Powertrain market

outlook 2030
Study extract

February 2021
Five major drivers are shaping the development of global powertrain
markets
Key powertrain market driver overview
Volume impact Content & technology impact

1 Global mobility 2 COVID-19 3 Regulatory 4 End-customer 5 Technology

demand implications restrictions preferences strategy

Globally growing Massive impact of High pressure on Challenges to convince OEMs responding to
mobility demand, COVID-19 on global OEMs from regulations potential EV buyers regulatory pressure and
mostly carried by sales; yet, accelerating to improve CO2/fuel (vehicle price and growing consumer
growth in emerging demand for individual efficiency and reduce infrastructure) demand by increasing
economies mobility and, esp. in pollutant emission addressed by strong EV offer shares in most
Europe due to incentive market supply growth markets
programs, xEV

Global powertrain forecast

Source: Interviews with market participants; Roland Berger; Photos: Adobe Stock: Sergii Chernov, Curioso.Photography, Romolo Tavani, BrunoWeltmann, Photographee.eu, Tierney 2
 1 Global mobility demand

Except for Europe and North America, global vehicle sales are
expected to increase – Overall growth mostly driven by China
Global light vehicle sales forecast1) [2019-'30, m units] 15%
32%

-3% -1%

32.8
20.4 19.8 20.6 20.4 24.8

2019 2030 2019 2030 2019 2030

North America Europe2) China 103.2
89.7

20%
36%

13.1 14.2 17.1

9.6
2019 2030 2019 2030 2019 2030
Rest of world Asia w/o China Global

x% Relative change from 2019 to 2030

1) Subsumes light commercial vehicles and passenger cars – Forecast until 2027 purely based on IHS, thereafter growth is forecasted on a regional basis by keeping North America and
Europe constant and applying the 2025-'27 CAGR for all other regions 2) Region as defined by IHS, i.e., Europe also includes, e.g., Russia and Turkey
Source: IHS; Roland Berger 3
 2 COVID-19 implications

COVID-19 impact on vehicle sales varies by region, with the effects

to be felt for years to come
Light vehicle sales forecast1) by key region [2018-30 indexed with 2018 = base, %]
130%

120% China

110%

100% Europe2)
North America
90%

80%

70%

60%
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

1) Subsumes light commercial vehicles and passenger cars – Forecast until 2027 purely based on IHS, thereafter growth is forecasted on a regional basis by keeping North America and
Europe constant and applying the 2025-'27 CAGR for all other regions 2) Region as defined by IHS, i.e., Europe also includes, e.g., Russia and Turkey
Source: IHS; Roland Berger 4
 2 COVID-19 implications

Many governments are increasing their subsidies in the course of

economic stimulus packages
Maximum purchase incentives for electric vehicles [EUR]1) Non-exhaustive

Germany France Spain Norway Netherlands

6.7% 6.9% 6.7% 4.5% 2.0% 2.3% 54.0% 20.0% 21.0% 4.0%

9,000

3,000 6,750 7,000

1,000
2,250
4,000 4,000
0
6,000 4,500 6,000 2,000 1,900
4,000 0 4,000
2,000 1,900 0 0 0
0 0 0 0
BEV PHEV
BEV PHEV BEV PHEV BEV PHEV BEV PHEV

> Strong push for direct
subsidy in EV and PHEVs
> Duration of subsidies
prolonged on 'Autogipfel'
in November 2020 until
2025
Pre-COVID-19 incentives (2019)
1) Maximum possible incentives for private new car buyers including government and OEM contribution and depending mainly on overall vehicle price (BEV/PHEV) and electric driving
ranges (PHEV)
Source: Desk research; Roland Berger
> Focus on BEV subsidies > New MOVES II program > Massive tax deduction, > Focus on BEVs - PHEV
> On top bonus of up to > Additional 1,500 EUR for e.g., no value added tax subsidies not clear yet
5,000 EUR for exchanging BEVs and 500 EUR for and no import fees > Additional bonus of EUR
old ICE with BEV PHEVs for scrapping an > Only applicable for BEVs 2,000 for used electric
old vehicle > Additional BEV benefits vehicles
like free parking > Tax benefits for both BEV
and PHEV
Increase due to COVID-19 economic stimulus packages (2020) x.x% Share of BEVs/ PHEVs sold in 2020
5
 3 Regulatory restrictions

Emission regulations increase pressure on automotive OEMs to

improve CO2 emissions, fuel efficiency and exhaust gas emissions
Passenger car greenhouse gas emissions/fuel consumption regulations Non-exhaustive

CAFC1) [g/km] CO2 emission2) [g/km] CAFE [g/km]3)

171
159

-8% 130 -22%

125
117
108
-38% 97
95
c.81

c.59

2013 2020 2025 2015 2020 2025 2030 2013 2020 2025

1) Weight-class based per vehicle and corporate average; 2) Weight-based corporate average, NEDC based – Shift to WLTP monitoring in 2020; 3) Fuel economy in miles per US gallon
transferred to display in g/km; ambitious target level set for 2020 – only moderate increase of ambition level afterwards; Footprint-based corporate average; converted to NEDC
Source: Desk research; ICCT; Roland Berger 6
 4 End-customer preferences

Price and infrastructure are still the main challenges to convince

potential BEV buyers
Survey: Share of potential BEV buyers1) – reasons for yes and no [%]

Reasons for Yes (multiple choice possible) Reasons for No (multiple choice possible)

It is suitable for the (short)

ranges I would use a car for 60% Price is too high 50%

Tax advantage for buying Insufficient infrastructure

an electric vehicle 40% / charging stations 40%

It would replace my trips

with public transport 25% Range is too low 30%

Yes, other 15% No, other 0%

1) Participants were asked whether they will consider BEV in their car buying decision; x% of participants answering Yes/No named the listed reasons
Source: RB online survey January 2020 (17,232 participants - Participants by country: Belgium 1,014; Canada 1,022; China 1,005; France 1,022; Germany 1,024; India 1,008; Italy 1,013;
Japan 1,014; Netherlands 1,008; Russia 1,011; Saudi Arabia 506; Singapore 1,009; South Korea 1,008; Spain 1,014; Sweden 1,025; UAE 504; UK 1,006; USA 1,019) 7
 4 End-customer preferences

However, significant infrastructure investments internationally address

demand from BEVs/PHEVs and are exptected to further increase
Amount of charging locations per 100 km roadways
# charging locations
[k units]
January 2017 September 2020 (annual growth rates)

South Korea 3.7 15.2 17 (213%)

Netherlands 8.6 10.6 15 (142%)
China 1.6 6.1 322 (2004%)
UK 1.3 3.9 16 (182%)
Sweden 0.4 3.0 6.5 (109%)
Belgium 0.4 2.5 3.8 (75%)
UAE 0.1 2.3 0.4 (24%)
Germany 0.8 2.2 18 (198%)
Japan 0.9 1.8 22 (217%)
France 0.5 1.5 17 (195%)
Singapore 0.0 1.2 0.1 (NA)
Spain 0.1 1.0 5.3 (109%)
Italy 0.2 0.9 7.5 (115%)
Canada 0.1 0.6 6.3 (107%)
USA 0.3 0.5 32 (281%)
India 0.0 0.0 0.5 (12%)
Russia 0.0 0.0 0.8 (48%)
Saoudi Arabia 0.0 0.0 0 (NA)

0.6 1.9
Source: EV Volumes, Desk research, Roland Berger 8
 5 Technology strategy

OEMs respond to growing end-customer demand and regulatory

pressure by increasing xEV offer shares for most countries
Total number of BEV/PHEV/FCEV models per region, production outlook 2020-'30 [#]
414 631 c.660 Expected
development of
c.460
444 model portfolio
> Coming from already high levels of
different BEV/PHEV/FCEV models
in 2020, Chinese production
300 continues to be the main driver of
new models until 2030
c.240 > Due to sharp increase in new
224
models between 2020-25, Europe
and North America reduce the gap in
model variety to China
122
– Note: Analysis does not yet reflect
c.95
78 potential effects from new political
leadership in the USA
24
> After 2025, only minor increase in
model portfolio is expected
2020 2025 2030
Europe China North America

x Total number of unique models across regions, i.e., models produced in more than one region only considered once
Source: IHS; Roland Berger 9
 5 Technology strategy

Architecture-specific and overarching technology trends are leading

to a positive outlook on opportunities for xEV powertrain suppliers
Overview of xEV technology trends Non-exhaustive

1 Mild hybrid 2 Full hybrid 3 Plug-in hybrid 4 BEV

> P0 systems expected to > Full hybrid technology > Currently high focus on > Major technological
remain leading technology primarily used by Japanese plug-in hybrids to reach advances for BEVs
but selected developments OEMs and viewed as a ambitious CO2 targets3) expected – Ranging from
towards Px1) systems with niche technology2) > Major technology battery-related trends to
more vehicle-level benefits > Experts indicate that no developments expected for entire vehicle platforms
expected major technological electric drives, electronics and architectures
> Px systems expected to advances are foreseen and batteries > Technology trends are base
eventually increase content > Additional supplier business > PHEV with growing business for growing business
per vehicle in mild hybrid potential only from volume opportunities for xEV opportunities for xEV
systems increase powertrain suppliers suppliers

5 Thermal management Increasing complexity of TM to enable advances in performance, efficiency, and comfort

6 Lithium-Ion battery prices Continuously improving technology is decreasing battery prices

7 System integration Development of more powerful highly integrated systems

1) Referring to P1 to P4 mild hybrid systems 2) Also in development at European as well as at Chinese OEMs 3) Current particular focus in Europe due to emission legislation
Source: Interviews with market participants; Roland Berger 10
Overall production growth is highest in China – ICE share is
expected to decline significantly across regions
Light vehicle production forecast1) by region/powertrain type, 2019-'30 [m units]
Europe2) North Amer. China World

0.0% +0.3%
21.1 21.1 16.8 33.1 +1.4% 103.3
20.8 16.3 16.3
2% +2.8%
2% 1% 3% 1% 12% 94.6
15% 1% 8% 17%
2% 1% 28.8 88.9 2%
26% 3% 27% 11%
5% 5%
16.4 13.0 3% 1%
9% 8% 16% 1% 5% 6%
4% 3% 1% 8% 24.4
4% 2% 4% 1% 73.0 8%
3% 6% 8% 1% 22.6 1% 6% 9%
3% 10%
6% 2% 13%
1% 4% 2% 8% 4% 2%
7% 3% 18%
2% 9%
26%
37% 23%
93% 94%
93%
75% 35%
48% 92% 93%
84% 62% 91% 89%
58%
47% 40%
33%
20%
11%

2019 2020 2025 2030 2019 2020 2025 2030 2019 2020 2025 2030 2019 2020 2025 2030

xx% CAGR BEV PHEV FHEV MHEV (48V) ICE

1) Subsumes light commercial vehicles and passenger cars – Forecast until 2027 purely based on IHS, thereafter growth (CAGR) is extrapolated based on region and powertrain type
2) Region as defined by IHS, i.e., Europe also includes, e.g., Russia and Turkey
Source: IHS, Roland Berger 11
xEV architectures are expected to account for c.70% of the market
by 2030 – Pure ICE volume to shrink at a CAGR of c.-6.0% '25-'30
Global powertrain components market value, 2015-30 [EUR bn]
Historical Forecast CAGR
'15-'19
CAGR
'20-'25
CAGR
'25-'30
Expected
development of
3.3% 9.4% 2.1%
402 powertrain markets
361 > Total market reflecting vehicle
125 44.1% 31.0% 6.4% production development
91 – overall growing production
volumes, driven by China
266
26 34 28.5% 26.3% 5.3% – increase of xEV propulsion share
233 21 231
9 2 0
5 13 5 4 33 41
– HV battery pack as major total
24 11.6% 19.0% 4.6% market driver (c.84 EUR bn by
8 2030 for BEV alone)
14 7 60
92 n.a. 55.6% 8.8% > Market value decrease from pure
ICE architectures significantly
218 222 outweighed by growth in electrified
179 segments
151
111 0.5% -3.3% -6.0% > MHEV (48V) as strongest growth
segment
> Hybrid powertrains also include
2015 2019 2020 2025 2030 content for combustion engine and
BEV PHEV FHEV MHEV (48V) ICE
transmission components

Source: IHS; interviews with market participants; Roland Berger 12

Electrified powertrains offer highest content per vehicle for suppliers
– Strong relative decrease expected due to battery price reduction
Global total powertrain content per vehicle (CPV) development, 2015-30 [EUR, %]
Historical Forecast CAGR
'15-'19
CAGR
'20-'25
CAGR
'25-'30
Expected
development of
14.217

powertrain CPV
> Strong relative decrease of CPV
11.554

11.211

for high voltage electrified

-5.1% -4.4% -5.0% architectures due to strong battery
price reduction until 2030
8.970

> Stable CPV for ICE: general

7.756

7.113

6.935 standardization/decontenting
6.918

trends balanced with decreasing

5.924

-2.1% -3.1% -2.5%

5.366

5.222
volumes as well
4.900

4.836

as content upsides (e.g., in

4.282

-2.2% -2.4% -1.9%

3.883
3.837

3.601

3.515

3.427
exhaust aftertreatment)
n.a. -0.5% -0.5%
2.749

2.729
2.688

2.660
2.514

1.7% -0.1% -0.5%

0

2015 2019 2020 2025 2030

BEV PHEV FHEV MHEV (48V)1) ICE

1) MHEV technology introduced in 2016, therefore no CPV for 2015 available

Source: IHS; interviews with market participants; Roland Berger 13
OEM requirements for xEV focused powertrain component suppliers
are becoming higher – both for incumbent as well as new suppliers
Summary: Key purchasing criteria for xEV powertrain component suppliers Indicative

KPC Importance for OEMs Consequence for suppliers

Low High
Cost With growing volumes, OEM purchasing power and cost pressure
competitiveness also for xEV powertrain component will increase
Technology Innovativeness is one of the top criterion as technology is
competence advancing fast (e.g., to achieve higher energy efficiency)
System Knowledge of the overall powertrain system and adjacent vehicle
competence domains is crucial for smooth integration and vehicle performance
Customi- Many OEMs prioritize performance, smooth integration and cost
zation position over strong product customization
Customer track As a rather 'young' system, not too much emphasis is put on the
record track record of a xEV powertrain component supplier
Global Global footprint is crucial to cater for clients in all major
footprint manufacturing regions (also to meet cost expectations)

OEMs are open to work with new players in the xEV component field – but large, incumbent
suppliers often have an advantage on scale, system competence and global footprint

Source: Interviews with market participants; Roland Berger 14

 Despite current trends, a decrease of insourcing is likely as tier-1
suppliers drive product and cost optimization across customers
OEM sourcing strategy outlook (focus Europe and North America)
Illustrative Hypotheses
> Amongst xEV components, mostly only
> OEMs with high outsourcing
High share gain market share HV e-machines and inverters affected by
> Some OEMs insource
insourcing tends
> Increasing outsourcing
Inhouse production share [%]

> Despite current insourcing tendencies,

OEMs in EU/US will find economic value in
> Pioneers have high outsourcing to tier-1 suppliers as those
inhouse share – can realize economies of scale across
multiple OEMs
> OEMs without inhouse
HV E-Machine2) – can focus on ongoing technical
production gain market share optimization better than a particular OEM
– can be managed efficiently once OEMs
have acquired technology competence
> Some pioneers have
high inhouse share Inverter1) > Insourcing pressure from labor unions for the
sake of job retention will ease over time
Low > Only OEMs with very large volumes will keep
it in-house to customize
2020 2030
Year > Insourcing of inverter production is more
European and US OEMs challenging than e-motor – Therefore, only
minor inhouse production
1) HV Inverter used with e-axles and transmission integrated hybrid (power split not considered) 2) E-machines used in integrated axle drive
Source: Interviews with market participants; Roland Berger 15
We see significant market opportunities in electric powertrain supply
markets – Well balanced market ramp-up strategy is key
Key considerations for incumbent or emerging electric powertrain suppliers
ICE
Key > Market for electrified powertrain compo-
trends nents expected to overtake the ICE
component market before 2025
> Nevertheless, combustion-related
components will have significant volumes
beyond 2030
xEV
> Maturing OEM expectations in line with
growing market volumes for electrified
powertrain components
> Scale advantages an increasingly
important OEM purchasing criteria

Implications > Balanced approach on product portfolio and > Scenario-proof portfolio across xEV
for suppliers sensible investment strategy variants
> Strict focus on product standardization and > Focus on modular, scalable solutions that
cost optimization for ICE components allow multi-customer applications
essential

Key powertrain e.g., Bosch, BorgWarner (incl. Delphi), CATL, Denso, Panasonic, Schaeffler,
suppliers Valeo (incl. Valeo Siemens), Vitesco Technologies
(selection)

Source: Interviews with market participants; Roland Berger 16

Your contacts at Roland Berger

Wolfgang Stefan
Bernhart Riederle
Lead authors
Senior Partner Principal

+49 711 3275-7421 +49 89 9230.8169

Wolfgang.Bernhart@rolandberger.com Stefan.Riederle@rolandberger.com

Brendan Ron
Boyle Zheng
Co-authors and
regional contacts
Senior Partner, Senior Partner,
USA China
+1 248 729-5127 +86 21 52986677-163
Brandon.Boyle@rolandberger.com Ron.Zheng@rolandberger.com

Source: Roland Berger 17