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Key Objectives of Policy

Key Elements of the Proposal for a Regulation to Reduce CO2 Emissions from Light-Duty Vehicles – Super-Credits. Key Objectives of Policy. Stimulate innovation Enable continuing reductions in CO2 emissions beyond the legislative target over the longer term

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Key Objectives of Policy

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  1. Key Elements of the Proposal for a Regulation to Reduce CO2 Emissions from Light-Duty Vehicles – Super-Credits

  2. Key Objectives of Policy • Stimulate innovation • Enable continuing reductions in CO2 emissions beyond the legislative target over the longer term • Encourage development of technologies that enable full range of vehicles to continue to be available • Ensure new vehicles remain affordable to average European families • Don’t prolong life of older, higher emitting vehicles • Encourage compliance • Encourage competitiveness of European auto industry – continued jobs & investment

  3. Encouraging Breakthrough Technologies • In addition to improvements to gasoline & diesel-powered internal combustion vehicles, the industry is working on “ultra-low” CO2 emissions technologies, such as plug-in hybrids, extended range electric vehicles and hydrogen-powered vehicles • Basic enabling technologies are still in development & very expensive (e,g, batteries, H2 storage) • First generations of vehicle technology are small volume, very expensive and applied to one vehicle model only, but enable fundamental learnings and scale up of supplier and production capacity • Given the size of the challenge to meet the 130 g target, automakers are concerned that all resources will be required for near-term compliance with incremental technologies, “robbing” resources that would otherwise have been allocated to breakthrough technology development • Government funding for research encourages further research which is one element to stimulate innovation – but does not encourage automakers to take risks to introduce new technologies to the market as early as possible • Fundamental challenge is not just to develop the technology in a lab, but to make it work under extreme automotive conditions

  4. Policy to Encourage Early Introduction of Advanced Propulsion Technologies Improved Vehicle Fuel Economy & Emissions Reduced Petroleum Consumption Greater Energy Diversity Hydrogen Fuel Cell Battery ElectricVehicles (E-Flex) Hybrid ElectricVehicles (includingPlug-In HEV) IC Engine andTransmissionImprovements 2012 Time Petroleum(Conventional & Alternative Sources) Bio Fuels (Ethanol E85, Bio-diesel) Electricity (Conventional & Alternative Sources) Hydrogen

  5. Scaling up New Technologies to Commercialization Yr 4 Yr 1 Yr 2 Yr 3 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Technology Development Pilot Commercialization Early Commercialization Technology development and validation under real world conditions Technology refinement and early market preparation Commercial deployment into mass market Region 1 Region 2 OEM/Vehicles 10,000 veh / OEM 100 veh / OEM 1000 veh / OEM $250k / veh $50k / veh $1mil / veh (early incremental cost) Energy/Infrastructure Region 1 Region 2 Leadtime Leadtime 10 Stations 100 Stations Leadtime 250 Stations

  6. Technologies in Development – E-flex extended range plug-in hybrid • Plug-In electric drive vehicle with range-extending generator on board which recharges battery for long trips • On-board generator could be designed for petrol, diesel, E-85 or hydrogen depending on local fuel sources • Achieves 55 km pure electric range which meets trip needs of 75% of Europeans • 700 km with E-REV • Utilizes electricity from the grid as major propulsion source • Off-peak charging = no plus CO2 • Infrastructure development required • Lithium ion battery development a key priority to enable commercialization

  7. Technologies in Development - HydroGen4: Next Step On Road To Hydrogen Fuel Cell Vehicles 10 Vehicles in real-world use as part of Clean Energy Partnership in Berlin Understand how vehicles perform in real-world conditions with real customers Gain refueling experience Late 2008 - 2010 Power: 73 kW Fuel: 4.2 kg CGH2 (700 bars) Range: 320 km Top Speed: 160 kmh Engineered for 80,000 km - 2.5 yrs Start/operate in sub-zero temps Meets current motor vehiclesafety standards

  8. Super-Credits • “Super-credits” would encourage automakers to pull-ahead early generations of ultra-low technologies • “Output enabler” to encourage earlier commercialization Recognized by European Parliament in Chris Davies report • Should encourage broad innovation below a “challenge threshold” such as 50 g/CO2 • Threshold set to encourage non-conventional technologies • Extra credit for these vehicles in averaging for CO2 compliance • Would encourage automakers to move forward with early “uneconomic” generations of technology (low volumes) to reach full market economic viability • Hasten progress to technology developments and economies of scale necessary to make these more broadly available across the vehicle fleet • Include a “super-credit” for all vehicles under 50g CO2/km. • For compliance purposes, these vehicles would count as 10 vehicles in 2012, 7 vehicles in 2013, 4 vehicles in 2014 and 2 vehicles in 2015

  9. Additional Charts

  10. With GDP per capita less than the price of a new small car in new MS, we need to ensure that new vehicles remain affordable to average European families Real GDP per Capita Luxembourg Average real GDP per capita Denmark €7,250 in new MS Sweden EU15 = €28,114 € Ireland U.K. Netherlands France Germany Finland Austria Belgium Italy Spain Greece Czech Republic Portugal Cyprus Malta Hungary Poland Slovenia Lithuania Estonia Romania Latvia Slovakia Bulgaria Population, Thousands EU - Affordability

  11. New EU regulatory requirements adding up to € 7000 per vehicle

  12. Affordability – ECCP2 data Independent EECP2 consultant (TNO) confirms high cost for reducing CO2 emissions from passenger cars Average retail price increase of €3600 for achieving 120g CO2/km target and €2500 for achieving 130g CO2/km target

  13. Timing • CO2 legislation will require a 20 – 25% improvement on average • Will require substantial vehicle redesign for aero improvements, addition of new technologies, etc. • Will require suppliers to scale up new production to meet needs of entire industry • Leadtime of 2-3 years is completely unrealistic • The typical development time for a new model in our industry is 3-5 years and the typical production duration is 6-7 years • Industry cadences new vehicle launches to level the workload across engineering, manufacturing, suppliers, etc • Industry cannot introduce new models across entire fleet in one year • Most of the vehicles to be sold in 2012 are already on the road or very advanced in their development • We are planning to launch many next generation products at our plants in Sweden, Germany, UK, Belgium, Poland, Spain, Hungary, Austria between 2008 and 2011 • We are already at an advanced stage of development of the vehicle and powertrains and have started making the necessary adjustments to the production line, contracted for tooling, made commitments to labour unions and established legal contracts with suppliers • It is too late to change these programs now and not viable to stop production in 2012 after only a few years of production to make radical changes to the product  We strongly support a phase-in of the legislative requirements over the period from 2012 to 2015, with 25% of products to comply in 2012, 50% in 2013, 75% in 2014 and full compliance in 2015

  14. Vehicle Development & Production Timing YEARS Total Lifecycle of Architecture Total Production of vehicles from Architecture (approx. 10 years) Development Time for a new Arch & Model Lifecycle of a new Model Start of Production End of Sales Supplier Selection Tooling Start Development Time of a new Powertrain Generation 1 Derivative Model Derivative Model Derivative Model ETC. Development Time for a new Arch & Model Generation 2 Supplier Selection Tooling Start Development Time of a new Powertrain

  15. Cadenced Vehicle Development Workload NEW Agila Significant MCE NEW Corsa Significant MCE NEW NEW Astra Significant MCE NEW Significant MCE Vectra Significant MCE NEW Significant MCE Medium Vivaro Significant MCE NEW NEW Movano Significant MCE Heavy Automakers must cadence vehicle introduction to level internal and supplier engineering workload and capital expenditures, manage new technology risk and ensure regular refreshment of offerings to consumers.

  16. Excess Emission Premiums • Europe needs to put in place a fair and balanced regulation with the expectation that automakers can and will comply with the Regulation. • We support a phase-in of requirements to facilitate introducing new technologies and models to enable us to comply • Penalties must be reasonable and in line with CO2-related penalties on other sectors • The European Emissions Trading System has already established a metric when carbon targets are not met – the price of a credit plus €100/tonne. • This level applies to stationary sources (including many of our facilities) and will apply to the aviation sector going forward. It is equitable to apply this value across all sectors, including to passenger cars • Support phase-in of requirements • Penalties should be consistent with CO2 penalties for other sectors

  17. Eco – Innovations • EU proposing mandatory Tire Pressure Monitoring and Low Rolling Resistance Tires • Expensive technologies • Acknowledge that they will deliver 7 grams of reductions • Need to ensure full credit given for reductions • Policy also needs to enable other technologies, which may not show in test cycle but will reduce “real-world” CO2 emissions to be utilized on vehicles with credits to automakers (such as 6-speed transmission, efficient lighting) • Policy should encourage further technologies to be invented/applied • Cannot continually change test cycle to incorporate new technologies • Complexity, uncertainty and delay • With 3rd party validation, credit should be available for these technologies in addition to the vehicle technologies (in addition to powertrain, aerodynamics, material substitution, etc. which will show in test cycle) CO2 Test Cycle Eco-innovation CO2 Real Start/stop Eco-Turbo Lightweight Aero Etc. 6th speed Efficient lighting Cruise control Ttc EU CO2 compliance process CO2 taxation  Provide CO2 credits in CO2 Policy for Passenger Cars for technologies that deliver proven CO2 reductions, but are not reflected in the test cycle

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