Draft Report For Media Use Only Draft Report Powering Autos to 2020: The Era of the Electric Car? Mythili Devineni, Andreas Dinger, Marco Gerrits, Tobias Mezger, Xavier Mosquet, Massimo Russo, Georg Sticher and Hadi Zablit July 2011 Draft Report For Media Use Only 1 THE BOSTON CONSULTING GROUP July 2011 he Boston Consulting Group (BCG) is a global management consulting firm and the worlds leading advisor on business strategy. We partner with clients in all sectors and regions to identify their highest-value opportunities, address their most critical challenges, and transform their businesses. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 74 offices in 42 countries. For more information, please visit www.bcg.com.T Draft Report For Media Use Only 2 THE BOSTON CONSULTING GROUP July 2011 Contents Executive Summary Key Recent Changes in the Vehicle Propulsion Landscape ICE-Propelled Vehicles and Emissions Targets Sidebar: Compressed Natural Gas: A Potential Bridge Technology? The Role of the Consumer Sidebar: Consumer Research The Potential for EVs and HEVs Sidebar: The China Wildcard Go-to-Market Challenges for EVs Implications for OEMs, Suppliers, and Regulators. Draft Report For Media Use Only 3 THE BOSTON CONSULTING GROUP July 2011 Executive Summary The automotive propulsion landscape is evolving rapidlyand the questions facing OEMs as they look out to 2020 are becoming increasingly complex. Which technologies will prevail? How will consumers react to an expanding range of choices? How is the battle for market share between conventional and electric vehicles likely to shake out? What are the specific go-to-market challenges facing electric vehicles? This report, our latest in a series on automotive propulsion, addresses these and other questions stakeholders will face by providing an integrated perspective on the technologies that will populate the vehicle landscape through the rest of the decade. Specifically, the report focuses on internal combustion engine vehicles (ICEs), including those fueled by gasoline, diesel, compressed natural gas, and biofuels. This includes micro-hybrids. hybrid electric vehicles (HEVs), which have both an internal combustion engine and an electric motor but no external charging. This category includes mild and full hybrids. electric vehicles (EVs), which have an electric motor and can be charged externally. We include pure battery, range-extended, and plug-in hybrid electric vehicles in this category. Drawing on interviews with industry experts, BCG consumer research, and total cost of ownership (TCO) economics, the report identifies different scenarios and their implication for OEMs, suppliers, and regulators. Our high-level findings include the following: Conventional technologies have significant emission-reduction potentialbut OEMs will need to pull multiple levers simultaneously to meet likely 2020 emissions targets. Modifications to combustion technologies, transmissions, vehicle mass, aerodynamics, and power management will all be necessary. o Advanced combustion technologies alone could reduce CO2 tailpipe emissions by 40 percent from current average levels for new-vehicle fleets of 250 to 270 grams per kilometer (g/km) in the United States, 150 to 170 g/km in Europe, 130 to 140 g/km in Japan, and 200 to 215g/km in China. The cost to the consumer would be about $50 to $60 per percent reductionroughly half the cost of what was expected three years ago. o Within advanced ICE technologies, engine downsizing, turbocharging, optimized cooling, low friction, start-stop systems, electric power steering, direct injection, and variable valve timing will likely lead the charge. We expect these to be mainstream across most passenger-car segments in all major markets. Draft Report For Media Use Only 4 THE BOSTON CONSULTING GROUP July 2011 The electric car faces stiff competition from ICEs and, based solely on total cost of ownership (TCO) economics, will not be the preferred option for most consumers. o Battery costs will fall sharply (approximately 64 percent from 2009 levels) to $400 per usable kilowatt hour at the pack level. However, this still represents a cost of $9,600 per vehicle to the consumer for the typical 20-kilowatt-hour battery necessary for a pure battery EV. o TCO economics for electric cars will also be significantly influenced by government incentives and fuel and electricity prices. o High costs notwithstanding, EVs will see relatively strong uptake from specific consumers. In particular, there is evidence of a “green“ consumer cohort (approximately 6 percent of consumers in the United States and 9 percent of those in Europe) that