Automotive the way we see itElectric Vehicles: A Force for the FutureCollaboration Inside and Outside the AutomotiveIndustry Will Be Key to Electric Vehicle DevelopmentThe growth of electric-powered vehicles willlead to a fundamentalshift in the existinglandscape in areas suchas design andmanufacturing,distribution andaftersales service, andenergy supply andinfrastructure.But most importantly, electric vehicledevelopment is being strongly fueledby consumer demand stemming fromeconomic and environmental factors.In Capgeminis Cars Online 09/10study, 41% of consumers said theycurrently own a fuel-efficient and/oralternative-fuel vehicle, up from 36%the prior year. And another 30% saidthey plan to buy a fuel-efficient and/oralternative-fuel vehicle.Hybrids Lead the WayElectric vehicles, particularly hybridgas/electric cars, are the mostcommercially mature and viable of thevarious kinds of alternative vehiclesand have demonstrated the potentialto reduce fuel consumption andexhaust emission. Gas/electric hybridsare the primary type of alternative-fuelvehicle that consumers currently ownor plan to buy.5Hybrid electric vehicles still representonly a small share of overall car sales estimated at about 1% in Europeand 2% in the U.S. Sales of hybridcars, like all vehicles, have sufferedrecently. Nevertheless, future demandis expected to grow, particularly in theU.S. and Japan, as prices of hybridand other types of electric vehiclesbegin to drop. By some estimates, global sales ofhybrid electric vehicles may surge at acompound annual growth rate as highas 12% over the next few years.Developing markets like Brazil, Indiaand China are also expected tocontribute to this growth as they putmore focus on environmental issuessuch as CO2 reduction.1The electrification of the automobile is inevitable. Bob Lutz, Vice Chairman, General Motors1Bob Lutz is not the only one who seesa bright future for electric cars. Mostof the major automotive manufacturers as well as new players like BYD andTesla are investing heavily in electricvehicle design and manufacturing.Governments and other public sectorbodies from the U.S., France, the UKand other countries are makingsignificant investments in thedevelopment of electric vehicles andintroducing various tax credits, incentivesand subsidies. In France, for example,the ministry of sustainable developmentrecently launched a national plan forthe development of electric vehiclesand rechargeable hybrids.Energy companies and otherindustries have also set their sights onelectric vehicles. ExxonMobil, forexample, is sponsoring an all-electriccar-sharing and rental program, calledAltCar, at the Maryland ScienceCenter in Baltimore.2French utilitycompany EDF is working with carmaker Renault on a recharge systemenabling communication betweenrecharge terminals and electricvehicles.3In Germany, Renault andRWE, a leading European gas andelectric company, have partnered tocreate a common transport andrecharge system for electric vehicles.The U.S. Postal Service is studying thefeasibility of moving its fleet of146,000 delivery vehicles to electricvehicles.4And consortia combiningdifferent groups are working togetherin countries like Israel and Portugal totest various integrated models.1Bob Lutz: The Man Who Revived the Electric Car, http://www.newsweek.com/id/815802Exxon and Electrovaya Launch Car Program in Baltimore, http://www.businesswire.com/portal/site/home/email/alert/?ndmViewId=news_view&newsLang=en&newsId=200906230056713 http://press.edf.com/the-edf-group/press/press-releases/noeud-communiques-et-dossier-de-presse/renault-and-edf-strengthen-collaboration-on-zero-emission-electric-vehicle-602317.html4U.S. Postal Service: Electrification of Delivery Vehicles, http://www.uspsoig.gov/FOIA_files/DA-WP-09-001.pdf5 Cars Online 09/10, Capgemini (study spans the U.S., Western Europe and the BRIC countries of Brazil, Russia, India and China), 2009Electric Vehicles: A Force for the Future 2Automotive the way we see itAddressing the ChallengesAlthough there is considerable interest in electric vehicles, a numberof challenges must be addressed ifwidespread acceptance is to beachieved.Performance of batteries: Theindustry must solve issues such as low distance capability, rechargingduration, battery weight, shortlifecycle and the high cost of batteries.Infrastructure investment: Thedevelopment of the electric vehicle is dependent on the paralleldevelopment of a recharginginfrastructure. The current lowdistance capability and frequentrecharging necessitates a significantnumber of charging points, which willrequire considerable planning andinvestment.Market acceptance: Current electricvehicles do not yet meet consumerexpectations regarding speed, power,performance, recharging capability,distance and, especially, price. Price: Prices of new electric hybridvehicles have begun to dropGlobal Hybrid Electric Vehicle SalesForecast Sales expected to surge at a CAGR of 12% during 2008-2015 Hybrid car sales in the U.S. market are likely to cross 1 million by 2012 Hybrid vehicle production in Japan is projected to hit a CAGR of 6.6% from 2008 to 2011

NumberSales5,0001997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009F 2010F 202020,000 30,000 55,000110,000195,000230,000390,000700,0001,090,0001,600,0002,100,0003,750,000Sales (Global)0500,0001,000,0001,500,0002,000,0002,500,0003,000,0003,500,0004,000,000Sources: Capgemini analysis; Global Hybrid Car Market Forecast to 2010, RNCOSsomewhat, but it is still early in thecost-reduction curve. Government-sponsored programs in the form ofboth consumer credits/rebates andbattery development incentivesprovide some cost relief. However, theprice gap between gas-powered andelectric vehicles will need to shrink if themass market is to accept electric cars.Our Cars Online research found thatconsumers show some willingness topay for improved fuel efficiency.However, most are unwilling to pay apremium of more than 10%.The existence of other alternatives:Electric cars are not the onlyalternative-fuel vehicles on themarket. Other options like ethanoland gasoline/ethanol flex-fuel vehicleshave grown in popularity in somecountries. For example, in Brazil, 22%of consumers said they currently ownor plan to buy an ethanol or flex-fuelcar, the highest among the countriessurveyed in Cars Online.Ecological value: While the generalperception is that electric vehicles aremore environmentally friendly thanthose powered by combustionengines, the actual ecological value isquestioned by some. For instance,environmental concerns may be raisedif a vehicle consumes electricity froma coal-fired plant. Other factors suchas the recycling of used batteries mayalso impact the ecological equation.Technological maturity: Electricvehicles are a late entry into theautomotive market and, as such, thestandardization of components,technology and test methods is not yetmature. 3What Do We Mean by Electric Vehicle?In a general sense, electric vehicles are powered by electricity to some degree or another.However, there are a number of different types of electric vehicles, including but notlimited to:Gasoline/electric hybrid vehicle: has both a gas and an electric motor, and is basedon two energy carriers: liquid and battery. A gasoline/electric hybrid vehicle typically hasa limited electric range. The electric propulsion can be mobilized for short urban trips,but the true utility of the electrical energy is to serve as a boost for the gas engine. Theelectricity is produced in the vehicle (recovery through regenerative braking); thesevehicles do not need to be recharged.Rechargeable hybrid vehicle: also called a plug-in vehicle. This is a primarily electricvehicle that also has a small combustion engine. Typically it can be used at 100%electric power in the city with a distance capability per charge of approximately 50 km.Electricity must be provided by the electric network grid. This type of vehicle does notrequire complicated recharging terminals; existing electrical outlets in most public andprivate parking areas may be sufficient.Fully electric vehicle: 100% electric vehicle without any type of heat engine. A pureelectric vehicle requires prior creation of an infrastructure for recharging batteries.Currently the distance capability per charge of a pure electric vehicle is still low (about200 km) and the cost is high.Despite these challenges, there is nolack of investment in electric vehicles.The continued volatility in oil prices,growing focus on ecological issuesand the ongoing improvement oftechnologies should lead to anincreasingly favorable environment for electric vehicle sales.Development Scenarios WillDepend on a Range of FactorsThe development scenarios for electricvehicles will depend on technical,political and energy considerations.Capgemini expects two scenarios torise to the forefront over the next fewyears:Market specific: In this scenario,electric vehicles will hold ameasurable market share in certainregions and for specific uses (likeurban mobility, sport vehicles orprivate company fleets). The technicalmaturity will be present, however thelack of consultation and cooperationamong market players in areas such asinfrastructure and standards willadversely affect development on abroader scale. In this scenario, thedevelopment and dissemination of theelectric vehicle will occur throughspecific segments such as commercialfleets. In addition, a higher-incomesocio-professional category ofconsumers will help drive thedevelopment of electric vehicles.New model expansion: In thisscenario, electric vehicles will hold amore substantial market share. Thesocial consensus and the organizedconvergence of infrastructure andstandards will result in a strong andlasting market for electric vehicles.This scenario will be dominated bynew business models and a newvision of vehicles and mobility.I think we will start seeing an awful lot more carsavailable in electric form. And greater pressure will be puton drivers to be more green aware.UK consumer, Cars Online 09/10Electric Vehicles: A Force for the Future 4Automotive the way we see itWe anticipate that the market-specificscenario will be the most realistic pathfor electric vehicles as it is moreevolutionary in nature. The newmodel expansion scenario is morerevolutionary and would require theconvergence of all players around anumber of key dimensions, includingtechnology, infrastructure for recharging,tax and regulation, evolution of users,and the development of theindustrial/manufacturing capability.This second scenario will only happenif there is significant governmentintervention in terms of subsidies andinvestment, brought about by growingconcerns for the environment and forlong-term oil supplies.Changing the Landscape As these development scenarios playout, the growth of electric vehicleswill raise a number of criticalquestions:Will traditional players (vehiclemanufacturers, suppliers, energyCapgemini anticipates that electric vehicledevelopment scenarios B and D are themost likely future models, with B being the most realistic path.Development Scenarios for Electric VehiclesScenarios2020A. Limbo B. Market SpecificD. New Model ExpansionC. Classic ExpansionPolitical 1% = 20,000