Global Automotive DowAksa current focus

World at a glance

Light weighting is not a new idea

Key Market Driver: Mass Reduction

• Mass reduction is vital for car makers to avoid fuel efficiency or emissions legislated penalties

CALIFORNIA

Key Market Driver: Mass Reduction

− 10% mass reduction = +8-10% fuel efficiency

including secondary mass (and cost)

reduction of powertrain / chassis

23%

Vehicle Mass versus Emissions / Fuel Efficiency

1500 2000 2500 3000 3500 4000 4500 5000 5500

Vehicle Mass (lbs)

US Lt Truck Avg.EU Average

EU Car Average

US Car Average

US Lt Truck Avg. Gasoline car

Diesel car

Gasoline Hybrid

Diesel Hybrid

EU 2020 targetCA 2020 target

EU 2015 target

US 2015 target

330

300

270

240

210

180

150

90

60

30

CO

2 E

mis

sio

ns g

/km

US Car Avg.

Vehicle Mass

1500 2000 2500 3000 3500 4000 4500 5000 5500 lbs680 910 1130 1360 1590 1820 2050 2270 2500 Kg

Gasoline Vehicles

Diesel Vehicles

Original Source: WorldAutoSteel

OEMs face penalties - exceeding mandated emissions and

efficiency standards

SOURCE: European Commission; McKinsey analysis

95 95 95 95 95 95 95 95 95 95

-42%

31

-36%

130 126

-25%

139

-31%

140

-32%

143

-33%

42 44 45 48 53

163

-27% -28% -30% -31%

35

148

132

37

136

41

137

68

Emissions standards are

enforced through penalties

The top 10 EU OEMs

paid $6.2B in penalties in

2010 for exceeding

emissions limits

Penalties for excess CO2

will increase and tiers will

be eliminated for a

uniform penalty of 95

Euro per gm / km of CO2

by 2020

If top 10 OEMs in EU

were to maintain their

current levels of

emissions and car sales,

they would pay a

combined $127.8B in

penalties, or ~$5700 per

vehicle sold in 2020

Overall %

Reduction1

41.8 35.8 33.3 31.5 30.6 30.3 26.9 24.5 32.0 27.8

Emission

Penalties

$ Billions

18.6 12.4 31.1 5.0 14.7 9.8 5.7 6.1 14.6 9.8

Penalties

per vehicle1

$

8530 3860 6610 5940 5600 5450 5240 5160 4570 4370

EU target (2020)

2010 fleet emissions

Driving cycle CO2 emissions of top-10 selling OEMs g CO2/km

1 Based on current fleet emissions performance numbers

Light weighting value varies by car segment and geography

Value to OEMs from 1kg weight reduction

$

23

24

7

21

39

222020

31

24

45

9

23 23

34

8

22

Electric Vehicles

(mid market)

Low cost

vehicle

Mid range

vehicle

Upper end

mass market

Luxury Car

ROW China Europe North America

▪ EU emission regulations

and penalties increase the

benefits of lightweighting

for vehicles sold in the EU

▪ Lightweighting electric

vehicles benefits by

offsetting battery costs

required to maintain range

and performance

▪ Luxury carmakers are able

to pass on a larger portion

of costs to consumers

e.g. Audi A8 e.g. BMW 328 e.g. Honda

Accord

e.g. Nissan

Leaf

e.g. Toyota

Yaris

DowAksa Solution Portfolio

DowAksa – Dow Dow VORAFORCETM

Dow VORAFUSETM

Resin Matrix Systems

DowAksa AKSACA™ Carbon fiber and

Derivatives

Dow BETAFOAM™ Structural Foam

Dow BETAMATE™

and BETAFORCE™ Structural Adhesives

• Tailored Substrate Surface Chemistry for optimal

performance

• Materials Design and Joint Engineering to manage

inter-relationship between different substrates

• Down-engineering of composite components by

leveraging adhesive joint

• Solutions for Body Shop or Trim Shop assembly

• Optimization of

interface between

carbon fiber and

resin

• Ability to create

carbon fiber

systems tailored

for automotive

composite

applications

• Adhesive bonding

of cavity sections

reinforced with

structural foam

• Continuous bond-

line contains

structural foam

within the cavity

• Potential to reduce level of carbon fiber in the

composite by leveraging reinforcement contribution of

structural foam

• Acoustical contribution of foam in composite body

BMW – ground up

NEW technologies

NEW processes

NEW design/s vehicle concepts

CFRP Passenger ‘Life’ Module

Aluminum “Skate Board”

Target a part e.g. front seat, ‘B’ pillar, decklid etc.

Commercialize on one vehicle model

Extend across platform globally

Driven by value of technology vis-à-vis alternative options

in achieving target performance

Ford – ‘Democratization’

VW – ‘parts replacement’

Identify a part e.g. front seat, bumper, roof panel etc.

Design to fit in current assembly process

Duplicate in other similar plants

Driven by multi material hybrid parts strategy

Brands [e.g. Audi] may follow different strategy while Wolfsburg focus on long term

Potential Carbon Fiber Composite Targets

1

3

High performance Reinforcing or non-structural Structural

Monocoque

Drive shafts

Radiator mounts

Roof

panels

Bumpers

Trunk

Seats

Vehicle

underbody

Door

panels

Fenders

Suspension components

Hoods

Bumper

beams

Spoilers

Dashboard X member

Example parts

Parts Based approach

Ref: Rocky Mountain Institute

Multiplication Effects

Ref: Rocky Mountain Institute

Potential Supply Chain

Ref: Rocky Mountain Institute

Designers/Engineer’s Influence

Ref: Rocky Mountain Institute

OEMs developing formal partnerships with CF players in order to drive costs of manufacturing CF components downwards

▪ OEMs/ CF players are

forming formal relationships

in order to:

– Vertically integrate to

jointly reduce

component costs

– Ensure supply

consistency, which is of

utmost importance to

auto OEMs

▪ Several OEMs have yet to

form long-term partnerships

with CF players

JV

partnership

JDA

JDA

Longstanding

relationship

Business Drivers

• Light weighting – CO2 regulations in EU, Japan

• Followed by Asia [China, S and SE Asia and Australia]

– CAFÉ regulations in US – fleet average 54 mpg by 2025

• Future CFC [carbon fiber comp] production capacity – Concern by Auto OEM that potential demand far exceeds current and

projected global supply

• New capacity is capital intensive

– All capacity is ‘energy’ intensive

• Automotive supply chain – CFC based design and part production capability

Risks/Risk mitigations

• Market/Demand Risk: Demand could be delayed for a variety of reasons including regulation peel back or delay, global economic downturn, unclear price/perf benefit

– Mitigation: Close collaboraton with Auto OEM. Staying close to decision makers

• Capital Risk: CF production is capital intensive...additional capacity requires high levels of capital infusion with ROI at risk. Also operation expenses linked to energy costs…look for low cost energy geographies to locate CF production

– Mitigation: Demand guarantee or supply security agreements. Investment strategies in low energy cost locations

• Technical Risks: Efficient high volume CF composite production and part level cost/peformance.

– Mitigation: Technical focus

• Supply Chain Risks: ACN availability, Price of CAN

– Mitigation: Hedging

Summary

• Demand driven by Fuel Economy /CO2 emissions regulations which beget light weighting

– Current CFC capacity easily outstrips automotive market potential

• Intensive work globally to reduce the part level [piece price] cost of CFC

– Partnerships / Alignments forming e.g. Ford DowAksa

– CF capacity rationalization e.g. Toray Zoltek

• Risk identification and mitigation strategies