1

Global Commercial Vehicle Powertrain Systems MarketClear Signs of Growth in Demand for Automated and Automatic Transmissions

Sandeep Kar- Global Manager- Commercial Vehicle Research

May, 2010

2

Global Commercial Truck Production: Polarization of Truck Classes Implies Growth in LCV and HCV Segments

17.89 Million CV

2008

23.49 Million CV

2020

Heavy CV 15.4%

Medium CV 4.3%

Light CV 80.3%

Heavy CV 16.9%

Medium CV 7.1%

Light CV 76.0%

2008 2020

Europe North America Asia Others

0

4,000

8,000

12,000

16,000

20,000

LCV MCV HCV

Un

it (

Th

ou

san

d)

LCV MCV HCV

HCV1.5%HCV1.5%

LCV2.8%LCV2.8%

MCV1.9%MCV1.9%

Navistar ProStarNavistar ProStar Scania R-SeriesScania R-Series Mercedes ActrosMercedes Actros Ford ConnectFord Connect Nissan AtlasNissan Atlas TATA ACETATA ACEHino 185Hino 185

3

Case in Point: Chinese and Indian CV Markets Show Strong Polarization Trends

0%

20%

40%

60%

80%

100%

2005 2006 2007 2008 2015

HDT MDT LDT

18.3%18.3% 21.0%21.0% 26.5%26.5% 28.1%28.1%15.1%15.1% 13.8%13.8% 12.9%12.9% 10.8%10.8%

66.6%66.6% 65.2%65.2% 60.6%60.6% 61.1%61.1% 60.6%60.6%

9.3%9.3%

30.1%30.1%

YearYear

100

80

60

40

20

0

Market Share (%)Market Share (%)

HeilongjiangHeilongjiang

JilinJilin

LiaoningLiaoning

HainanHainan

YunnanYunnan

GuizhouGuizhou

SichuanSichuan

QinghaiQinghaiNingxiaNingxia ShanxiShanxi

HenanHenan

ShandongShandong

JiangsuJiangsu

AnhuiAnhui

FujianFujianJiangxiJiangxi

HunanHunan

HubeiHubei

HebeiHebeiTianjinTianjin

ShanxiShanxi

ChongqingChongqing

NeimengguNeimenggu

GuangxiGuangxi

GansuGansu

Provinces Taking the Policy of Charge-by-Weight (China), 2008

LDT, MDT, HDT Truck Sales Ratios: (China), 2008-2015

Rising Volume of Containerized Freight (India), 2008-2015

Rising Demand for Heavy Trucks- Volvo’s Market Share Growth (India),

4

In Europe the LCV Segment is Expected to Experience a CAGR of 2.4 Percent (2008-2013)

LCVs Powered by Diesel Engines (55% Penetration Forecast for 2015-2020) and

Featuring Stepped MTs willPrevail..DCT, ATs will

Gain Penetration

LCVs Powered by Diesel Engines (55% Penetration Forecast for 2015-2020) and

Featuring Stepped MTs willPrevail..DCT, ATs will

Gain Penetration

5

Demand Analysis: Trucks by Transmission Type (North America),

Trucks in Operation by Class Type (2009)Trucks in Operation by Class Type (2009)

56%

27%11% 8%

42%

69%82% 84%

55.5%

2% 3%

4%

7% 8%

41.5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Class 4 Class 5 Class 6 Class 7 Class 8

Tru

cks

in O

per

atio

n (

%)

Automatic Automated Manual

New Truck Sales by Transmission Type (2009)New Truck Sales by Transmission Type (2009)

81% 78%65%

19% 22%35%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

New

Tru

ck S

ales

(%

)

Manual Automatic

New Truck Sales Forecasts (2005 – 2015)New Truck Sales Forecasts (2005 – 2015)

Demand for automatic and automated transmissions for Class 6-8 trucks is forecast to increase until 2015 because they are easier to operate and are more fuel efficient

In 2015, automatics/automated will represent almost 35% of new truck sales, rising from 22% in 2008.

In 2008, Class 8 production trucks had the highest concentration of automated manual transmissions (11%).

Both are more costly than manuals to maintain (require more fluid), repair, reman/rebuild (much more complex).

Automatics cost 20 to 30% more than manuals. Comparatively, automated manuals are cheaper and cost 10-15% more than manuals.

58%

35%19% 12%

40% 42%58%

72% 77%

55.5%11%

9%

7%

2.5%2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Class 4 Class 5 Class 6 Class 7 Class 8

New

Tru

ck S

ales

(%

)

Automatic Automated Manual Note: All figures are rounded; the base year is 2008. Source: Frost & Sullivan

6

End User Research: Key Desired Benefits of Powertrain Technologies Among Managers of Largest Fleets in U.S. Point Towards Automated/Automatic Transmissions as Solutions

Highest Ranking Benefits of Powertrain Technologies(N=109)

59%

17%

5%

5%

6%

17%

19%

20%

9%

6%

6%

6%

6%

12%

18%

22%

10%

10%

8%

8%

5%

5%

0% 20% 40% 60% 80% 100%

Fuel Efficiency

Reliability

Reduced Maintenance Requirement

Longer Lifecycle

Attractive Lifecycle Costs

Effectiveness Under All Operating Conditions

Residual Value

Reduce Idling

Lower Weight Penalty

Low Level Emissions

Acces to Powertrain Support Infrastructure

#1 ranking #2 ranking #3 ranking

Note: Proportions less than three not shown numerically in chart.

Q: When purchasing powertrain technologies, please rank the top three benefits that are most important to your fleet from the following list below?

Automated/Automatic

Trannies Offer Solutions But

Pose Challenges Too!!

Solutions

Fuel Efficiency, Reduced Maintenance,, Residual

Value

Challenges

Lifecycle Costs, Weight Penalty, Access to Support

Infrastructure

Source: Frost & Sullivan 

7

Future Intentions of Automatic/Automated Transmissions Technologies Among Fleet Managers in U.S.

Familiarity with Automatic/Automated

Transmission Technologies

51%

27%

36%

37% 17%

0% 20% 40% 60% 80% 100%

Automatic(N=89)

Automated(N=97)

Very FamiliarSomewhat FamiliarNeitherSomewhat UnfamiliarVery Unfamiliar

87% are familiar with Automatic

Transmission.

64% are familiar with Automated

Transmission.

Q: How likely are you to consider automatic/automated transmissions over manual transmissions in future new truck purchases?

Source: Frost & Sullivan

Rising Awareness and Demand for Automatic andAutomated Transmissions

8

Fuel Efficiency Enhancement of Trucks Through A Combination of Modifications and Regulatory Support

Source: Frost & Sullivan

2007 2015

Hybrid Powertrain

Electronic Controls andModulation

Class 6-8 Truck Fuel Efficiency Enhancement

Automated/Automatic

Transmission

AdvancedTurbocharger

Smaller Engine, Camless

Engine

Powertrain Systems Modifications for Hybrid Trucks

AuxiliaryPower Unit

AdvancedThermal

Management

Lightweight Structural andBody Materials

Air-Disc Brakes, Regenerative Braking

Lighter Fuel Tank

Vehicle GeometryAerodynamic Modifications

Fuel Injection,Valve ActuationImprovements

Low Resistance Tires

Reduced EngineFriction Reduced Trailer Gap

HigherLoads

LesserCongestion

OptimumSpeed

Other Design Modifications

Regulatory Support

Low-viscosity Lubricants

Hybrid Powertrain

Electronic Controls andModulation

Truck Fuel Efficiency Enhancement

Automated/Automatic

Transmission

AdvancedTurbocharger

Smaller Engine, Camless

Engine

Powertrain Systems Modifications for Hybrid Trucks

AuxiliaryPower Unit

AdvancedThermal

Management

Lightweight Structural andBody Materials

Air-Disc Brakes, Regenerative Braking

Lighter Fuel Tank

Vehicle GeometryAerodynamic Modifications

Fuel Injection,Valve ActuationImprovements

Low Resistance Tires

Reduced EngineFriction Reduced Trailer Gap

HigherLoads

LesserCongestion

OptimumSpeed

Other Design Modifications

Regulatory Support

Low-viscosity Lubricants

9

(0.3)

-

0.3

0.6

0.9

1.2

1.5

1.8

10.0% 60.0% 110.0% 160.0%

Bus NA

Bus EU

HCV NA

HCV EU

MCV NA

MCV EU

LCV EU

LCV NA

CAGR

Pro

duct

ion

Vol

umes

in 2

009

(in th

ousa

nds)

Bubble size represents production volumes in 2016

(0.3)

-

0.3

0.6

0.9

1.2

1.5

1.8

10.0% 60.0% 110.0% 160.0%

Bus NA

Bus EU

HCV NA

HCV EU

MCV NA

MCV EU

LCV EU

LCV NA

CAGR

Pro

duct

ion

Vol

umes

in 2

009

(in th

ousa

nds)

Bubble size represents production volumes in 2016

Hybrid Commercial Vehicle Market= Smart Business At Play

0

30

60

90

120

150

180

2006 2008 2010 2012 2014 2016Year

Prod

uctio

n Vo

lum

e (in

th

ousa

nds)

North American and European Hybrid Commercial Vehicles Market: Production Forecast (North America & Europe), 2006 - 2016

CAGR 90.9 %

CAGR 99.6 %

North American and European Hybrid Commercial Vehicles Market: Market Attractiveness of Commercial Hybrid Systems (North America & Europe), 2009-2016

Market attractiveness for hybrid vehicles is highest in the MCV, HCV and Bus segments

Least Pressure on Existing Infrastructure Will Continue Drawing Governments, Truckmakers and Customers Towards Hybrid CVs in EU and NA in New Decade

10

Class 6-8 Hybrid Truck Production: Hybrid Trucks to Set to Account for 8 Percent of Total Truck Production by 2015, New revenue Streams for Automated/Automatic Transmission Suppliers

0

10

20

30

40

50

60

70

80

90

100

2009 2010 2011 2012

Installatio

n (

%)

Hybridization of North American Commercial Trucks (Class 6-8) : Production Volumes and Market Shares of Major OEMs (2008-2015), Hybrid Power Source (2009-2012)

Hybrid Production39,400

2008 2015

Hybrid Production600

Navistar

62%

Navistar39%

Daimler16%

Volvo/Mack-11%

PACCAR23%

PACCAR27%

Daimler-11%

CAGR (2008-2015)=80.8%Electric Hybrid

Hydraulic Hybrid

8% of Truck Production

• Private fleets (Coca-Cola, UPS, FedEx, Utilities) driving the first wave of Class 6-7 truck adoption

• Class 8 long-haul emerging as holy-grail for volume growth

• Hydraulic hybrid production to begin in 2010 (Peterbilt Class 8, FCCC hydraulic)

• Private fleets (Coca-Cola, UPS, FedEx, Utilities) driving the first wave of Class 6-7 truck adoption

• Class 8 long-haul emerging as holy-grail for volume growth

• Hydraulic hybrid production to begin in 2010 (Peterbilt Class 8, FCCC hydraulic)

11

Key Transmission Trends and Takeaways: Commercial Vehicles

Driver Shortage

Declining Price and Rising

Fuel Efficiency of Auto-Trannies

Rising Hybrid Truck Demand

Rising Demand and Penetration

in BRIC Countries

Increasing Vocational

Activity

Favourable Regulatory

Environment

Rising Fleet Manager

Awareness and Preference

Upfront and Lifecycle Cost

Barriers- Developed and

Emerging Markets

12

Questions?

Sandeep KarGlobal Program Manager- Commercial Vehicles ResearchToronto, CanadaDirect: 416.490.7796Fax: 416.490.1533Email: skar@frost.com

Sandeep KarGlobal Program Manager- Commercial Vehicles ResearchToronto, CanadaDirect: 416.490.7796Fax: 416.490.1533Email: skar@frost.com