What Does the Future Hold for Advanced Technologies? John German American Honda Motor Co., Inc. Advanced Powertrain Forum August 5, 2005 I will start off discussing Honda’s commitment to bringing environmental technologies and products to market. Then I’ll switch to discussing drivers for and barriers to bringing these products to market. Hopefully, this will help to illustrate the complexity of the climate change and transportation issue. As usual, I have way too many slides, so hang on.

3 Issues for the Future Automobile: Energy Supply & Demand Sustainability Climate Change But going forward, what are the key “green issues” facing our industry? Clearly, they are: - the Sustainability of Energy (both supply and demand) - Climate Change concerns - and Urban Air Quality Urban Air Quality

Transportation’s Social Issues Key Issues Energy Sustainability Social Concerns Climate Change Air Pollution These three issues are not static, but will change over time, with Air Pollution becoming less of a concern, and the issues of climate change and energy sustainability increasing in terms of social priorities.

Honda is Committed to Clean and Efficient Gasoline Vehicles Technically advanced F.E. leading models in the market Popular mass-market models with continual efficiency improvement Highest CAFE of major OEMs Honda is committed to contributing to mitigation of GHG emissions through technology progress. Honda believes it is our responsibility to develop and offer efficient products in the market. We have been doing this and will continue to do so. While our commitment is perhaps most visable with our hybrid gasoline-electric vehicles, it also extends to introducing emission and fuel effiient technology across all of our products.

Honda’s Environmental Leadership 1975 Civic CVCC 1st to meet ’70’s Clean Air Act, without a catalyst 1986 Civic CRX-HF 1st to top 50-mpg mark 1990 VTEC engine introduced Honda’s history of environmental vehicles has involved focusing our investment and efforts on those technologies we believed have high real world potential. These efforts have yielded results, and valuable lessons. Seemingly-incompatible achievement of -- 1. Strong performance 2. Low emissions 3. High fuel economy

Honda’s Power Train Roadmap FCV Hydrogen fueled FCV Alternative Fuel Vehicle + Improvement of ICE Efficiency / CO2 Reduction Honda continues to work on improving fuel economy by advancing gasoline engine technologies. One example is Honda’s application of variable valve timing, or VTEC, which we started in 1991. We introduced our first hybrid vehicle, the Insight, in 1999, equipped with Honda’s unique Integrated Motor Assist system, called “IMA”, and have adapted the system to the Civic and the Accord V6. Starting in 2002, we introduced a new generation of gasoline engines, the i-VTEC series, which adds cam phasing and DOHC. Simultaneously, we have continued development of CNG and fuel cell technologies I. C. Engine Technologies Accord I M A Civic IMA I M A Integrated Motor Assist CNG INSIGHT i-DSI C V T i-VTEC VTEC-E 1990 2000 2010 2020

Honda’s Building Blocks for the Future CNG Future Building Blocks Working with Government Understanding Fleet Customers Infrastructure Challenges Gaseous Fuel know-how PURE ELECTRIC Future Building Blocks EV know-how Infrastructure Issues Home Refueling Customer Habits Honda’s approach to vehicle technology and alternative fuels is based on establishing fundamentals we can build on for future transportation options. The super clean gasoline vehicles promote catalyst know-how, and will help assure healthy air quality goals are met in the near term, (Press ENTER – this is a slide which builds) The battery EV development has promoted electric component know-how, and the value of home refueling. Natural gas vehicles promote gaseous fuel know-how and offer a clean and economical alternative to petroleum. CLEAN GASOLINE Future Building Block LEV, ULEV, SULEV Leadership Infrastructure is perfect Reasonable cost Catalyst technology

Honda’s Building Blocks for the Future CNG HOME REFUELED AFV Combines CNG with BEV attributes: Home Refueling As Clean as a BEV Lower Cost potential Future Building Block: Potential Infrastructure Solution Gaseous Fuel know-how PURE ELECTRIC Combines BEV with ULEV Infrastructure is perfect Cost is affordable Good Customer Acceptance Future Building Block: Electric Energy Mgmt & Safety... GASOLINE-ELECTRIC HYBRIDS Some of the positive learnings from EVs and CNG combine to enable home refueling of Natural Gas Vehicles, as a way to expand the practical use of AFVs to the consumer market. (press ENTER – this is a slide which builds) And, combining the technology of our efficient gasoline vehicles with EV know-how has enabled the super-clean, super efficient hybrids now offered. CLEAN GASOLINE

GASOLINE-ELECTRIC HYBRIDS Honda’s Future Dream CNG HOME REFUELED AFV FUEL CELL VEHICLES PURE ELECTRIC GASOLINE-ELECTRIC HYBRIDS Built on Core Honda Technologies: EV and HEV vehicle know-how Gaseous Fuel know-how Catalyst know-how Infrastructure innovation Technology innovation (Ultra-Cap) The experience with home refueled AFVs and with Hybrid technology helps provide the practical know-how that can help us succeed with fuel cell vehicles and a hydrogen infrastructure in the long term. It is the steps we take today, that move us most effectively down the road of sustainable transportation. CLEAN GASOLINE

Conventional Technology

Honda VTEC Combustion: (Variable valve Timing and lift, Electronically Controlled) HIGHER EFFICIENCY LOWER EMISSIONS GREATER PERFORMANCE Application % 50% One of the effective technologies for improving combustion is variable valve control. Honda calls it “VTEC”. This can help promote stable, lean operation during cold engine operation before the catalyst is active to reduce emissions. It also can be used to reduce fuel consumption through increased fuel efficiency. It is now applied to most of our power plants, including our larger trucks such as the 7-passenger, 260 horsepower Acura MDX Sport Utility Vehicle. This vehicle is already meeting EPA’s future Tier 2 bin 5 standard. That makes it the cleanest gasoline truck in the world. ‘91 ‘95 ‘03

Variable Cylinder Management Accel 6 Cylinder operation Cruise 3 Cylinder operation This chart shows a typical pattern of the speed, acceleration, and deceleration of a vehicle running. We roughly assumed that the vehicle would run in this red region with three cylinders, and in the other regions with six cylinders. Decel Vehicle speed

Honda Announced Improvements 2006 Civic VTEC Delays intake valve closure timing during cruising and other low-load conditions Throttle-by-wire used for larger throttle opening and a major reduction in pumping loss Switches valve timing for excellent acceleration Advanced VTEC Continuously variable intake valve timing and lift + 13% efficiency (vs. 2005 i-VTEC engine Advanced VCM Increased flexibility to expand range of driving conditions Improved active control engine mounts + 11% efficiency (vs. 2005 Honda V-6 engine)

Transmission Advances Computer controls are enabling a variety of improved transmission designs Dual-clutch automated manual Smooth shifting and potentially cheaper But launch concerns (no torque converter), huge investment Continuously Variable Transmission (CVT) Excellent city efficiency and extremely smooth Can deliver steady-state engine speeds to facilitate HCCI But torque limited, highway efficiency lower (belt friction), huge investment Improved shift points and lock-up strategies Low investment Lapillier 6-speed automatic Not yet clear which is most cost-effective – all may co-exist

Incremental FE Technology Engine technology High specific output (including 4 valve/cylinder) Variable valve timing/lift Cylinder deactivation Direct injection Precise air/fuel metering Transmission efficiency 5/6 speed-AT/6-speed MT CVT Dual-clutch automated MT Reduced losses Lightweight materials Low drag coefficient Low resistance tires Lower accessory losses Cost and value issue These technologies are continuously being incorporated into vehicles. However, consumers value other attributes more highly, such as performance, safety, utility, and luxury. Putting in technologies just to improve fuel economy may not be valued by customers. Fuel Economy Improvement - ??? Depends on how much is already incorporated into fleet and synergies (or lack of synergy) between technologies

Worldwide Fuel Control On a systems basis, good fuel is needed to enable many technologies Growing countries, such as India and China, need to improve fuel quality Sulfur Heavy metals Aromatics Deposit additives etc

Diesels