©Copyright 2007 The Martec Group, Inc. All Rights Reserved

American Road:Clean Diesels for the Real World

14th

DEER ConferenceU.S. Department of Energy

August 5, 2008

1©Copyright 2008 The Martec Group, Inc. All Rights Reserved

What is our national objective?

EPA Wedge Analysis

Reduce consumption of petroleum . . . . . enhance energy security

Stabilize and reduce GHG emissions

Provide the greatest good at the lowest societal cost . . .

… Expand national wealth/ prosperity of the US

Reduce consumption of petroleum . . . . . enhance energy security

Stabilize and reduce GHG emissions

Provide the greatest good at the lowest societal cost . . .

… Expand national wealth/ prosperity of the US

2©Copyright 2008 The Martec Group, Inc. All Rights Reserved

100

125

150

175

200

225

1995 1998 2001 2004 2007 2010 2013 2016 2019 2022

AB 1493 forces the fleet average 26% below the 2007 EU fleet actual.

US car CAFE (unreformed)

US car fleet

EU fleet

-14% in 12 years

ACEA Voluntary Agreement

AB 1493 PC/LDT1-31% in 7 years

-

40% in 11 years

CO

2gr

ams/

km

Green House Gas Emissions Overview

US and EU test cycles are not equivalent. ARB standard includes max MAC credit. AB 1493 LDT2 definition includes 8,500-10,000 lb. gvw MDPVs. Fuel economy conversions at 19.55 lb CO2

/gallon gasoline and 22.43 lbs/gallon diesel. US fleet excludes

flex fuel credits.

EU Target

Light Duty Vehicles

3©Copyright 2008 The Martec Group, Inc. All Rights Reserved

US and EU –

vastly different fleet characteristics.

0

20

40

60

80

100

US EU US EU US EUFuel Taxes/gal. Transmissions Cylinder Count

3.5L 1.7L

$0.38

$4.00

92% Automatic 80%

Manual

31% 4-cyl

84% 4-cyl

5% 3-cyl

43% 6-cyl

23% 8-cyl

1% 8-cyl

8% 6-cyl

Light Duty Fleet Characteristics

4©Copyright 2008 The Martec Group, Inc. All Rights Reserved

68%

63%

The EU and PC/LDT1 fleet distribution is nearly reversed

below/above ~ 1400 kg mass.

Light Duty Fleet Characteristics

CO2

Mass

Europe

Focus Diesel 5M1325 kg

139 g/km

68%

US

Camry L4 5AT 1425 kg

177 g/km

68%

5©Copyright 2008 The Martec Group, Inc. All Rights Reserved

0%

10%

20%

30%

40%

50%

60%

1990

1992

1994

1996

1998

2000

2002

2004

2006

Technology enabled an already efficient powertrain to become one

that the mass market wanted to drive.

European Light Duty Diesel Market Share Development

Total Fuel ConsumedDiesel Market Share

Highway

City

Political Cost/BenefitEfficient

+ Fun-to-drive

+ Quiet

+ Clean

6©Copyright 2008 The Martec Group, Inc. All Rights Reserved

The 2007 EU diesel

fleet would not meet the 2016 CA standard.

AB 1493 vs. 2007 Fleet Actual

US and EU test cycles are not equivalent. ARB standard includes maximum MAC credits. Fuel economy conversions at 19.55 lbs CO2

/gallon gasoline and 22.43 lbs/gallon diesel.

AB 1493 PC/LDT1

GH

G g

ram

s/km

105

120

135

150

165

180

210

225

2005 2007 2009 2011 2013 2015 2017 2019 2021

195 CAFE27.5 mpg

LDT1: 27.0 mpg

EU Gasoline: 32.6 mpg

EU Diesel: 41.6 mpg

US Compact: 31.0 mpg

Pavley

140.2 mpg

Pavley 2 46.6 mpg

7©Copyright 2008 The Martec Group, Inc. All Rights Reserved

Globally, light duty diesels outsell hard hybrids 30 to 1.

WTW Lifetime GHG Saved vs. OEM Mature Hardware Costs –

Midsize Car

0

10

20

30

40

50

60

$100 $150 $200 $250 $300 $350 $400

CO2

MT Saved

Type E Diesel HEV+ $5,500 [ 220%]

Gas PHEV –

CA Grid+ $8,000 [ 320%]

FCV –

H2 from Biomass+ $20,000 [ 800%]

Type E Gas HEV+ $3,500 [ 140%]

ULEV Diesel+ $2,350 [ 94%]

OEM Hardware Cost/MT Saved

8©Copyright 2008 The Martec Group, Inc. All Rights Reserved

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Nickel

Terbium

Platinum

Oil WTI

Lithium

Copper

CobaltDys

prosiu

mNeo

dymium

Rhodium

Over 1 vehicle design cycle, global prices for electrification-

enabling materials rose along with oil.

2003 vs. 2008 Spot Price Index

OPEC is not the only cartel paying attention

9©Copyright 2008 The Martec Group, Inc. All Rights Reserved

Will the PHEV community prove technology developed for the Autobahn matches the way American’s really

drive?

New GM study (Savagian) based on GPS-monitored CA mid-size sedan owners.

•

Median CA driving intensity is between highway and US06 cycles

•

Researcher’s objective is to prove hybrids with larger batteries are required to match the way American’s really

drive

New GM study (Savagian) based on GPS-monitored CA mid-size sedan owners.

•

Median CA driving intensity is between highway and US06 cycles

•

Researcher’s objective is to prove hybrids with larger batteries are required to match the way American’s really

drive

10©Copyright 2008 The Martec Group, Inc. All Rights Reserved

30 year-old federal test procedures are unhinged from the nation’s objective of saving real barrels and real tonnes.

Designing vehicles to artificial test standards leads to:•

Technologies that over promise and under-deliver in real-world•

Attractive real-world technologies left on the table

Designing vehicles to artificial test standards leads to:•

Technologies that over promise and under-deliver in real-world•

Attractive real-world technologies left on the table

City Hwy

Real World

Off-Cycle

US06

PHEV Study

2/3 Fuel Used

City Hwy

Societal PromiseOn-Cycle

CAFE Test

55%45%

City Hwy

109th CongressH.R. 1103

A BILLFuel Efficiency Truth inAdvertising Act of 2005

EPA RevisedSticker

43%

57%

11©Copyright 2008 The Martec Group, Inc. All Rights Reserved

2 vehicles making a similar promise to society, but the off-cycle delivery is substantially different.

Real World vs. Lab World

mpg

Camry HEV Jetta TDI

CAFE Sticker US06 CAFE Sticker US0624

28

32

36

40

44

48

52

- 16%- 16%

- 35%- 35%

- 23%- 23%

55/4555/45

- 26%- 26%

43/5743/57

12©Copyright 2008 The Martec Group, Inc. All Rights Reserved

The hybrid value equation is built on stop & go driving conditions, where brake energy is captured.

Jetta TDI

ULEV-II certification•

49.4 ft.2

footprint•

Sticker city:

30 mpg•

Sticker highway:

40 mpg•

43/57 combined:

35 mpg

ULEV-II certification•

49.4 ft.2

footprint•

Sticker city:

30 mpg•

Sticker highway:

40 mpg•

43/57 combined:

35 mpg

Camry HEV

AT-PZEV (SULEV) certification•

54.4 ft.2

footprint•

Sticker city:

33 mpg•

Sticker highway:

34 mpg•

43/57 combined:

34 mpg

AT-PZEV (SULEV) certification•

54.4 ft.2

footprint•

Sticker city:

33 mpg•

Sticker highway:

34 mpg•

43/57 combined:

34 mpg

13©Copyright 2008 The Martec Group, Inc. All Rights Reserved

Societal benefit of a diesel ULEV vs. an AT-PZEV.

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

WTW CO2

WTW Fossil Fuel

WTW Petro Fuel

Total NOx

Total PM10

Based on California Energy Commission study, June 2007.

CA WTW Benefits Over Life of the Vehicle (B10 and E10 Fuel)

Jetta TDI Savings vs. Camry HEV

Die

sel V

ehic

le O

ver/(

Und

er)

HEV

Policy

Parity

Monetized using NHTSA2008 Values

$27 $275 $33 $4

14©Copyright 2008 The Martec Group, Inc. All Rights Reserved

Clean Diesel Miles per Dollar Index©

0.6

0.8

1

1.2

1.4

1.6

1.8

Jun-9

8Ju

n-99

Jun-0

0Ju

n-01

Jun-0

2Ju

n-03

Jun-0

4Ju

n-05

Jun-0

6Ju

n-07

Jun-0

8

Gasoline Parity

Miles per Dollar in a Clean Diesel Vehicle as an Index to Gasoline

1.235MoreClean Diesel Miles/$

15©Copyright 2008 The Martec Group, Inc. All Rights Reserved

Both consumers and the nation win with clean diesel.

Summary

1.

To expand American prosperity, policies must achieve the greatest good at the lowest societal cost.

2.

To maximize petroleum and GHG savings from the light duty fleet,

focus technology where the most fuel is consumed.

•

High speed/high load drivers•

Who accumulate the most miles per year

3.

Measuring fleet fuel consumption and GHG emissions with antiquated test

procedures will not align with:

•

A society that consumes 2/3rd

of all fuel in non-urban use•

Policy makers who will be accountable in barrels and tonnes•

Manufacturers who must survive in this “wedge”

4.

To give consumers –

and society –

the best value for money, focus on fuel efficiency solutions that deliver:

•

Best drivability•

Lowest variable cost increase•

Highest demonstrated residual value performance

martecgroup.com