2021: pandemic disruptions and ev momentum

Confidential. © 2021 IHS Markit®. All rights reserved.Confidential. © 2021 IHS Markit®. All rights reserved.

2021: Pandemic Disruptions and EV Momentum2021 CAR Management Briefing Seminar5 August 2021

Confidential. © 2021 IHS Markit®. All rights reserved.

Agenda

• Production and Sales Overview

• Electric Vehicle Momentum and Challenges

Caption goes here

CAR Management Briefing Seminars August 2021


Production and Sales OverviewSemiconductor and other parts shortages slowing recovery

Confidential. © 2021 IHS Markit®. All rights reserved. 4Source: IHS Markit

94.289.0

74.6

82.0

90.7 92.5 94.1

-1%

-6%

-16%

10% 11%

2% 2%

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Global Production

Global Production Year over Year Change

Global Production Overview


Confidential. © 2021 IHS Markit®. All rights reserved. 5

16.9616.31

13.02

14.63

17.03 16.82 16.87

-0.6%-3.8%

-20.2%

12.3%

16.4%

-1.2%0.3%

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Yearly Production

North America Production Year over Year Change

Source: IHS Markit

North America Production OverviewSemiconductor shortage undermines short-term outlook

▲ US inventory at 22 days’ supply or 1.04 million units at the end of July 2021▲ US inventory declined 1.5 million units or 59% on a year-over-year basis continuing its now 24 months stretch of declines▲ Over 1.5-million-unit inventory shortage to remain amid component shortages▲ Supportive US demand for autos bolsters regional production, though output is hampered by several externally related issues



93.789.7

76.9

84.789.6 91.8 93.8

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Global Sales

Global Sales Year over Year Change

6Source: IHS Markit

Global Sales OverviewRecovery prospects dependent on “race” between vaccine & variants alongside chip shortages

▲ Auto demand prospects continue to be influenced path of the pandemic. Rising concerns on “race” between vaccine & variants (esp. Delta)—although many governments moving away from “zero-Covid” strategies due to progress on vaccines

▲ Recovering economic prospects reflect vaccine optimism & rebounding US (esp. govt. stimulus/jobs)

▲ Key vaccine rollouts in full swing, esp. US, UK, China & Europe—“a marathon not a sprint”

▲ Outlook assumes pandemic-related disruptions & supply chain bottlenecks unwind over 12–18 months

▲ Key markets approaching pre-pandemic demand levels supported by improved economic fundamentals (esp. China & USA)

▼ Elsewhere more challenging conditions including lingering COVID-19 impacts, new variant risks & continued supply chain pressures

▼ Mixed auto prospects—2021 downgrade with momentum rebuilding into 2022 & 2023 (esp. recovering supply chains)

▼ Semiconductor shortage constraining autos supply. Inventories very stretched for some markets / could stretch recovery profiles into 2022

▼ Vaccine roll-outs & removal of restrictions disrupted by virus mutations & vaccine-reluctance—ongoing fears for vaccine escape mutations


Confidential. © 2021 IHS Markit®. All rights reserved. 7

17.32 17.08

14.59

16.69 16.96 17.06 16.83

0.4%-1.4%

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Yearly Sales

USA Sales Year over Year Change

Source: IHS Markit

USA Sales OverviewJune and Q3 sales dented by inventory constraint, little relief expected in immediate term

▲ While remaining above the year-ago period, the pace of sales in July (est 14.8-15.1M units, SAAR) retreated strongly from average of three months March-May (17.9M units, SAAR)

▲ Consumer spending trends remain strong▲ Inventory constraints presenting the next roadblock to auto demand recovery but OEMs (to various degrees) and consumers managing thus far



EVs: Not If, WhenMomentum increases in 2021


United States | Summary | Electrification FrameworkFramework Factor IHS Markit Premises 2021 Effect on xEV Trend

Incentives

• $7,500 federal tax credit and additional incentives become part of post-2026 CAFE legislation• Additional state incentives, or tax rebates given in addition to federal tax credit incentive• Home charger installation incentives given• High-Occupancy Vehicle lane access for BEVs is a major incentive in states with high traffic density like CA• Stable fuel prices throughout forecast period, increasing need for incentives; NOTE: Unable to confidently predict added gasoline tax

imposed at a state level

xEV Connected Industries

• BEV pick-up trucks (PUPs) produced initially to take advantage of economies of scale, better cost margins, and less expensive platform costs than a multi-energy platform. PHEV PUPs remain useful for consumers that tow/travel to locations where charging is insufficient

• Automotive battery production expected to be sufficient to cover automotive and non-automotive needs• Autonomous L4 vehicles reach 5% of LV Sales by 2032; Delay in L5 vehicles before 2032 in recognition of the challenges associated with

replicating human capabilities

GHG REGULATION

• All new vehicles sold in 2035 in five states must be zero emission vehicles• ZEV fleets turnover throughout 2030s, as OEMs use likely flexibility in mandate credit scheme• State with regulations to become completely ZEV by 2035: CA, NY, MA, RI, WA• States with regulations to become completely ZEV by 2040: CO, CT, MD, ME, NJ, OR, VT• Non-ZEV states increase BEV penetration due to nation wide availability and popularity of specific BEV segments (e.g. PUPs in Texas)• Corporate Average Fuel Economy (CAFE aka “SAFE”) standard expected to rise 5% YoY after 2026 throughout forecast horizon

Charging Infrastructure

• Home charging share in the context of the housing structure (consequent home charging trend)• Charging infrastructure is expected to satisfy demand for up to 15 million BEVs by 2030• President Biden made campaign promises to invest in 500,000 EV charging stations by 2030 versus estimated 1.2 million gasoline pumps

currently installed in the U.S..

2025 2030

BEV

PHEV

HEV

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BEV

PHEV

HEV

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2025 2030

BEV

PHEV

HEV

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BEV

PHEV

HEV

2035



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2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033

BEV PHEV HEV ICESource: IHS Markit © 2021 IHS Markit

United States | Forecast

OEMs begin to phase out ICE-based vehicles and related long-term

investments, and replace with complete BEV platforms

Remaining Section 177 become

completely ZEV by 2040

Electric vehicle nameplates rise; competition in multiple vehicle segments.

ZEV 3.0; Expected CAFE increase States expected to become completely ZEV by 2035: CA, NY, MA, RI, WA,



Seven elements of EV adoption• All are interrelated

• Every factor has momentum in 2021

• No single factor will determine EV fate

• Different regions balance factors differently

EV Sales Expansion

Consumer Price

Driving Range

Infrastructure/ Charging

R&D Life CycleFuel Price

Regulation and Incentives

Battery Cell Supply Chain



Momentum• Cost and price

> EVs are being offered at more price points

> Fuel price has regional and uneven impact

> Potential for increase and extension of incentives

• Driving range

> Improved to ability to meet routine, daily driving needs for most Americans

> Charging time continues to improve—if you are at the right charger

Challenges• Cost and price

> EVs still more expensive than similarly sized models in most cases

> New products focused on above-average price points, and still lower margin for OEM

• Driving range

> Consumers buy for edge case

> Charge time drives range concern

> Charge time inconsistent and misunderstood, driving concern over range

Consumer Vehicle Cost, Fuel Price, and Driving Range



Momentum

• Regulations

> The most significant of all

> Globally, governments and companies are pledging path to net carbon neutrality. Zero-emissions vehicles central to reaching these goals

• Infrastructure and Charging

> US commitment to investing in new charging stations is not final, but expected

> Automakers partnering with charging networks

> Automakers aggressive about launching new EV with programs to support at-home and on-the-go-charging

Challenges

• Regulations and incentives

> Risk of regulatory delays and challenges

> Difficult to demonstrate incentives true impact on consumer behavior

• Infrastructure and Charging

> Funding for public charging; government support isn’t enough

> Clear business model for making money from public charging uncertain. No profit = no sustainable business

> Potential misalignment between charging technology and vehicle charge capability

> Lack of consistency in location, operation and cost transparency for public charging stations

> At-home charging not available for many consumers

Regulations and Infrastructure/Charging



Momentum

• R&D Life Cycle

> Automakers shifting investment from ICE to EV

> Traditional industry inertia for substantial change is being broken down at key automakers

> Automakers (and suppliers) moving quickly along product development path. Speed to market can amplify momentum

• Battery Cell Supply Chain

> Increased investment by automakers and battery suppliers

> Automakers opting to maintain knowledge base and have more control over their supply

Challenges

• R&D Life Cycle

> ICE vehicle lifecycles may be stretched out if regulations, market demand pace not as expected

• Battery Cell Supply Chain

> Development time

> Managing investment that is flexible for developments in cell chemistry and structure

R&D Lifecycle, Battery Cell Supply Chain



• Consumer attitude

> Weather may shift attitudes in some areas relative to autos impact on climate

> Perception of improved air quality during COVID lockdowns may contribute to shifting attitudes

> Interest in BEV and other electrified vehicles is gaining ground

> CYTD to May 31 electrified US registrations see growth

– EVs reached 2.2% of US sales, up from 1.8% in 2020

– PHEV reached 1.0%, up from 0.5%

– HEV reached 5.8%, up from 4.0%

• Product and choice

> New EVs are aligned with consumer trends, in popular, profitable segments

– 2018: 89% EV sales were cars, versus 29% all powertrain

– 2018: 11% EV sales were SUVs, versus 46% all powertrain

– 2028: 14% EV sales forecast to be cars, versus 18% of all powertrain

– 2028: 67% EV sales forecast to be SUV, versus 56% all powertrain

> Plethora of introductions drives awareness and consideration—though also holds down volume per nameplate in the near term

– 2018: 367 total nameplates; 17 EV nameplates

– 2028: 389 total nameplates; est 166 EV nameplates

– In 2025, EV nameplates to make up about 33% of all nameplates, but only 11% of total sales

Other Momentum Sources



• Consumer accessibility and education

> EVs skew to higher-incomes than aggregate light-vehicle registrations. Gap needs to close

– Vehicles scheduled for launch in next 24-36 months largely expected to be priced above average new-vehicle price

– Vehicle cost and access to at-home charging slows EV adoption at lower income levels

> Consumer education takes time, exposure

> Traditionally, consumer action to address efficiency has been modest

– Hybrid (excl PHEV) still 5.8% of US registrations after 25 years—though growing quickly in 2021

Other Challenges

0.0

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$0 - $19,999 $20,000 -$39,999

$40,000 -$74,999

$75,000 -$124,999

$125,000 -$175,999

$175,000 -$249,999

$250,000 ormore

All ICE HEV EV

Income distribution, 2021

Source: IHS Markit Catalyst for Insight, Jan to 31 May 2021 © 2021 IHS Markit

0.0

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$0 - $19,999 $20,000 -$39,999

$40,000 -$74,999

$75,000 -$124,999

$125,000 -$175,999

$175,000 -$249,999

$250,000 ormore

All EV Lux EV Non Lux

Income distribution, 2021

Source: IHS Markit Catalyst for Insight, Jan to 31 May 2021 © 2021 IHS Markit



VIO data shows were EVs need to improve

2020 Metric Electric Vehicles

Gasoline Vehicles

Still owned by original owner(2011 – Current model years only) 82% 54%Return to Market Loyalty 63% 92%Used Sales, percent of VIO (2011 – Current model years only) 7% 13%Sustainability* 91% 95%*Sustainability - how many vehicles are still on the road at the end of 2020 compared to New Registration 2011 – 2020Source: IHS Markit WorldView VIO, Catalyst New and Used Registration and Loyalty Analytics Tool



What’s next?


• New EV sales are replacement for ICE

> Increasing share/volume of EV requires converting ICE

> Maintaining the increase requires EV loyalty, which remains lower than ICE

• Regulations suggest government policies will follow to support

• Pace of adoption and change is still up to consumer, but consumers increasingly interested

> Holdouts can continue with ICE for at least a decade after the last one is produced

> Current infrastructure still easier for ICE than EV

• Necessary scale benefits established OEMs

> Scale in manufacturing and distribution provides existing OEM edge over startups

> Two – three years ago, perception skewed that was it was start-up OEM game to win

> Reality: Traditional OEMs able to incorporate startup innovations into more robust network and scale

Regulations driving transition. New EV product competition is ICE, not existing EV


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2021: pandemic disruptions and ev momentum

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