 242,400 2.45% 9 MELCO 207,300 2.10% 10 Hitachi 193,800 1.96% 11 Bosch 169,500 1.71% 12 ZF 160,500 1.62% 13 EM-motive 154,900 1.57% 14 Meidensha 135,000 1.36% 15 BYD 120,000 1.21% 16 Tesla Motors 110,100 1.11% 17 Remy 69,300 0.70% 18 Fuji Machinery 48,900 0.49% 19 AC Propulsion 43,500 0.44% 20 Siemens 35,900 0.36% 21 Edrive 34,500 0.35% 22 Dajun 29,200 0.30% 23 Magna 25,200 0.25% 24 Greatland Electrics 23,300 0.24% 25 Ford 22,500 0.23% 26 General Motors 18,200 0.18% 27 Not Researched 15,800 0.16% 28 Denso 11,700 0.12% 29 Unite 11,400 0.12% 30 Zhongke Shenjiang 9,800 0.10% 31 Dakaer 8,900 0.09% 32 Mahindra 8,800 0.09% 33 Hyosung 6,600 0.07%

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Percent Share of Total xEVs Supplied Approximate 5-Year Total xEVs By All Motor Supplied (Incl. OEM motor Rank Motor Supplier Suppliers (Incl. OEM installations only, rounded to motor installations nearest 100), From 2011-2015 only), From 2011- 2015 34 Weiteli 4,200 0.04% 35 MHI 2,400 0.02% 36 Unknown 2,200 0.02% 37 Changan 1,800 0.02% 38 Yuanzhou 1,200 0.01% 39 Delta 1,100 0.01% 40 Daihatsu 1,100 0.01% 41 Huayu E-drive 1,100 0.01% 42 Nanche 200 0.00% 43 Sichuan Dongfeng 200 0.00% 44 UQM Technologies 200 0.00% 45 Zytek 100 0.00%

Source: Synthesis Partners, LLC (2015).

Synthesis draws the following conclusions concerning the NA motor supply chain from the above figures and tables:

 The motor supply market is very concentrated: o Top 3 producers account for 70% of all production o Top 5 producers account for 75% of all production

 The #1 motor supplier (Toyota) has 40% larger market share than the #2 motor supplier (Honda).

 The #2 motor supplier (Honda) has ~9% larger market share than the #3 motor supplier (Toshiba).

 Less than 0.5% separates the market shares of each successive supplier ranked #3 and below. The companies in this part of the supply chain can be seen as “not yet at scale” in the automotive traction drive motor production business.

 The top NA-based motor producer is Tesla, which is ranked 16th globally.

 Tesla Motors’ sales are just 30% of the #3 supplier (Toshiba), 9% of the #2 supplier (Honda), and 2% of the #1 producer, Toyota. This illustrates the extent to which the top two producers (both Japan-based) dominate xEV production. Despite Tesla’s success, it also highlights the limited role that NA currently plays in the

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motor supply chain.

 As the cost of motor production is tightly linked to the scale of production, Tesla (and any other company outside the top 3 producers) has a limited ability to significantly reduce the cost of production. The motor suppliers ranked below 16th each produced tens of thousands of motors over the five-year period.

 In absolute numbers, the difference in volume between 1st ranked Toyota and 2nd ranked Honda is significant: 4 million xEVs, or 40% of the market.

 Toyota holds a significant lead in their cost curves, design learning curves, and manufacturing know-how.

 Current and future xEV vehicles that are assembled or produced in NA are perhaps obvious targets for NA-based motor suppliers to seek growth opportunities – though this does not obviate the need for a globally cost-competitive and quality product.

 The market dynamics of niche markets for low-volume traction drive motors manufacturing (e.g., retrofitting internal combustion engine (ICE) vehicles to xEVs) could become increasingly relevant to the NA motor supply chain. Low-volume (i.e., at hundreds or at most several thousand units per year) producers could represent new and innovative entrants into the NA motors supply chain. These companies may achieve success based on relatively strong profit margins vis a vis the high volume producers. Such margins could be possible by leveraging others’ R&D, minimizing plant construction and production equipment costs, and building a strong, unique brand. Note that these niche motor manufacturers may have no intention of pursuing higher-volume production markets.

 OEMs state that they have strong incentives to continue to use particular motor suppliers for particular vehicle types. Therefore, the xEV relationships highlighted in the Table above will likely continue absent a major failure or breakdown in a supply relationship.

 NA motor manufacturers that do not supply the top 5 global producers will need to employ disruptive strategies in order to compete effectively. It is very unlikely that direct competition by a NA motor supplier on cost or quality alone can succeed. Specifically, a new, sustainable value proposition appears to be necessary.

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top global motor supplier cities and regions highlight elements of a future NA motor supply strategic plan.

 The nature of a disruptive strategy can be defined via a careful SWOT analysis, from the perspective of a particular private sector motor supplier.

9.0 Analysis of Primary Source Information on Gaps in the NA Motor Supply Chain

Introduction

The following NA motors supply chain gap analysis is based on hundreds of phone calls, interviews and in-person conference contacts that Synthesis has performed from 2012 to present. These contacts are built on relationships that extend from research conducted over the past five years, up to the most recent 2015 research timeframe.

As shown in the Figure 3 below, Synthesis made contact with nearly 100 individual companies, with the distribution among OEMs, Tier 1-4s and other organizations as depicted in 2015.

Source: Synthesis Partners, LLC (2015).

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The distribution of primary source contacts made in prior years (2012 to 2014) is very similar to that depicted in Figure 3 above.

Each gap reported below is traceable to a confidential open-ended interview, conducted by a Synthesis analyst in the 2012-2015 timeframe. This supply chain gap analysis is based exclusively on open-ended, confidential interviews and therefore – while based on deep and careful research – does not statistically support significant conclusions. Interpretation of Gap Analysis Findings

Each interview began with background on the research that Synthesis is performing for DOE-VTO, followed by several opening questions found in Appendix 1.

Synthesis did not begin this research with a pre-conceived list or understanding of gaps, and did not present such a list to the interviewees. Every gap and gap category identified through this research is based on Synthesis’ analysis of the inputs from the primary sources.

The gap analysis was conducted in a dynamic environment, which included factors such as individuals’ positions, background, and knowledge, and the NA motors market context.

This work illustrates the key issues and gaps relevant to DOE VTO’s option space regarding the NA motors supply chain. Top 10 Gap Findings

The top ten categories of NA motors supply chain gaps identified by primary sources from 2012 to 2015, by percent of all gaps discussed, are provided below in Figure 4.

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Figure 4: Top 10 Categories of Gaps in the NA Motors Supply Chain*

1. Strategic Investment Planning: 36%

2. Situational Awareness: All Types: 18% 3. Critical Materials Manufacturing Capacity: 10%

4. Training and Engineering Skills: 7% 5. Manufacturing Techniques and Tech.: 7%

6. Standards Development: 5% 7. Coordination and Collaboration: 5%

8. Applied R&D: 3%

9. Technology Transition Planning: 2% 10. Multi-/Single-Industry Collaborative Eng.: 2%

* Percentages do not add up to 100 because there are several gaps outside the Top 10 that are not included (see report) and rounding.

Source: Synthesis Partners, LLC (2015)

Definition of Gaps: A critical missing action or capability, from within the business, technology, cultural, market, and/or economic environment which – if addressed in a concrete manner by an entity (e.g., VTO) – could, according to supply chain participants, catalyze the NA supply chain leading to expanded NA production and increased likelihood of NA motor successes. Many, though not all, gaps are within the DOE VTO span of control. Source: Adapted from, "North American Traction Drive Power Electronics and Motors Supply Chain Analysis", Synthesis Partners, LLC, January 2015, pg. 33/61 (report available upon request).

Further detailed information on each category of gap is provided below. It is notable that Strategic Investment Planning and Situational Awareness gap types account for over 50 percent of the total. These two gap categories are discussed in detail below.

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The third most frequently cited gap category, Critical Materials Manufacturing Capacity, addresses the need for advances in critical materials and critical materials manufacturing in support of motors production in NA. This was the only additional gap category cited by 10 percent or more of the interviewees. The gap categories not included in the top ten, and therefore are not shown in Figure 4 above, are presented below:

 Capacity of Tier 1 to 4 Automotive-Level Manufacturing Quality Control

Addresses the possibility that suppliers in the NA market may have a peculiar issue regarding meeting or exceeding the quality control requirements needed to achieve success in the automotive industry.

 Ability to Navigate NA Market Legal Frameworks

Concerns the possibility that suppliers in the NA market may be hindered by legal complexities in navigating the business environment.

 Level of Manufacturing Presence in NA

Points out that there may be an insufficient number of suppliers in NA to support the current and expected future demand for motors.

 IP Protection

Addresses a potential need to protect IP, which may affect the capability to compete in manufacturing in NA. Few primary source interviewees raised issues that fit into these other gap categories. However, the sources that raised them believed strongly that these issues need to be discussed. As a result, Synthesis cautions against drawing the conclusion that the above gap categories are of no relevance to the NA motor supply chain. The primary sources contacted have provided their views on gaps from 2012 to present. This section evaluates how views have changed over time.

Caveat: As with any evolving study – and especially one that is driven by source availability, as this one is – the sources interviewed in 2012 are not necessarily the same individuals interviewed in 2015.

Analyzing Trends Among All Sources’ Views on Gaps

The following key trends are identified through this analysis:

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• The top gap categories remain consistent among all organization types, and have generally increased in prominence over time, from 2012 to 2015.

– The strategic investment-planning gap remained as a top-level concern. – The manufacturing techniques and technology gap is of increasing concern over time, from 2012 to 2015. – The training and engineering skills gap is prominent, and is of increasing concern, from 2012 to 2015.

– The critical materials manufacturing capacity and situational awareness gaps are prominent, and are of increasing concern, from 2012 to 2015.

• Several gap categories appear to have become less important, including: – Standards development;

– Multi- and single-industry collaborative engineering and coordination;

– Collaboration between all players

Analyzing Gaps by Organizational Type

An analysis of gaps by organizational types, and the level of concern communicated by individuals within these organizations about particular gaps provides another perspective. The information in Table 7 and below addresses these findings based on Synthesis’ complete archive of NA motors primary source gap statements from 2012 to 2015.

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Table 7: Key NA Motors Supply Chain Gaps, Based on Primary Sources, From 2012 to 2015.

Relative OEMs Tier 1s Tier 2s Tier 3s Others Frequency, 2012- 2015.  Strategic Investment  Strategic Investment  Strategic  Strategic Investment  Strategic Gaps Most Planning Planning Investment Planning Investment Planning  Situational  Situational Awareness Planning  Situational Frequently Raised Awareness  Training and Engineering Awareness Skill Development  Critical Materials Manufacturing Capacity  Critical Materials  Coordination and  Manufacturing  Critical Materials  Situational Gaps Raised with Manufacturing Collaboration Between Techniques and Manufacturing Awareness Capacity and Among All Players Technology Capacity Above Average  Standards  Standards Development  Situational  Manufacturing Frequency Development Awareness Techniques and  Training and Technology Engineering Skill Development  Applied R&D  Manufacturing  Applied R&D  Applied R&D  Coordination and Gaps Raised with  Capacity of Tier 1 to Techniques and  Technology  Ability to Navigate Collaboration 4 Automotive-Level Technology Transition Planning NA Market Legal Between and Below Average Manufacturing QC  Multi- and Single-Industry Frameworks Among All Players Collaborative Engineering  Level of Frequency  Multi- and Single- Manufacturing Presence in NA Industry

 Coordination and Collaborative Collaboration Engineering Between and Among  Technology All Players Transition Planning  IP Protection  Training and Engineering Skill Development Source: Synthesis Partners, LLC (2015).

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More information on the nature of individual gaps in the NA motors supply chain and potential solutions offered is provided in a following section.

Synthesis draws the following conclusions concerning gaps in NA motors supply chain, by organizational type, as evidenced in Table 7 above:

• The gaps that are most frequently raised, by organizational type: o OEMs: strategic investment planning and situational awareness.

o Tier 1s: strategic investment planning, situational awareness, training and engineering skills development, and critical materials manufacturing capacity.

o Tier 2s: strategic investment planning. o Tier 3s: strategic investment planning and situational awareness.

o Others: strategic investment planning.

 The gaps that come in second, based on frequency of occurrence, by organizational type, are:

o OEMs: critical materials manufacturing capacity and standards development.

o Tier 1s: coordination and collaboration between and among all players and standards development.

o Tier 2s: manufacturing techniques and technology, situational awareness, and training and engineering skill development.

o Tier 3s: critical material manufacturing capacity and manufacturing techniques and technology.

o Others: situational awareness.

 The gaps that have the lowest frequency of occurrence, but which are notable because they are raised, by organizational type, are:

o OEMs: applied R&D, and capacity of Tier 1 to 4 automotive-level manufacturing quality control.

o Tier 1s: manufacturing techniques and technology and multi- and single- industry collaborative engineering.

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o Tier 2s: applied R&D and technology transition planning.

o Tier 3s: applied R&D, ability to navigate the NA market legal frameworks level of manufacturing, coordination and collaboration between and among all players, IP protection and training and engineering skill development.

o Others: coordination and collaboration between and among all players, multi- and single-industry collaborative engineering, and technology transition planning.

Synthesis makes the following additional points based on the primary source views reported in Table 7 above:

 Sources from all organizational types are deeply concerned about strategic investment planning and the need for improved situational awareness. More information is provided below.

 Of above-average concern to almost all organization types are critical materials manufacturing capacity. This points to single-string dependencies in the core advanced material inputs needed to produce motor magnets, copper windings, and other key components. This indicates that the supply chain is brittle at the bottom. More information is provided below.

 Combining the top two gap categories (in terms of frequency), all organization types (OEMs, Tier 1-3s) are concerned not only about strategic investment planning, situational awareness and critical materials manufacturing capacity, but also standards development. The combination of all of these gaps, and the role of standards development in particular in terms of planning initiatives, may help focus economic development policy-makers on items to catalyze the development of the NA motors supply chain.

 The existence of the four gaps (strategic investment planning, situational awareness critical materials manufacturing capacity and standards development) – across OEM, Tier 1-3s sources – indicates the factors contributing to the weakness of the NA motors supply chain.

 Only Tier 1s focus on top gap categories such as training and engineering skill development, and coordination and collaboration between and among all players. This suggests that Tier 1s are experiencing negative business effects of inadequate

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training, coordination, and collaboration in the NA motors supply chain. These may be key precursors to the successful development of the NA motors supply chain.

Finding Brittleness in the NA Motors Supply Chain

In general, Synthesis believes that the NA supply chain is brittle both at the top and the bottom. This is based on analysis of the primary source gap results and the facts, trends, and issues identified in this report. These additional facts provide details on the state of supply of magnets, silicon steel, copper, copper winding, and copper and aluminum rotors. (Note: The top-to-bottom brittleness finding is in contrast to the NA PE supply chain findings provided in an earlier report, in which Synthesis found that the PE supply chain is principally brittle at the lower levels.)

At the top, weakness is indicated by divergence of views among OEMs and Tier 1s concerning the level of importance of training and engineering skill development, and coordination and collaboration between and among all players. OEM sources focused exclusively on strategic investment planning and situational awareness as the most important gaps while Tier 1s raised these gaps at the highest level of concern and also raise training and engineering skill development, and coordination and collaboration gaps as equally important. The key finding is that targeted investments and strategies for skill development and coordination among players is viewed to be of equal importance to the overall need for improved strategy development and situational awareness.

Another factor is that motors are heavy, and hence costly to ship. This encourages firms to consider local manufacture of motors components and materials. But with global competition, any part or component can be made almost anywhere. In the case of motors, Tier 1s generally pay the shipping costs for finished motors shipped to the OEMs. Tier 1s are therefore most concerned about shipping distances and costs, and see a greater need to coordinate and collaborate to find local manufacturing and hence avail themselves of cost reduction opportunities. This is especially true as it relates to local supply of the heaviest inputs into motor production (e.g., silicon steel, copper, aluminum and rotors).

The lack of qualified domestic NA suppliers of heavy inputs (e.g., silicon steel) is a key driver of present brittle state of the NA motors supply chain. Against this background, there is an additional challenge, which is that Tier 1s are necessarily focused on local production possibilities should demand increase, whereas OEMs are focused on receipt of high-quality motors at the best possible price – no matter where they are made. Figure 5 below shows this perspective of the NA motors supply chain.

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Figure 5: NA Motors Supply Chain

Source: Synthesis Partners, LLC (2015).

Of course this is not the only perspective of the NA motors supply chain. The level of OEM- Tier 1 collaborative design and engineering work is not fixed and naturally depends on the business and technical options available to each participant. There are examples of OEMs working very closely and successfully with Tier 1s to supply motors to xEVs. Nonetheless, the majority of primary source information supports the finding that work is needed to strengthen the NA motors supply chain starting at the top.

In addition, the agreement among all sources that strategic investment planning and situational awareness are key gaps may indicate that supplier networks are not resilient in terms of NA-sourcing, mainly due to the lack of available options. Synthesis believes Tier 1- 3s in the NA motors supply chain will therefore continue to seek approaches to address the need for improved collaboration, coordination, training, and engineering skills development to expand the supplier options available. However, Synthesis believes that they will likely fail to make any significant headway in terms of NA-sourcing if OEMs are not involved.

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Finally, it is worth noting here that Tier 3 primary source responses focused on the need to supply silicon steel, magnetic materials, copper winding techniques and new low- dysprosium magnets. The gaps of concern to Tier 3s, which are not raised by other organizational types, include the ability to navigate the NA legal market framework, the level of manufacturing presence in NA, IP protection, and manufacturing techniques and technology. Tier 3 suppliers are constantly seeking strategies to work with or around others’ competitive material supply strategies.

Synthesis therefore concludes that Tier 3s will be especially amenable to assistance that is focused on developing plans to enable the resilient, stable, and cost-competitive supply of core components for the NA motors supply chain.

Detailed Analysis

The following section assesses the gaps of highest interest to all sources. Each gap is defined and discussed with representative examples as provided by sources.2 The lower tier gaps are reviewed in combination.

 Strategic Investment Planning Gaps:

This gap category is at the top as it accounts for 36% of all references to gaps that Synthesis has collected regarding the NA motor supply chain, from 2012 to present.

More specifically, this gap category refers to investments and plans to drive outcomes beyond a 5-year horizon, focusing on motor technology investments that are linked to a roadmap that is constructed to address specific strengths and weaknesses of the NA motor supply market, and that is supported at a level that is intended to deliver specific, measurable outcomes.

Examples of sources’ views of aspects of strategic investment planning gaps include: 1. Lack of plans to leverage USG resources against fewer challenges; for example, focusing on increasing manufacturing readiness levels.

2. Approaches lacking to help mid-level producers (that work with manufacturing runs in the hundreds to low thousands of units) to achieve flexible manufacturing at low cost are lacking. 3. Inability of most current NA suppliers to demonstrate the strategy, skill-sets and make the investments needed to go "global" in support of automotive Tier 1s or OEMs.

2 Specific examples are not necessarily supported by all sources. Rather, each example provides one original interpretation of a particular gap category as provided by a source in an open-ended in-depth conversation with Synthesis. The important point is that each named category of gap carries support from a cohort of sources with whom Synthesis has spoken from 2012 to present.

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4. Lack of vision and understanding concerning technology innovation in NA for the purpose of supporting new motor manufacturing in NA (particularly as compared to Japan and China).

5. Insufficient USG and US OEM-led funding and leadership dedicated to the NA industrial base in traction drive and power needs.

6. Lack of concerted private-public effort to take advantage of the core advantages in NA regarding e-steel manufacturing, and to determine how to extend these for commercial success.

7. Insufficient USG-led "micro" funding of manufacturing-focused, niche-market companies at $100K levels.

8. Belief that DOE investment strategy places too much focus on high-risk projects.

9. Belief that current US automotive industry strategy provides for insufficient R&D spending in NA. In conclusion, the general issue of strategic investment planning is a critical gap. According to sources interviewed, the lack of a strategic outlook in the NA motors supply chain development community, and the absence of targeted technology investments to build on NA strengths and address weaknesses to achieve specific, measurable outcomes is a core weakness and gap in the NA motor supply chain.

 Situational Awareness Gaps

This gap category is ranked second, accounting for 18% of all references to gaps collected by Synthesis from interviews regarding the NA motor supply chain.

It addresses sources’ views that actionable intelligence concerning the current state of the NA supply chain (focusing in this case on motors, though sources made it clear that this applies to every aspect of the NA supply chain for electric traction drive) and specifically for accurate and accessible information on firms, their true capabilities, technological achievements, and most of all, partnership and supplier opportunities.

Examples of sources’ views of aspects of the situational awareness gap include:

1. Lack of a NA supply chain database that provides accurate, current, accessible information on firms, capabilities, technologies and partnership opportunities.

2. Insufficient transparency regarding criteria for US government contract awards focused on manufacturing know-how, to include more knowledge

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sharing, metrics and measurement of manufacturing know-how.

3. Insufficient dialogue and technical information sharing with transplant suppliers (e.g., companies with overseas headquarters which are growing their manufacturing presence in NA).

4. Little dialogue and technical information sharing concerning the core issue of identifying the critical paths to achieving significant cost reductions. This would include a detailed characterization of a commoditized system, as well as a systematic analysis of potential paths to commoditization.

5. Lack of comparative analyses of US vs. Germany vs. Japan vs. others’ manufacturing process capabilities and costs.

6. Little action on transplant companies’ interest in varied, strategic, multiple- company/multi-tier, focused interactions with VTO.

7. Insufficient attention to potentially leveraging manufacturing processes in order to drive significant cost reductions for specific motor designs.

8. Lack of clarity concerning how DOE-VTO awardees are ranked in terms of their ability to manufacture key products, or simply manufacturing know- how.

9. A need for ranking of suppliers, based on, for example, motor and PE (or system) architectures and capabilities.

In conclusion, there is a significant and ongoing need for actionable information and approaches to sharing such information to enable all participants in the NA supply chain to better plan, act, and respond to opportunities – both individually, and as parts of larger collaborations.

 Critical Materials Manufacturing Capacity Gaps

This gap category comes in third, and is the last double-digit percentage gap category, accounting for 10% of all references to gaps collected by Synthesis from interviews regarding the NA motor supply chain.

This gap category addresses sources’ views regarding material gaps for motors, as well as design, development and manufacturability issues regarding motors. The issue of optimizing materials integrated with manufacturing to achieve world-class automotive motor design and manufacturing is an on-going concern.

Examples of sources’ views of aspects of the critical materials manufacturing

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capacity gaps include:

1. Silicon steel (aka, e-steel, which is required for xEV motor rotors) 2. Neodymium 3. Magnetic copper (wire) 4. Inductor core ferrite materials

When sources raise these gaps, Synthesis found there is considerable individual organizational interest in one or more of the above materials. Primary and secondary information on these and other selected areas are reviewed in the next section.

 Training and Engineering Skills Gaps

This gap category is the first of several gap categories that capture a small share, with just 7% of all references to gaps collected by Synthesis from interviews regarding the NA motor supply chain.

It addresses the perceived need for improved engineering skills and capabilities in NA, in particular experienced engineering. This shortage likely has a number of causes, and many impacts, but in general hampers the overall NA xEV supply chain growth.

Synthesis assesses that perceived lack of access to NA engineering talent is the result of the availability low-cost skilled engineering competition from around the world. NA-based companies, including automotive OEMs, are seeking and finding lower-cost automotive- and motor-expert engineers outside of NA. When there is an uptick in demand for new engineering products in NA markets, it is predictable that sources may state that NA has “too few” engineers, or “too few” experienced engineers are available. But organizations do not appear to be making a concerted effort to significantly build their NA-based engineering ranks and this is because it does not appear that they can do so at globally competitive cost-points.

Synthesis believes that global companies (including automotive) will continue to make billion dollar investments to site high-technology R&D activities outside of NA. This is because they are planning for a long-term horizon that requires foreign market access, a long-term lower cost-base for R&D, and the ability to access and leverage locations that are global leaders in per capita investment in engineering and manufacturing-know-how and training.

Accordingly, Synthesis views this gap as a symptom of a larger issue: supply and demand in a global economy will likely not result in significant growth in the numbers of NA engineers.

 Manufacturing Techniques and Technology Gaps

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This gap category is the second of several gap categories that capture a small share, with just 7% of all references to gaps collected by Synthesis from interviews regarding the NA motor supply chain.

It addresses the perceived need for specific improvements in manufacturing techniques and technology. (See the next section for further details on information provided by sources on materials, manufacturing techniques and technology in general.) Each is targeted to NA-based motor developments, including:

1. Lack of knowledge of the manufacture of motor windings. This is in part due to a lack of substantial transfer of motor windings skills to younger employees. (See next section for further information on copper stators and windings.)

2. Lack of attention to field of ferrite manufacturing, which appears ripe for innovation.

3. NA manufacturers lack tools and funds to invest in best practice tools needed for motors and materials for motors manufacturing.

4. Insufficient "learning by doing": there is a lack of tool making and related technology expertise for xEV motor manufacturing.

 Other Gaps

The remaining five gap categories in Figure 4 represent an increasingly small share, from 2-5% each, of all references to gaps collected by Synthesis from interviews regarding the NA motor supply chain.

Selected information provided by individual sources about each of these remaining gap categories is provided below. Standards Development: [5% of references to gaps]

1. Need for standards for motors used to drive localization of production (i.e., NA)

2. Lack standards that specifically leverage activities in global standards initiatives. This is an area for further review. By way of example, the recent diesel emission software controversy and how it may affect future NA motors supply chain standards activity is an area for discussion. More rigorous enforcement of emission regulations will have an impact on design, development, and manufacturing standards. Finally, the question of how to use global standards for modeling NA standards is an area for further review.

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Coordination and Collaboration: [5% of references to gaps]

1. Lack of coordination and sharing of requirements and plans; particularly the lack of sharing by Japanese industry with NA counterparts.

2. Lack of sufficiently coordinated actions focused on NA supply chain development by USG and private-public initiatives, particularly with regards to transplants.

In conclusion, there is an opportunity to address paths to improved information sharing and coordination concerning supply chain issues to increase opportunities for to achieve efficient and high quality production in NA.

Applied R&D: [3% of references to gaps]

1. Improved identification and development of enabling technologies.

2. Improved packaging and thermal management.

3. Need to focus on technology enablers, not system end-states, e.g., capacitors and magnetic materials.

4. Magnetic steels (e.g., cores for conductors). Note: See reference to silicon steel in the critical materials gap analysis. The applied R&D gap addresses the need for new materials, design approaches, technology enablers and magnetic steels. Concurrently, the more frequently-cited strategic planning and investment gap category points to the need for a comprehensive plan addressing these issues. Synthesis sees an opportunity to develop a strategic plan that incorporates various courses of action (e.g. technology investments and trade) to strengthen the NA motor supply chain.

Technology Transition Planning: [2% of references to gaps] This gap addresses the need for technology that is designed by US-based organizations to be commercialized by US-based institutions.

In conclusion, it is interesting that so few respondents raised this issue. Industry sources have consistently argued for more attention to be devoted to the issue of technology transition in a general sense. However, this does not indicate that technology transition is a core NA motors supply chain gap. The focus by primary sources in conversations with Synthesis has been on the lack of sufficient technology transition precursors; e.g., the investment, training, planning and understanding of industry’s needs in narrow niches of motors (or PE) manufacturing capabilities.

Synthesis finds that while technology transition is one aspect of future NA motors

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supply chain growth, it is an issue that is raised by sources only after the issues of identifying 1) industry needs (i.e., situational awareness) 2) the intended transition recipients; and 3) investments levels (both addressed by strategic planning).

Multi-/Single-Industry Collaborative Engineering: (2% of references to gaps)

1. Lack of ICE-to-xEV collaborative approaches, e.g., regenerative braking.

2. Lack of cross-industry PE and motor component development and engineering efforts.

Relatively few sources raised the lack of ICE-to-HEV/EV technical collaborative approaches, or cross-industry PE and motor component development and engineering efforts as key gaps in the NA motors supply chain. This is likely because the lack of growth in the NA motors supply chain is first and foremost a function of demand, and after demand, a function of the lack of strategic planning, investment, and road mapping on the part of NA supply chain participants. Thereafter, the specific multi- or single-industry collaborative engineering efforts that may be recommended are more likely to be raised, in the context of what is needed to initiate faster overall growth in the NA motors supply chain. 10.0 Other Trends, Issues and Topics

In this section, information on additional trends, issues and topics that shed light on the NA motor supply chain is provided. These findings are based on assessment of findings from numerous sources, including both primary and secondary sources. The information is sourced anonymously or to organizations by type, to maintain confidentiality. Unless otherwise noted, all information below is paraphrased. Public references are provided when available.

Shipping Costs Favor Motor Production in NA

 “If it’s light, it will ship. If it’s heavy, it is preferred not to ship, because anything that can be made, can be made (almost) anywhere.” – and this clearly assumes the available capital investment between locations is similar.

The weight of an xEV drive train being shipped is the most important determining factor about where it will be produced, rather than the complexity of manufacturing the item. Shipping costs and the shipping time is a key factor in determining the production location for NA customers.

Motors, like batteries, are heavy, and they will not be shipped for long distances over the long-term. Localized production of motors in NA is likely once the market growth and demand in xEVs supports the business case. (Sources: Several OEM and Tier 1 interviews, 2014-2015.)

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 The current inability to source silicon steel which meets automotive traction drive specifications in NA is a key factor driving the sourcing of motors from overseas, rather than producing them in NA (because steel is a heavy portion of the motors). Once silicon steel can be made to automotive traction drive motor specifications in NA, traction drive motors will be more likely to be produced in NA. (Source: Several OEM and Tier 1 interviews, 2014-2015.)

 OEM e-steel specifications are neither forthcoming nor consistent (Source: Tier 3 Industry representative.

 Our decisions to manufacture in the U.S. are based mainly on cost and quality. For example, we made the decision to manufacture the electric traction motors for EV/HEV/PHEVs at the US plant to save shipping time and to counter exchange rate fluctuations. Previously, it took approximately 6 weeks to ship the motors from Japan, now we deliver them to the OEM in 4 days. (Source: Tier 1 interview, 2013.) Selected NA Motor Producer Developments

 US Hybrid is producing high power density permanent magnet motors and generators in California and Massachusetts, and high end servo motors in Worcester MA, while its induction motors are assembled in NA based on components sourced in Asia. (Source: Tier 1 interview, 2015.)

 GM may be the only company building both induction and permanent magnet motors. GM builds both motors in-house and also contracts out production. The GM induction e-assist motor is used in the Buick LaCrosse, the Chevy Malibu and the Buick Regal. (Source: "An Interview with Pete Savagian of GM", Malcolm Burwell, Podcast, Posted 05-07-13, http://www.coppermotor.com/visual-media- podcasts/#prettyPhoto, accessed 06-24-15.)

 In January 2010, GM announced it would be the first major U.S. automaker to design and manufacture its own e-motors for use in its second-generation Two Mode hybrid drive system beginning in 2013. GM set up a dedicated manufacturing facility for the permanent-magnet motors at its Baltimore, MD transmission plant which builds the current Two Mode unit. The motor plant is being financed partially by a $105 million U.S. Department of Energy grant aimed at boosting domestic electric-propulsion knowledge and capacity. GM has been developing the proprietary e-motors since 2003 in dedicated research and testing facilities, and it has hired engineers to boost its motor R&D capabilities. The company's total investment in the motor activity is $246 million [as of 2010]. (Source: "OEMs Look to Insource Electric Traction Motor Engineering and Production", Lindsay Brooke, SAE International, 02-17-10, http://articles.sae.org/7623/, accessed 02/16/15.)

 Magna is engaged in NA in both R&D and the manufacture of traction drive electric motors for xEV applications. Magna produces the electric motors for the Ford Focus

at their Holly, MI plant. Magna also produces the inverters for the Focus. There is room for additional capacity, and Magna could increase capacity by tens of thousands of units/year with private capital investment. (Source: Tier 1 interview, 2015.)

 Japanese HEV and electric motor manufacturers have continued their assessment of alternatives to permanent magnet motors in order to better deal with anticipated price fluctuations. This has continued to the point where Toyota and other Japanese OEMs likely have an induction electric motor that they are likely to put in a commercially-available vehicle in the next few years.

Part of the Japanese (and German) OEM's process of assessing alternatives to the permanent magnet motor was firms including Toyota, Mercedes, Daimler and BMW buying Tesla's copper rotor induction electric motor and building several hundred vehicles using Tesla's electric propulsion system, trying the vehicle out with consumers, collecting data on the performance of these motors and assessing the results. (Source: Industry expert interview, 2015.)

 Subsequent to an introductory telephone discussion and consultation between Tesla and AK Steel, Tesla selected AK Steel’s 0.25mm HF-10 product for the Roadster’s motor in 2005. In an AK Steel-internal e-mail of 3/15/2005, AK Steel was directed by Tesla to ship the material to SkoDie (Skokie, IL) for conversion into motor laminations. (Sko-Die is a US tool-and-die specialist who delivered punched and stress-relief-annealed laminations for the motor. After the motor testing trials went well, Tesla then requested AK Steel’s assistance in qualifying an unnamed Taiwanese vendor (2/21/2006). (The vendor was subsequently identified as Fukuta Electric). After that was completed, AK Steel was directed to ship material directly to the same vendor (6/29/2006) and later still to provide technical support to the vendor (Fukuta Electric) in developing proper stress-relief-annealing practices (7/16/2007). In August 2007, Tesla turned e-steel procurement from AK Steel over to Fukuta Electric. (Source: AK Steel, 2016). (Note: Since Synthesis received this detailed information from AK Steel, it has requested comments from both Tesla and Fukuta Electric. No response has been received from either Tesla or Fukuta Electric as of the publication deadline of this report.)

 According to published sources, Mr. Gordon Chang, General Manager of Fukuta Electric & Machinery Co. reportedly stated that he first met Mr. JB Straubel, Tesla's chief technical officer, in July 2005. Mr. Straubel had reportedly called upon suppliers across Europe, America, Japan and Korea before his visit to Taiwan, only to find rejection. Subsequent to the meeting, Fukuta became Tesla's first supplier in Taiwan, producing the Roadster's motor. The motor was produced at the Tesla facility in the Linkou Industrial Zone in Taoyuan. Mr. Chang reportedly stated that Fukuta worked with Tesla to replace aluminum with copper to produce the motor's core rotor, resulting in 40 percent higher electrical conductivity. Further refinements in materials and production processes reduced the motor's weight by

80 percent. In 2009, the US government issued an ultimatum to Tesla Motors to the effect that if Tesla wanted to receive subsidies, then it would have to move production back to the US and create job opportunities. In order to qualify for the US$465 million in funding from the US government, Tesla had to raise the proportion of autonomously developed products in their cars. So they closed up operations in Taiwan at the end of 2009 and moved back to California. (Source: "Electric Vehicles - Why Did Taiwan Lose Tesla?", Yuan Chou, CommonWealth Magazine, 10-03-13, No. 532, http://english.cw.com.tw/article.do?action=show&id=14438&offset=0, accessed 04-22-15).

 As of 2012, Tesla Model S utilizes an AC induction motor w/ cast aluminum exterior, copper plated rotor. (Source: https://www.youtube.com/watch?v=4OddRX9uO4o, accessed 07-21-15.)

 In 2015, Tesla Model S 70 utilizes two electric motors. Tesla will start accepting orders for the 70D on 04-09-15 and begin delivery in about two months. (Source: "Tesla Replaces Base Model S with More Powerful, Longer Range 70D", Gabe Nelson, Auto News, 04-08-15, http://www.autonews.com/article/20150408/RETAIL/150409871/tesla-replaces- base-model-s-with-more-powerful-longer-range-70d, accessed 04-08-15.)

 Tesla's AC Induction traction motors use 48 slots and 68 bars (Source: "Electric Traction Machine Choices for Hybrid & Electric Vehicles", James R. Hendershot, 11-20-14, pg. 40/71, http://sites.ieee.org/miami/files/2014/11/Hendershot-FIU-Lecture.pdf, accessed 06-23-15.) Capital and IP Investment Issues

 The cost of purchasing patents can exceed that of physical plant investments in motors. (Source: Tier 1 interview, 2015.)

 A high level of capital expenditure is required to manufacture traction drive electric motors so until the market stabilizes firms are unlikely to risk the investment required to enter the NA market. (Source: Tier 1 interview, 2015.)

Aluminum Rotor Developments

 GM has experience in building both copper and aluminum rotors and for the time being has chosen to use aluminum rotors, mainly due to aluminum rotors being more amenable to high volume die casting whereas copper rotors, although offering greater efficiencies, are more expensive, heavier and so far, are more appropriate to lower volume die casting. (Source: “An Interview with Pete Savagian of GM", Malcolm Burwell, Podcast, Posted 05-07-13, http://www.coppermotor.com/visual- media-podcasts/#prettyPhoto, accessed 06-24-15.)

Copper, Copper Windings and Copper Rotor Developments

 The Tesla Roadster uses a hand-fabricated copper and steel rotor in a 100-lb motor that is about the size of a bread box. Due to the high expense of hand-fabricating the rotor, as of 2011, Tesla sought to develop, acquire or access casting technology that would enable it to make its copper rotors in the same way as aluminum rotors are made. (Source: "How Copper Could Be Key to EVs’ Viability", Kevin Clemens, 10-17- 11, Midwest Energy News, http://www.midwestenergynews.com/2011/10/17/how-copper-could-be-key-to- evs-viability/, accessed 02-10-15.)

 Tesla Roadster’s stator coils employ significantly more copper than a traditional motor of its size. The copper is tightly packed in a proprietary winding pattern to optimize efficiency and power. The copper loops are encapsulated by special polymers that facilitate heat transfer and ensure reliability under the demands of high-performance driving in extreme conditions. (Source: http://my.teslamotors.com/roadster/technology/motor, accessed 07-21-15.)

 Currently, the company supplying Tesla with the copper rotor bars makes them outside the NA. However, that company is willing to initiate manufacture of the rotor bars in North America. (Source: Industry analyst interview, 2015.)

 Fukuta Electric & Machinery Co. in Taiwan has collaborated with Tesla Motors on the development of a copper rotor induction motor for Tesla’s electric Roadster. (Source: "Copper Rotor Induction Motor: The Better Solution to Power Electric Vehicles", 04-11-11, http://www.coppermotor.com/2012/04/copper-rotor- induction-motor-the-better-solution-to-power-electric-vehicles/, accessed 04-22- 15.)

 The US Copper Development Association and the Department of Energy both provided Tesla with technical assistance in developing the cast copper rotor. (Source: http://www.copper.org/about/ __www.copper.org_publications_newsletters_discover_2007_wi.pdf).

 Tesla’s 48-slot induction motor design is substantially identical to the AC Propulsion induction motor used for the GM EV-1. Armco Inc., predecessor to AK Steel, collaborated with GM and AC Propulsion on the core steel used for the EV-1. (Source: Industry representative).

 Fukuta Electric & Machinery Co. worked with Tesla to replace aluminum with copper to produce the motor's core rotor, resulting in 40 percent higher electrical conductivity. Further refinements in materials and production processes reduced the motor's weight by 80 percent. (Source: "Electric Vehicles, Why Did Taiwan Lose Tesla?", Yuan Chou, CommonWealth Magazine, 10-03-13, No.532,

http://english.cw.com.tw/article.do?action=show&id=14438&offset=3, accessed 04-22-15.)

 There is at least one production line in Germany that is set up to produce copper stator induction motors. The Japanese are likely similarly situated so that OEMs in both countries are now prepared to switch to copper rotor induction motor production, if necessary. (Source: Industry analyst interview, 2015.)

 It is expected that the demand for copper rotor induction motors will grow. Already, several prominent manufacturers are using this type of motor, including Tesla, BMW, Daimler, VW, Renault and Toyota. (Source: Tier 1 interview, 2015.)

 As of 2013, Remy was working with GM to convert the Volt's electric motor rotor to a copper rotor. (Source: "Power Converters Teardown", John Scott-Thomas, 12-23- 13, http://driveforinnovation.blogs.tech.ubm.com/teardown/power-converters- teardown/, accessed 06-05-15.)

 To date, producers struggle to identify companies in NA that offer competitive products in copper windings. This appears to be mainly a supply and demand issue as the market is not currently sufficient to justify the capital expenditure required for a supplier to produce a competitive product. In contrast, the Japan-based suppliers of these products have already been subsidized and made the expenditures necessary to develop their products. (Source: Tier 1 interview, 2015.)

 Currently, there are US suppliers for copper and for some of the mechanical components, but many of the components are simply not available in the U.S. and still come from Japan (or other areas). This company is looking to expand the number of US bases suppliers if the quality and cost are competitive. (Source: Tier 1 interview, 2013.)

 Potential die casting copper rotor customers associate the die casting process with porosity problems. However, Kienle+Speiss (Germany) claims to have developed machinery that allows it to achieve reductions in porosity of 99% in die casted rotors. Despite such new developments, many NA customers remain reluctant to use die casted rotors given that they perceive a higher cost. (Source: Tier 1 interview, 2015.)

 In the area of copper rotor laminations, work is carried out at plants in the UK, Germany and Hungary with Hungary being the center of expertise. There is a critical gap – meaning, little to no expertise – in copper rotor laminations in the NA motor supply chain. (Source: Tier 1 interview, 2015.)

Magnets and Rare Earths Developments

 The Nissan Leaf uses an estimated 2 kg of magnetic materials. (Source: "Electric Vehicle Traction Motors Without Rare Earth Magnets", James D. Widmer, Richard Martin, Mohammed Kimiabeigi, Sustainable Materials and Technologies, Volume 3, April 2015, Pages 7–13, http://www.sciencedirect.com/science/article/pii/S2214993715000032, accessed 06-09-15.)

 The second-generation Volt’s redesigned drive motor is 12% more efficient and dropped 45 kg from the first-generation unit. The motor also uses fewer magnets, reducing consumption of rare-earth materials. (Source: "Chevy Malibu Strong Hybrid Coming Next Year", James M. Amend, Wards Auto, 03-25-15, http://wardsauto.com/auto-makers/chevy-malibu-strong-hybrid-coming-next-year, accessed 03-26-15.)

 “We (Ford) estimate(s) that approximately 0.44 kg of RE elements are used in a typical conventional sedan, with approximately 80 percent of the rare earth content in magnets. “ o “Conventional vehicles primarily use neodymium, which is used in batteries and magnets, and cerium, which is used mainly in catalytic converters.” o “Relatively larger amounts of RE elements – primarily neodymium and dysprosium – are used in full hybrid electric vehicles (HEVs).” o “A typical HEV sedan with a nickel-metal-hydride battery uses approximately 4.5 kg of rare earth metals.”

Ford has “reduced the use of dysprosium by approximately 50 percent in the electric machine permanent motor magnets used in our (Ford) hybrid system. This new technology reduces the cost of our hybrid systems by 30 percent, largely by reducing the use of dysprosium, which is the most expensive REE used in electric motor magnets.” (Source: "Sustainability Report 2013", Ford, 2014, pg. 18/21, http://corporate.ford.com/content/dam/corporate/en/company/sustainability- report-2013.pdf, accessed 06-24-15.

 Hitachi’s Neomax production in the U.S. was begun at a North Carolina plant at the request of Ford. (Source: Interview, Anonymous, 2015.)

 There is also only one manufacturer of neo magnets in the US: Hitachi [for higher volume automotive applications]. (Source: OEM interview, 2014.)

 To date, the [magnet R&D] focus has been on non-neo magnets. However, alternative approaches should be explored with Neodymium Boron magnets. For example, dysprosium reduction/elimination needs to be further examined. In this area, Hitachi is looking at the minimum amount of dysprosium required on the surface. This is just one approach and represents the down side of having only one company engaged as there is no cross-pollenization [or, competition between] ideas,

approaches, etc. to test, challenge and improve one another. Another area that deserves attention is nano applications to magnets. This is a very new area and needs to be examined. (Source: OEM interview, 2014.)

 In reality rare earth magnets will most likely continue to be the mainstay for the next 10 years, but from 10- 20 years out, there is a real chance to move beyond rare earth magnets to other approaches. (Source: OEM interview, 2014.)

 The Chinese recognize the U.S. OEM's fixation on near-term problem solving, and have been selling permanent magnets in the U.S. at a very low cost in order to take control of the U.S. market. At the same time, they have been restricting the availability of rare earth materials to Japanese OEMs by keeping prices there high. In this way, the Chinese have been able to develop their value-added manufacturing capabilities in permanent magnets and position themselves to take the market for permanent magnets in the U.S. away from Japan. (Source: Industry analyst, 2015.)

 U.S. manufacturers have generally been hesitant regarding induction motors, mainly due to the current low cost of the rare earth elements used in permanent magnet motors which have been more commonly used in U.S.-manufactured xEVs. However, there is growing interest in induction motors as an alternative to PM due to the historical price volatility in rare earth materials and the uncertainty over their supply. (Source: Tier 1 interview, 2015.)

Silicon Steel Developments

Silicon steel (also, E-steel or electrical steel) is used in rotors for both induction and PM motors. It is a critical material that is produced through complex manufacturing techniques. Due to its weight and the amount of steel required to produce each motor, numerous sources suggest that when silicon steel can be produced to automotive specifications in NA, then motor manufacturing will significantly increase in NA. The supply and demand for E-Steel in NA has become a contentious issue given the recent imposition of US tariffs on imports of E-Steel from Japan, China, Korea, Taiwan, Germany, and Sweden. As a result, Synthesis provides below content to assist planners in considering future NA supply chain possibilities.

 Silicon steel manufacturers see the ~25% per year growth rate in specialty steels anticipated for HEV/EV motors as being a key growth market. (Source: Tier 2 interview, 2015).

 Given the current and expected growth rate in the hybrid and electric vehicle market in the U.S., there may be a shortage of high quality e-steel 4-5 years out. (Source: Industry analyst interview, 2015).

 Silicon steel requires a very specific manufacturing pattern/process. One cannot move from motor laminated steel to silicon steel in the same plant without an extensive recapitalization effort. (Source: Tier 1, 2 and 3 interviews, 2015).

 It takes 12-24 months to install production equipment for thin steels, so companies need to move to address this potential gap. Both French and Austrian steel producers are currently looking at this potential market. (Source: Industry analyst interview, 2015).

 With silicon steel, after development and manufacturing is completed, the evaluation and qualification takes about 1-2 years. Given the extremely conservative nature of the automotive industry it is difficult for small or medium- sized firms (i.e., with revenues in tens to hundreds of millions of dollars) to complete this process without outside assistance. USG assistance in the area of support to evaluation/qualification of silicon steel could be a possible role for the DOE labs or an organization like the Small Motor & Motion Association. More attention needs to be paid to qualifying the materials used in motors for the automotive use-case. (Source: Tier 2 interview, 2015).

In conversations to-date with Synthesis, sources have expressed very strong views concerning the impact of the tariff. The following are examples of comments made about the impact of the e-steel tariff by different sources:

o The pursuit of the ITC/DOC legal action is designed to begin to reverse the concerted strategy made by overseas suppliers – and this is seen in many industries, not just steel, and therefore provides lessons for supply chain development, across many industries – to “dump products in America, isolate the sole or few American producer(s), undermine the sole or few American producers’ financial viability, drive capital flight from that producer by reinforcing its weakened state, and then take customers and move up the value chain, and ultimately eliminate the American producer’s IP advantage, if any is left, after gaining access to all necessary IP through any available means.” (Source: Interview, Anonymous 2015.)

o The result of the tariff has been the transfer of e-steel-related production to Canada and Mexico, the loss of related manufacturing jobs in the U.S. and higher prices paid by U.S. manufacturers who use these products. As a result of the tariffs, motor manufacturers have not turned to AK Steel as a supplier,

but rather, are either sourcing their motors overseas or have switched manufacturing to Mexico or Canada to avoid the tariff. (Source: Interview, Anonymous, 2015.)

o The imposition of the tariffs on e-steel sheet does not apply to imported finished goods which use e-steel. The end result is that imported electric motors are exempt from the tariff, which in effect can subsidize the import of foreign-produced electric motors over U.S.-produced electric motors. This was the main argument in opposition to the tariff case presented to the Commerce Department and to Congressional representatives. (Source: Interview, Anonymous, 2015.)

o As a result of the Si steel tariff, Nippon Steel & Sumitomo Metal USA, Inc. cannot do non-oriented electrical steel business in the USA. (Source: Interview, Anonymous, 2015.)

o Mitsui Hi-Tec, an electric motor lamination tool supplier for the Toyota Prius, made the decision to invest in a manufacturing facility in Canada rather than the US as a direct result of the imposition of the tariffs. (Source: Interview, Anonymous, 2015.)

o Tempel Steel of Chicago has or is building an e-steel stamping plant in Mexico. Tempel moved to Mexico where they import raw material and make it into discs, which they then ship to Chicago for further processing. Although this allows them avoid the tariff, it still adds to their costs in the form of the shipping charges. (Source: Interview, Anonymous, 2015.)

o Most e-steel sheet used for electric motors continues to be imported although there are several NA firms engaged in stamping e-steel. As only select countries are subject to the tariff, it could be that some firms are sourcing their e-steel plate from countries exempt from the tariff. Austria is exempt and Italy might also be exempt. (Source: Interview, Anonymous, 2015).

o Companies such as Nippon Steel and JFE spent 10 years developing their e- steel product to the specifications of automotive OEMs and have alternatives available them in response to the tariffs. For example, JFE has a production plant in Tijuana, Mexico, which it operates with Bourgeois (most likely, R. Bourgeois JFE Shoji Magnetic Lamination, Inc.). (Source: Interview, Anonymous, 2015).

 In addition, there are strategic issues regarding automotive silicon steel costs of production and supply strategies, including:

o Before the tariff was implemented, NA-produced e-steel cost approximately $4.00 per unit weight, maybe as low as $3.00 per unit weight, for high volume purchases for automotive and other applications. This contrasts with around $1.00 per unit weight for e-steel sourced from Asia. Firms that are not required to use US-sourced e-steel can take advantage of this price differential. For example, a leading NA-e-steel supplier offers a .27 mm (31 gauge) product which is apparently sourced from POSCO (Korea), JFE (Japan) and sometimes from Bao (China). (Source: Interview, Anonymous, 2014).

o AK Steel offers a different view on pricing, reporting that as of early 2005, AK Steel was making commercial deliveries of 0.25 mm HF-10 (25HF1550) (e- steel) product for high frequency motors for $2000/net ton ($1.00 per pound or $100/cwt). According to AK Steel, this price was largely unchanged during the course of AK Steel’s HF-10 deliveries to Tesla and, later, Fukuta Electric through 2008. AK Steel’s prices for HF-10 and similar light gauge grades since has also been in this same range, ranging from $0.80 to $1.00 per pound. From 2011 -2015, a “$3-$4 per unit price” was never quoted to any customer by AK Steel. (Source: AK Steel, 2016). (Note: Since Synthesis received this detailed information from AK Steel, it has requested comments from both Tesla and Fukuta Electric. No response has been received from either Tesla or Fukuta Electric as of the publication deadline of this report.)

o Japanese OEMs in the area of traction motors have said they would like a US source of e-steel. However, this is highly unlikely to happen. This is due to the long-term, heavily invested, socially- and economically-significant engineering-supplier relationship with JFE. Also, JFE has had difficulties in the past in developing relationships with US OEMs. It was only recently that JFE agreed to even sell its high-content silicon steel in the US. At this time, as a result, it appears that JFE has little interest in producing in the US. (Source: Interview, Anonymous, 2014 and 2015.)

 In terms of actual silicon steel products in use for production or planned xEVs:

o GM uses a 0.27mm type HF-11X type e-steel from Hitachi in its electric motors. (Source: Interview, Anonymous, 2015).

o Nissan uses 0.30mm HF-12 type e-steel in the electric motor for the Leaf. (Source: Interview, Anonymous, 2015).

o Euro USA is reported to either already be supplying or is on track to supply a laminated e-steel for the Nissan Leaf's e-motor. (Source: Interview, Anonymous, 2015). (Note: Another source points out that Nissan has its own e-steel processing facility).

o Italian-origin firm (Euro USA) just bought Tecumseh's compressor business in Tennessee and plans on stamping e-steel. It may be planning to be the supplier of e-steel for the Nissan Leaf. (Source: Interview, Anonymous, 2015).

o Toshiba may already be stamping e-steel in Houston, TX. (Source: Interview, Anonymous, 2015).

o JFE and Nippon Steel are engaged in forging the e-steel plates but it does not appear that they are engaged in stamping, as they sell e-steel to stampers. (Source: Interview, Anonymous, 2015).

o JFE-Bourgeois of Mexico is expected to begin offering stamping services to the EV/HEV market in the next year. (Source: Interview, Anonymous, 2015).

o LH Carbide is the only US company capable of making competitive tools/dies for e-steel stamping applications. (Source: Interview, Anonymous, 2015). (Note: Following this comment, Synthesis learned from a Tier 3 source that both Penn United Technologies, Inc. (Cabot, PA) and Oberg Industries (Freeport, PA) may also be competitive in this area.)

o Mitsui High-Tec (Japan) is head and shoulders above LH Carbide and others due to its strong patent portfolio and its protection of those patents. Prior to last year's trade action, Mitsui was taking a close look at establishing a manufacturing presence in the U.S., but once the tariffs were imposed, changed its focus to Canada. (Source: Interview, Anonymous, 2015).

o Reuters reported on 12-02-14 that Mitsui High Tec Inc. would set up a wholly owned subsidiary, Mitsui High-Tec (Canada), Inc. in Canada in Jan. 2015. The subsidiary will be engaged in the manufacture and sale of motor cores. Business expected to be started in Feb. 2017. (Source: http://www.reuters.com/finance/stocks/6966.T/key- developments/article/3116801, accessed 06-15-15.)

o China Steel Corporation (Taiwan) was expected to start a new production line by the end of 2014 for 0.15 mm-thick non-oriented silicon-steel sheets to be used as core material for motors of electric vehicles such as Tesla Motors. Annual capacity was expected to be 150,000 metric tons. Source: "China Steel Expects Orders to Rise", Fanny Liu, Market Watch, 03- 03-14, http://www.marketwatch.com/story/china-steel-expects-orders-to- rise-2014-03-03, accessed 06-22-15.

o NA suppliers have been identified that are developing an e-steel product to compete with China Steel for Tesla. (Source: Interview, Anonymous, 2015).

o Arnold Magnetics produces thin gauge Electrical Steel both grain oriented (GOES) and non-grain oriented [NGOEs, Arnon 5 (0.005") and Arnon 7 (0.007")] using 3.2% Silicon steel at Marengo, IL Precision Thin Metals. (Source: Interview, Anonymous, 2015).

o Metglas has a path forward for developing e-steel for electric motors for xEVs. Hitachi Ltd. owns 50% of Metglas. The Metglas' e-steel is cast in one step. The current capability is about 1/10 the thickness required for the e-steel used in an xEV electric motor. (Source: Interview, Anonymous, 2015).

o JFE (Japan) has been working on manufacturing silicon steel for 50 years. JFE Super Core is manufactured using an innovative process that is completely different from that for conventional silicon steel sheets. These are the highest grade, non-oriented magnetic steel sheets available. “It has been impractical to produce thin steel sheets with a Si content of over 3.5% because the steel tends to harden and become brittle. In 1993, JFE Steel solved this production problem through the adoption of a process called the CVD process, and successfully introduced the first 6.5% Si steel sheets (JNEX- Core) to the world.” (Source: Interview, Anonymous, 2015). (Note: "Super Core™ is the highest grade, one-of-a-kind non-oriented electrical steel sheet product made by JFE Steel." Source: http://www.jfe- steel.co.jp/en/products/electrical/supercore/index.html, accessed 06-16- 14).

o JFE’s current Si-steel production line is not in full use. Should there be a significant increase in demand, JFE has the capability to simply duplicate its current process in Japan. (Source: Interview, Anonymous, 2015).

Market Trends The following are selected business trends of interest concerning the current state and future development of the NA motors supply chain market: • There always may be companies that demonstrate potential even though they might not be solely a motor company and may not be based in North America. Parker Hannifin is one example. Parker Hannifin is not currently engaged in the automotive sector, but their GVM motor line includes options for 3 frame sizes and 2-4 different lengths. Their largest customer to date has been Brammo Motorcycles. We have used their product. Parker is further along on the modular solution track than Remy and UQM. (Source: Tier 1 interview, 2015.) • In-house production by OEMs is driving critical NA motor supply chain trends:

o Regarding large OEMs, as soon as something becomes big enough, they are going to bring it inside. GM has converted 1 plant to make traction motors for the Volt and Spark. Ford and Toshiba are also paired. (Source: Tier 1 interview, 2015.)

o We have no manufacturing activity in NA related to traction drive electric motors for xEV applications. This is mainly due to the volatility of the electric motor market and the fact that several of the largest HEV OEMs such as GM and Toyota are producing their electric motors in-house. (Source: Tier 1 interview, 2015.)

o When GM first started the Volt program, they used Remy motors. However, soon after GM took over the motor, bringing it in-house to design. By proceeding in this way, OEMs and motor manufacturers pretty much guarantee there will be little or no standardization achieved. (Source: Tier 1 interview, 2015.)

• When interacting with large volume motor Tier 1s or N.A. newly-established motor producers, mid-sized Tier 1s encounter a range of difficulties – all of which boil down to the fact that there is not an efficient and stable market in motors sales and support to support the mid-range volume business model for smaller-batch motors, despite the fact that there is significant end-customer demand in NA for the lower- cost products offered. (Source: Tier 1 interview, 2015.)

• In a locomotive contract deal, a Tier 1 integrated motor supplier couldn't find a US- based supplier for the motors and components, and had to go to a South Korean motor manufacturer. Despite the additional shipping costs, etc., it was still the most cost-effective way to go. (Source: Tier 1 interview, 2015.)

• A company that manufactures the motors for battery-powered fork lifts/lift trucks for virtually all of the top lift-truck manufacturers (Toyota, Linde, NACCO, Mitsubishi Heavy Industries, Caterpillar, etc.), now ships 1-2 million motors per year. The market amounts to around $100 million in sales. This company is now in the 6- 7th generation of technology. This company has been expanding into HEV and electric heavy-duty vehicles. … This company now manufactures motors for the lift truck market in the USA. Until 2008, the company operated a manufacturing plant in Mexico but the economic downturn and security considerations led it to transfer that manufacturing operation to the US. (Source: Tier interview, 2013.)

Selected Points for US Government Planners to Consider

The following views are direct from sources and Synthesis. These comments are from credible participants regarding the NA motor supply chain.

point (if we reach this point), the market will be there and suppliers like us will respond. (Source: Tier 1 interview, 2015.)

• There is not sufficient market volume to justify U.S.-based production to meet the requirements of the Buy American Act (BAA). A recommendation would be to suspend the BAA for about 10 years, until the EV market improves and sales volumes increase. Then, when market conditions warrant, the BAA can be imposed and there is likely to be sufficient volume to justify localized manufacture. (Source: Tier 1 interview, 2015.)

• Among the things that the USG, in particular DOE, could do to help firms such as ours, is to make adjustments to the Advanced Technology Vehicles Manufacturing (ATVM) loan program. The last time we applied under this loan program, it was focused on $100-$200 million loans that carried a loan cost of $10-$11 million. This is much too high of a loan for a company such as ours and the cost is way out of our reach. (Source: Tier 1 interview, 2015.) • The emergence of the xEV market is lagging. The Leaf, Prius and Focus EVs take up most of the current market and will likely continue to do so until around 2020 when California's Zero Emissions Vehicle (ZEV) program will take effect and the CAFE standards are implemented on schedule. if such regulations are implemented in their current form and if power/energy density and cost improvements are made in the xEV battery and if further ICE technological advancements are unable to keep pace with the environmental standards, then the xEV market might start to experience high enough volume to trigger firms such as ours to initiate NA R&D and manufacturing activity in traction drive electric motors for xEVs. (Source: Tier 1 interview, 2015.)

• An important investment area would be to fund increased R&D and manufacturing at the mid-volume manufacturing state. Modularity was one of the objectives for early support, but as the VTO program evolved, it became more focused on a single size. Now, more emphasis is needed on manufacturing -- how to produce in different sizes. (Source: Tier 1 interview, 2015.) • Taking a lead in the development of standards for electric motors is where DOE VTO might be most effective. Japanese firms dominate in traction drive electric motors

for xEV applications because they were subsidized and because of this currently have a leadership position. Implementing standards is one means that might leverage firms to localize manufacturing in NA, and this is the key [for NA motor supply chain growth] – localization. (Source: Tier 1 interview, 2015.) Potential Motor R&D Focus Areas

The following are specific R&D recommendations discovered during this research. • [USG should find ways to encourage more motor design innovation.] More interesting than leaving the drive and motor designers to innovate within existing constraints would be to remove the constraints. I'd love to ask motor designers, "How would you ideally generate torque if the constraints of switching frequency and power loss in the electronics were removed? [e.g., use GaN switches.] Would you use lower-inductance windings? Increase pole count?" I'm not sure what the reciprocal questions from the motor designers would be. The first step – and the challenge – is to get the motor designers and electronic-drive designers talking, with a goal of defining a spec for a demonstration prototype. Ideally the concepts to be tried would not require a lot of new development, just combining technologies which are more or less available. i.e. "Sure we can do that. I didn't realize it was an option". (Source: Tier 3 interview, 2014.)

• [What] is missing in terms of motor R&D and/or manufacturing support that could produce sustainable gains in the North American industrial base: a commercialized sensorless traction drive system. There is no commercialized sensor-less traction drive system on the road today. GM doesn't have one. Ford doesn't have one and Toyota doesn't have one. Regarding a sensor-less traction drive system, in reality, this is an evolutionary rather than a revolutionary step and probably would amount to only about a $100 savings in the drive system. It was an example of what has been talked about frequently, but towards which no concrete steps have been taken. (Source: Tier 1 interview, 2014.) • Integrated motors/drives is an area for R&D focus. Toyota has done some work in this area on transaxles and this should be assessed. (Source: Tier 1 interview, 2014.)

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Appendix 1: Primary Source Questions

These are the questions addressed to the primary sources to guide open-ended conversations.

 Are you engaged in R&D or manufacturing activity in NA in traction drive electric motors for xEV applications? If not, are you interested in doing so?

 What are the main constraints limiting your engagement in the electric motors area?

 What are the key "triggers” that could help you to expand your engagement in this area?

 What are critical skills that you believe are required in motors manufacturing for xEV applications?

 What are the critical skill deficits in NA that you believe limit motors manufacturing in NA to support xEV applications?

 To whom should we speak, in and outside of the companies listed below or what question are we not asking, but should we be, to better understand the state of motors R&D/ manufacturing in NA?

 Of the "triggers" identified, which ones might DOE VTO be able to influence in your view through R&D, or technology development grants, or manufacturing extension programs or networking, or technical symposia among key players, or otherwise, to catalyze motors development in NA?

Source: Synthesis Partners, LLC (2015).