Hybrids & Competing Automotive Powerplants to 2009

Diesels, hybrids to gain market share

While overall sales of light vehicles in the US are forecast to grow less than one percent annually through 2009, there will be a significant shift in the product mix of powerplants used as diesel engines and hybrid-electric powerplants begin to take significant share away from spark ignition internal combustion engines. The fuel price spike that occurred in 2005 ignited new interest in fuelefficient powertrain technologies, which has boosted demand for hybridelectric vehicles and, to an extent, for diesel engines. Fuel cells remain a more distance promise due to technology and infrastructure challenges.

Spark ignition ICEs to remain dominant

Nevertheless, despite rapid advances in alternative powerplant types, the conventional spark ignition internal combustion engine (ICE) will remain the dominant powerplant technology in the US throughout the forecast period. The spark ignition ICEs continued ability to cost-effectively meet tighter emission standards yet provide high levels of power and driveability will ensure its position in the marketplace. Even so, continued consumer demands in terms of fuel economy and vehicle emissions are causing automakers to seek out efficient new technologies.

Diesels ICE shows promise in the US

The diesel ICE has recently emerged as a legitimate substitute for the spark ignition engine in the US light vehicle market both from a market and a regulatory perspective. The tremendous success of the technology in Europe, where it is on the verge of capturing 50 percent of the total automobile market, amply demonstrates the advances made in light diesel direct injection technology in the past decade. Growth will be robust, due in part to the introduction of low-sulfur fuels (scheduled for late 2006), which will make meeting new emission standards more feasible for light vehicles.

Hybrid-electric ICEs to accelerate

The market for hybridelectric ICEs will expand significantly from a relatively small base in 2001. Hybrid-electric ICEs feature adapted internal combustion engines in tandem with electric motors to increase fuel efficiency and reduce emissions while providing performance similar to a conventional spark ignition engine. Two types of hybrids are currently being developed: full hybrids, with large high voltage battery packs such as those already introduced by Toyota and Honda; and mild hybrids, which provide less electric power to operate the vehicle but can be more easily integrated into existing ICE drivetrains and are more cost effective. Cost disparities between HEVs and conventional light vehicles are expected to decline significantly as production volumes increase.

Fuel cells show promise in the long-term

Fuel cell-powered vehicles will emerge slowly in the next decade. Significant but apparently solvable vehicle-related engineering challenges as well as daunting fueling infrastructure requirements will limit commercialization. The industry is currently experiencing a backlash to the just around the corner" coverage that has surrounded the automotive fuel cell in recent years, but the longer term, the technology continues to show promise as an ICE replacement.

Study coverage

Details on these and other key findings are available Hybrids & Competing Automotive Powerplants, the new Freedonia industry study, which provides historical US demand data (1994, 1999, 2004) plus forecasts through 2009 and 2014 by powerplant type and by market. The study also considers market environment trends and indicators, discusses global supply and demand, reviews technology, evaluates company market share and profiles 35 leading competitors in the fledgling US industry.

TABLE OF CONTENTS

INTRODUCTION

I. EXECUTIVE SUMMARY

II. MARKET ENVIRONMENT

General

Macroeconomic Environment

Light Vehicle Supply & Demand Dynamics

Automotive Industry Trends

Legal & Regulatory Trends

Air Quality

Fuel Efficiency

Global Warming

Fuel Economy

Pricing Trends

Comparative Cost Analysis

Average Kilowatts Produced

Average Powerplant Cost

III. GLOBAL SUPPLY & DEMAND

General

Global Demand

North America

Western Europe

Asia/Pacific

Other Regions

Global Supply

North America

Western Europe

Asia/Pacific

Other Regions

IV. TECHNOLOGY

General

Transition to Fuel Cells

Well-to-Wheels Efficiency & Pollution Comparisons

Internal Combustion Engines

Spark Ignition Internal Combustion Engines

Diesel Internal Combustion Engines

Hybrid-Electric ICE Powerplants

Series Hybrid

Parallel Hybrid

Mild Hybrid

Advantages of the Hybrid-Electric ICE Powertrain

Hybrid-Electric ICE Commercialization Issues

Heat Management

Power Control Systems

Field Service

Battery Life

Fuel Cells

Basic Fuel Cell Properties

How Fuel Cells Work

Fuel Cell Types

Fuel Cell Fueling Strategies

High Pressure Hydrogen Storage

Hydrogen Absorption

Cryogenic Storage

Onboard Fuel Processor/Reformer Systems

PEM Fuel Cell Commercialization -- Product Issues

Start Up Issues

Shutdown Issues

Electro-Catalyst Poisoning Issues

Cold Temperatures Issues

Lifecycle Issues

PEM Fuel Cell Commercialization -- Process Issues

Energy Storage Technologies

Competing Technologies

V. POWERPLANT COMPETITIVE OVERVIEW

General

Six Hurdles to Powerplant Dominance

Technology Readiness

S-Curve Headroom

Internal Combustion Engines

Hybrid-Electric ICEs

Fuel Cells

Electric Vehicles

Regulatory Compliance

Emissions Compliance

Fuel Efficiency Compliance

Safety Compliance

Infrastructure Readiness

Fueling Infrastructure

Service Infrastructure

Consumer Price/Benefits

Industry Focus

Technology Penetration Profiles

Market Pull

Regulatory Push

Rapid Penetration

Niche

Hybrid-Electric Vehicle Market Assessment

Automatic Transmissions

Power Steering

Air Conditioning

Antilock Brake Systems

Penetration Summary

Penetration Analysis for HEVs

Markets

Types of Markets

Light Vehicle Demand by Powerplant Type

VI. INTERNAL COMBUSTION ENGINES

General

Spark Ignition Engines

Infinitely Variable Valve Timing

Cylinder Deactivation Systems

Direct Fuel Injection

Feedback Plasma Ignition Systems

Hydrogen-Fueled Spark Ignition Engine

Spark Ignition ICE Producers

Diesel (Compression Ignition) Engines

Direct Injection

Other Fuel System Advances

Particulate Trap

Diesel ICE Producers

VII. HYBRID-ELECTRIC INTERNAL COMBUSTION

ENGINES

General

Full Hybrid-Electric Internal Combustion Engines

Mild Hybrid-Electric Internal Combustion Engines

Hybrid-Electric ICE Producers

VIII. FUEL CELLS

General

Fuel Cell Configurations

Fuel Cell Vehicles

Onboard Hydrogen Fueling Technologies

Fuel Cell Producers

IX. POWERPLANT MARKET BY COMPANY

General

Original Equipment Manufacturers

OEM Strategic Requirements

OEM Strategic Options

OEM Part & Component Suppliers

Supplier Strategic Requirements

Supplier Strategic Options

X. INDUSTRY STRUCTURE

General

Industry Composition & Market Share

Mergers, Acquisitions & Industry Restructuring

Research & Product Development

Manufacturing

Marketing

Distribution

Financial Issues & Requirements

Strategic Partnerships

COMPANY PROFILES

Aisin Seiki Company Limited

Alfa SA de CV

Ballard Power Systems Incorporated

Bayerische Motoren Werke AG

BERU AG, see BorgWarner Incorporated

BorgWarner Incorporated

Bosch (Robert) GmbH

Cobasys LLC, see Energy Conversion Devices

Cosworth Technology Limited, see MAHLE GmbH

Cummins Incorporated

DaimlerChrysler AG

Delphi Corporation

DENSO Corporation

Detroit Diesel Corporation, see DaimlerChrysler

DuPont (EI) de Nemours

Eaton Corporation

Energy Conversion Devices Incorporated

Exide Technologies

Federal-Mogul Corporation

Ford Motor Company

Freescale Semiconductor Incorporated

General Motors Corporation

Global Electric Motorcars LLC, see DaimlerChrysler

Global Engine Manufacturing Alliance, see DaimlerChrysler

Hitachi Limited

Holset Engineering Company, see Cummins Incorporated

Honda Motor Company Limited

Honeywell International Incorporated

International Truck and Engine Corporation, see

Navistar International Corporation

Johnson Controls Incorporated

MAHLE GmbH

Matsushita Electric Industrial Company Limited

Motorola Incorporated

Navistar International Corporation

Nemak SA, see Alfa SA de CV and Ford Motor Company

Nissan Motor Company Limited, see Renault SA

Ovonic Battery Company, see Energy Conversion Devices

Ovonic Hydrogen Systems, see Energy Conversion Devices

Panasonic EV Energy Company, see Matsushita Electric Industrial

Company and Toyota Motor Corporation

Quantum Fuel Systems Technologies Worldwide

Incorporated

Renault SA

Saft Groupe SA

SANYO Electric Company Limited

Siemens AG

Starcraft Corporation, see Quantum Fuel Systems

Technologies Worldwide

TorqTransfer Systems, see BorgWarner Incorporated

Toyota Motor Corporation

United Technologies Corporation

UTC Fuel Cells, see United Technologies Corporation

Valeo SA

Visteon Corporation

Volkswagen AG

LIST OF TABLES

SECTION I -- EXECUTIVE SUMMARY

Summary Table

SECTION II -- MARKET ENVIRONMENT

1 Macroeconomic Environment

2 Light Vehicle Indicators

3 Light Vehicle Powerplant Assumed Kilowatt Output by Type

4 Light Vehicle Powertrain Estimated Cost by Type

SECTION III -- GLOBAL SUPPLY & DEMAND

1 World Demand for Light Vehicles by Powerplant Type

2 North America Demand for Light Vehicles by Powerplant Type

3 Western Europe Demand for Light Vehicles by Powerplant

4 Asia/Pacific Demand for Light Vehicles by Powerplant Type

5 Other Regions Demand for Light Vehicles by Powerplant Type

6 World Production of Light Vehicles by Powerplant Type

7 North America Production of Light Vehicles by Powerplant Type

8 Western Europe Production of Light Vehicles by Powerplant Type

9 Asia/Pacific Production of Light Vehicles by Powerplant Type

10 Other Regions Production of Light Vehicles by Powerplant

SECTION V -- POWERPLANT COMPETITIVE OVERVIEW

1 Light Vehicle Demand by Powerplant Type

SECTION VI -- INTERNAL COMBUSTION ENGINES

1 Internal Combustion Engine Light Vehicle Demand

2 Spark Ignition Engine Light Vehicle Demand

3 Diesel Engine Light Vehicle Demand

SECTION VII -- HYBRID-ELECTRIC INTERNAL

COMBUSTION ENGINES

1 Hybrid-Electric Internal Combustion Engine Light Vehicle Demand

2 Full Hybrid-Electric Internal Combustion Engine Light Vehicle Demand

3 Mild Hybrid-Electric Internal Combustion Engine Light Vehicle Demand

SECTION VIII --FUEL CELLS

1 Fuel Cell Light Vehicle Demand

SECTION X --INDUSTRY STRUCTURE

1 Selected Acquisitions & Divestitures

2 Selected Cooperative Agreements

LIST OF CHARTS

SECTION II -- MARKET ENVIRONMENT

1 US Light Vehicle Production by Company, 2004

2 Options for Improving Light Vehicle Fuel Efficiency

3 Honda Civic Hybrid Breakeven Versus Civic ICE LX Model, US Market Example, 2004 Data

SECTION IV -- TECHNOLOGY

1 Conceptual Technology Migration Profile: ICE to Fuel Cell

SECTION V -- POWERPLANT COMPETITIVE OVERVIEW

1 Alternative Powerplant Forces at Work

2 Light Vehicle Powerplant Technology Assessment

3 Price/Benefits Analysis -- 2003-2005 Model Year

4 HEV Price/Benefits Analysis -- 2003-2005 Model Year

5 Categorizing Technology Penetration Curves -- US Market Example

6 Framework for Assessing Automotive Technology Penetration

7 Automatic Transmission Penetration at Retail Price Analysis US Passenger Car Example

8 Power Steering Penetration at Retail Price Analysis -- US Passenger Car Example

9 Air Conditioning Penetration at Retail Price Analysis -- US Passenger Car Example

10 Antilock Brake System Penetration at Retail Price Analysis US Passenger Car Example

11 Summary of Technology Penetration Profiles -- US Example

12 Estimated Full Hybrid-Electric Vehicle Option Pricing Trend -- Worldwide Example

SECTION VI -- INTERNAL COMBUSTION ENGINES

1 US Light Vehicle Spark Ignition Engine Market Share, 2004

2 US Light Vehicle Diesel Engine Market Share, 2004

SECTION VII -- HYBRID-ELECTRIC INTERNAL

COMBUSTION ENGINES

1 Historical & Potential Light HEV Introductions Through 2009

SECTION IX -- POWERPLANT MARKET BY COMPANY

1 OEM Strategic Powerplant Options -- US Perspective

2 Supplier Strategic Powerplant Supply Options

SECTION X -- INDUSTRY STRUCTURE

1 US Light Vehicle Powerplant Market Share, 2004

2 Trigger Technology Definition -- Antilock Brake Wheel-Speed Sensor Example

3 Advanced Powertrain Technologies with Multiple Possible Applications