The Future of the Automotive Industry - And its Impact on Automotive Materials -

Park, Hyungkeun

Image: Mercedes Benz Concept

1/26 After a 130 years of car history, still…

Source: “Resource Revolution “, Heck & Rogers (2014)

Idling

Egine losses

• Rolling resistance • Aux. power • Transmission losses

• Inertia • Aerodynamics

Fuel Efficiency

• 0.8% looking for parking

• 0.5% sitting in congestion

Utilization efficiency

2.6% driving

A car spends

96% of its time parked

* Based on the USA

Infra efficiency

Energy used to move a person/thing (4~5%)

86% of fuel never reaches the wheels

Only 10% of a road occupied by cars (Peak) Peak only 5% of the time

90% of road is idle

2/26 3 key drivers of automotive paradigm shift

Electric vehicles (EVs)

Energy efficiency

Sharing economy

Ownership efficiency

Self-driving cars

Use efficiency

3/26 Tesla Model 3 & GM Bolt heralds ‘era of electric vehicles’

Rank Model 2015 Sales

1 Toyota Corolla 1,278,909

2 Volkswagen Golf 1,041,279

3 Ford F-Series 920,172

4 Ford Focus 826,221

5 Toyota Camry 754,154

6 Hyundai Elantra 746,924

7 Volkswagen Polo 698,182

8 Honda CR-V 696,594

9 Chevrolet Silverado 669,683

10 Toyota RAV4 664,382

Global Top Sellers 2015

400,000 Pre-orders

In April only,

If 500,000 vehicles are produced by 2018, Tesla will be able to become a

top seller Tesla Motors Model 3

$35,000

Price

215 miles

Mileage

End of

2017

Release GM Chevy Bolt

• 200 miles per charge • 60kWh battery capacity • U$37,500, release in 2017

Source: Compiled from the media

(Unit)

4/26

U$30,000

Innovation in battery pack cost

• Leading companies’ battery cost: U$400/kWh (cell U$250/kWh) U$150/kWh by 2025 upon popularization of EVs

*Tesla already achieved U$190/kWh by 2016 (’16.4 IR)

[Battery pack cost, U$/kWh]

0

100

200

300

400

500

600

2013 2015 2020 USABC

Target*

Tesla

2016

Pack Cost

Cell Mfg

Other Materials

Separator

Electrolyte

Anode

Cathode

521

393

261

150 190

Best-in-Class Manufacturer

2025?

Cost-competitive EVs

Source: Avicenne Energy 2015, POSRI revised

* USABC (US Advanced Battery Consortium) has set a price target of battery pack at $150/kWh

Rapidly falling battery costs will expedite spread of EVs

EV price excl. battery packs

• Less room for improvement in auto body tech.

U$20,000

Ideal battery pack cost

• Over 300 miles • About 60 kWh • U$150/kWh

U$10,000

5/26

* Share of xEV (HEV, PHEV, AEV, FCEV) in total auto sales (passenger cars, SUVs, light duty vehicles)

xEV adoption forecast Perspective by institution

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2010 2015 2020

Midrange Entire forecast range

0.8~4.0%

2.0~12.0%

1.5~2.5%

6.0~8.0%

Optimistic

About 10 mil. units by 2020 (Over 10% )*

• Battery research institutes (SNE, IIT, B3)

- China’s bus market working as positive

- Influenced by micro car, e-bike, commercial vehicle markets

Neutral

About 5 mil. units by 2020

(6~8% )

Pessimistic

About 2 mil. units by 2020 (Under 2% )

• Battery producers (LG Chem, Samsung SDI)

- Battery producers have neutral views

- Paying attention to 100GWh-battery market in anticipation for increased EVs (‘20)

• Traditional energy institutes (OPEC, Shell)

- Limited battery tech., insufficient infra. ICE’s improved gas mileage

Performance 2.9%

[Share of xEV in new car sales]

※ Complied from various forecast reports after 2009, UK Dept. for Transport

BNEF forecasts that xEV will account for 35% by 2040 (BNEF: Bloomberg New Energy Finance)

EVs accounting for 6% of new car sales within 5 years (neutral)

6/26

Total 2.1 mil. miles self-driving record

• 24 Lexus RX450h SUVs • 34 prototypes • 6 states with self-driving car legislation • 19 accidents (mostly by other vehicles)

A 15km self-driving test on A8 motorway in Germany (Oct. ‘15)

A 30km self-driving test on G7 highway in Beijing (Dec. ‘15)

Fierce competition for developing self-driving cars

Source: Compiled from the media

7/26

Source: “Revolution in the driver’s seat”, BCG (2015)

200

50

10 1

2014 2015 2025 2030

Price decline in full-self driving system

[$1,000]

LIDAR (Core Equipment)

GPS positioning $80~$6,000

Ultrasonic sensors Measure position of

nearby objects $15~$20

Odometry sensors Complement GPS info.

$80~$120

Central ECU Information processing & control

50~200% of sensor costs

Lidar Monitors surroundings $90~$8,000

Video camera Visual monitoring $125~$200

Radar sensors Monitor surroundings (pedestrians, roads) $50~150

‘Fully autonomous vehicles’ about to be commercialized

Tesla Motors offers a level 5 autonomous system without LIDAR at a price level of 8,000 US dollars

8/26

Source: “Revolution in the driver’s seat”, BCG (2015); forecast is based on McKinsey&Company

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

2020 2025 2030 2035 2040

15.4%

56.0% 62.5%

97.5%

9.0%

34.0%

8.0%

100.0%

90.0%

Incl. partial automation

Share of high automation

Incl. partial automation

Share of high automation

High Scenario

Low Scenario

Share of self-driving cars in new car sales

BCG 25% Partial 15% Full 10%

Mixed views on the market penetration

PROS • Reduced accidents: 94% caused by human mistakes

• Improved efficiency: Less congestion

• Prosperous sharing economy: Less demand for cars,

improved efficiency

CONS • Facility investment: Expensive facility, infra investment

• Unpredictable mechanical fault: System failure, hacking

• Job loss: Truck and taxi drivers

9/26

Source: Chinese automotive consumer survey, McKinsey 2016 (n=3,571) *Estimated by A.T. Kearney

1.5 mil. 22,000

NORTH AMERICA EUROPE ASIA-PACIFIC

2.1 mil. 31,000 2.3 mil. 33,000

Leading company

Survey about car ownership

• 60% No more symbol of wealth

• 42% Less appealing due to high maintenance costs & traffic jam

• 37% Alternatives make car ownership less important

Survey about alternatives

• 40% Rent a car if necessary

• 34% Long-term leasing if cost is similar

• 26% Don’t mind sharing a car with others

86,000 cars

58 mil. users

2.5 bil. minutes per year

EUR 650 mil. car-sharing market

WORLD (‘15): 500,000 car-sharing vehicles by 2020*

Rapid growth in car sharing, reduced car ownership

10/26 Impact on Automotive Industry

Changes in

Supply Chain

• Electrification – Battery, motor, electric components

• Autonomous Vehicles - LIDAR, camera, radar

• Customization – 3D printing, customized design parts

Changes in

Business Models

• Car Sharing – Car ownership becomes obsolete

• Robot Taxis – New form of cheap public transportation

• Autonomous Trucks – Disruption in logistics

Changes in

Car Design

• Simple Structure – Less components, less weight

• Micro Mobility – Mini pods, Minibus

• Pedestrian Interaction – Communication with outer space

11/26 Changes in Supply Chain - Electrification

Source: POSRI * According to JAMA(Japan Automobile Manufacturers Association), among 30,000 parts in a gasoline car,

6,900 engine parts, 2,100 powertrain parts and 2,100 electric components can be reduced when electrified

ICE EV

New Parts

Drive Motor

Battery Pack

High Voltage Components

Disappearing Parts

Engine

Intake/ Exhaust

Transmission

Fuel Tank Axle

Components Electrification

Electric Pump (HVAC)

Electric Steering System

Electric Brake Regenerative Brake

12/26 Changes in Supply Chain – New Production Paradigm

Crowdsourcing from 20,000 people

Online collaboration

Using already market-available

components

Basic components Preassembled,

consumer self-assembles and finishes last process

3D printing base frame Carbon fiber

reinforced ABS

13/26 Changes in Business Models

Source: ‘Revolution of the automotive ecosystem’, Roland Berger * VMT (Vehicle Miles Traveled)

Private

Cars

Auton.

Minibus

Robot

Taxi

Family Autonomous Vehicle Shared Autonomous Vehicle Pooled Shared AV

‘15 ‘30

Transportation Demand (VMT*) 74% ▶ 46% 0% ▶ 27%

24%

▼

25%

High-Cap. Transport

2%

▼

2%

• Car Rental • Taxi • P2P Sharing

Others

‘15

‘30

14/26 Changes in Car Design - Electrification

Source: Tesla Motors, BMW

15/26 Changes in Car Design – Urban Mobility

Source: MIT, EZIO

16/26

1st Material War Oil Shock (80’s)

2nd Material War Oil Price Hike, China Effect (2000’s)

Impact on Automotive Materials

3rd Material War Climate Action (2010~)

CAFE 27.5 mpg for almost 26 years

1985~2010

Market-Lead Efficiency Improvement Regulation-Lead

33.0 54.5 2025 2012

CAGR 4%

AutoBody

Design, Frames Transparent Plastics,

Fiber-reinforced Plastics

Major Steel Market

Poly Polymer/

Composite

Al Aluminum

Wheels

Ornaments Emblems, Covers,

Housings, Bumpers

Engine Castings, Closures

Interior Instrument Panels, Seat Covers,

Thermoplastics, Engineering Plastics

Source: POSRI

17/26 Automotive Materials Race

Source: Compiled from the media * CFRP: Carbon Fiber Reinforced Plastic

Future

Automotive

Material?

2015 Ford F-150 Pickup • Aluminum full body 222kg reduction

• Railframe 77% HSS, 27kg reduction

Al Aluminum 317 kg

(Compared to MY2014)

Volkswagen 7th gen • Superstructure (AHSS 60%) 37kg reduction

• Other powertrain-, electric components

Fe Steel 100 kg

(Compared to 6th gen.)

BMW i3 EV • CFRP applied on whole passenger cell

• Aluminum subframe, plastic closures

Poly Polymer/

Composite 315 kg

(Compared to LEAF)

18/26 Automotive Materials Race - Steel

Source: WorldAutoSteel

WorldAutoSteel FSV (Future Steel Vehicle) Development of Steel Solutions

19/26 Automotive Materials Race - Aluminum

Source: POSCO

Al Replacement Possibility Section Components Description

Body-In-White • Structures • Supports

Steel more competitive

Better crash∙process features Low

Closure • Hood • Door • Trunk Lid

High Al, rigidity advantage

Fast adoption

Body (Non-BIW) • Bumper Beam • IP Support

Competitive environment

Al growth in midterm Medium

Suspension • Subframe • Control Arm Medium

PO (durability↑), Al(drive comfort)

Steel more competitive

Seat/Fender • Fender • Seatframe Low

Seat: Steel more competitive

Fender: Steel, plastic competitive

20/26 Automotive Materials Race – Plastic & Composites

Source: BMW

i-Series Carbon Fiber Lifemodule 7-Series Carbon Core

Plastic Structures for Interior

Support Structure PBT

Seat Cover PA Structure PU

Rear Seat Support PU Interior Materials

Kenaf: Biological fibers from plants

-20.6kg CO2 reduction per kg

Outer Shell

Elastic parts

EPDM-modified PP copolymer

21/26

Source: BMW, compiled from the media

PAN (Precursor)

Weaving

Prepreg

Carbonization

Carbon Fiber

• Energy intensive carbonization • Wanapum hydroelectric power

SGL Moses Lake (JV w/ BMW)

Electricity:2.8cent/kWh

※ 1/3 of US, 1/5 Germany

Cutting

Forming (HP-RTM)

• High-pressure resin transfer molding • Thermosetting plastics, 100 degrees high pressure

Fast forming

speed: 3~5min. 1/3 of market price

※ Forming normally takes several hours

Thermal Pressing

Assembly

BMW Leipzig

• 4x 2.5MW wind turbines 100% energy supply • Press, paintshop minimized

Energy use : -50% Water use : -70%

Recycled Materials

Rooftop CFRP 10% Thermoplastics 25%

Aluminum frame 80%

Maintenance (Sectioning)

Economic Repair Process

• CFRP parts sectioned bonding process

Insurance, repair cost↓

Automotive Materials Race – Plastic & Composites

22/26

Source: American Chemistry Council 2014

CFRP Hood (17min. forming time)

Valve Cover (BASF)

Nissan Tail gate (LyondellBasell))

Audi A8 Frontend (Lanxess)

Roof Assembly Nissan Battery Case (SABIC)

Door trim Panel (Bayer)

Front grill Ford Diesel System (BASF)

Seat pan Foam-filled frame (Dow)

Automotive Materials Race – Plastic & Composites

23/26 Automotive Materials Race – Comparison

Source: Mass Reduction for LDV for MY2017-2025, NHTSA

Fe Steel

Al Aluminum

Poly CFRP

(Applied on same base model 2011MY Honda Accord, NHTSA)

328 kg 164 kg 213 kg -35% -23%

Weight

Price +$720 +$1,792

Weight reduction and cost analysis

Metal Intensive

Plastic/Composite Intensive

[단위:$/kg]

1.14 1.44 4.26

17.6 1.46 2.08

5.62

42.24

Mild Steel AHSS Aluminum Sheet CFRP

가공비

소재가격

Unit cost comparison (Fender example)

[ $/kg ]

Processing cost Material cost

24/26

Source: American Chemistry Council 2015 *LDV(Light Duty Vehicle): Passenger cars, pickups, SUV

2014 US LDV* weight breakdown

Regular Steel,

35%

High-&Medium-

Strength, 16%

Stainless Steel,

2% Other Steels, 1%

Iron

Castings,

7%

Aluminum, 10%

Magnesium, 0%

Copper and Bass,

2%

Lead, 1%

Zinc Castings, 0%

Powder Metal, 1%

Other Metals, 0%

Plastics/Polymer

Composites, 8%

Rubber, 5%

Coatings, 1%

Textiles, 1%Fluids and

Lubricants, 6%Glass, 2%Other, 2%

1,812 kg/unit

Fe Steel

• Mass market of $30,000 cars • Steel intensive, while closures like hood, doors are aluminum Nissan Leaf, Tesla Model3

※ Battery weight 218kg out of 1,495kg (15%)

Al Aluminum

• Premium brands with over $50,000 • Battery pack cage, base frame and body in white with closures Tesla Model S

※ Battery weight 540kg out of 2,200kg (25%)

Poly Polymer/

Composites

• Building full supply chain is key • Sports cars, luxury cars

BMW i-Series

※ Battery weight 230kg out of 1,195kg (19%)

Automotive Materials Race – EVs

25/26

Source: Korea institute of machinery and materials

• Energy efficiency, quality still needs improvements R&D stage

Hybrid Welding

• Using tool rotation friction heat Hyundai, trunk lid welding Honda Acura, Nissan

Friction Stir Welding

• Anti-corrosion treated boron steel rivets • Hybrid & aluminum bodies Jaguar, Land rover, Ford

Self-piercing Rivets

• BASF, Henkel are key players • Aluminum bonding, finishing Various applications

Chemical Bonding

• Future of welding • Friction welding using ultrasonic waves

Ultrasonic Spot Welding

Automotive Materials Race – Multi-material solutions

26/26 Key Takeaways

Multi-material use, hybrid structure is the new norm

While alternatives grow fast, steel solutions will still play a key role

Develop multi-material solutions, collaborate with your competitors

Electrification, Car Sharing and Autonomous Vehicles are unavoidable future

Prepare for new players, supply chain and business models

It may also have direct impact on car sales

Keep an eye on new entrants who may become your future customers