The challenges facing OEM’s in the Chinese Market

A Presentation By Martin Joyce

Engines Group Chief Engineer Changan UK

Contents of Presentation

1) Engine evolution in mature markets

2) Global Regulations

3) Chinese market

4) Requirements placed on Engine Design 5) OEM response

6) Summary and Conclusions

Contents of Presentation

1) Engine evolution in mature markets

2) Global Regulations

3) Chinese market

4) Requirements placed on Engine Design 5) OEM response

6) Summary and Conclusions

VW 1.4L TFSI turbo charged gasoline direct injection

More power Higher efficiency More reliability and durability Less noise and vibration Less exhaust emissions More compact and lighter

Otto-Langen gas engine 1867

Internal Combustion Engine Evolution

Evolution

Rocket engine, a type of IC engine, invented by the Chinese, Mongols and Arabs in 13th century. IC engines of various forms using gun powder or gas fuels invented by Europeans in 17th century.

IC engines in principle similar to modern piston engines invented in 19th century.

Otto four stroke gas cycle

Modern IC engines Gas turbines Jet engines Rotary engines (e.g., Wankel engine) Piston engines

Powering almost all road transport Two stroke and four stroke Gasoline, diesel, gas fuels Naturally aspirated and pressure charged

Benz patent motor car 1885

Passenger Car Engine Changes in the Last 30 Years

Gasoline engines

Cast iron block

2 valves per cylinder

Belt drive overhead cam or push rod

Carburettor

Naturally aspirated

Some with Lean burn

A typical 1980s engine

A typical today’s engine

Naturally aspirated or pressure charged

4 valves per cylinder

Belt or chain drive overhead cams

PFI or DI

Aluminium block

VVTs / inlet VVL / EGR

Ignition distributor

Ignition coils

Electric PAS pump

Electric water pump

Catalyst converter

ECU

Massive increase in both engine complexity and also variety

• Step changes in technology mainly driven by legislation except Diesel Common Rail which has changed the market • Cost & Reliability driven by competition

Major technical trends in EU Market

• Step changes in technology mainly driven by legislation except Diesel Common Rail which has changed the market • Cost & Reliability driven by competition

Major technical trends in EU Market

-Relatively slow development pace.

- Competition mainly within each region only

- Intense development pace.

- Global competition

•CO2 emissions & Global Markets have increased in their importance •All requirements have to be met to be successful Concurrently meeting the requirements creates the complexity

Requirements Priority

Tail pipe emissions CO2 emissions Unit cost Global Markets Vehicle Installation NVH Drivability Power & Torque

2014 Tail pipe emissions Unit cost Power & Torque Vehicle Installation NVH CO2 emissions Drivability Global Markets

1981 -Legal Requirements - Customer Satisfaction

- Cost; variable and fixed - Resource capacity (engineering and manufacturing)

-Customer Satisfaction

-CO2 emissions & Global Markets have increased in their importance -All requirements have to be met to be successful

-> Concurrently meeting the requirements creates the complexity

Requirements Priority

Tail pipe emissions CO2 emissions Unit cost Global Markets Vehicle Installation NVH Drivability Power & Torque

2014 Tail pipe emissions Unit cost Power & Torque Vehicle Installation NVH CO2 emissions Drivability Global Markets

1981 -Legal Requirements - Customer Satisfaction

- Cost; variable and fixed - Resource capacity (engineering and manufacturing)

-Customer Satisfaction

Legal requirements

are most critical

requirements

Legal requirements

are most critical

• Engines are used in multiple applications & markets •Intense competition from global competition Huge pressure on cost, coupled with high volumes

Influence of the Global Market

USA ~95% gasoline

Europe – 50/50

Gasoline /diesel

SE Asia ~ 90% gasoline

Japan ~ 100% gasoline

China ~ 95%

gasoline

India ~ 70%

gasoline South

America ~ 90%

gasoline / Ethanol

• Europe is only market with high diesel passenger car sales •This creates a problem of high engine complexity for EU OEM because they need gasoline and diesel engines and to develop EV and hybrid powertrains

Global Market Split of Engine Types

•Common Rail injection, high power EMS and turbochargers coupled with high fuel price and CO2 taxation has transformed the EU market •Europe is currently nearly unique with the high content of diesel engines in passenger cars for medium to large vehicles

EU Market Split of Engine Types

0 20 40 60 80 100

A

B

C

D

E

Petrol Diesel

0 20 40 60 80 100

A

B

C

D

E

Petrol Diesel

1980’s 2011

•Petrol vehicle dominate the market with ~ 95% market share •Diesel vehicles only chosen by high mileage drivers •Diesel cars are “slow, noisy & smelly”

•Petrol & diesel share the market ~ 50 / 50 •Diesel dominates larger vehicles, petrol dominates small •Diesel cars are “smooth, fast and efficient” •Petrol cars are “cheap to buy”

Contents of Presentation

1) Engine evolution in mature markets

2) Global Regulations

3) Chinese market

4) Requirements placed on Engine Design 5) Unique issues for the Chinese market

6) Summary and Conclusions

100

110

120

130

140

150

160

170

90

1000 1100 1200 1300 1400 1500 1600 1700 1800

Average fleet weight; Vehicle weight [kg]

CO2Em

issi

on [g

/km

]

CO2 fleet target 2015

125,9 (131)

137,3 (142)

130 (132)

131,6 (136)

136,3(140)

138,6 (141)

136,9 (144)139,8 (148)

147,1 (147)

149,9 (149)147,8(154)

142,5 (153)

163,3(167)

147,9(151)

80

CO2 fleet target 2020*

87Polo 1.2 TDIBM

98PSA 308 e-HDI

GOLF 1,6TDI BM99

FORD FocusEconetic

C220 CDI

109320d Eff. Dyn.

125

119Saab 9-3

129A6 2.0TDI

Kia Rio Anouncement

*adjusted in 2016, to be reviewed every three years

PriusHybrid

89Chevrolet VOLT/OPEL AMPERA

117

40

Honda CR-Z Hybrid

500 Twin Air

Jetta 1,2TSI

Passat 1,4TSIEcofuel (CNG)

117

Honda Insight Hybrid 101

Benchmark data from AVL

CO2 limits have become legal requirement from 2012 onwards in EU Regulated by fleet average CO2 emissions vs weight curve Industry fleet average CO2 emissions no more than 130 g/km by 2015 and 95 g/km by

2020 for passenger cars. This compares with an average of almost 160g in 2007 and 135.7g in 2011.

Significant fines for non compliance.

EU CO2 regulation

EU emissions legislations for light duty gasoline vehicles

0

0.5

1

1.5

2

2.5

3

0 0.2 0.4 0.6 0.8 1

CO (g

/km

)

HC+NOx (g/km)

EU1 (1993)EU2 (1996)

EU3 (2000)

EU4 (2005)

EU5 (2009)/EU6 (2014)

0

0.1

0.2

0.3

0.4

0.5

0.6

0 0.002 0.004 0.006 0.008 0.01 0.012 0.014 0.016

HC+N

Ox (

g/km

)

PM (mg/km)

EU5 (2009)EU6 (2014)

Particle number (PN) limit to be introduced in EU6

Durability (km)

EU4 100,000 EU5/6 160,000

Y

New driving cycle has been in development for some time to replicate “real world” usage better than NEDC and to become a simple international standard More aggressive accelerations and high speed driving. Higher engine loads

Current

Future

Drive Cycle

•Unfortunately it seems not ! •USA has rejected the new cycle •India and China seem unlikely to adopt it for 5 to 10 years (if at all) •WLTC risks being the “new” NEDC

World Harmonised Test Cycle

Contents of Presentation

1) Engine evolution in mature markets

2) Global Regulations

3) Chinese market

4) Requirements placed on Engine Design 5) Unique issues for the Chinese market

6) Summary and Conclusions

•Chinese cities are already suffering very heavy congestion •There is a wide variety of vehicles on the roads, both in cities and even more so in rural areas

Roads and vehicles

Climate and environment

China has an extremely diverse range of climate

+ 50 Degrees C Death Valley = 57

-52 Degrees C Alaska = -62

4,700 metres Colorado = 3,600m 90~100% humidity

For the past 10 years there has been relatively steady growth in market – approximately 1.4 million increase per year Largest market in the world by volume; overtook USA in 2011 and unlikely to be caught (26% of global sales) Growth in “per unit cost” as well as volume so in time (2025 ?) will be the valuable market in the world also

Market size and growth

Quality standards being led to international standards by presence of all major Global OEM; especially VW, GM, Toyota & Ford Consumer active on social media to share knowledge on quality issues in “real time” Powertrain critical for customer satisfaction (as other markets)

Quality expectations

Different fuel additives – MMT – leads to unique problems Variable fuel quality , oil quality & variable service environment Glamorous motor shows & attractive dealerships Very high (and very low) customer expectations

Everything you have heard and seen is likely to be true – and the opposite !!

Immature market and consumers

Tailpipe Emissions control – Motivation IC engines emit noxious gases, namely HC, CO and Nox, and particulates. They lead to local air quality issues like photochemical smog. Governments set regulations to limit these emissions.

HC+NOx

PAN + Ozone

PAN: Peroxy Acetyl Nitrates

Smog Formation

China has amongst the worst air quality in the world already Air quality is the #1 topic of social concern discussed on social media website in china China already has 5 mega cities (> 10 million) and a number of other urban

conglomerates with populations in the 10’s of million

Historical Behaviour The majority of Chinese automotive regulations are heavily based on either US or EU regulations with a time lag of 4 ~8 years There has been relatively minor modifications to adapt to local circumstances “Tactical” implimentation of more stringent regulations (pull ahead) adopted for cities to (try to) address air quality issues More recent behaviour 2020 fuel economy regulation is closer to Japanese model but with multiple modifiers proposed to incentivise technology directions the government wishes the market to follow WLTC is not well received – change is moving away from Chinese market conditions not towards – unlikely to be adopted The focus is very much on fuel economy, not CO2 to address national issues rather than global ones Process is somewhat “fuzzy” with decision making path difficult to follow Incentives for “New Energy” vehicles (PHEV & EV) No incentives for Diesel and unlikely to be widely adopted due to fuel availability and air quality concerns

Legislation approach

Improvement rate needed for 1206 ~ 1320 kg vehicles

6~7% “year on year” improvement needed from 2016

Improvement rate needed for 1206 ~ 1320 kg vehicles

5.9l/100 1.6 NA &DI-TC

4.7l/100 1.0l DI-TC

4.2l/100 1.6l diesel

3.4l/100 1.6l Econetic

•The best EU gasoline vehicles meet the 2020 regulation •Diesel vehicles also meet the regulation but unlikely to be widely adopted

Chinese fuel economy regulations vs other major markets

•Chinese 2020 fuel economy target is equal to EU goal at around 2017 •It is going to need to be achieved without significant diesel content •By 2025 ~ 2030 it is easy to imagine china will have the same or tougher target as EU

Tailpipe emission standards

Tailpipe emission standard have very closely match EU standards The time-lag from the EU has been around 5 years generally but EU5 is delayed The mega-cities do not wait for the national standard, Beijing implimented C5 in 2013 EU6 is unlikely nationally till mid-2020’s but likely in mega-cities before 2020

The different approach for national regulation and mega-cities illustrates the different in the “3rd world” parts of china (government want to avoid economic burden) and the “1st world” mega-cities with severe air quality issues

Contents of Presentation

1) Engine evolution in mature markets

2) Global Regulations

3) Chinese market

4) Requirements placed on Engine Design 5) Unique issues for the Chinese market

6) Summary and Conclusions

Engine design is driven by a complex balance of requirements; both internal to OEM and external from customers and regulators

Engine Design Requirements

Luxury Car Engines

2014

Large Capacity Naturally aspirated Port fuel injected

1980’s

Hybrid •Gasoline Direct Injection •Supercharged •Variable Cam Phasing

Diesel Common Rail Injection • Multiple injections/cycle •Sequential turbocharging •Cooled EGR

Lean Burn GDI with NOx control •Piezo Gasoline Direct Injection with multiple injections/cycle •Variable Cam Phasing •EGR

Downsized Turbo GDI •Valvetronic valve lift control •Gasoline Direct Injection •Twin scroll turbocharging •Variable cam phasing

Massive increase in both engine complexity and also variety to meet all customer requirements and regulations

Volume Car Engines

2014

2v/cyl Naturally aspirated Carburated

1980’s

Hybrid •Atkinson Cycle •Variable Cam Phasing •Port Fuel Injected

Diesel Common Rail Injection •Multiple injections/cycle •Sequential turbocharged •Cooled EGR

Downsized PFI turbo •Multi-air Valve Lift Control •Turbocharged •Port Fuel Injected

Downsized GDI turbo •Variable Cam Phasing •Gasoline Direct Injection •Turbocharging

Even greater increase in complexity in the volume market

Improved Nat Aspirated •Variable Cam Phasing •4v/cyl Naturally Aspirated •Port Fuel Injected

Powertrain control complexity

•The technology which has enabled this growth in engine complexity is software (and supporting hardware & CPU’s)

•This complexity is growing at a constant logarithmic rate

• Joint engine development and manufacture has become fairly common. • Traditionally this has been done to “fill gaps” in OEMs range (niche

engines) but increasingly it is expanding

OEM Strategies to manage Engine Complexity #1 1) Joint developments 2) Example #1 Ford aligned with PSA to develop

diesel engines Example #2 Mercedes and Renault will jointly

develop small gasoline engines together Example #3 BMW and PSA jointly developed

the the 1.6l Prince engine for Mini and PSA

2) Standardisation of parts BMW will have all of its engines sharing a and systems single cylinder of components - 3 cylinder 1.5litre - 4 cylinder 2.0litre - 6 cylinder 3.0 litre - 8 cylinder 4.0 litre - 12 cylinder 6.0 litre Each engine has a common combustion system

and engine layout

By standardising parts dramatically reduces the number of engineers needed to design, develop, validation and calibrate it’s engines

OEM Strategies to manage Engine Complexity #2

2012 I3

I4

I6

V8

V12

•Modular engine designs allows VW to flexibly impliment many different engine derivatives with high components volumes & reduced engineering

OEM Strategies to manage Engine Complexity #3

3) Modular design approach VW designs it’s engines to have easily interchangable systems

Example :- EA111 engine family 1.2l 3 cylinder 4v/cyl PFI n.a. 1.2l 4 cylinder 2v/cyl GDI turbo 1.4l 4 cylinder 4v/cyl PFI n.a. 1.4l 4 cylinder 4v/cyl GDI turbo 1.4l 4 cylinder 4v/cyl GDI turbo & supercharger 1.6l 4 cylinder 4v/cyl GDI n.a. 50 BHP 180 BHP with one engine family with

modular design allowing “mix and match” of derivates to meet market needs

Unique / key challenges of different major markets

Europe -High speed driving and tendancy to use higher engine RPM -CO2 reduction & EU6 emission regulations (GDI & diesel)

USA -Diagnostic regulations -Tough tailpipe emissions with heavy vehicles

China - Road conditions - Highly variable fuel quality -In-experienced drivers (often never owned a car before) -Low driving speeds and a high tendancy to “lug” in high gears -Immature & variable by region infra-structure for maintainance

• Global engines need to be designed to meet all requirements •For high volume OEM, there is an opportunity for regional variation to tailor

designs to specific markets

1) Engine evolution in mature markets

2) Global Regulations

3) Chinese market

4) Requirements placed on Engine Design 5) What are OEM’s doing about china

6) Summary and Conclusions

Contents of Presentation

Chinese OEM - Catching up 1970’s 1980’s 1990’s 2000’s 2010’s

Having been 10~15 years behind global standards, chinese OEM are “rushing” to catch up – they are already 5~10 years behind and will continue

to quickly catch up

Pressure charged engine market trend Pressure charged engines, dominated by TC+DI engines, are becoming main stream in

Europe

Downsizing and down speeding with TC GDI engines – Benefits Replace naturally aspirated engines with similar powers Reduces fuel consumption by shifting the normal operations to higher BMEP and lower

engine speed region in real world driving.

•In developed markets; TC GDI is seen as one of the key technologies to meet customer requirements whilst simultaneously meeting increasingly tightening CO2 regulations - chinese OEM are increasing following

Downsizing with TC and DI – Challenges

Downsizing with TC and DI

Efficiency increase

Challenges Increased particulates

emissions

Increased engine out HC

emissions

Increased knock tendency

Abnormal combustion

‘Mega Knock’

Oil dilution by fuel

Low speed torque delivery

EU5+ PM EU6+ PN

EU4+ HC

Fuel consumption

NVH

Engine durability

Low speed acceleration

• TC GDI brings it’s own unique set of technical challenges •It also brings a substantial increase in Calibration complexity with a modern gasoline engine now approaching diesel engines in these terms

Downsizing with TC and DI – Challenges

Downsizing with TC and DI

Efficiency increase

Challenges Increased particulates

emissions

Increased engine out HC

emissions

Increased knock tendency

Abnormal combustion

‘Mega Knock’

Oil dilution by fuel

Low speed torque delivery

EU5+ PM EU6+ PN

EU4+ HC

Fuel consumption

NVH

Engine durability

Low speed acceleration

• The circumstances of the chinese market increase the challenges faced by TC-GDI engines and require still further development and calibration effort to overcome them

•Fuel & oil quality (and variability) •Servicing

regime

•Fuel & oil quality (and variability) •Servicing

regime

Market sensitivity

Global OEM – Recognising the market and adapting

Launch USA -> China -> Europe

In-market durability testing with local servicing

Be-spoke models from global platforms

•Global OEM are increasingly treating china as a priority market •Global platforms are being maintained but the needs and conditions of china are being added to the requirements for the platforms specification, design and validation

EU, USA & ROW – 4.4l China – 4.0l

-> Equal performance

Contents of Presentation

1) Engine evolution in mature markets

2) Global Regulations

3) Chinese market

4) Requirements placed on Engine Design 5) Unique issues for the Chinese market

6) Summary and Conclusions

Robust know-how

Good Strategy

Fast, Disciplined Delivery Process

Success !!

The winning approach needs 3 pillars

•To be successful in changing markets agility is a key need •Therefore you need to have a strong combination of a flexible strategy, strong know-how to tactically use based on needs and a disciplined and capable delivery process to allow fast product delivery into the market

Robust know-how

Good Strategy

Fast, Disciplined Delivery Process

Success !!

The winning approach needs 3 pillars

•To be successful in changing markets agility is a key need •Therefore you need to have a strong combination of a flexible strategy, strong know-how to tactically use based on needs and a disciplined and capable delivery process to allow fast product delivery into the market

Strategy needs to consider china’s

specific circumstances

Technology and application needs to be

robust to chinese environment

Fast and flexible delivery is needed due to the evolving nature

of the market

Summary

The chinese market has evolved very rapidly

It is likely to continue to evolve quickly and may not converge with EU and USA

In the past the emissions regulations and the customer expectations were stable and lagged Europe by 5 ~10 years making it “easy” to sell “old” product into the market

The market is now the largest in the world and growing fast (by mature market standards) so it warrants “bespoke” solutions

To be competitive, OEM need global strategies that support the needs of china equally with all other major markets

Good tools & processes backing up a good strategy are needed for success

• Mercedes announced in Nov 2013 that it will combine the manufacturing of it’s 4 & 6 cylinder engines, both gasoline and diesel into one combined flexible line in China

• The 6 cylinder changing from V to Inline • Andreas Renschler explained as follows :

4cyl gasoline 4cyl diesel

6cyl gasoline 6cyl diesel

1 Flexible line for Agile manufacturing

Andreas Renschler VP – Purchasing & Production

“we are producing the four- and six-cylinder versions of diesel and gasoline engines on separate lines so far, we will be able to manufacture all four variations of the next generation on one line”

“Good products are not enough for success, the key is balancing complexity and costs”

“Product diversity is also rising and detailed sales planning is becoming more and more difficult”

“Inflexible production is increasingly turning into Russian roulette”

Mercedes Response

51

Thank you for your attention

Any questions ?