Published 2Q Bradley Berman Industry Analyst. John Gartner Research Director

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1 EXECUTIVE SUMMARY: Plug-in Electric Vehicles Battery Electric and Plug-in Hybrid Electric Vehicles: OEM Strategies, Demand Drivers, Technology Issues, Key Industry Players, and Global Market Forecasts NOTE: This document is a free excerpt of a larger report. If you are interested in purchasing the full report, please contact Pike Research at sales@pikeresearch.com. Published 2Q 2012 Bradley Berman Industry Analyst John Gartner Research Director

2 Section 1 EXECUTIVE SUMMARY 1.1 PEV Market Overview After years of anticipation, the first buyers of the Nissan Leaf battery electric vehicle (BEV) and Chevrolet Volt plug-in hybrid electric vehicle (PHEV) took delivery of their vehicles in December These early adopters were thrilled to finally own a plug-in electric vehicle (PEV) and utilize the technology s ability to displace petroleum, lower or eliminate tailpipe emissions, and provide brisk, quiet acceleration. Many in the auto industry were equally enthusiastic about the re-emergence of PEVs, which had been absent from the marketplace for nearly 100 years (except for a brief period in California in the late 1990s/ early 2000s). Assembly lines in Japan and the United States produced more than 20,000 PEVs in 2011, an all-time record for such vehicles. Yet, optimism was gradually replaced with a better understanding of the practical challenges of launching new models and expanding PEV sales to mainstream consumers unfamiliar with the technology especially coming off a global economic recession. Still, the PEV market was indeed launched. Throughout 2011, a growing number of consumers started to learn to recognize the key distinctions between hybrid electric vehicles (HEVs) and PEVs, which include both PHEVs and BEVs: HEVs are mostly powered by gasoline, with assistance from an electric motor. They have been in the marketplace for more than 15 years, and more than 4 million units have been sold globally now on pace to grow by more than 1 million a year. PHEVs offer increased electric driving range over HEVs, using some energy from the electric grid. But PHEVs command higher prices due to greater complexity and the use of larger, more expensive battery packs. BEVs use still larger battery packs, but do not require petroleum fuel because they plug into the grid for all their energy. Driving range between charges is usually less than 100 miles. Despite this slightly better understanding, the PEV market continues to be characterized by uncertainty. Many consumers are uncertain about the pros and cons of different electric drive technologies. The industry insiders with whom Pike Research spoke for this report point to key unanswered questions, including: How fast will the price of PEV batteries come down? How long will it take to build vehicle charging infrastructure? How many years will it take for automotive original equipment manufacturers (OEMs) to offer PEVs in a range of designs and segments that consumers want? How will various PEVs fit into consumer driving lifestyles? What messages should OEMs use to sell the benefits of PEVs? How deep will the field of early adopters be before OEMs need to sell to more mainstream buyers? 1

3 1.2 Market Forecasts HEVs versus PEVs Many of the people interviewed for this report look to the pattern of HEV sales during the past 15 years for guidance as to how long it will take for PEV sales to grow. Global sales of HEVs will reach 1,060,427 units in years after the first Toyota Prius went on sale in Japan. Pike Research expects that sales of PEVs will reach this level in approximately half the time after only 7 years in the market. More specifically, global PEV sales are expected to reach 1,162,210 units (439,639 PHEVs and 722,571 BEVs) in The compound annual growth rate (CAGR) for PEV sales is forecast at 37.4%. Chart 1.1 Comparison of Annual Sales of PEVs vs. HEVs, United States: Year 1-Year 7 350, ,000 HEVs PEVs 250,000 (Vehicles) 200, , ,000 50,000 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 (Source: Pike Research) 2

4 1.3 PEV Sales: The actual sales data for 2010, 2011, and the first 5 months of 2012 indicate relative sales volumes above HEV sales during their equivalent initial launch years. Given the schedule for PEV product introductions for the remainder of 2012, Pike Research forecasts the global PEV market will reach 137,950 units in U.S. PEV sales will reach 47,966 units, making the United States the country with the highest number of PEV sales. The country will maintain this lead role at least through 2020 and beyond. Of those nearly 48,000 sales in the United States, 27,992 will be PHEVs and 19,974 will be BEVs in Chart 1.2 Electrified Vehicle Sales by Segment, World Markets: ,800,000 1,600,000 1,400,000 1,200,000 HEV Sales PHEV Sales BEV Sales (Vehicles) 1,000, , , , , (Source: Pike Research) The preference of U.S. consumers for PHEVs over BEVs is expected to continue throughout the forecast period. Car companies will continue to produce PHEVs, as they anticipate that U.S. consumers will continue to want slightly larger vehicles with longer range and the ability to extend the electric range using a gas engine. However, all PEVs will face increasing competition from more affordable high mpg internal combustion engine (ICE) cars, as well as HEVs. 3

5 In contrast, the Japanese market is expected to see 32,226 sales of BEVs compared to just 2,840 PHEV sales in A preference for BEVs over PHEVs will be the pattern for the Asia Pacific region, where consumers will be amenable to the smaller BEVs that North Americans are more reluctant to purchase. Western Europe will fall somewhere in between, showing roughly equal sales numbers for both PHEVs and BEVs. In the mid-term, the three global regions, North America, Asia Pacific, and Western Europe, will each represent roughly one-third of the PEV market. As China s PEV market begins to grow in 2013 and expands throughout the decade, Asia Pacific will become the world s largest market for PEVs. Chart 1.3 Plug-in Electric Vehicle Sales by Region, World Markets: (Vehicles) 1,800,000 1,600,000 1,400,000 1,200,000 1,000, ,000 North America Western Europe Eastern Europe Asia Pacific Latin America Africa/Middle East 600, , , The Future of the PEV Market (Source: Pike Research) The PEV market will develop and grow, but not at the scale or pace previously anticipated by key proponents of the technology. The frequently quoted goal of reaching 1 million PEVs on the road in the United States by 2015 will not be met. Instead, the 1 million mark will be reached in early Many of the OEMs, suppliers, charging equipment and service providers, and other stakeholders interviewed for this report remain hopeful about reaching the 1 million goal soon after 2015, expecting one kind of market breakthrough or another. Those betting on strong early growth curves hoped that battery prices would quickly fall, positive word of mouth would quickly spread, or automakers would introduce new models more quickly. There is little evidence that any one of such breakthroughs will happen to any significant degree in the next 5 or 6 years. In fact, the lion s share of OEMs making PEVs are doing so at a very measured pace, vetting technology and consumer preferences. In the meantime, they are tracking to government mandates rather than producing based on expectations of creating an overnight sensation. Startup PEV companies, many venture-backed, will face a difficult time meeting announced production numbers. That has been the case for the past few years, a time when several prominent startups have gone out of business or fallen in and out of bankruptcy. 4

6 While Pike Research does not foresee a major single tipping point, a series of slight market improvements is anticipated one adding to another, combining to gently push bigger production and sales numbers. Slightly lower battery costs will mean slightly lower purchase prices, spurring increased production of cars with slightly more range and easier charging. Positive word of mouth will slowly spread. Of course, a big wild card is gas prices, which are expected (but cannot be guaranteed) to rise. The first-mover advantage owned by Nissan and General Motors (GM) will fade away in the next couple of years. For the third straight year, Pike Research s survey of consumer preferences indicates that Toyota, Ford, and Honda are the brands that resonate most as providers of electric vehicles (EVs). These three companies have demonstrated among the strongest track records for building and selling HEVs. Their announcements for future PEV products, especially plug-in hybrids, align with what consumers want, based on segment as well as price. On the other hand, it is not clear how announced product plans from Nissan and GM will help them capitalize on aggressive early positions. As a result, Toyota will bypass Nissan and GM in North American PEV sales by 2013, and Ford will become the top seller as early as Ford will likely hold this position for the rest of the decade. While the PEV market will develop slower than many in the industry hope, it will nevertheless reach annual sales of 594,130 by 2015 and 1,748,268 by At the end of the decade, HEVs will see 1.6 million annual sales. Total sales of battery-powered vehicles will thus reach around 3.4 million out of the 103 million global light duty vehicle sales expected in

7 Section 9 TABLE OF CONTENTS Section Executive Summary PEV Market Overview Market Forecasts HEVs versus PEVs PEV Sales: The Future of the PEV Market... 4 Section Market Issues History Plug-in Hybrid Electric Vehicles Passenger Cars Light Trucks Battery Electric Vehicles Passenger Cars Light Trucks Conversion of ICE and Hybrids to Plug-in Electric Vehicles Market Challenges Vehicle Prices Battery Leasing PEV Company Failures Production Cutbacks and Delays EV Infrastructure Availability Section Technology Issues Overview of PEV Technology Plug-in Hybrid Electric Vehicle Drivetrains Parallel Hybrid Design Series Hybrid Design/Extended-Range Electric Vehicle Battery Electric Vehicle Drivetrains Battery Technology Lithium Ion Battery Chemistry Safety Concerns and Battery Thermal Management Battery Reliability Advanced Battery Chemistry Lithium-Air Solid-State Batteries Regenerative Braking Charging Infrastructure Charging Equipment AC Charging Equipment Fast DC Charging Home Energy Technologies and Grid Communications Vehicle-to-Grid (V2G) Mobile Applications PEVs and Solar Recharging Habits and Public Recharging

8 Section Demand Drivers Market-Based Demand TCO Analysis Energy Costs and Gas/Diesel Prices Consumer Experiences and Preferences PEV Brands Media Depictions of PEVs and Industry Fleet Interest and Adoption Impact of Alternative Fuel Vehicles on Plug-in Electric Vehicles Government Emissions Regulations United States CAFE Standards California Air Resources Board Canada Mexico Europe Japan China National Incentives U.S. Incentives Impacting PEVs Global PEV Incentives Section Key Industry Players Original Equipment Manufacturers BYD CODA Automotive Chery Daimler Ford Motor Co Fiat/Chrysler Fisker Automotive General Motors Honda Hyundai/Kia Mitsubishi Nissan-Renault PSA Peugeot/Citroen Tesla Motors Toyota Motor Corp Volkswagen/Audi PEV Conversion Companies ALTe LLC VIA Motors Key Suppliers A123 Systems AeroVironment Better Place Dow Kokam Inc General Electric GS Yuasa Johnson Controls LG Chem

9 5.3.9 Magna E-Car Systems NRG Energy Primearth EV Energy Quantum Technologies Ricardo SB LiMotive UQM Technologies Section Market Forecasts Global Light Duty Vehicle Sales Forecast Global Hybrid Electric Vehicle Forecast Global Plug-in Hybrid Electric Vehicle Forecast Global Battery Electric Vehicle Forecast Selected OEM Market Share, United States Plug-in Electric Vehicle Sales Forecast by Segment, United States Summary and Conclusions Section Company Directory Section Acronym and Abbreviation List Section Table of Contents Section Table of Charts and Figures Section Scope of Study Sources and Methodology Notes

10 Section 10 TABLE OF CHARTS AND FIGURES Chart 1.1 Comparison of Annual Sales of PEVs vs. HEVs, United States: Year 1-Year Chart 1.2 Electrified Vehicle Sales by Segment, World Markets: Chart 1.3 Plug-in Electric Vehicle Sales by Region, World Markets: Chart 2.1 PHEV Sales by Segment, United States: Chart 2.2 BEV Sales by Segment, United States: Chart 2.3 Cost and MPG Comparisons of PEVs vs. Similar Fuel-Efficient Vehicles: Chart 2.4 Estimated Buildout of Public Charging Stations, World Markets: Chart 3.1 Battery Pack Size, Model Year Chart 4.1 Estimated Total Cost of Ownership Comparison, Small Sedans, 75,000 Lifetime Miles, United States: Chart 4.2 Consumer Brand Preference for Purchasing PEVs Chart 6.1 Total Light Duty Vehicle Sales by Region, World Markets: Chart 6.2 HEV Light Duty Vehicle Sales by Region, World Markets: Chart 6.3 PHEV Light Duty Vehicle Sales by Region, World Markets: Chart 6.4 BEV Light Duty Vehicle Sales by Region, World Markets: Chart 6.5 Plug-in Electric Vehicle Sales by Selected Manufacturers, United States: Chart 6.6 PHEV Sales by Vehicle Segment, United States: Chart 6.7 BEV Sales by Vehicle Segment, United States: Table 2.1 Planned HEV/PHEV/BEV Launches, North America: Table 2.2 Planned HEV/PHEV/BEV Launches, Europe: Table 2.3 Planned HEV/PHEV/BEV Launches, Asia Pacific: Table 3.1 Battery Chemistry Adoption Table 4.1 PEV Incentives by State, United States: Table 4.2 Light Duty Electric Vehicle Purchase Incentives by Country, World Markets: Table 6.1 Consumer Brand Preference for Purchasing PEVs

11 Section 11 SCOPE OF STUDY Pike Research has prepared this report to provide participants at all levels of the plug-in electric vehicle (PEV) market, including vehicle OEMs, suppliers, and battery manufacturers, with a study of the market for PHEV and BEV technologies. The major objective of this study is to determine the state of the industry and likely future growth of PEVs n the overall consumer automobile market. Pike Research also provides a review of major demand drivers and key industry players within the competitive landscape. The report s purpose is not to provide an exhaustive technical assessment of the technologies and vehicles covered, but rather, a strategic examination from an overall tactical business perspective. Pike Research strives to identify and examine new market segments to aid readers in the development of their business models. All major global regions are included and the forecast period extends through SOURCES AND METHODOLOGY Pike Research s industry analysts utilize a variety of research sources in preparing Research Reports. The key component of Pike Research s analysis is primary research gained from phone and in-person interviews with industry leaders including executives, engineers, and marketing professionals. Analysts are diligent in ensuring that they speak with representatives from every part of the value chain, including but not limited to technology companies, utilities and other service providers, industry associations, government agencies, and the investment community. Additional analysis includes secondary research conducted by Pike Research s analysts and the firm s staff of research assistants. Where applicable, all secondary research sources are appropriately cited within this report. These primary and secondary research sources, combined with the analyst s industry expertise, are synthesized into the qualitative and quantitative analysis presented in Pike Research s reports. Great care is taken in making sure that all analysis is well-supported by facts, but where the facts are unknown and assumptions must be made, analysts document their assumptions and are prepared to explain their methodology, both within the body of a report and in direct conversations with clients. Pike Research is an independent market research firm whose goal is to present an objective, unbiased view of market opportunities within its coverage areas. The firm is not beholden to any special interests and is thus able to offer clear, actionable advice to help clients succeed in the industry, unfettered by technology hype, political agendas, or emotional factors that are inherent in cleantech markets. 78

12 NOTES CAGR refers to compound average annual growth rate, using the formula: CAGR = (End Year Value Start Year Value) (1/steps) 1. CAGRs presented in the tables are for the entire timeframe in the title. Where data for fewer years are given, the CAGR is for the range presented. Where relevant, CAGRs for shorter timeframes may be given as well. Figures are based on the best estimates available at the time of calculation. Annual revenues, shipments, and sales are based on end-of-year figures unless otherwise noted. All values are expressed in year 2012 U.S. dollars unless otherwise noted. Percentages may not add up to 100 due to rounding. 79

13 Published 2Q Pike Research LLC 1320 Pearl Street, Suite 300 Boulder, CO USA Tel: This publication is provided by Pike Research LLC ( Pike ). This publication may be used only as expressly permitted by license from Pike and may not otherwise be reproduced, recorded, photocopied, distributed, displayed, modified, extracted, accessed, or used without the express written permission of Pike. Notwithstanding the foregoing, Pike makes no claim to any government data and other data obtained from public sources found in this publication (whether or not the owners of such data are noted in this publication). If you do not have a license from Pike covering this publication, please refrain from accessing or using this publication. Please contact Pike to obtain a license to this publication. 80