Key automotive trends impacting the tire industry

Historic emission levels and future targets (in gCO2/km) in the EU 1 An increasing focus on CO2 emissions to foster development of green tires, high performing tires and recycling Use of old tires as fuel All season tires Carbon reduction targets are increasingly becoming part of corporate KPIs, driven by evolving emission norms. Historic emission levels and future targets (in gCO2/km) in the EU 2010 2015F 2020F Cementos Argos: Colombian cement firm rolled out a project costing US$50m, to use old tires as fuel for its cement plants in Columbia Michelin launched world’s first summer tire with winter certification It has highest European label “A” for wet braking and it is certified for winter use by ‘3- Peak Mountain Snow Flake’ symbol. Development in high performance green tires Hankook’s NPT completes speed test Versalis, Ecombine and EVE rubber institute, enter joint technology agreement to develop technology for high performance green tires. Green tires market has grown 30% per year since 2010. Hankook’s latest non- pneumatic tire (NPT), made using eco-friendly materials, completed ride and handling test Source: EMIS Intelligence News http://www.securities.com/php/search/doc?pc=AC&dcid=491059730&sv=EMIS&query_entry=advanced&search_mode=2&sort_by=date&keyword_any=innovation+innovative+technology&keyword_all=tire&display=1&change_selected_countries=1&change_selected_indus=1&range=365&title=2&abstract=1&similar=1&lang[]=en&rpp=25&refresh-filters=auto&controller=search&action=search&module=default&first_load_rpp=10 http://www.securities.com/php/search/doc?pc=ZZ&dcid=475188398&sv=EMIS&query_entry=advanced&search_mode=2&sort_by=date&keyword_all=tire+green&display=1&change_selected_countries=1&change_selected_indus=1&range=365&title=2&abstract=1&similar=1&lang[]=en&rpp=15&refresh-filters=auto&get_rest_results=1&controller=search&action=search&module=default http://www.securities.com/php/search/doc?pc=KR&dcid=492938380&sv=EMIS&query_entry=advanced&search_mode=2&sort_by=date&keyword_any=innovation+innovative+technology&keyword_all=tire&display=1&change_selected_countries=1&change_selected_indus=1&range=365&title=2&abstract=1&similar=1&lang[]=en&rpp=25&refresh-filters=auto&controller=search&action=search&module=default&first_load_rpp=10 http://www.carscoops.com/2015/03/michelin-launches-worlds-first-summer.html Source: News articles, EMIS Intelligence News Global tire industry analysis

Implications for the tire industry 2 Shared mobility to increase tire replacement demand for fleets and impact all facets of branding, marketing and operations The global car sharing market is expected to witness huge growth driven by consumer awareness and increasing number of vendors offering mobility services Implications for the tire industry Higher vehicle utilization to increase replacement demand A shift in customer base towards fleets and mobility service providers An increase in vehicle utilization due to car sharing will increase replacement demand for tires As car sharing replaces private cars with fleet vehicles, there will be a marked rise in replacement demand from fleets A shift in branding, marking and selling strategies A shift in branding, marketing and operational strategies High levels of commoditization in the tire industry due to lack of customer touch points will lead to an increased focus on tire technology and design Increased focus on reducing costs as profitability declines due to increasing bargaining power of larger customers (fleets) Source: Technavio analysis, EY analysis E: estimate Global tire industry analysis

Implications for the tire industry 3 Increasing prominence of electric and hybrid vehicles to result in advances in tire technology aiding the charging of electric vehicles Rapid pace of development in battery technology and increasing awareness of environmental benefits is expected to result in a huge increase in electric vehicle sales Implications for the tire industry Development of tire technology aiding electric vehicle charging Increased focus on reducing rolling resistance and aerodynamics to increase electric vehicle range CAGR (2014-20): 29.9% Goodyear BH03 concept tire A concept tire from Goodyear that generates electricity by converting the heat it builds up while driving The tire also has a thermo-piezoelectric layer, can also collect heat when not moving Bridgestone concept tire for BMW i3 Bridgestone has developed specialized tires using ologic technology, which capitalizes on the synergies of a large diameter coupled with a narrow tread design. The tire delivers significant improvements in aerodynamics and rolling resistance Source: Navigant research, EY analysis E: estimate Global tire industry analysis

Implications for tire manufacturers 4 Emerging manufacturing technologies such as 3D printing to have implications for tire manufacturers across the product characteristics and supply chain Huge growth expected in the 3D printing market over the next five years Current applications of 3D printing in the tire industry Creating new intricate tread designs Developing molding parts to manufacture unique high performance tires Rapid prototyping to increase speed to market Michelin 3D printing joint venture Michelin formed a JV with Fives, an industrial engineering group to develop industrial machines and production shops using metal 3D printing Implications for tire manufacturers Formulating marketing strategies for custom-made tire designs for end consumers Increasing implications for licensing of 3D printable files for manufacturing tires Mass manufacturing of 3D printed tires to alter supply chain strategies due to reduction in inventory Source: Technavio analysis, EY analysis E: estimate Global tire industry analysis

Key growth drivers for automotive sensors 5 The fast growing connected car market will require tire manufacturers to build analytics capabilities to offer advanced prognostic services The connected car will generate huge amount of tire related data (tire pressure, tread depth, need for tire replacement) that will enable tire manufacturers to offer various services to customers in the field of tire maintenance and safety Implications for tire manufacturers Developing advanced cloud and data analytics capabilities Setting up analytics centers to interpret huge amount of data generated from tire sensors New revenue streams in the form of data driven tire maintenance packages Increasing revenue from services in the field of predictive maintenance will require modified product and operational strategies Key growth drivers for automotive sensors Increasing demand for connectivity and informed decision making by customers. Stricter government norms on fuel emissions and vehicle efficiency drives the growth for sensors such as air pressure, vehicle speed, and throttle position. Managing cyber security threats related to tire data Setting up of new functional units to manage security and use of customer data related to tire performance Source: Technavio analysis, EY analysis E: estimate Global tire industry analysis