Powertrain 2020

Li-Ion batteries – the next bubble ahead?

Munich/Shanghai/Detroit – February 2010

© Roland Berger Strategy Consultants 2010 1
Di l i
Disclaimer

> 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
M f t off LiIon
LiI batteries
b tt i currently
tl enjoy
j a business
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"
i l t" will
ill nott be
b reached
h d before
b f 2018
> 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,
batteryy suppliers
pp need a well defined strategy
gy to ggain market shares fast to survive,
investors should be aware of massive investment risks

Source: Roland Berger © Roland Berger Strategy Consultants 2010 3

Share off electrified
Sh l t ifi d powertrains
t i will
ill increase
i in
i allll major
j
Automotive markets

Share of powertrain technologies in major markets in 2015/2020 – High scenario

Western Europe
p Japan
1%
0% 0%
2% ICE (None + Mirco) 5% 0% ICE (None + Mirco) 4%
4% 7% 4%
1% Mild 14% 1% 5%
Mild
2% Full Full 9% 0%
PHEV (serial)
6% 1% 0%
PHEV (serial)

2015 PHEV (parallel) 2020 73% 2015 PHEV (parallel) 2020

EV EV 77%
94% 90%
US China
1%
0% 0%
0% 6%
8% 4%
ICE (None + Mirco) ICE (None + Mirco)
3% 2% 9%
Mild Mild
7% 8% 1% 1%
Full 2% Full 4% 2% 0%
0% 5%
PHEV (serial) PHEV (serial)

2015 PHEV (parallel)

( ll l) 2020 74% 2015 PHEV (parallel)
( ll l) 2020
EV EV 79%
89% 93%

Source: Roland Berger © Roland Berger Strategy Consultants 2010 4

IIncreasedd share
h off HEV/PHEV and d EV is
i driven
di by
b massive
i
battery cost reductions in the next 10 years

Potential cost progression of high energy battery cells [EUR/kWh]

COST REDUCTION KEY POINTS
ENABLERS
> Cost improvements will cause market volumes to rise
475 substantially, further improving EV battery cost structure:
- Internal economies of scale
- Material supplier economies of scale/new
entrants
300
> Significant advances in technology are required and are
expected to be facilitated by substantial R&D
200 investments:
- Design changes to remove components and
increase energy density
- Chemistry changes – up to EUR 100 m invest for
new chemistry
h i t
> Large capital investments into efficient, cutting edge
2010 2015 2020 manufacturing infrastructures is necessary: approx EUR
350 m for 100,000 unit EV equivalent plant

HIGH CAPITAL REQUIREMENTS DRIVE THE NEED FOR SCALE

Source: Interviews, Roland Berger © Roland Berger Strategy Consultants 2010 5

PHEV and d EV in
i maini regions
i accountt ffor 1,2
1 2 mio
i vehicles
hi l iin
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

2% 0,82 mio units EV equivalent

3%
3% Mio veh.
veh
0% ICE (None + Mirco) 46,1
1%
Europe
Mild 1,3
0,38 0,32 US
Full 1,6
PHEV (serial) 0,8 Japan
PHEV (parallel) 0,1
China
EV 0,3
92%
0 03 0,10
0,03 0 10
Assumptions:
EV: 25 kWh
PHEV: 12,5 kWh
F ll Hybrid:
Full H b id 2 5 kWh
2,5
Mild Hybrid: 1,25 kWh
EV/PHEV: LiIon batteries
Full/Mild Hybrid: 65% NiMh / 35% LiIon batteries in 2015
Source: Roland Berger © Roland Berger Strategy Consultants 2010 6
Demand
D d for
f LiIon
LiI batteries
b tt i willill ffurther
th iincrease 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
Mild
Full
44,44
PHEV (serial) 2,8
0,1 0,1
PHEV (parallel)
EV 3,0
2,1
0,1 0,1
01 02
0,2
2,0
1,4 0,1
0,1 0,0
1,3
0 0 0,1
0,0 1,0 0,1
, 2,8
00,88 01
0,6 0,1 2,0
0,1 0,0 1,3
0,4 0,0 0,8
0,3 0,0 0,5

2015 2016 2017 2018 2019 2020

1) Europe, Japan, US, China

Source: Roland Berger © Roland Berger Strategy Consultants 2010 7
However, announced
H d investments
i t t will
ill result
lt iin significant
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.

equiv in 2015 [EUR m,
m '000]
000] Comments
Total investment: > EUR 8,5 bn
 Declared capacity will be 200% of
Total capacity: ~2.6 mio. EV equivalents 2016 demand already in 2015
Average investment: EUR 350 m  Unannounced plans of key players
Average capacity 2015e: 110 000 EV equivalents and other companies further
increase overcapacity
1,494
1,357
,
 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/
807 846
769 Saft)
713
– EUR 125 m for the Renault
Renault-Nissan/NEC
Nissan/NEC
462 420 alliance (AESC) for battery manufacturing
385 405 360
351
294 269 at Flins plant
195 202 214 242 200
149 140 144 – Investments for BYD, BAK,
77 40 85 87 55 60 110 60 70
9 25 30
CNOOC/Lishen strongly supported by the
Chinese g
government
Li T SB
Li-Tec JCI AESC Ener1
E 1 A123 Pana-
P SK Lithium
Lithi Blue
Bl T hib LG
Toshiba Sanyo Dow/
S D / Hitachi
Hit hi SSonyChine
Chi
LiMotive Saft sonic EnergyEnergy Energy Chem KokamVehicle (BYD, – …
EV Japan Energy BAK,
Energy CNOOC/
Investments (EUR m) 2015 capacity (’000) EV equivalents LISHEN)
Source: Deutsche Bank; press review; Roland Berger analysis © Roland Berger Strategy Consultants 2010 8
O
Overcapacity
it is
i especially
i ll expected
t d iin th
the US and
d Japan
J

2015 demand and supply in major regions (units EV equivalents, high scenario)
Comments
1.228.400 > EU:
Not included: additional capacity planned but
Capacity not officially announced for at least 100,000 "EV
Demand (Sales) equivalent" units in Europe by Asian battery
suppliers
859.000 No coordinated approach so far
> Japan/Korea:
S l for
Supply f exported
t d cars (Toyota
(T t hybrids,
h b id EVs,
EV
Mitsubishi iMEV) accounts for some hundred
thousand EV equivalents
Massive support to drive technology leadership
375.000 380.000
320.000 > US
US:
Overcapacity stimulated by massive subsidies,
160.000 stimulation of demand side missing
100.000
> China:
30.000
A
Announced d invest
i in-line
i li with
i h expectedd ddemandd
Government wants China to become market
Japan/Korea US EU China
leader in new energy vehicles
Source: Roland Berger analysis © Roland Berger Strategy Consultants 2010 9
Only
O l 6 tto 8 global
l b l bbattery
tt manufacturer
f t will
ill survive
i iin th
the nextt
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 CAPEX
needs Consolidation requirements for
to ramp-up
ramp up to 6..8
6 8 global R&D:
capacity: battery EUR 50..100 m
EUR 350 m for companies for new cell
100k unit p
plant1) chemistryy

Ability to manage growth:

yield rate, quality, cash flow
1) EV equivalents
Source: Roland Berger analysis © Roland Berger Strategy Consultants 2010 10