Automotive OEM and Industry Trends

GaryMParsons4March2016AutomotiveOEMandIndustryTrends©2016ChevronOroniteCompanyLLC.Allrightsreserved.AEOOEMFocusAreaforNextDecadeTotalCostofOwnershipandConservationofResourcesExtendedServiceandDurabilityFuelEconomy©2016ChevronOroniteCompanyLLC.Allrightsreserved.2FuelEconomyDrivesTechnologyImplementationDrivingCyclesNEDC,FTP,WHTC,stop/startDownsizingDownspeedingFrictionReductionCombustionOptimizationFuelEconomyundertransient/transitionalconditionsNewmaterials,Surfacefinishes,coatingsEGR,VVT,HCCIHigherpowerdensity,directinjection,turbo-chargingNarroweroperatingrange,Lowspeed,highloadoperationDIandVISelection+BaseOilFormulatingTechnologies,oilfilmcontrol/wearSurfacechemistryandadditiveinteractions,surface“wetting”orfilmformationLSPI,aeration,corrosioncontrolLSPI,Oxidation,hightemperaturedepositcontrolLSPI,boundarylubricationFuelEconomy©2016ChevronOroniteCompanyLLC.Allrightsreserved.3FutureImpactsonAdditiveFormulationSupplementalWearInhibitorsNewFrictionModifiersNewDepositControlAdditivesNewOxidationInhibitorsNewNitrationInhibitorsTBNRetentionAdditivesAdditivesImpactedSustainabilityExtendedService/DurabilityFuelEconomyAdvancedThermalManagementUltraLowViscosityOilsBenefitsTurbo-DownsizingSurfaceTreatmentsforReducedFrictionandWearRenewableFuelsReducedMaintenanceandLongDrainsTotalCostofOwnership(TCO)©2016ChevronOroniteCompanyLLC.Allrightsreserved.InternalCombustionEnginesToRemainDominantInAllRegionsSource:Ricardo©2016ChevronOroniteCompanyLLC.Allrightsreserved.FuelEconomyWillContinueToDriveTechnologyIntroductionsForTheNextCoupleofDecades4.7%annuallyIncreasingfueleconomydemandswillcontinuetodrivelowerviscosityengineoilsintoallmarkets.Newviscositygrades,suchasxW-16arebeingdefinedandintroducedinsomemarkets7©2016ChevronOroniteCompanyLLC.Allrightsreserved.EngineLubricantisanInexpensiveMethodtoImproveFuelEconomy6.00.160.140.120.100.080.060.040.020.51.01.52.02.53.03.54.04.55.05.5FuelConsumptionReduction(%)%FCReduction/USDLowFrictionLubricantsCamPhasingEngineFrictionReductionCylinderDeactivationGasolineDirectInjection0Source:FromNorthAmericanFuelEconomyTesting,T.Miller,15thAnnualFuels&LubesAsiaConferenceDatafromU.S.DepartmentofTransportationReportRIN2127-AK29©2016ChevronOroniteCompanyLLC.Allrightsreserved.80102030405060708090100MY2009MY2013MY2014Source:U.S.EPAImplementationofFuelSavingsTechnologiesLightDutyVehicles–U.S.MarketIncreasingfueleconomydemandsaredrivingnewenginetechnologiesintothemarketatunprecedentedrates©2016ChevronOroniteCompanyLLC.Allrightsreserved.VehicleLightweighting–EngineDownsizingisaMajorComponentTheOEMtrendinmostpassengercarmarkets:Smallerdisplacement,higherpowerdensityenginesSmallerengines=higherloadfactorsChangingperformancedemandsonfuels,lubricants,andadditives3LV6(200HP)2L4cylinderTurbo(200HP)Downsized,higheroutputenginessaveweightandtakeuplessspace.However,theyplacegreaterdemandsonengineoils.©2016ChevronOroniteCompanyLLC.Allrightsreserved.10HowSmallisSmall?Ford1liter3-cylinderEcoBoost125HPEngineBlockWeight:52pounds(24Kg)©2016ChevronOroniteCompanyLLC.Allrightsreserved.SpecificPowerOutputHasIncreasedSignificantlyWhileFuelEconomyImproves©2016ChevronOroniteCompanyLLC.Allrightsreserved.Source:U.S.EPAHigherpowerdensityresultsinmorestressonoil13DownsizingandDownspeedingHigherStress©2016ChevronOroniteCompanyLLC.Allrightsreserved.GMvs.FordTwoDifferentApproachesToFuelEconomy•GM:makesbigenginesactsmall–activefuelmanagement•CylinderdeactivationinexistinglargeV6sandV8s•Cheaper,easier,upto7.5%fueleconomygain•Additionalgainsupto15%usingDynamicSkipfire•Ford:makessmallenginesactbig-Ecoboost•Directinjectionwithturboinsmallerdisplacementengines•Moreexpensiveandcomplicated,upto20%fueleconomygainAE,autonews.com©2016ChevronOroniteCompanyLLC.Allrightsreserved.15GasolineDirectInjection(GDI)PenetrationRateGrowing©2016ChevronOroniteCompanyLLC.Allrightsreserved.QualityofVehiclesandOilExtendLifeMedianU.S.PassengerVehicleAgeAsOfJanuaryEachYear5.06.07.08.09.010.011.012.013.020022003200420052006200720082009201020112012201320142015Fcst2017Fcst2019FcstVehicleAge,YearsCarsLightTrucksTotalLightVehiclesSource:R.L.Polk•2014totallightvehiclepopulation252million(up3.7MMor1.5%from2013)•Medianagevehicleis11.4yearsoldandhasmorethan130,000milesThequalityofvehiclesandengineoilshasimprovedsignificantlywhichallowsvehiclestostayinservicelonger.OldervehiclesareprimecandidatesforDIYorindependentworkshops.TheyarenottypicallyservicedbyOEdealers.17©2016ChevronOroniteCompanyLLC.Allrightsreserved.MigrationtoPremiumVehiclesU.S.Market18©2016ChevronOroniteCompanyLLC.Allrightsreserved.•PremiumvehiclesmorelikelytorequiresyntheticorOEMspecificoilsSource:BasedonmanufacturersSuggestedRetailPrice(MSRP)OEMOilDrainIntervalRecommendationsAreIncreasingOilLifeMonitorPre-GF-5OilDrainIntervals(miles)GF-5OilDrainIntervals(miles)GMYesAverage10KToward15KFordNo750010,000ToyotaSortof500010,000HondaYes7500~10,0007500~10,000ChryslerYes6000/3000(normal/severe)8000/5000HyundaiNo3750/7500(normal/severe)3750/7500(4800forturbo)NissanNo75007500VWYes10,00010,000MercedesYes15,00