Reinventing the Wheel: Mobility and Energy Future A new IHS Markit subscription service The global automotive ecosystem will undergo more change in coming years than it has over the past century. The pace of change is the question—not whether change occurs. Will it be of a revolutionary nature, toppling incumbents in the automotive and energy industries, and dramatically reshaping the automotive and energy landscape including oil demand? Or will it be gradual and provide opportunities for companies—incumbents and new entrants—to adapt to changing technology, government policies, business models, and consumer behavior? These are existential questions for the industries involved. Reinventing the Wheel: Mobility and Energy Future is a new IHS Markit service providing insight, analysis, and data to keep members ahead of the curve in understanding how regulations, technology, new business models, and consumers are impacting oil, energy demand, and the automotive industry and its supply chain. Changes are occurring beyond the much discussed shift to electric vehicles. The century-old model of selling cars for personal use is giving way to a new multi-dimensional rivalry involving electric vehicles, driverless cars, and mobility service companies. The competition of the 21st century: Mobility services, driverless technology, and electric cars are adding new competitive forces that impact the century-old personal car use model Personally owned cars versus mobility services Gasoline/diesel Human- versus electric operated versus powertrains driverless cars Source: IHS Markit © 2017 IHS Markit: 1694430 1 What’s really happening? An independent, in-depth understanding of emerging realities is essential for any company that could be affected by sweeping changes in how automobiles are built, sold, financed, used, fueled or powered and regulated. Trillions of dollars of investment capital are at stake. Reinventing the Wheel (RTW): Mobility and Energy Future delivers research that addresses the latest developments and insights while also providing a scenario framework for decision-making. Mobility as a Service (MaaS): What are the impacts of this growing to a $1+ trillion business? 1200 MaaS annual revenue expected to 1000 grow rapidly to more than $1 trillion. 800 600 400 200 Billions of constant 2016 US$ Billions of constant 0 2010 2015 2020 2025 2030 2035 2040 Mobility as a service includes ride-hailing, ride-sharing, and ancillary offerings. Revenue projection is for the IHS Markit Rivalry scenario. Integrated, Cross-Industry Perspectives As the forces that shape tomorrow’s world are already in motion, it is vital to prepare today by understanding what is driving change, the direction and pace of the transformation, and industry impacts. An integrated, cross-industry perspective is necessary to understand the impacts in the energy, automotive, and chemical industries. This will identify emerging trends, new entrants, and potential surprises. RTW: Mobility and Energy Future is a joint effort of IHS Energy, IHS Automotive, and IHS Chemical. Our proprietary database, modeling capabilities, and experts in these industries deliver comprehensive research, analytics, and datasets—a high value combination to guide decision- making during what will be a tumultuous period for the future of cars, energy, and chemicals. This new service is a successor to the IHS Markit Multi Client Study entitled Reinventing the Wheel: The future of oil, cars, chemicals, and electric power. The 12-month study established IHS Markit as a thought leader with unique intellectual capital, industry relationships, data, and insights in the automotive ecosystem. IHS Markit’s deep expertise across industries and expansive databases give it unparalleled knowledge and resources to look beyond the perspective of a single industry and to see how changes in one industry impact others. 2 ‒ For the oil and gas industry, light duty vehicles (LDVs) represent the most important end-market.1 LDVs represent one-third of global oil demand and nearly 40% of total oil demand growth since 2000. Understanding the evolving automotive landscape is essential to discerning the future path of oil demand, which is key to undertaking multi-billion dollar investment decisions in the oil and gas industry. For example the question of peak oil demand is directly related to changes in the automotive system. ‒ For the automotive industry, understanding the patterns of future car ownership and use will be vital in preparing for tomorrow’s market. The market will become more complex – mobility as a service (ride-hailing and ride sharing), driverless cars, and electric powertrains will give consumers an increasing number of options for personal mobility. Automakers and suppliers will need to adapt their products and business models to ensure they are prepared for greater diversity, the resizing of markets, battery charging needs, regulatory changes, and impacts on electric power markets. ‒ The chemicals industry will also be affected as the transformation in the automotive world ripples through the refining industry, resulting in changes in chemical feedstock prices and availability. Changes in LDV powertrains and design will also affect materials demand coming from the automotive sector. These changes have critical global implications for company investments and competitive strategy. ‒ As electric cars become more widespread around the world, the electric power industry will develop more ties with transportation as cars become a source of power demand growth. New demand will have to be priced and managed by the industry at a time of wider transformation. ‒ Repercussions of change in the automotive ecosystem will reverberate in many other industries as well, including finance. Financial firms are directly involved because of their investments in the energy industry and with vehicles throughout their life-cycle— dealer inventory, initial purchase/lease, and resale. Will LDVs depreciate in line with historical norms—or will risks to the finance sector increase until values for new types of cars are established? 1 LDVs are cars and light trucks. 3 RTW Deliverables The deliverables of the service are a comprehensive package of insight, analysis, and data relevant to both short and long-term decision-making. The service includes written analysis, extensive datasets, and two member gatherings during the year that will bring together perspectives across the automotive, energy, and chemical industries. Our focus is on light duty vehicles (LDVs – passenger cars and lights trucks) that account for about one-third of world oil consumption and nearly 40% of the growth in world oil demand since 2000. ‒ What’s really happening: Context and assessment of new developments. Announcements by governments, companies, media and others about the future automotive ecosystem need context and understanding to discern facts from aspiration. An example of an “understanding the news” report is our analysis from our team in China on what China’s discussions about eliminating sales of oil- powered cars mean. Depending on the subject in question, these reports shed light on implications for specific industries, such as oil or automobiles. These reports are released periodically. ‒ The pulse of change—monthly LDV sales for select markets with electric vehicles (EVs) broken out. We provide data and commentary on monthly sales data as an indicator of the pace of change and how government policy and vehicle price trends impacts sales. We also periodically include updates on US miles traveled and fuel economy of newly sold LDVs. ‒ Bi-annual Mobility Watch provides qualitative and quantitative assessments that evaluate the pace of transformation of the automotive ecosystem. Included are “Signposts”—developments and events—and whether they point to an evolutionary or revolutionary pace of change. Each Mobility Watch will address one or more issues such as fuel economy standards, government incentives for electric vehicles, moves by regulatory agencies, government plans that impact sales and use of oil powered cars, commercialization of driverless technology, EV battery costs, growth of mobility as a service, and implications for auto companies, oil producers, oil refiners, and electricity companies. ‒ Interactive member workshops twice a year to review recent developments, discuss ideas and projections about the future automotive ecosystem and implications for auto, energy, and chemical companies. 2 A member company can send 2 participants to each of the workshops. 2 The location and timing of each workshop will be determined 2-3 months in advance. 4 ‒ Scenario projections to 2050 covering key variables shaping the future of the automotive and oil industries. We provide global and regional historical data and projections of key elements of the automotive ecosystem: ‒ LDV sales by powertrain ‒ LDV fleet by powertrain ‒ Total miles driven ‒ New vehicle fuel economy ‒ On-road fleet-wide fuel economy ‒ Energy consumption by LDVs and prices for crude oil, gasoline, diesel, and electricity In addition to global coverage, we provide deep “mobility channel” analysis and projections for 4 key markets that account for most of the world’s LDV fleet and new sales: China, Europe, United States and India. Mobility channel projections illustrate how demand for "robo-taxis" (driverless mobility services) compares to human-driven cars-- including how these LDVs are powered. Understanding demand from different mobility channels is necessary to identify