FPC Future Powertrain 2018

Electrification of Off-Road and CV Powertrains –

Cutting Through the Hype

Alex Woodrow, Managing Director

Knibb, Gormezano and PartnersFebruary 2018

1 FPC 2018

2 FPC 2018

Summary Reports available at www.kgpauto.com/shop Bi-weekly Free Briefings at www.kgpauto.com

Acronyms

• AG – Agricultural machinery

• ADT/RDT – Articulated/Rigid Dump Truck

• BHL – Backhoe Loader

• CECE/CEMA – European Construction/Agricultural Equipment Manufacturers Associations Councils

• CSR – Corporate Social Responsibility

• CREX – Crawler Excavator

• CV – Commercial Vehicle

• GHG – Greenhouse Gas (CO2, CH4 etc.)

• ISC/ISM – In-service Compliance/Monitoring

• MEX – Mini Excavator

• OBD – Onboard Diagnostics

• WHL – Wheeled Loader

• RTLT – Rough Terrain Lift Truck (Telescopic) – Telehandler

• TIV – Total Industry Volume

3 FPC 2018

CV vs NRMM Annual Production Volume (Million)

• CV – Medium Truck, Heavy Truck, Heavy Bus

• NRMM – AG Tractors, Harvester, Construction Equipment, *Diesel Materials Handling, Niche AG

4 FPC 2018

2020

3.6

0.5

2.1

2016

3.1

0.4

1.7

2012

0.4

1.11.0

3.1

1.0

1.7

1.0

1.9

1.0

2.1

2020

0.1

3.7

0.5

3.0

0.4

1.8

2016

3.4

2012

0.8

0.0

0.4

0.0

Global CV Production >6T Global NRMM Production*

Source: KGP CV Engine/NRMM Engine Forecast Q3 17

Construction/ Earthmoving

Material Handling

Niche Agriculture

AgricultureHeavy Truck (16t+)

Heavy Bus (6t+)

Medium Truck (6-16t)

Technology Roadmaps

• Automotive Council Roadmaps

• Need to consider technology transfer between segments

5 FPC 2018

Drivers – Legislation Trends CV

6 FPC 2018

Euro VI

2015 2020 2025 2030

Europe

EPA 10U.S.

P-7Brazil

China VChina

BS IVIndia

JP 09Japan

P-8

China VI a China VI b

BS VI

JP 16

Euro VII?

BS VI/PEMS?

NOₓ NO₂?

PM₁₀ PM₂.₅?

ISC

LEZ ZEZ?

NOₓ Tightening?

CO₂ CO₂ Tightening?

?

CV Total Market Regulated vs Unregulated 2021 (000s)

Heavy Bus

468

15%6%

1,121

Heavy

2,009

93% 94%

7%

Medium

85%

Source: KGP NRMM Q2 2017 Engine Forecast

Euro IV or greater

Euro III or less

FPC 20187

By 2024 65%

will be Euro VI

or equivalent

But…

CO2 legislation

will start

becoming

stringent in all

major markets

Drivers - Air Quality Indicators – Europe and China

8 FPC 2018Source: AQICN.org/…

Road Transport

51%

Resuspension23%

NRMM8%

Industry3%

Other15%

London Emissions Inventory PM 2013

CO2/FE Legislation - CV

9 FPC 2018

Drivers –

Are we at the inflection between the OEM/Operator and Social impact?

10 FPC 2018

Fuel Cost

Productivity

Noxious Emissions

Local Air Quality

Noise Emissions

Lifecycle Cost

CSR

GHG/CO2/Carbon Neutrality

Safety

Electrification

Hybridisation

Autonomy

Digitalisation

Competitiveness

Supply Chain Integration

Infrastructure

OEMs/Operators

Society

t?

t(-10-5y)

t(-5-0y)

TCO

Digitisation and Advanced Vehicle Technologies will Combine

NB Not exhaustive

11 FPC 2018

Telematics

Condition Based Maintenance

Smart Routing

PlatooningDigitisation

Thermal Management

Vehicle Technologies

Automated Manual

48W

Mild Hybrid

RCCI

99.5% NOX Conversion?

SCR on DPF

Solid Urea Systems

All Electric Range

(Last mile)

Electrical Accessories

V2V

Technology Availability – CV Market

12 FPC 2018

CV Total Market – Environmental Scenario 2024 (TIV 3.8m Units)

13 FPC 2018

South America

84%

174

3%

ROW

7% 7%4% 7%6%

9% 7%

100%

81%75%

2%

C & E Europe

2,362

EU & EFTA

8%

5%

2%

228

2%

513

50%

89%

804

North America

39

1%2%

4%

37%

Asia Pacific

Source: KGP Q3 2017 GCVEAT

Mild HEV

Micro HEV

Electric

Full Parallel HEV

Full Parallel PHEV

Full Series HEV

Natural Gas

Diesel

000s

Drivers – Legislation Trends - NRMM

14 FPC 2018

Stage IV

2015 2020 2025 2030

Europe

Tier 4 FinalU.S.

Stage IIIABrazil

Stage IIIChina

Stage IIIAIndia

MLIT 3Japan

Stage IV

MLIT 4

Stage V

NOₓ NO₂?

PM₁₀ PM₂.₅?

ISC?

LEZ ZEZ?

NOₓ Tightening?

CO₂? CO₂ Tightening?

ISM

>56kW Tightening?

?

Stage V

Market - NRMM 2016 Production 000s by Power Band –TIV 3.0m Units

15 FPC 2018

56-75kW

602

62%

34%

11%

47%

43%

1%

390

2%

75-130kW

2% 3%

229

225-560kW130-225kW

73

44%

2%

48%

8%13%

714

11%

82%

<19kW

51%

901

49%

19-36kW

49%

34%

37-56kW

23%

0%

130

63%

3%

15%

Source: KGP NRMM Q2 2017 Engine Forecast

Agriculture

Niche Agriculture

Construction

Material Handling

Drivers – CECE/CEMA –‘4 Columns’

16 FPC 2018

Machine

Efficiency

e.g.

Load sensing

hydraulics

Electronic

engines

System

optimisation

Process

Efficiency

e.g.

Advanced tool

changes

Operating

Efficiency

e.g.

Driver training

and comfort

Systems

monitoring,

optimisation and

downtime

reduction

Alternative

Energy

e.g.

Hybridisation

Electrification

Natural Gas

Digitisation

Autonomy

Need for considerable further development

Drivers – Air Quality Fleet Renewal

17 FPC 2018Source: KGP Parc Model

- 1 2 3 4 5 6 7

2005

2010

2015

2020

2025

Millions

Estimated EU Equipment Population

Stage II or less Stage III Stage IIIB Stage IV Stage V

• Newer machines average hours are higher than older machines

• Smaller <56kW use disproportionately less fuel

Drivers - Fuel Consumption NRMM

0

20

40

60

80

100

120

140

160

180

200

Fuel Consumption Litres Per Hour Medium Load

Low High

Electric single shift possible

18 FPC 2018Source: Caterpillar

Fuel cost #1 variable cost >20-30l (HCV ~30l/h)

Drivers - Duty Cycles CV vs NRMM

19 FPC 2018

AD

T

40

T C

V

Technology Options – Hybrid/Electric & Downsizing Potential

Application WHL ADT CREX MH AG

Energy Saving Potential

Engine ++ ++ + ++ +

Transmission ++ +++ - ++ ++

Hydraulics +++ + ++ ++ +

Duty Cycle

Load ++ + +++ ++ +++

Hours +/++ ++/+++ ++/+++ +++ +/++

Hybridisation/Electrification Potential

Mild Hybrid/48V +++ +++ +++ +++ +++

Series +++ - + +++ +

Electric +/- - +++/- +++ ++/-

Mechanical +++ + +++ +++ +

Downsizing +++ + +++ +++ ++

20 FPC 2018Source: KGP Analysis

Electrification NRMM - Current State of Alternative Fuels (NB not

exhaustive!)

Machine Diesel LPG/ Gasoline CNG/LNG/BG Electric Electric Drive Hybrid Fuel Cell

Forklift

AG Tractor

Combine Harvesters

Skid Steer Loaders

Backhoe Loaders

Wheel Loaders

Mini Excavators

Excavators

Crawler Dozers

Rigid Dump Trucks

Mining Excavators

Underground Mining

RTLT

21 FPC 2018

Dominant PrototypeWidespread Infancy/Declining Low Volume

Not to mention GTL, HVO, DME, 100% Bio-Diesel etc…….

Technology Availability - NRMM

22 FPC 2018

Mini Wheel Loader 14kWh BatteryMidi Excavator - 38kWh Battery Mini Site Dumper 7.3kWh Mini Excavator Diesel Engine APU

Caterpillar D7E Dozer Electric Drive Hitachi Electric Drive RDTDeere 644k Hybrid Wheel LoaderKomatsu 4th Gen Hybrid Excavator

Hybrid & Electric Suitability

23 FPC 2018

<56kW

CE/AG/MH

Fuel

Consumption

20l/h

50l/h

100l/h

56kW 130kW 560kW

Technology Options - Battery Sizing for Electric Applications

24 FPC 2018Source: KGP Estimates, JCB, Public Domain

20

20

100

150

300

1000

85

200

0 400 800 1200

MEX (2t)

Forklift (2t)

Tractor (50kW 5hrs)

Backhoe Loader (7t)

Tractor (130kW)

CREX (30t)

Tesla S (400km)

Mercedes eTruck (100kM)

8h Shift kWh • Efficiency improvements will

reduce battery size

• Hydraulics may be replaced

by motors

• Cost to fall below $200kWh

• Needs charging solutions

for mobile work sites

• Resale value/

• In-field service and

maintenance

Technology Options – Short Term

• CV Technology Carry Over

25 FPC 2018

Carry Over Technology Comments

High Stop-Start

48V

Electrical Accessories

High idling % in some appl.

Increasing power requirements

Packaging benefits

Medium Predictive Cruise Control

Combustion Control

Thermal Management

Downsizing

Advanced Aftertreatment

Adapt for transmission control

LTC for low load appl.

Engine, driveline opportunities

Low Waste Heat Recovery (ORC) No ram air cooling

None Aerodynamics

Source: KGP Preliminary Analysis

Technology Options - Transfer from Automotive - Status

Technology Transfer <56kW >56kW

Automotive Segment Light Vehicle – Passenger Car/LCV Heavy Commercial Vehicle

Batteries Modular packs possible

Additional durability/environmental

requirements

Higher per unit cost due to additional

durability/environmental requirements

Charging Can use light vehicle chargers Industrial charging system required

Motors Application specific Application specific

Power Electronics Possible direct transfer Application specific

Cost 1-2x 2-5x

Maturity Level Good Immature

26 FPC 2018

Mature Immature

Outlook - Summary

• Continued pressure on emissions limits globally– Potential post 2025 Stage VI/Euro VII

– NRMM CO2 regulation to follow CV

– Harmonisation difficult due to wide range of applications, urban vs extra-urban zones

• Market– Structural changes may be inevitable

– OEM, dealers/rental companies and operators business models all likely impacted

• Proliferation of low emission zones and CO2 will come– Some, but not strict impact on NRMM initially

– Carbon neutrality

– Corporate Social Responsibility

• Hybridisation, electrification and alternative fuels– System optimisation

– Increasing variance in the fuel mix

– Best fit applications to suit wide range of usage cases

– Technology transfer possible from automotive <56kW, CV above 56kW, but many technologies will be driven by the Construction segment

– Electrical accessories, turbocharging etc. likely to become more widespread

• Drivers will impact on whole of the supply chain– OEMs – Increased product variety

– Suppliers – System integration – powertrain incl. hybridisation

– Dealers/Rental Companies – supply productivity and energy not machines and fuel

– Fuel Companies – diversification of fuel types

– Service Providers – Managing digitalisation across brands and systems

27 FPC 2018

Questions – Contact Us!

28 FPC 2018

With thanks to FPC2018, James Dorling, Paris Kiernan, and Mick Beeson