The Future of the Automotive Industry

- And its Impact on Automotive Materials -

Park, Hyungkeun
Image: Mercedes Benz Concept
 After a 130 years of car history, still 1/26

Energy used to move

a person/thing (4~5%) 2.6% driving

0.8% looking for parking

Inertia 0.5% sitting in congestion
Aerodynamics

Rolling resistance
Aux. power
A car spends
86% Egine losses
Transmission losses
96%
of fuel never
reaches the wheels of its time parked
Idling

Fuel Efficiency Utilization efficiency

90% of road is idle

Infra efficiency
Only 10% of a road occupied by cars (Peak) Peak only 5% of the time

Source: Resource Revolution , Heck & Rogers (2014) * Based on the USA
3 key drivers of automotive paradigm shift 2/26

Electric vehicles (EVs)

Energy efficiency

Self-driving cars Sharing economy

Use efficiency Ownership efficiency

 Tesla Model 3 & GM Bolt heralds era of electric vehicles 3/26

Global Top Sellers 2015

(Unit)

Rank Model 2015 Sales

1 Toyota Corolla 1,278,909
In April only,
2 Volkswagen Golf 1,041,279
400,000 3 Ford F-Series 920,172
Pre-orders 4 Ford Focus 826,221
5 Toyota Camry 754,154
6 Hyundai Elantra 746,924
If 500,000 vehicles are 7 Volkswagen Polo 698,182
produced by 2018, Tesla 8 Honda CR-V 696,594
will be able to become a
9 Chevrolet Silverado 669,683
top seller
Tesla Motors Model 3 10 Toyota RAV4 664,382

Price Mileage Release

GM Chevy Bolt
End of 200 miles per charge
$35,000 215 miles 2017 60kWh battery capacity
U$37,500, release in 2017

Source: Compiled from the media

 Rapidly falling battery costs will expedite spread of EVs 4/26

Cost-competitive EVs Innovation in battery pack cost

Leading companies battery cost: U$400/kWh (cell U$250/kWh)
U$150/kWh by 2025 upon popularization of EVs
*Tesla already achieved U$190/kWh by 2016 (16.4 IR)
EV price excl. battery packs
U$20,000
Less room for improvement 600 [Battery pack cost, U$/kWh]
in auto body tech. 521
500

400 393 Pack Cost

U$30,000 300
2025?
Cell Mfg
261 Other Materials

200 190 Separator

150
Electrolyte
Ideal battery pack cost 100 Anode
U$10,000
Over 300 miles 0 Cathode
About 60 kWh 2013 2015 2020 USABC Tesla
U$150/kWh
Target* 2016
Best-in-Class
Manufacturer

Source: Avicenne Energy 2015, POSRI revised

* USABC (US Advanced Battery Consortium) has set a price target of battery pack at $150/kWh
 EVs accounting for 6% of new car sales within 5 years (neutral) 5/26

xEV adoption forecast Perspective by institution

Complied from various forecast reports after 2009, UK Dept. for Transport

[Share of xEV in new car sales] Battery research institutes (SNE, IIT, B3)
14.0%
2.0~12.0% Optimistic
About 10 mil.
- Chinas bus market working as positive
12.0% Midrange units by 2020 - Influenced by micro car, e-bike, commercial
Entire forecast range (Over 10% )* vehicle markets
10.0%

Battery producers (LG Chem, Samsung SDI)

8.0% Neutral
6.0~8.0% About 5 mil.
- Battery producers have neutral views
6.0% 0.8~4.0% units by 2020 - Paying attention to 100GWh-battery market
(6~8% ) in anticipation for increased EVs (20)
4.0% Performance 2.9%

1.5~2.5% Pessimistic Traditional energy institutes (OPEC, Shell)

2.0%
About 2 mil. - Limited battery tech., insufficient infra.
0.0% units by 2020 ICEs improved gas mileage
(Under 2% )
2010 2015 2020

BNEF forecasts that xEV will account for 35% by 2040

(BNEF: Bloomberg New Energy Finance)

* Share of xEV (HEV, PHEV, AEV, FCEV) in total auto sales (passenger cars, SUVs, light duty vehicles)
 Fierce competition for developing self-driving cars 6/26

A 15km self-driving test on A 30km self-driving test on

A8 motorway in Germany (Oct. 15) G7 highway in Beijing (Dec. 15)

Total 2.1 mil. miles self-driving record

24 Lexus RX450h SUVs
34 prototypes
6 states with self-driving car legislation
19 accidents (mostly by other vehicles)

Source: Compiled from the media

 Fully autonomous vehicles about to be commercialized 7/26

LIDAR
(Core Equipment)
GPS Lidar
positioning Monitors surroundings
$80~$6,000 $90~$8,000

Ultrasonic sensors Video camera

Measure position of Visual monitoring
nearby objects $15~$20 $125~$200

Odometry sensors
Complement GPS info. Price decline in
$80~$120
full-self driving system
200 [$1,000]
Radar sensors
Central ECU
Monitor surroundings
Information processing & control
(pedestrians, roads)
50~200% of sensor costs
$50~150
50
10 1

2014 2015 2025 2030

Tesla Motors offers a level 5 autonomous system without LIDAR at a price level of 8,000 US dollars

Source: Revolution in the drivers seat, BCG (2015)

 Mixed views on the market penetration 8/26

Share of self-driving cars in new car sales

97.5%
100.0% 100.0% Incl. partial automation
High Scenario
90.0% Share of high automation
80.0%
62.5%
56.0%
60.0% BCG 25%
Partial 15%
Full 10%
40.0% Incl. partial automation
34.0%

15.4% Low Scenario

20.0% 9.0%
8.0% Share of high automation

0.0%
2020 2025 2030 2035 2040

Reduced accidents: 94% caused by human mistakes Facility investment: Expensive facility, infra investment
Improved efficiency: Less congestion PROS CONS Unpredictable mechanical fault: System failure, hacking
Prosperous sharing economy: Less demand for cars, Job loss: Truck and taxi drivers
improved efficiency

Source: Revolution in the drivers seat, BCG (2015); forecast is based on McKinsey&Company
 Rapid growth in car sharing, reduced car ownership 9/26

86,000 58 mil. 2.5 bil. EUR 650 mil.

cars users minutes per year car-sharing market

WORLD (15): 500,000 car-sharing vehicles by 2020*

NORTH AMERICA EUROPE ASIA-PACIFIC

Leading company

1.5 mil. 22,000 2.1 mil. 31,000 2.3 mil. 33,000

Survey about car ownership Survey about alternatives

60% No more symbol of wealth
42% Less appealing due to high maintenance costs &
traffic jam
37% Alternatives make car ownership less important
40% Rent a car if necessary
34% Long-term leasing if cost is similar
26% Dont mind sharing a car with others

Source: Chinese automotive consumer survey, McKinsey 2016 (n=3,571) *Estimated by A.T. Kearney
Impact on Automotive Industry 10/26

Electrification Battery, motor, electric components

Changes in
Autonomous Vehicles - LIDAR, camera, radar
Supply Chain
Customization 3D printing, customized design parts

Car Sharing Car ownership becomes obsolete

Changes in
Robot Taxis New form of cheap public transportation
Business Models
Autonomous Trucks Disruption in logistics

Simple Structure Less components, less weight

Changes in
Micro Mobility Mini pods, Minibus
Car Design
Pedestrian Interaction Communication with outer space
 Changes in Supply Chain - Electrification 11/26

ICE EV

Disappearing Parts Components Electrification New Parts

Drive Motor
Electric Pump
Intake/
(HVAC)
Exhaust

Engine
Electric Steering System Battery Pack
Transmission

Electric Brake High Voltage

Axle Regenerative Components
Fuel Tank
Brake

Source: POSRI * According to JAMA(Japan Automobile Manufacturers Association), among 30,000 parts in a gasoline car,
6,900 engine parts, 2,100 powertrain parts and 2,100 electric components can be reduced when electrified
Changes in Supply Chain New Production Paradigm 12/26

Crowdsourcing from Using already

20,000 people market-available
Online collaboration components

Basic components
3D printing base frame
Preassembled,
Carbon fiber
consumer self-assembles
reinforced ABS
and finishes last process
 Changes in Business Models 13/26

Private Robot Auton.

Cars Taxi Minibus

Family Autonomous Vehicle Shared Autonomous Vehicle Pooled Shared AV

Transportation
Demand (VMT*) 74% 46% 0% 27%
15 30

24% 15 2%
Car Rental
High-Cap.
Others Taxi
Transport P2P Sharing
25% 30
2%

Source: Revolution of the automotive ecosystem, Roland Berger * VMT (Vehicle Miles Traveled)
 Changes in Car Design - Electrification 14/26

Source: Tesla Motors, BMW

 Changes in Car Design Urban Mobility 15/26

Source: MIT, EZIO

 Impact on Automotive Materials 16/26

1st Material War 2nd Material War 3rd Material War

Oil Shock (80s) Oil Price Hike, China Effect (2000s) Climate Action (2010~)

Market-Lead Efficiency Improvement Regulation-Lead

CAFE 27.5 mpg for almost 26 years 33.0 CAGR 4% 54.5
1985~2010 2012 2025

Al
Aluminum
Wheels Engine Castings, Closures AutoBody
Major
Steel Market
Poly
Polymer/ Ornaments Interior
Composite
Design, Frames
Emblems, Covers, Instrument Panels, Seat Covers, Transparent Plastics,
Housings, Bumpers Thermoplastics, Engineering Plastics Fiber-reinforced Plastics

Source: POSRI
 Automotive Materials Race 17/26

Fe Volkswagen 7th gen

Steel 100 kg
Superstructure (AHSS 60%) 37kg reduction
(Compared to 6th gen.)
Other powertrain-, electric components

Al 2015 Ford F-150 Pickup

Future
Aluminum 317 kg Automotive
Aluminum full body 222kg reduction
Railframe 77% HSS, 27kg reduction
(Compared to MY2014) Material?

Poly BMW i3 EV
Polymer/ 315 kg
Composite CFRP applied on whole passenger cell
(Compared to LEAF)
Aluminum subframe, plastic closures

Source: Compiled from the media * CFRP: Carbon Fiber Reinforced Plastic
 Automotive Materials Race - Steel 18/26

WorldAutoSteel FSV (Future Steel Vehicle) Development of Steel Solutions

Source: WorldAutoSteel
 Automotive Materials Race - Aluminum 19/26

Section Components Al Replacement Possibility Description

Al, rigidity advantage

Closure High
Hood Door Trunk Lid
Fast adoption

Bumper Beam Competitive environment

Body (Non-BIW)
IP Support
Medium
Al growth in midterm

Subframe PO (durability), Al(drive comfort)

Suspension Control Arm Medium
Steel more competitive

Structures Steel more competitive

Body-In-White Supports Low Better crashprocess features

Fender Seat: Steel more competitive

Seat/Fender Seatframe Low Fender: Steel, plastic competitive

Source: POSCO
 Automotive Materials Race Plastic & Composites 20/26

i-Series Carbon Fiber Lifemodule 7-Series Carbon Core

Support Structure Seat Cover PA

PBT Structure PU

Elastic parts Kenaf: Biological fibers from plants

EPDM-modified PP copolymer -20.6kg CO2 reduction per kg

Outer Shell Rear Seat Support PU

Interior Materials
Plastic Structures for Interior

Source: BMW
 Automotive Materials Race Plastic & Composites 21/26

SGL Fast forming

Moses Lake High-pressure resin
(JV w/ BMW) transfer molding
Weaving Thermosetting plastics,
Energy intensive carbonization Carbon 100 degrees high pressure
Prepreg
Wanapum hydroelectric power Fiber
speed: 3~5min.
Carbonization Cutting 1/3 of market price
Electricity:2.8cent/kWh
1/3 of US, 1/5 Germany Forming normally
takes several hours
Forming
PAN
(HP-RTM)
(Precursor)

Economic Thermal
Pressing BMW
Repair Leipzig
Process
Maintenance 4x 2.5MW wind turbines
(Sectioning) Assembly
100% energy supply
CFRP parts sectioned Press, paintshop minimized
bonding process
Rooftop CFRP 10%
Recycled Energy use : -50%
Insurance, repair cost Thermoplastics 25%
Materials Water use : -70%
Aluminum frame 80%

Source: BMW, compiled from the media

 Automotive Materials Race Plastic & Composites 22/26

CFRP Hood Valve Cover Nissan Tail gate Audi A8 Frontend Roof Assembly Nissan Battery Case
(17min. forming time) (BASF) (LyondellBasell)) (Lanxess) (SABIC)

Door trim Panel Front grill Ford Diesel System Seat pan Foam-filled frame
(Bayer) (BASF) (Dow)

Source: American Chemistry Council 2014

 Automotive Materials Race Comparison 23/26

Metal Intensive Unit cost comparison (Fender example)

[ $/kg ]
[:$/kg]
42.24

Processing cost
Material cost

5.62 17.6
1.46 2.08
1.14 1.44 4.26

Mild Steel AHSS Aluminum Sheet CFRP

Weight reduction and cost analysis

(Applied on same base model 2011MY Honda Accord, NHTSA)

Fe Al Poly
Steel Aluminum CFRP
-35% -23%
Weight 328 kg 213 kg 164 kg
Plastic/Composite Intensive Price +$720 +$1,792

Source: Mass Reduction for LDV for MY2017-2025, NHTSA

 Automotive Materials Race EVs 24/26

2014 US LDV* weight breakdown

Mass market of $30,000 cars
Fe Steel intensive, while closures like
Stainless Steel,
Steel hood, doors are aluminum
Other Steels, 1%
2% Magnesium, 0%
Nissan Leaf, Tesla Model3
Copper and Bass,
Iron
Castings,
2% Battery weight 218kg out of 1,495kg (15%)
High-&Medium-
Lead, 1%
Strength, 16% 7%

Aluminum, 10%
Zinc Castings, 0% Premium brands with over $50,000
Powder Metal, 1%
Al Battery pack cage, base frame and
Aluminum body in white with closures
1,812 kg/unit Other Metals, 0%
Tesla Model S
Plastics/Polymer
Regular Steel, Composites, 8% Battery weight 540kg out of 2,200kg (25%)
35%

Rubber, 5%
Building full supply chain is key
Coatings, 1% Poly Sports cars, luxury cars
Textiles, 1%
Polymer/
Glass, 2%
Fluids and
Composites BMW i-Series
Other, 2% Lubricants, 6%

Battery weight 230kg out of 1,195kg (19%)

Source: American Chemistry Council 2015 *LDV(Light Duty Vehicle): Passenger cars, pickups, SUV
 Automotive Materials Race Multi-material solutions 25/26

Hybrid Welding Friction Stir Welding

Energy efficiency, quality Using tool rotation friction heat
still needs improvements Hyundai, trunk lid welding
R&D stage Honda Acura, Nissan

Self-piercing Rivets Chemical Bonding

Anti-corrosion treated BASF, Henkel are key players
boron steel rivets Aluminum bonding, finishing
Hybrid & aluminum bodies Various applications
Jaguar, Land rover, Ford

Ultrasonic Spot Welding

Future of welding
Friction welding using
ultrasonic waves

Source: Korea institute of machinery and materials

Key Takeaways 26/26

Electrification, Car Sharing and Autonomous Vehicles are unavoidable future

Prepare for new players, supply chain and business models
It may also have direct impact on car sales
Keep an eye on new entrants who may become your future customers

Multi-material use, hybrid structure is the new norm

While alternatives grow fast, steel solutions will still play a key role
Develop multi-material solutions, collaborate with your competitors