1. : Excellent: Good: Marginal:No contribution or not acceptable H 2 Fuel Cell Gasoline Nat Gas Gasoline Hybrid Social Demand Customer Demand Tailpipe Emissions Efficiency (CO 2 ) Alt. Fuel Cost Infra- structure Diesel Technology ◎ ◎ ◎ ◎ ◎ ◎ ◎ ◎◎ ◎ ○ ○ ○ ○ ○ ○ △ △ △ △△ △ × × × × × × ○ ○ (tank) Current Evaluation of Power Plant Technologies ○ ○ ○ w/ home refueling Package (Volume, Wt., features) × (inc. range) △ ○ - (range)

2. 00 Insight03 Civic IMA Development History of Honda Hybrids 05 Accord IMA06 Civic IMA 60 mm thick, 10kW NiMH, 144v, 35 kg Air cooled also asymmetric windings + 30 % torque High strength material Soft, magnetic material Volume –30%, weight –6% Integrated cooling –32% weight, -20% size. Also more efficient inverter Internal magnet + resolver pickup, 12kW Magnet Silicon Steel Improved electrode New Current Collector Reduce internal resistance U-shape, 12-cell series module Volume –10%, weight –17% Power + 20% Condenser Integrated inverter, condenser, heat sink: –13% weight, -57% size High density coil windings High-performance magnets 15 kW, same size Inverter integrated with motor ECU Battery output power increased 30% 158v Improved cooling

3. Hybrid Synergies More efficient electric pumps and compressors –Beltless engine Extend operating windows for Atkinson cycle and cylinder deactivation Provide quasi-steady-state load conditions for HCCI/CAI operation (especially with CVT) E-turbo –High electric power – supercharger boost –When power is not needed, use exhaust energy to drive e-turbo and recharge battery

4. Potential Operating Modes Atkinson cycle Otto cycle Electric motor only CAI – Controlled Auto Ignition Assumes camless valve actuation and e-turbo

5. Consumer Features Plenty of electric power to do anything On-board electric generator –Construction, emergency power Individual climate-controlled seats Power everything Automatic load leveling and shock resistance Multiple video displays and high power sound Safety features – cameras, heads-up displays “Stealth” operation (military, police, crooks) No limit to the imagination

6. : Excellent: Good: Marginal :No contribution or not acceptable Gasoline Hybrid Social Demand Customer Demand Tailpipe Emissions Efficiency (CO 2 ) Alt. Fuel Package (Volume, Wt., features) Cost Infra- structure Diesel Technology ◎ ◎ ◎ ◎ ◎◎ ○ ○ ○ △ △ × × × × △ ○ ○ Mid-Term Evaluation of Hybrids vs. Diesels ○ - △ ○ - ◎ △ ○ - △ ○ - Diesels in wide-open rural areas – value highway FE and towing Hybrids everywhere else? – better city FE plus electric features Hybrid Cost down Synergies + customer features Diesel Emissions down, but cost up Diesel shift  cheap gasoline

7. Technology Conclusions Challenge is customer’s low value of fuel economy –Real cost of driving very low –Performance, utility, comfort, safety valued more highly –Most only consider fuel savings during ownership period Hybrid technology is progressing rapidly –Costs coming down –Synergies with other technologies developing –Consumer features will develop Crystal ball unclear –Improved conventional engines keep raising the bar –Fuel cells the endgame, but timing unclear (not near term) –CNG may appeal to a segment who dislikes refueling –Diesels for rural areas, hybrids for urban? –Multiple transmission designs likely

9. Barriers to Achieving Potential Fuel Economy Increases in Cars and Light Trucks Tradeoff with other attributes Declining fuel cost Consumers versus society

10. CAFE History Historical combined car and light truck CAFE Since 1987: Car CAFE up 0.9 mpg, light truck CAFE down 0.8 mpg LDT market share increased from 28% to 48% Combined CAFE decreased by 1.5 mpg

11. Effect of Attribute Tradeoffs - Cars Car Data from EPA’s 2003 FE Trends Report Fuel efficiency has increased by about 1.5% per year since 1987 However, this has all been used to increase other attributes more highly valued by the customer, such as performance, comfort, utility, and safety

12. Effect of Attribute Tradeoffs - LDT Light Truck Data from EPA’s 2003 FE Trends Report Fuel efficiency has increased by about 1.9% per year since 1987 However, this has all been used to increase other attributes more highly valued by the customer, such as performance, comfort, utility, and safety

13. Real Gasoline Price June 2004

14. Fleet Fuel Economy

15. Gasoline Cost per Mile

16. Real Fuel Cost - % of Disposable Income Per Capita Disposable Income from BEA, Table 2.1, Personal Income and It's Disposition

17. Willingness to Pay for FE J.D. Power Hybrid Vehicle Acceptance Study March 6, 2002 Press Release Consumer interest in hybrid vehicles increases as gasoline prices rise 30% of buyers would “definitely” consider - another 30% indicate a strong consideration Of these, 1/3 would buy even if fuel cost savings during their ownership period would be less than the extra cost of the hybrid option 2/3 would not pay more than fuel savings during ownership period

18. Customer Value of Hybrid Fuel Savings (Savings for the first 50,000 miles @ U.S.$1.80/gallon) Hybrid fuel economy increase 34 mpg baseline 23 mpg baseline 14 mpg baseline Small carMidsize carLarge truck + 20% + 40% + 80% $441 $756 $1,176 $652 $1,118 $1,739 $1,071 $1,837 $2,857 J.D.Power survey on hybrids found that “Consumers indicate a willingness to pay more – $1,000 to $1,500 – for a hybrid powertrain…”