Powertrain 2020

Li-Ion batteries the next bubble ahead?

Munich/Shanghai/Detroit February 2010
Roland Berger Strategy Consultants 2010 1

Disclaimer Di l i

> The conclusions and recommendations in this document are based on market knowledge of Roland Berger Strategy Consultants or drawn from information and data gathered through desk research and interviews > Interviews reflect the opinions of experts at individual companies and do not necessarily reflect the official opinion of the interviewee's organization > The statements made by Roland Berger Strategy Consultants are based on assumptions held to be accurate on the basis of the information available > Roland Berger Strategy Consultants assumes no liability for the correctness of the information and statements made within this document as well as for actions undertaken upon this document > The document is for personal use only and not to be disclosed to third parties
Roland Berger Strategy Consultants 2010 2

SUMMARY

Manufacturers of LiI b tt i currently enjoy a business M f t f LiIon batteries tl j b i hype but massive consolidation expected in next 5..7 years
> Share of electrified powertrains will increase in all major Automotive markets - driven by significant battery cost reductions in the next 10 years > PHEV and EV in main regions account for not more than 1,2 mio vehicles in 2015 in an aggressive scenario LiIon battery demand for HEV/PHEV and EV account for 0,82 mio "EV equivalents". Demand for LiIon batteries might further increase significantly until 2020, but 3 mio unit "EV equivalent" will not be reached before 2018 i l t" ill t b h db f > Announced investments will result in significant overcapacity in the period between 2014 and 2017 (200% of 2016 demand already in 2015), especially in the US and Japan > In addition, high levels of R&D and CAPEX will be required to drive down costs fast: EUR 50..100 m for new cell chemistry, EUR 350 m for 100k unit plant > Therefore only six to eight global battery manufacturer will survive in the next five to seven years critical size approx. EUR 600m revenues in 2015 > Western governments need to act in order to avoid loosing future technologies to Asia, battery suppliers need a well defined strategy to gain market shares fast to survive, y pp gy g investors should be aware of massive investment risks
Source: Roland Berger

Roland Berger Strategy Consultants 2010

Share f l t ifi d Sh of electrified powertrains will increase in all major t i ill i i ll j Automotive markets
Share of powertrain technologies in major markets in 2015/2020 High scenario
Western Europe p
1% 0% 2% 1% 2% 5% 14% 1% 6% 1%

Japan
0% 0% 5% 0% 4% 7% 4% 9% 0%

ICE (None + Mirco) Mild Full PHEV (serial) PHEV (parallel) EV

4%

ICE (None + Mirco) Mild Full PHEV (serial) PHEV (parallel) EV

2015
94%

2020 73% China

2015
90% 1% 0% 2% 1% 2%

2020

77%

US
3% 0% 0% 7% 0%
ICE (None + Mirco) Mild Full PHEV (serial) PHEV ( (parallel) ll l) EV

8% 4% 8% 1% 5%

ICE (None + Mirco) Mild Full PHEV (serial) PHEV ( (parallel) ll l) EV

6% 9% 4% 2% 0%

2015
89%
Source: Roland Berger

2020 74%

2015
93%

2020

79%
4

Roland Berger Strategy Consultants 2010

Increased share of HEV/PHEV and EV is driven by massive I d h f d i di b i battery cost reductions in the next 10 years
Potential cost progression of high energy battery cells [EUR/kWh]
COST REDUCTION ENABLERS

KEY POINTS
> Cost improvements will cause market volumes to rise substantially, further improving EV battery cost structure: - Internal economies of scale - Material supplier economies of scale/new entrants > Significant advances in technology are required and are expected to be facilitated by substantial R&D investments: - Design changes to remove components and increase energy density - Chemistry changes up to EUR 100 m invest for h i t new chemistry > Large capital investments into efficient, cutting edge manufacturing infrastructures is necessary: approx EUR 350 m for 100,000 unit EV equivalent plant

475

300 200

2010

2015

2020

HIGH CAPITAL REQUIREMENTS DRIVE THE NEED FOR SCALE

Source: Interviews, Roland Berger

Roland Berger Strategy Consultants 2010

PHEV and EV in main regions account f 1,2 mio vehicles i d i i i t for 1 2 i hi l in 2015 LiIon battery demand for 0,82 mio "EV equivalents"
xEV vehicles in major markets in 2015 (High scenario) and resulting LiIon battery demand
Vehicles in Western Europe, Japan, US, China LiIon battery demand

3%

2% 3% 0% 1%

Mio veh veh.

ICE (None + Mirco) Mild Full PHEV (serial) PHEV (parallel) EV
46,1 1,3 1,6 0,8 0,1 0,3

0,82 mio units EV equivalent

0,38

0,32

Europe US Japan China

92%

0,03 0,10 0 03 0 10
Assumptions: EV: PHEV: Full Hybrid: F ll H b id Mild Hybrid: EV/PHEV: Full/Mild Hybrid: 25 kWh 12,5 kWh 2,5 2 5 kWh 1,25 kWh LiIon batteries 65% NiMh / 35% LiIon batteries in 2015 6

Source:

Roland Berger

Roland Berger Strategy Consultants 2010

Demand for LiI b tt i will f th i D d f LiIon batteries ill further increase significantly i ifi tl until 2020 - 3 mio unit "EV equivalent" not reached before 2018
LiIon battery demand in "EV equivalents" in major regions1) 2015 2020 [units]
6,0 0,2 0,1 4,4 44 0,1 0,1 3,0 0,1 0,1 0 1 2,0 0,1 0,0 1,0 0,1 0,8 2017 1,4 0,1 , 1,3 2018 2,1 0,1 2,8 2,0

Mild Full PHEV (serial) PHEV (parallel) EV

2,8

0,2 02

0,8 08 0,1 0,0 0,4 0,3 0,0 2015

1,3 0,0 0,1 00 01 0,6 0,0 0,5 2016

2019

2020

1) Europe, Japan, US, China

Source: Roland Berger

Roland Berger Strategy Consultants 2010

However, announced investments will result i significant H di t t ill lt in i ifi t overcapacity in the period between 2014 and 2017
Main investments 20 biggest players only for Li-Ion battery manufacturing Automotive
Investments and estimated capacity in EV equiv in 2015 [EUR m '000] equiv. m, 000]
Total investment: > EUR 8,5 bn Total capacity: ~2.6 mio. EV equivalents Average investment: EUR 350 m Average capacity 2015e: 110 000 EV equivalents
1,494 1,357 ,

Comments
Declared capacity will be 200% of 2016 demand already in 2015 Unannounced plans of key players and other companies further increase overcapacity National subsidies stimulate investment in excess capacity, e.g.:
USD 2.6 bn loans, steered by US DOE (e.g. USD 1.6 bn for Nissan, USD 148 m for JCI/ Saft)
360

713 385 77 40 149 462 140 420 195

807

846

769 405

294 85 9 87 25 144 55

202 30

214 60

242 110

269 60

351 200 70

EUR 125 m for the Renault-Nissan/NEC Renault Nissan/NEC alliance (AESC) for battery manufacturing at Flins plant Investments for BYD, BAK, CNOOC/Lishen strongly supported by the Chinese government g

Source: Deutsche Bank; press review; Roland Berger analysis

Li-Tec Li T SB JCI AESC E 1 A123 P Ener1 Pana- SK Lithi Bl Lithium Blue T hib LG Toshiba Sanyo D / Hit hi S Chi S Dow/ Hitachi SonyChine sonic EnergyEnergy Energy LiMotive Saft Chem KokamVehicle (BYD, EV Japan Energy BAK, Energy CNOOC/ Investments (EUR m) 2015 capacity (000) EV equivalents LISHEN)

Roland Berger Strategy Consultants 2010

Overcapacity is especially expected i th US and Japan O it i i ll t d in the dJ

2015 demand and supply in major regions (units EV equivalents, high scenario)
Comments
1.228.400

Capacity Demand (Sales)

859.000

> EU: Not included: additional capacity planned but not officially announced for at least 100,000 "EV equivalent" units in Europe by Asian battery suppliers No coordinated approach so far > Japan/Korea: Supply for S l f exported cars (T t h b id EV t d (Toyota hybrids, EVs, Mitsubishi iMEV) accounts for some hundred thousand EV equivalents Massive support to drive technology leadership > US US: Overcapacity stimulated by massive subsidies, stimulation of demand side missing > China: Announced invest in-line with expected d A di i li ih d demand d Government wants China to become market leader in new energy vehicles
9

320.000 100.000 160.000

375.000 380.000

30.000

Japan/Korea
Source: Roland Berger analysis

US

EU

China

Roland Berger Strategy Consultants 2010

Only to l b l battery O l 6 t 8 global b tt manufacturer will survive i th next f t ill i in the t 5 to 7 years critical size approx. EUR 600m revenues in 2015
Challenges for Automotive LiIon battery manufacturers will accelerate consolidation
Overcapacity, price pressure

Investment needs to ramp up ramp-up capacity: EUR 350 m for 100k unit plant1) p

Consolidation to 6 8 global 6..8 battery companies

CAPEX requirements for R&D: EUR 50..100 m for new cell chemistry y

Ability to manage growth: yield rate, quality, cash flow

1) EV equivalents
Source: Roland Berger analysis

Roland Berger Strategy Consultants 2010

10