Demand for Biofuels: E85, Flex-Fuel Vehicles, and Intermediate Ethanol Blends

1. Demand for Biofuels: E85, Flex-Fuel Vehicles, and Intermediate Ethanol Blends US Chamber of Commerce September 27, 2007 Tom Stricker, Director Technical & Regulatory Affairs Toyota Motor North America, Inc.

2. 1. Energy Issues 2. CO2 Issues (global warming measures) 3. Air Quality Issues Three issues: energy, CO2, and air quality Awareness of Issues Automotive Powertrain Issues Accelerated consumption of fossil fuels Global development of industry & technologyin the 21st century Population growth (in USA, Asia, etc.) Growing number of motor vehicles

3. No silver bullet, but hybrid is beneficial to all types Toyota’s Approach Ultimate eco-car Hybrid Technology Synthetic fuel Gaseous fuel Gasoline / Diesel Hydrogen Electricity Bio fuel Right Vehicle Right Time Right Place

4. Thought! Biofuels (Ethanol) Discussion Overview • Some Benefits of Ethanol • Benefits/Challenges of Expanding Ethanol • Low-Level Blends • High-Level Blends • Mid-Level Blends • Food for Fuel

5. Some Benefits of Ethanol Domestic Resource Energy Security/Diversity Job Creation Potential CO2 Reductions c. 1940 2004 Grinnell Glacier Source: LiveScience Image Gallery

6. Low-Level Blends (E10↓) All-Vehicle Compatibility Good Energy Content BTU vs. Gasoline Legal Fuel  Blending Infrastructure Other Non-Auto Equipment

7. Key Challenges: Customer Value, Fuel Availability, Fuel Supply High-Level Blends (E85) High Oil Displacement ~8M FFV’s on the Road Legal Fuel 

8. Consumers Appear Both Educated and Uneducated at the Same Time High-Level Blends (E85) – Customer Factors Main Reasons to Consider FFV  Decrease oil dependence  Lower fuel costs  Better for the environment Main Reasons Not to Consider FFV  Availability of refueling  Never thought about it  Cost

9. High-Level Blends (E85) – Potential Vehicle Mods. Key upgrades for Ford Taurus FFV Widely reported Big-3 cost of $150-200 per vehicle

10. High-Level Blends (E85) – Customer Factors Lower Energy Density = Lower MPG and Reduced Range Current E85 Fuel Cost > Current Gasoline Cost Source: DOE Clean Cities Alternative Fuel Price Report July 2007

11. High-Level Blends (E85) – Customer Factors Flex Fuel technology loses about 1/3 of its considerers upon learning about the reduction in fuel economy and the loss of driving range per fill-up. Definitely/Probably Consider 50% 34% Q: Assume that today your preferred manufacturer offered a vehicle that met your needs for vehicle size and your tastes for vehicle styling, to what extent would you consider purchasing this vehicle as your next new vehicle if it had the following vehicle technology…? (Definitely would consider, Probably would consider, Might or might not consider, Probably would NOT consider, Definitely would NOT consider) Q: Now that you have read about each of the advanced technologies, assume that today your preferred manufacturer offered a vehicle that met your needs for vehicle size and your tastes for vehicle styling, to what extent would you consider purchasing this vehicle as your next new vehicle if it had the following vehicle technology…? (Definitely would consider, Probably would consider, Might or might not consider, Probably would NOT consider, Definitely would NOT consider)

12. High-Level Blends (E85) – Availability Only about 1,200+ pumps nationwide – focus in the mid-west Source: DOE Alternative Fuels Data Center (as of May 2007)

13. High-Level Blends (E85) – Supply % Corn Crop An Analysis of the Effects of an Expansion in Biofuel Demand on U.S. Agriculture, U.S. Department of Agriculture, May 2007 20B 47% 37% 15B 12B 31%

14. High-Level Blends (E85) – Supply Estimate of Cellulosic Ethanol Potential % US Gasoline Demand 30% 0% DOE Target for Cellulosic Ethanol Cost $3.50 $2.50 $/gallon $1.04 Source: USDA, DOE

15. Key Challenges: Emissions, Near-Zero Fuel Availability, Non-Autos Mid-Level Blends (E20) High Oil Displacement ~8M “E20” Vehicles on the Road Legal Fuel   and Other FFV

16. Mid-Level Blends (E20) – Potential Vehicle Concerns (2) (5) (1) (3), (4) (6) (*): Only some vehicles Potential Issues: Materials failures, Evaporative Emissions, Hot Re-Start, Idle Quality

17. Toyota View • Biofuels (ethanol) have a key role to play • Low-level (E10) makes sense • Still examining the best way to use “excess” ethanol • Interested in exploring all options – concern about E11+ usage • Cooperation with/among CRC, EPA, DOE, etc. • 2009 Toyota Tundra FFV • Support biofuels policy • Pockets of demand (rejection criteria for some) • Cautious approach while assessing customers, fuel supply and infrastructure

18. Food for Thought (Not Toyota Position) • Assume corn reaches 15B and cellulose reaches 15B in the next 15 years (cost-competitive) - total 30B gallons • This is about 20% of future gasoline demand • Let manufacturers choose between E20 and E85 vehicles - substantially greater potential for large ethanol-capable fleet (E20) at much lower cost • Distribute “excess” ethanol as E20 rather than E85 • - Four times as many refueling locations with same amount of ethanol • - 1/4 to 1/8 the mpg, range and cost hit of E85 for consumers Still Challenges: Fuel Spec, Certification Fuel, Misfueling (E10 vehicles and non-automotive applications)

19. TODAY for TOMORROW