1. Global trends and China situation
The future of commercial vehicle
powertrains
China-U.S. Clean Truck and Bus Summit
October 2012
Dr. Stephen W. Dyer
Partner
A.T. Kearney (Shanghai) Management Consulting Co., Ltd.

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A.T. Kearney used the text and charts compiled in this report in a presentation; they do not
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3. Agenda
• Global trends in clean commercial vehicles
• China clean commercial vehicle situation
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4. Converging interests of multiple stakeholders are driving the
development of the alternative energy automotive industry
EV/HEV customer buying criteria and key influencing stakeholders and drivers
Convenience
Total Cost (%) represent “%
of Ownership
(9-11%) (15-35%) importance” for
passenger car
Functional
Safety Customer Perform- buyers
(11-13%) decision ance (17-
26%)
Reliability Image
(13-17%) (13-20%)
Stakeholders Description / role Needs / motivation Key drivers
• Governments have actively promoted • Energy security • Financial/non financial subsidies
alternative powertrain, especially for • Environment protection (purchase, R&D, infrastructure)
Government electric vehicles • Industry/ economic • State owned enterprises
leadership
• It includes energy companies and • Profit • Energy cost
infrastructure operators (e.g. grid) • Sustainable business • Infrastructure availability
Energy Providers • Driven by market opportunities and • Image/ political
Government pressure, they are heavily
investing in EV/HEV business
Vehicle • It includes all companies operating on • Profit • Technology performance
manufacturing the EV/HEV value chain: vehicle OEM • Sustainable business • Technology cost/ price
players and all upstream suppliers • Image/ political • Production capacity
Source: China Consumer Surveys; A.T. Kearney analysis A.T. Kearney xx/mm.yyyy/00000 4

5. Commercial vehicle buyers have a much more clear and
rational focus on TCO than passenger car buyers
Recent VOC case example
Innovation opportunity scores for long-
distance coach purchaser desired outcomes Desired outcome opportunity map
Minimize f uel consumption 151151 Satisfaction (%) >150 121-150
Maximize usef ul lif e of brake system 141141 101-120 <100
100
Minimize labor and parts cost of repairs 138 138 Over-delivered
90 desired outcomes
Maximize the predicability of component f ailure 132 132
(cost reduction
Minimize cost of periodic maintenance 128 128 opportunities)
80
Minimize accoustic noise in vehicle interior 126 126 Maximize useful
Minimize time f or f ault diagnostic and repairs 125 125 70 life of braking system
Maximize accuracy of monitoring f uel / operating costs 125 125
Maximize f reshness of air in vehicle interior 123 123 60
Minimize necessity to replace complete assemblies 123 123 50
Minimize the unpleasant odor in new vehicles 122 122
Minimize fuel
Maximize the accuracy of f uel consumption monitoring 122 122 40 Minimize labor and consumption
parts cost of repairs
Minimize vehicle skidding or loss of control 122 122
30
Minimize corrosion of vehicle chassis 120 120
Maximize the usef ul lif e of tires 120 120 20
Minimize the chance of A/C ducts leaking water out 119 119 Under-
10 satisfied
Minimize time to evacuate vehicle during emergency 116 116 desired
… outcomes
0
Maximize alignment of luggage compartment doors 75 75
0 10 20 30 40 50 60 70 80 90 100
Minimize chance of luggage compt. door handle f ailure 72 72
Importance (%)
Source: quantitative survey results; A.T. Kearney A.T. Kearney xx/mm.yyyy/00000 5

6. A recent global A.T. Kearney study assessed the future of
alternative powertrains for commercial vehicles
Focus
Study approach and results segments
• Global study on the future of commercial LD MD HD
vehicle powertrains
• Conducted by A.T. Kearney Long-haul
Approach • > 70 interviews with fleet customers, OEM,
suppliers and associations
• Supported by TCO calculations, third party
data research, etc.
MHD Distrib.2) HD Distrib.
• Vehicle segments: Truck (LD, MD, HD), LD Truck
Bus (LD, MD, HD) Construction
• Technologies: Diesel, Gasoline, HEV, HHV, Truck
Scope CNG
• Regions: Europe, NAFTA, Japan, China MLD Distrib.3)
• Timeframe: Today - 2020
Garbage
• Forecast of global powertrain shares per
vehicle segment in 2020 (scenario based)
• Description of the related key drivers: Small Bus City Bus Coach
Results customer demand (e.g. TCO, functionality, Bus
image), OEM perspective, technology
development and regulation
1) GVW: >15t 2) GVW: 9-15t 3) GVW: 6.4-8.9t 4) GVW: 2.7-6.3t
Source:; A.T. Kearney A.T. Kearney xx/mm.yyyy/00000 6

7. We applied a scenario based-approach using customer and
OEM strategies to model future powertrain developments
Factors and scenarios impacting the 2020 powertrain landscape
Boundary conditions Scenarios
Perspective Parameter “Mod-
How do macro parameters impact “Low” “High”
erate”
powertrain developments?
Customer
Tech-
Regula Fuel Fuel price increase, e.g. Signif-
nolog Limited Moderate
-tion
y
prices • Crude oil price 2020 icant
70 140
[$/barrel] 210
OEM
Component cost reduction,
Aggre-
e.g. Limited Moderate
Customer OEM ssive
• HEV Li-ion battery cell 26 18
9
needs strategies costs 2020 [$/kW]
What do What do OEMs
customers want? plan to offer? Technology
OEM‟s drive to introduce
• Total costs of • Technology Limited Moderate Strong
alternative powertrains, e.g.
ownership strategy • Avg. SOP HEV for HD
2018 2016 2014
• Functionality • Development Long-haul, Europe
• Image status
Regulation
• SOP/ramp-up Maturity of new drivetrain
planning technology, e.g. Low Moderate High
• HEV battery lifetime 2020 4 6 8
[years] 1)
1. Example MD Upper Distribution profile
2. Only vehicle technology related reduction; additional targets might include biofuels, speed limitation, etc. Focus of this
Source: A.T. Kearney A.T. Kearney xx/mm.yyyy/00000
presentation 7

8. Due to comparably high annual mileage with major urban
driving share, City Bus HEV has a strong TCO case
City Bus: Customer need
TCO 2020 (Europe) Fleet customer‟s evaluation
TCO p.a. [k €]
TCO
90 • Clear TCO advantage of HEV for most usage
profiles
€ 5,800 p.a. TCO advantage
for HEV vs. Diesel Functionality
80
• Additional volume of alternative powertrains
critical (could lead to passenger loss if top-
load is not possible)
70
• Limited e-only driving capability
(1-5 km) of HEV is beneficial
60 Average Image
mileage
• HEV is seen as the "greenest" of all available
~60% of all vehicles powertrains
50
40 45 50 55 60 65 70
Mileage p.a. [k km]
Diesel CNG HEV ser.
1. 2020 HEV data: 210 kW e-engine, 14 kWh battery; avg. fuel saving cp. to Diesel: 23%; only powertrain related TCO considered
Source: Fleet customer interviews,, A.T. Kearney A.T. Kearney xx/mm.yyyy/00000 8

9. Almost all OEMs globally show clear plans towards HEV City
Bus – including China
City Bus: OEM strategy
HEV CNG
• MB Citaro • MAN Lion‟s City
• (Small) series • (Small) series
• Orion VII • New Flyer C30LF
• In series • In series
• Hino Blue Ribbon • FUSO Aero Star
• In series • (Small) series
• Dongfeng EQ6122 • King Long CNG bus
• (Small) series • (Small) series
Expected portfolio penetration1): Expected portfolio penetration1):
• Avg. SOP: 2012-2014 • Avg. SOP: in series
City bus will be the segment with the overall highest HEV shares in 2020
1. Avg. OEM perspective based on current status and strategy (example Europe)
Source: OEM interviews, third party publication research,, A.T. Kearney A.T. Kearney xx/mm.yyyy/00000 9

10. High urban driving share and comparably high annual mileage
also leads to a winning HEV TCO case for MHD distribution
MHD Distribution: Customer need
TCO 2020 (Europe) Customer„s evaluation
TCO p.a. [k €]
TCO
38 • Solid TCO advantage of Hybrids for
customers with average mileages (but lower
36 € 950 p.a. TCO advantage for than for HD Long-haul)
Hybrids compared to Diesel
34 Functionality
32 • Limited weight impact of Hybrids due to
downsizing of ICE (+80 kg); CNG weight
30 more critical (+350 kg)
28 • Limited e-only driving capability
Average (1-5 km) of HEV is beneficial
26 mileage
Image
24
~60% of all vehicles • HEV is seen as the "greenest" of all available
22 powertrains
35 40 45 50 55 60 65
Mileage p.a. [k km]
Diesel HEV / HHV CNG
1. 2020 HEV data: 60 kW e-engine, 72 kW battery; avg. fuel saving cp. to Diesel: 12%; only powertrain related TCO considered
Source: Fleet customer interviews, A.T. Kearney A.T. Kearney xx/mm.yyyy/00000 10

11. MHD Distribution is currently the top focus focus segment for
hybridization of powertrains
MHD Distribution: OEM strategy
HEV CNG
Examples Example
• Mercedes Atego HEV • International Durastar CNG
• 5 vehicles in first trial; second • Prototype
trial will be started end of 2010
Expected portfolio penetration1):
• Avg. SOP: 2014-16
• Peterbilt Model 335 HEV
• Early fleet testing
HHV
Example
• Hino Ranger HEV • FCCC HHV Walk-in Van
• In series Chassis (MT55)
• Initial prototypes
Expected portfolio penetration1): Expected portfolio penetration1):
• Avg. SOP: 2014-2016 • Avg. SOP: 2015-2017
MHD Distribution will see the highest Hybrid shares of all truck segments in
2020
1) Avg. OEM perspective based on current status and strategy (example Europe); Source: OEM interviews, desk research, Bosch, A.T. Kearney
A.T. Kearney xx/mm.yyyy/00000 11

12. In Europe, hybrids will likely capture share up to 22% in truck
segments and up to 35% for buses
Market summary Europe 2020: Powertrain shares
Powertrain market shares [%] Key findings
Heavy Duty Medium Duty Heavy Duty
15% 22% • Hybrids will find inroads into all HD segments
5% except construction
• CNG will gain some share in HD niches
85%
73% • Garbage with highest HD Hybrid and CNG
shares
Medium Duty
• MHD Distribution (9-15t) with higher
Long-haul Upper MD
alternative powertrain shares than MLD
Light Duty Bus Distribution (6.4-9t)
15%
2% Light Duty
5% 35% • Broadest spectrum of powertrains
20% • Alternative powertrains mainly for customers
78% with high mileages and image driven
45%
purchase decision
Bus
• City bus with significantly higher share of
Van City bus alternative powertrains than coach
EV Hybrids CNG Diesel
Source: A.T. Kearney A.T. Kearney xx/mm.yyyy/00000 12

13. In NAFTA, Hybrids will gain shares up to 21% in truck segments
and up to 35% for buses in 2020
Market summary NAFTA 2020: Powertrain shares
Powertrain market shares [%] Key findings
Heavy Duty Medium Duty Heavy Duty
15% 21% • Similar alternative powertrain shares as in
2% Europe
• Higher annual mileages but less recuperation
85% 77% opportunities during long distance driving
(more constant driving) and lower Diesel fuel
costs
Medium Duty
Long-haul Upper MD • Slightly lower alternative powertrain shares
Light Duty Bus than in Europe as low Diesel costs impact
2% Hybrid and CNG TCO negatively
16% 35% Light Duty
4%
43% 7% • Gasoline remains the dominating powertrain,
however Diesel and other alternatives gain
58% share
35%
Bus
• Similar Hybrid share as in Europe
Van City bus • CNG as niche application
EV Hybrids CNG Gasoline Diesel
Source: A.T. Kearney A.T. Kearney xx/mm.yyyy/00000 13

14. In China, Hybrids will gain share up to 8% in truck segments
and up to 25% for buses by 2020
Market summary China 2020: Powertrain shares
Powertrain market shares [%] Key findings
Heavy Duty Medium Duty Heavy Duty
1%
8%
3% • Overall low share of alternative powertrains
for HD as focus remains on optimizing
conventional Diesel engines
99%
89% • Some CNG share for HD Distribution,
Construction and Garbage
Medium Duty
• Increasing share of CNG applications and
Long-haul Upper MD some first Hybrids
Light Duty
100 Bus Light Duty
1% 8%
5%
• Some Hybrid penetration in the LD segment
25%
20% supported by hybridization and full-
20% electrification trend in the passenger car
segment
66%
55% Bus
• Strong drive towards Hybrids and CNG for city
buses to support inner-city emission reduction
Van City bus
EV Hybrids CNG Gasoline Diesel
Source: A.T. Kearney A.T. Kearney xx/mm.yyyy/00000 14

15. Agenda
• Global trends in clean commercial vehicles
• China clean commercial vehicle situation
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16. The Chinese government desires to develop clean energy
automotive to address industry development and energy issues
China Government Objectives
Develop the domestic automotive
Industry (Increase global
competitiveness)
Stimulate clean
Achieve energy security (increase energy automotive
use of energy efficient technology and development and Protect the environment (decrease
local renewable energy sources) usage “well-to-wheel” emissions)
Source: A.T. Kearney A.T. Kearney xx/mm.yyyy/00000 16

17. Sales of city buses, the top commercial vehicle candidates for
clean energy powertrains in China, will likely remain flat mainly
due to subway expansion plans
China‟s City Bus Ownership Projection (‟11-‟17F) Key Growth Drivers
(„000 units in operation)
1
+2.61% Metropolitan Public Transportation
431 442 Policy by the Chinese Government
+2.61% 420
410
389 399  Beijing subway carries 650K citizens daily,
372 371 375 379 creating the infamous rush-hours nightmares
342 (e.g. 19lines in Beijing and 13 lines in Shanghai
in „12)
 The government has a plan to expand its
subway line with additional 96 lines through
166B KRW investment1
2
Increase of Alternative Transportation
Means in China Rural Areas
 Fast growth in mini truck and SUV, driving
capabilities in bumpy roads surfaces (CAGR
34% over the next 5 years)
 The largest motorcycles market in global is still
a good source of transportation (23.4M units
in ‟11)
‟07 ‟08 ‟09 ‟10 ‟11 ‟12F ‟13F ‟14F ‟15F ‟16F ‟17F
1. 중국 교통운수협회 도시 지하철 교통 전문 위원회 책임자 인터뷰
Source: China Statistics Year Book, Media Search, JAMAM, A.T. Kearney Analysis A.T. Kearney xx/mm.yyyy/00000 17

18. HEV city buses will increase share in China in the medium term
due to increasingly mature technology and TCO advantages
China‟s City Bus xEV Penetration Projection (‟11-‟17F)
(Unit: %)
ICE and Others BEV HEV HEV City Bus Key Growth Drivers
CAGR 1 Strong Commitment by
100 100 100 100 100 100 100 100
(‟12F-‟17F)
Central/Local Government for
Green City Bus Policy
 xEV city bus penetration in top 10 cities
ranges from 8% through 27% in ‟12
2
66 Immaturity of EV Ecosystem and
-4.8%
77 Battery Technology
85
94 90
99 98 96  Neither of battery charging method
provides an ultimate solution for BEV bus
due to immature battery technology in
China
7 49.9% 3
5 Clear TCO advantage for HEV Bus
3 28 58.3%
2 18
2 7 12  Competitive TCO perspective with payback
10 20 31 5
period for HEV buses will become popular
as it does not require massive charging
‟10 ‟11 ‟12F ‟13F ‟14F ‟15F ‟16F ‟17F infrastructures
Source: China Statistics Year Book, Media Search ,Dongxing Securities, . Kearney Analysis A.T. Kearney xx/mm.yyyy/00000 18

19. HEV models have TCO advantages and equivalent payback
periods for bus fleet operators with government incentives
HEV TCO Perspective (‟12) Payback Period (‟12)6
(Unit: „000 RMB) (Unit: years)
HEV HEV Add‟l HEV : With Incentive
Premium4 Maint4. Energy 9.32
Total Cost : Without Incentive
Maint3. Saving5
2,135 64
16 30
Total 627 -25%TCO
Energy Saving
Cost2 5.48
1,602
5.84
1,569
2.30
Net 3.84
Purchase 3.18
Cost1 3.01
550
ICE HEV ICE HEV BEV
8-year TCO 8-year TCO
1. Net purchase cost includes no purchase tax due to city bus exempt from tax,
2. Total energy cost is calculated based on assumption a 8-year lifetime with 240Km daily driving range that is applied 0.3L/Km with 7.46RMB per liter
3. Total maintenance cost is based on an industry expert and media search
4. HEV Premium is a difference that exceeds ICE purchase costs and HEV requires additional maintenance given the current technology maturity
5. ////
6. Payback period is calculated based on assumptions that a city bus carries 500 passenger per day with 1RMB fare under 365 operation days per year
Source: Department of Commerce of China, Media Search, ATK Project IC, Industry Expert Interview, A.T. Kearney Analysis A.T. Kearney xx/mm.yyyy/00000 19

20. China xEV bus market has evolved through the government-
driven public project with local OEMs
Major City xEV Bus Market Penetration
China Total City China Major City xEV Bus Market (July ‟12)
Bus Ownership
25,368
389,043 :Penetration
17,131
11,952
24,098 9,170
300,429 16,720 7,241
(77%) 9,949 6,012
5,000
8,720 3,620 3,120
6,726 5,177 4,535 2,647
2,003 2,795 325
1,270 411 450 515 835 465 973
88,614 Beijing Shanghai Shenzhen Guangzhou Wuhan Hangzhou Zhengzhou Changsha Xiamen
(23%)
5.0% 2.4% 16.8% 4.9% 7.1% 13.9% 9.3% 26.9% 10.4%
Bus OEM-based in 10 cities – 1,000 units Pilot Project
14% 18%
Major 10 cities 12%
account for 23% 5% 4% 5% 7%
of total bus
ownership BAIC Sunwin Wuzhoulong GAIC DFM … Yutong … King-Long
The “10 city – 1,000 units project” was a pilot project developed through local
relationship, leaving closed sourcing system in China bus market
1. There are 65 bus company operating in Shanghai city in „12
Source: China Statistics Year Book, Media Search, A.T. Kearney Analysis A.T. Kearney xx/mm.yyyy/00000 20

21. Governments tend to source locally to support local OEMs and
drive GDP growth by developing new energy auto industries
Local sourcing status for top public xEV vehicle fleets
Major cities‟ xEV bus Parc1 & proportion Major cities‟ xEV taxi Parc1 & proportion
of local sourcing of local sourcing
Proportion Proportion
(Units, %) (Units, %) sourced locally2
sourced locally2
Shenzhen 2,003 100% Shenzhen 800 100%
Beijing 1,270 97% Beijing 450 100%
Changsha 973 Hangzhou 200 93%
100%
Xinxiang 100 100%
Hangzhou 835 1%3
Shenyang 50 100%
Wuhan 515 100%
Haikou 27 100%
Zhengzhou 465 99%
Chengdu 20 100%
Guangzhou 450 100% Yinchuan 0%
20
Shanghai 411 100% Zibo 20 100%
Xiamen 325 100% Baoji 10 100%
1. Calculated by the number of xEV models in operation as of July, 2012
2. Manufactured locally, or from OEMs with local facilities manufacturing other models
3. Major supplier King-Long has >50% market share in ICE buses in Hangzhou
Source: D1EV, A.T. Kearney Analysis A.T. Kearney xx/mm.yyyy/00000 21

22. But, there exists a slight push to shift to from closed local
sourcing to more open sourcing
China xEV Bus Sourcing Change
Key Issues Faced by Changes in
China xEV Bus Market Government Stance Implications
In Favor of Component
HEV Integration Issue  Chinese OEMs have
Designation
need to work with
 The current local designation of  Local protection
superior battery
critical components have not ― Through such practice, the
contributed to local bus OEM‟s governments can effectively protect suppliers
technological improvement, instead the market for their local companies  The global players to
causing HEV integration issues and enhance local GDP address many issues
 An integration of engine controlling, and possess
transmission/E-motor controllers, competitive
BMS, and power management
system into one HEV single system
advantages:
is defined as state of arts ―Enhanced vehicle
performance
Public Safety Issue Open Sourcing Policy ―Reduced security
risks
 Chinese xEV buses have  Ministry of Industry and Information
precedent cases of safety Technology & Ministry of Public ―Increased service
incidents: Security have issued banning life
–A BEV bus of Shanghai caught orders on changing core parts of
on fire in 2011 buses on Sept.,2010
– An HEV bus of Urumqi caught
on fire while parking in 2010
Source: Media Search, A. T. Kearney Analysis A.T. Kearney xx/mm.yyyy/00000 22

23. China will clearly follow or lead global trends toward clean
commercial vehicle usage, especially for city buses
Consistent
trend toward clean
Clear and rational commercial vehicles
focus on minimal Current local
TCO by commercial sourcing trend may
vehicle buyers open up in future
City buses and HEV bus
MHD distribution applications in
truck applications China will grow
have strongest China will Strong China share quickly
TCO case experience government
similar clean support for
vehicle share by clean energy
2020 vehicles will
continue
Source: A.T. Kearney A.T. Kearney xx/mm.yyyy/00000 23

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