Electric Vehicle (EV) Industry Overview January 2019 Table of Contents I. Investment Thesis and Risks II. Industry Overview A. Introduction to Electric Vehicle (EV) B. Trends in EV Design III. Global EV Market A. EV Adoption B. EV vs. ICE C. Commercial and Heavy Duty EVs IV. Regional Overview A. US Market Overview B. Tesla: A Major Disruptor in the Market C. Europe Market Overview D. China – The Major Player in Asian Market V. Battery Technologies A. Battery Swapping B. Solid-state Battery C. Other Battery Technologies D. Battery Recycling E. Autonomous Vehicle (AV) F. Connected Vehicle G. Robo-taxi H. Funding Landscape I. Market Dynamics I. Investment Thesis and Risks Palette RGB EVs are Poised to Disrupt the Automotive Ecosystem values 0 72 122 These are going to create a significant impact on the automotive ecosystem 100 135 190 Impact of EVs on the automotive ecosystem 255 204 0 • Automobile manufacturers are making huge investments in electric car divisions as they realize that EVs are disrupting the industry 228 114 0 • Significant internal changes will take place as teams fight for their share of budgets in R&D activities and existing powertrain heavyweights will refuse to move to electric 1 107 33 70 1 divisions • Many new supply chain partnerships will have to be created • The focus will move to new technologies as the automobile becomes a true computer 204 215 234 Automakers on wheels 0 112 60 • Dealers will have to unlearn and learn to sell both EVs and conventional vehicles • Dealers should equip their personnel with a diversified skillset to sell EVs 175 175 175 2 • The automotive business model is expected to transform with the emergence of EVs 5 2 • Profitability from service operations is expected to come down as EVs will require less Government maintenance 0 137 134 Dealers Regulations • Suppliers will be significantly affected as automobile manufacturers switch to the electric 120 178 87 Impact of EVs powertrain 3 • Only suppliers that take appropriate initiatives will survive and succeed; e.g., Bosch, 212 0 47 which has a separate division to focus on batteries 169 176 137 • Incentives and subsidies will turn the tide in favor of EVs • The rapidly growing charging stations network, combined with supercharging facilities, End will make the adoption of EVs easier for end customers 94 110 102 Suppliers 4 Customers • Superior driving experience with packed innovative features will make it difficult for customers to resist the experience of owning an EV. Once they drive an electric vehicle, 202 140 184 they will find it difficult to go back 4 3 • Governments will take the Electric Vehicles Initiative (EVI) seriously as the adoption of 102 102 153 EVs can reduce the carbon footprint • Governments will play a key role in resolving subsidy-related issues to promote and 35 31 32 5 make EVs affordable • Governments will have to consider providing special privileges such as the removal of tolls on expressways and providing priority parking spots to encourage the adoption of EVs Source: Electric Vehicle – Disruptor of the Automotive Ecosystem by Infosys 1 Palette RGB Disruptive to Industries Beyond Automotive values 0 72 122 Many auto-affiliated industries are likely to feel the disruption in the long term 100 135 190 Impact of EVs on different industries 255 204 0 • EVs are likely to have a widespread impact on multiple industries; disruption will be felt the most in the automotive sector, although the impact will vary from automakers to auto suppliers 228 114 0 • In the long term, oil and gas producers and refiners will feel the disruption, but general energy savings will likely offset demand upside from EVs for power utilities 107 33 70 • EVs can be a boost for metals and mining companies with exposure to cobalt, lithium, or copper 204 215 234 Oil and Gas Regulated Utilities 0 112 60 • Over the next decade, the growth in oil demand is likely to continue on • With load from EVs contributing about 1–4% to the total projected load the back of growth in commercial transport and chemicals over the next 15 years, general energy efficiency savings are likely to 175 175 175 offset EV-related consumption • However, in the long term (beyond 2030), the shift of light vehicle transport to EVs is more critical and could • EV revenue growth for regulated utilities is likely to be two pronged, 0 137 134 contribute to declining demand for oil products resulting from an increase in electricity demand as well as from higher capital investment in electric vehicle supply • The long lead time until EVs take over should allow major 120 178 87 equipment (EVSE) or EV charging infrastructure oil companies to look for alternative growth routes, with more focus on gas and renewables 212 0 47 Industries • EV batteries are predominantly lithium-ion batteries, which • In EVs, the electric component that matters the most is the 169 176 137 use lithium, cobalt, nickel, and graphite battery • In addition, electric motors include a group of 17 rare earth • With the adoption of electricity as a power source, 94 110 102 elements that are available in only small amounts increased safety and handling requirements of applied dispersed on the Earth’s crust batteries must be cost-efficiently integrated into logistics processes 202 140 184 • The introduction of EVs will result in higher demand for certain commodities such as cobalt, lithium, copper, and nickel • Also, the aftermarket sales of batteries will create logistics challenges as a system, and a plan will be required for the distribution and 102 102 153 installation of millions of used batteries coming back from customers 35 31 32 Metals and Mining Logistics Source: S&P Report on Tech Disruption and Press Articles 2 Palette RGB EVs Changes the Value Chain values 0 72 122 A market dominated by BEVs poses serious consequences for all parties 100 135 190 Changes due to EVs 255 204 0 A change from ICE to BEV will lead to disruptions in a Less labor required for BEV powertrain $217bn powertrain segment as it will be swapped by BEV production 228 114 0 components • BEVs are less dependent on labor as electric motors 107 33 70 ICE powertrain BEV powertrain are smaller and less complex than ICEs • It is possible to set up a highly automated production Total $217bn 204 215 234 process for battery packs and electric motors • Also, data from various ICE and BEV car 1,400 components 200 components manufacturing plants shows that the number of 0 112 60 electric engines/ motors produced per employee is Engine Exhaust Electric motor significantly higher than for ICEs, and this is likely to 175 175 175 (+ power electronics) rise further as BEV volumes increase $100bn $39bn 0 137 134 Estimated average components per employee per year 120 178 87 ICE engine 350 212 0 47 ICE transmission 350 169 176 137 BEV motor 1,600 94 110 102 Transmission / drivetrain Battery pack 202 140 184 $71bn Require more raw materials • While a BEV does not carry a significant number of 102 102 153 A BEV powertrain differs considerably from an ICE powertrain. Exhausts, transmissions, (moving) parts, it does require additional raw and engine components are exchanged for electric motors, battery packs, and power materials, mainly for its batteries electronics (to control electric power) 35 31 32 It is estimated a BEV powertrain has around 200 components, while an ICE carries 1,400 • Besides lithium, materials used include nickel, cobalt, components. Almost a third of the value of the automotive supply chain is powertrain- graphite, manganese, and aluminum related, and it is threatened by a potential shift to electric powertrains Source: ING Report 3 II. Industry Overview Introduction to Electric Vehicle (EV) Palette RGB EV Classification and Models values 0 72 122 EVs are broadly classified into HEVs, FCEVs, and PEVs 100 135 190 Classification of EVs 255 204 0 Electric vehicles (EVs) use electric motors instead of an internal combustion engine (ICE) to propel a vehicle. The electric power is derived from a battery of one of the several chemistries, including lead acid, nickel metal hydride (NiMH), and lithium-ion (Li-ion) 228 114 0 • The first commercial EV hit the US streets in 1897, and, in the early 1900s, EVs accounted for one-third of all vehicle sales • Concerns about battery range, coupled with the cheap availability of gasoline, led the ICE vehicle to dominate the market throughout the 20th 107 33 70 century • However, EVs could once again become the vehicles of choice 204 215 234 Plug-in Hybrid Electric Vehicle Hybrid Electric Vehicle (HEV) Fuel Cell Electric Vehicle (FCEV) Plug-in Electric Vehicle (PEV) (PHEV) 0 112 60 • Combines the benefits of • Operates by using hydrogen or • Like the hybrid, have both an • Combines a gasoline or diesel gasoline engines and electric another fuel to create ICE and electric motor, except engine with an electric motor 175 175 175 motors electricity and power an it uses a larger battery store to and a large rechargeable electric motor enable a portion of its energy battery 0 137 134 • Uses a petrol or diesel engine to come directly from the to generate electricity, which • Is a cleaner alternative to electricity grid, returning to • Can be plugged-in and then powers the electric drive conventional light-duty vehicles petrol or diesel energy when recharged from an outlet, 120 178 87 motor and battery electric vehicles, the battery charge is depleted allowing these cars to be due to high energy efficiency, to a certain level driven to longer distances 212 0 47 • Can be configured to meet and lower