Provides background information on clean technology in the automotive industry with a focus on transaction activity

1. GLOBAL POWERTRAIN AND CLEAN TRANSPORTATION
OVERVIEW
2012
Denver • Pittsburgh
Boise • Boston • Burlington • Chicago • New York • Orange County • San Francisco • São Paolo • West Palm

2. DISCLOSURES AND DISCLAIMERS
THE HEADWATERS MB POWERTRAIN AND CLEAN TRANSPORTATION OVERVIEW 2012 IS NOT AN ANALYST REPORT OR PROSPECTUS AND
IS NOT INTENDED TO PROVIDE BUY-SELL RECOMMENDATIONS REGARDING ANY SECURITY OR COMPANY DISCUSSED WITHIN. WHILE
EVERY REASONABLE EFFORT HAS BEEN MADE TO UTILIZE VERIFIABLY FACTUAL INFORMATION, NO INVESTMENT DECISION SHOULD BE
UNDERTAKEN BASED UPON THE INFORMATION PRESENTED OR DISCUSSION CONTAINED WITHIN. IN THE EVENT OF CLEAR FACTUAL
INNACURACY, PLEASE CONTACT HEADWATERS FOR PROMPT REVIEW.
THIS DOCUMENT IS EDITORIAL IN NATURE AND CONTAINS FORWARD LOOKING INFORMATION REGARDING THE STATE OF MARKETS AND
FINANCIAL PERFORMANCE OF COMPANIES THAT MAY NOT ACCURATEY REPRESENT CURRENT OR FUTURE PERFORMANCE.
THE ANALYSIS AND DISCUSSION PRESENTED IN THIS DOCUMENT IS THE OPINION OF HEADWATERS MB ALONE. NO THIRD PARTY,
WHETHER CITED OR NOT, SHALL BE RESPONSIBLE FOR THE STATEMENTS MADE OR USE OF INFORMATION WITHIN. REASONABLE
EFFORT HAS BEEN MADE TO ATTRIBUTE CREDIT TO THE SOURCES AND OWNERS OF THE INFORMATION CONTAINED IN THIS DOCUMENT.
IF AN OMMISSON HAS BEEN MADE, PLEASE CONTACT HEADWATERS FOR PROMPT REVIEW.
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HEADWATERS MB SHALL BEAR NO RESPONSIBILITY FOR THE UNAUTHORIZED OR INNAPROPRIATE USE AND DISTRIBUTION OF THIS
DOCUMENT. IF YOU HAVE RECEIVED THIS DOCUMENT IN ERROR OR WITHOUT KNOWLEDGE OF ITS PURPOSE, SCOPE AND INTENDED
AUDIENCE, PLEASE CONTACT HEADWATERS MB IMMEDIATELY.
2

3. TABLE OF CONTENTS
1. Powertrain Practice ………………………. 4
2. Industry Overview ………………………. 9
3. HEV/EV Technology …………………........ 26
4. Batteries ………………............ 33
5. Natural Gas Vehicles ………………………. 42
6. China ………………………. 47
7. India ………………………. 52
8. Brazil ………………………. 58
9. About Headwaters ………………………. 64
3

4. POWERTRAIN PRACTICE
4

5. POWERTRAIN PRACTICE
WHO WE ARE
Anant joined Headwaters after several years in investment banking sourcing capital for early and growth
Anant Vashi stage companies.
Managing Director Prior to investment banking, Anant worked with Sun Mountain Capital, a $90 million New Mexico-based co-
505.690.3561 investment fund focused on emerging technologies and economic development within the state. Prior to that,
Anant worked as a Senior Associate for Mesa Capital Partners, a private equity fund which invests in growth
avashi@headwatersmb.com
opportunities in the service, manufacturing and technology areas.
FOCUS: Anant began his private equity career with MWV Pinnacle, a $23 million fund mandated to invest in minority
owned or managed companies. He also spent five years as a proprietary equity trader for Electronic Trading
Powertrain Technology Group, LLC. Anant earned an MBA from the Weatherhead School of Business at Case Western Reserve
Clean Transportation University, an MA in Economics from the New School University in 1999 and BA in Liberal Arts from St. John’s
Automotive Supply Chain College in Santa Fe, NM
Peter Nam Peter Nam, Director, joined Headwaters from Kerlin Capital, where he served as a Vice President providing
strategic advisory and merger and acquisition services to middle market companies across a broad range of
Director industries.
949.679.8550 Prior to that, he served as a Vice President at vFinance Investments specializing in mergers, acquisitions, and
pnam@headwatersmb.com private placements of debt and equity for emerging growth technology companies.
Peter began his investment banking career with Credit Suisse First Boston in their Global Technology Group
FOCUS: focusing on mergers and acquisitions. Subsequent to CSFB, he also worked in the investment banking group
Industrial Technology at Robertson Stephens. Peter graduated with a BA in Economics from the University of California, Berkeley.
Asian Cross Border Transactions
John Ippolito, Managing Director, joined Headwaters in 2010 from Axia Advisors, a middle market investment
John Ippolito banking firm he co-founded in 2004 that focused on industrial technology markets.
Managing Director He has over fifteen years experience advising private and public companies on M&A and capital formation,
781.273.6062 both domestic and internationally. Prior to Axia Advisors, he was head of M&A at H.C. Wainwright, a full
jippolito@headwatersmb.com service investment banking firm that served technology, healthcare and industrial growth companies.
Before H.C. Wainwright, he was Managing Director at C.W. Downer & Company, where he helped establish a
FOCUS: cross-border sell-side practice. Before becoming an investment banker, he held senior management
positions with several companies serving the factory automation marketplace. Mr. Ippolito earned a B.S.
Industrial Technology Industrial Engineering degree with Highest Distinction from Purdue University, and an MBA from Harvard
Process Automation Technology Business School.
Sensors and Instrumentation
5

6. POWERTRAIN PRACTICE
WHERE WE FOCUS
International OEM’s and suppliers
TIER 1 suppliers should have
are starting to look at the US
exposure to multiple clean
market for technology acquisition.
powertrain technologies. This
Technology providers should
means M&A beyond the core, and
target exit now as new powertrain
it might mean buying at pre- Batteries
platforms are still developing .
commercial stages. Digital controls
Electric motors
Fuel injection
Sensors
Vehicle intelligence
Regeneration/Flywheel
Super/Turbo charging
Cylinder control
Lightweighting
Emissions
Well capitalized TECHNOLOGY
PROVIDERS seeking revenue
TIER 2 suppliers should look should look to acquire
actively at mergers to broaden established Tier 2 suppliers with
capabilities, diversify customer comparable legacy products to
base and strengthen financial jumpstart OEM activity
positions, including foreign
targets.
6

7. POWERTRAIN PRACTICE
WHAT WE SEE
Darker color represents current strength in the value chain
Indicates possible strategic transactions CNG EQUIPMENT
MANUFACTURERS
AUTO OEMS
BATTERY
MANUFACTURES
MARKET PROVEN EV
MANUFACTURERS
CNG SERVICES
COMPANIES
LARGE MULTI-INDUSTRY
TECHNOLOGY INTEGRATORS
POWERTRAIN
EV COMPONENT
SYSTEMS MANFUFACTURERS
INTEGRATORS VEHICLE CHARGING
INFRASTRUCTURE
TIER 1 MANUFACTURERS BRIC
ENGINEERING
FIRMS
SPECIALIZED
ENGINEERING
VALIDATED FIRMS
POWERTRAIN
STARTUPS
7

8. POWERTRAIN PRACTICE
WHAT WE DO
Investment Banking
Mergers and Acquisitions Capital Acquisition
• Stock/Asset sales • Private Equity/Venture Capital
• Divestitures • PIPES
• Buy-side engagements • Senior/Mezzanine Debt
• Project finance
Recapitalizations Cross Border Transactions
• Debt restructuring • Joint Ventures
• Stressed/Distressed situations • Licensing
• Management buyouts
Private Equity Family Office Capital
HCP invests exclusively in Headwaters client Family Office Direct Investment Services (FODIS) is designed to provide
companies and has the flexibility to play anywhere on business-owning families or Family Offices with access to Headwaters’
the balance sheet. With HCP’s limited partners, we’ve integrated business model, national network and market intelligence to
built a major capacity to handle everything from enhance their deal-origination process, optimize investments and exits,
complex distressed transactions to growth equity and strengthen oversight and monitoring of their private-company
investments in strong, emerging or transitional investments.
companies. We’re comfortable with virtually every
As part of FODIS, we can oversee, manage and report on behalf of Family
form of debt and equity, and we have restructuring
Offices, and we can also serve as a syndicate agent when multiple Family
experts onboard who can help you work through what
Offices combine to provide equity capital to a segment-leading business.
might have to happen at your company as together we
process the difficulties of the last few years.
8

9. INDUSTRY OVERVIEW
9

10. INDUSTRY OVERVIEW
THEMES
• It’s all about the “Mash-up”. OEM’s that can combine and synchronize best of breed
technologies will stay ahead in MPG performance and remain flexible against platform
obsolescence.
• OEM’s will begin to explore open source engineering, pushing development beyond the
castle walls.
• Customers will assume higher MPG’s as the norm, leaving non-participating manufacturers
at a disadvantage, even in high performance categories
• Powertrain suppliers will broaden geographic reach, acquiring smaller suppliers as well as
new technologies.
• Global M&A will focus on technology acquisition and supply chain efficiency.
• BRIC M&A will continue to consolidate small parts suppliers, localizing supply chain and
importing technology
• HEV and diesel will be near term winners; EV will pick up beyond 2015 as next generation
batteries enter commercial production and battery costs decrease
10

11. INDUSTRY OVERVIEW
2015 PROJECTIONS
• Global auto sales CAGR will exceed 3%; US unit sales to decline below 12MM
• Chinese auto companies enter western markets with multiple models
• Hybrids to gain market share, nearing 7% penetration due to Plug-in introduction and lower
battery costs
• Electric vehicles enter the market in force, but “range anxiety” keeps unit sales below
100,000 in 2015
• EV batteries average 150 miles per cycle, and at half cost
• Conventional IC fuel economy average to exceed 30 mpg through new engine design, efficient
fuel management and vehicle weight reduction
• Proprietary component makers drive M&A as powertrain platforms diversify and consolidate
geographically
• Natural gas approaches 2% penetration in US commercial truck sales
• Independent EV companies consolidate to survive; major OEM’s dominate EV
• Major OEM’s actively acquire venture stage technologies
11

12. INDUSTRY OVERVIEW
TOP 25 AUTOS STRENGTHEN FINANCIALLY
Average Revenue ($MM) Average Market Cap ($MM)
80,000 35,000
70,000 30,000
60,000
25,000
50,000
20,000
40,000
30,000 15,000
20,000 10,000
10,000 5,000
0 0
2006 2007 2008 2009 2010 2006 2007 2008 2009 2010
Average EBITDA ($MM) Average Working Cap ($MM)
8,000 8,000
7,000
6,000 6,000
5,000
4,000 4,000
3,000
2,000 2,000
1,000
0 0
2006 2007 2008 2009 2010 2006 2007 2008 2009 2010
Source: Cap IQ
12

13. INDUSTRY OVERVIEW
US DEMAND WILL MODERATE
Annual US Light Vehicle Sales (thousands of units)
15,000
2015
Headwaters Projections*
14,000
13,000
12,000
11,000
10,000
9,000 * Assumes 2012‐2013 US
GDP contraction of 0‐1%
8,000
Sources: Research and Innovative Technology Administration; Motor Intelligence
13

14. INDUSTRY OVERVIEW
BUT CHINA WILL DRIVE GLOBAL SALES
New Passenger Vehicles Sales (millions of units)
16
14
12
10 US
Western Europe
8 China
India
6 Brazil
4
2
0
2008 2009 2010 2011(p)
Source: Scotiabank Group, Global Auto Report, 6/21/2011
14

15. INDUSTRY OVERVIEW
THE US CUSTOMER SEEKS VALUE
% of US Annual Family Income Spent on a New Vehicle vs.
Average Gasoline PPG (2005 $)
Car spend Fuel Price
60% $3.50
55% $3.00
50%
$2.50
45%
$2.00
40%
$1.50
35%
$1.00
30%
$0.50
25%
20% $0.00
Source: US Department of Energy, via Ward’s Automotive Group
15

16. INDUSTRY OVERVIEW
ENGINE SIZE DROPS
US Light Vehicles Market Share by # of Cylinders
70%
60%
50%
40%
8 Cylinder
6 Cylinder
30%
4 Cylinder
20%
10%
0%
Source: Environmental Protection Agency
16

17. INDUSTRY OVERVIEW
ENGINE PERFORMANCE REFOCUSED ON MPG
Average US Light Vehicle Horse Power per Cubic Inch Displacement vs. Average MPG
1.30 24.0
1.20
22.0
1.10
1.00 20.0
0.90
18.0
0.80
16.0
0.70
0.60 14.0
0.50
12.0
0.40
0.30 10.0
Source: Environmental Protection Agency; US DOE
17

18. INDUSTRY OVERVIEW
PROPELLED BY TECHNOLOGY
Estimated % MPG Improvement over 25 mpg Gasoline Equivalent
600%
500%
Averaged Hybrid (1)
400%
Averaged Clean Diesel (1)
Toyota Prius (2)
300%
Plug‐In Hybrid (3)
All Electric (4)
200% Plug‐In Diesel Hybrid (5)
Next Gen Electric (6)
100%
0%
1
Notes:
1 – Averaged mpg benefit over equivalent gasoline models (i.e. Camry vs. Camry hybrid); EPA data
2 – 2011 production model
3 – Average based upon Chevy Volt and Plug-In Prius evaluations
4 – Based upon official Nissan Leaf combined mpg rating
5 – Based upon Volvo V60 DHEV evaluations
6 – Estimate based on near market CODA, Tesla and BYD models
18

19. INDUSTRY OVERVIEW
OEM PLAYERS
-Plug-in HEV -Plug-in HEV -Plug-in HEV -Plug-in HEV
-Clean Diesel -EV -EV -EV
-EV -HEV -HEV -HEV
-HEV -Clean Diesel -Clean Diesel
CHEVY VOLT PRIUS CMAX E 300 BlueTEC
-Clean Diesel -HEV -HEV -Clean diesel
-Efficient Gas -EV -Plug-in HEV -Plug-in HEV
-Plug-in HEV
FIAT 500 INSIGHT SONATA JETTA TDI
-Efficient Gas -Clean Diesel -HEV -HEV
-Clean Diesel -HEV -Clean Diesel -EV
-EV -EV
MAZDA3 SKYACTIV i3 VOLVO V60 MiEV
-Clean Diesel -EV -EV -Efficient Gas
-HEV -HEV -HEV -HEV (2013)
-Plug-in HEV -Plug-in HEV
RANGE_e e6 LEAF IMPREZA
-Plug-in HEV -EV -EV -EV
-Clean Diesel
KARMA MODEL S CODA REVA
-HEV -Efficient Gas -Clean Diesel -EV
-EV -HEV -HEV -HEV
-Plug-in HEV -EV
-Plug-in HEV
FLUENCE CAYENNE C-ZERO/iON BENNI MINI
19

20. INDUSTRY OVERVIEW
PARTNERING NEW TECHNOLOGIES
“Intel Inside” or “Sorry, not invented here”?
20

21. INDUSTRY OVERVIEW
DRIVING TRANSACTIONS
2011 KPMG survey cites technology as the most likely reason for M&A
21

22. INDUSTRY OVERVIEW
WHY TECHNOLOGY M&A?
Innovation will trump brand
• Balance sheet strength has returned to OEM’s
• Global long term industry growth certainty
• Most OEM’s and Tier 1 players are geographically diversified to benefit from overall growth
• Product innovation occurring more rapidly and accelerating
• Very decentralized technology landscape across multiple powertrain platforms (IC, Diesel, HEV, EV,
PHEV), no one has a lock
• Proprietary technology crucial for differentiation
• Low cost Chinese manufacturers catching up in design and reliability – looking to western export
markets
• Chinese and Indian OEM’s looking actively at western technology acquisition for mpg improvement , cost
reduction and competitive advantage
• Innovation driving customer acceptance – TESLA, FISKER, CODA, BYD
OEM and Tier 1 manufacturers will need to actively acquire technologies
across powertrain platforms to differentiate, maintain relevance and avoid
being shut out of the next performance benchmark
22

23. INDUSTRY OVERVIEW
INDUSTRY METRICS
Powertrain Valuation and Liquidity (Average, 65 companies)
2.00
1.75
1.50
1.25
Revenue Multiple
1.00 Current Ratio
0.75
0.50
0.25
0.00
2007 2008 2009 2010 Jul‐11
Source: Capital IQ
23

24. INDUSTRY OVERVIEW
TRANSACTIONS
Powertrain Middle-Market Transactions 2007-2011 (Average values, $MM)
$1,208 $1,416
$215 Mergers and
$116 $127 $114 Acquisitions
Private
Placement
Transaction Value Target EBITDA Target Revenue
Implied EBITDA Multiple: 12.09
Implied Revenue Multiple: 1.16
Source: Capital IQ
24

25. INDUSTRY OVERVIEW
TRANSACTION FOCUS
GKN acquires Getrag’s Driveline Products Business
Transaction Summary:
On July 27, 2011, GKN announced its agreement to acquire the all-wheel drive (AWD) components
businesses of Getrag KG, a privately held German company. Getrag Driveline Products engages in the
supply of geared driveline products, and is currently targeting the future supply of transmission and axle
products for hybrid and electric vehicle drivetrains. As part of the transaction, GKN will be acquiring an
exclusive license to Getrag’s electric drivetrain technology for use in electric and certain hybrid vehicles,
primarily for Europe and the Americas.
Transaction Deal Values:
The acquisition cost will be £295mm (US$481mm). Getrag Driveline Products has an approximate
enterprise value of £280mm (US$456mm). For the last audited year ended 31 December 2010, Getrag
Driveline Products achieved consolidated sales of approximately £380mm (US$618mm), EBITDA of
£50mm (US$81mm), profit before taxation of £25mm (US$41mm) and gross assets were £250mm
(US$408mm).
Strategy:
Global production of AWD vehicles is forecasted to grow at above-market rates, reflecting the overall
increase in demand for crossover vehicles and compact SUVs. The acquisition of Getrag Driveline
Products will also allow GKN to take advantage of the increasing demand for electric and hybrid vehicles
as those markets develop.
Source: Center for Automotive Research
25

26. HEV/EV TECHNOLOGY
26

27. HEV/EV TECHNOLOGY
THEMES
• Plug-in Diesel / Gas technology will set near term fuel efficiency at 70+mpg while
maintaining performance
• Increased consolidation of hybrid powertrain component providers will increase output
capacity and reduce pricing
• Abundant battery supply will further reduce HEV pricing
• Most active M&A area – vertical integration of EV’s “battery – motors – controls”
• May see a M&A land grab by auto OEMS’s for the most promising battery technology
• EV’s will not eclipse HEV gross sales for decades, but will compete for the commuter
segment
• “Outside the home” charging infrastructure will be a long term bottleneck – How do you
make money in charging?
• HEV technology will dominate western car markets by 2025 with majority new light vehicle
sales
27

28. HEV/EV TECHNOLOGY
HYBRID SALES
US HEV Penetration Rate(light vehicles, units)
10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0% Headwaters
2015
Projections
3.0%
2.0%
1.0%
0.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: US Department of Energy, Alternative Fuels and Advanced Vehicle Center
28

29. HEV/EV TECHNOLOGY
EV SALES
US Electric Vehicle Sales Projections (units)
160,000
140,000
136,000
140,000
116,000
120,000
100,000 95,000
77,000
80,000
70,000
60,000
45,000 CAR Estimate
40,000
27,000 25,000 Headwaters Estimate
20,000 15,000
‐
2011 2012 2013 2014 2015
Source: Center for Automotive Research
29

30. HEV/EV TECHNOLOGY
MARKET EXPECTING FAST EV GROWTH
Revenue (LTM) Multiple
30.00x
25.13
25.00x
20.9
19.59 19.8
20.00x 18.95
18.25
TESLA
15.00x
FORD
10.00x
5.00x
1.2 1.08 1.12 1.13 1.06 0.97
0.00x
Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Aug‐11
Source: Capital IQ
30

31. HEV/EV TECHNOLOGY
BUT WHO WILL REAP THE REWARDS?
2012 FORD FOCUS ELECTRIC
Range: ~100 miles
Charge Time; ~4 hrs. @ 220v
Post Rebate Cost Estimate: ~$25,000
2012 TESLA S
Range: ~160 miles
Charge Time; ~8 hrs.@ 220v
Post Rebate Cost Estimate: ~$50,000
31

32. HEV/EV TECHNOLOGY
TRANSACTIONS
Private Placements 2005-2011 (Average investment round size, $MM)
60
40
31
24
Battery / Components Powertrain / Transmission Complete vehicle Total average
development
Source: Capital IQ
32

33. BATTERIES
33

34. BATTERIES
THEMES
• Lithium ion battery manufacturing capacity overbuilt for demand in the near term
• Several early advanced battery manufactures entrants will fail
• Diversified providers will consolidate technology platforms
• China will become the dominant auto battery manufacturing hub through scale and cost
advantage
• Technologies will advance rapidly and auto makers will shift providers quickly
• Customer concentration will be a big issue for most manufacturers
• Strong early stage M&A likely as technology is consolidated by battery leaders
• Optimal battery chemistry and performance will be reached within five years and the
industry will stabilize as EV demand picks up
34

35. BATTERIES
STATIONARY BATTERY METRICS
Valuation and Liquidity (Averages, 16 companies)
2.50
2.00
1.50
Revenue Multiple
1.00
Current Ratio
0.50
0.00
2007 2008 2009 2010 Jul‐11
Source: Capital IQ
35

36. BATTERIES
LITHIUM CHEMISTRY METRICS
Revenue Multiple (LTM)
40.00x
Valence Technology
35.00x
Advanced Battery
Technologies
30.00x
A123 Systems
25.00x
Ener1
20.00x
15.00x
10.00x
5.00x
0.00x
Source: Capital IQ
36

37. BATTERIES
LITHIUM CHEMISTRY METRICS
Revenues (LTM by quarter)
120.00mm
100.00mm A123 Systems
80.00mm
Ener1
60.00mm
Advanced Battery
Technologies
40.00mm
Valence Technology
20.00mm
0.00
Source: Capital IQ
37

38. BATTERIES
LITHIUM CHEMISTRY METRICS
Cash and equivalents ($, LTM average)
500.00mm
450.00mm A123 Systems
400.00mm
Ener1
350.00mm
Advanced Battery
300.00mm Technologies
250.00mm Valence Technology
200.00mm
150.00mm
100.00mm
50.00mm
0.00
Source: Capital IQ
38

39. BATTERIES
VERTICAL INTEGRATION STORIES
Founded in 2003 and backed by Elon Musk and high profile venture funds, TESLA pioneered the modern EV by taking an integrated
approach to battery and vehicle development based upon the 18650 Li-Ion cell. Strong vehicle design, deep pockets and excellent
public relations kept the start-up in a positive light through several years of battery development until the Roadster debut in 2008.
Range capabilities, durability and road testing validated the battery approach, leading to interest in its battery system. TESLA has
reported deals with TOYOTA, DAIMLER and FREIGHTLINER to utilize battery and powertrain systems for a variety of vehicle
applications ranging from mini cars to fleet vans. What’s next? TESLA’s public valuation puts it in a strong position to acquire other
battery platforms and technologies to diversify and strengthen its position.
Like TESLA, CODA AUTOMOTIVE has integrated battery and vehicle development from day one, although for CODA, the battery is king.
The company has developed a 120 mile range flat Lithium Iron Phosphate battery that will be initially manufactured by LIO Energy
Systems, a joint venture with Lishen Power Battery. Heavily reliant on supplier partners to remain capital efficient, CODA will sell
automobiles in California by the end of 2011. The more interesting strategic initiative is its recently announced partnership with Chinese
auto manufacturer Great Wall Motors. Great Wall will reportedly use the CODA battery system and other components for a range of
vehicles for export globally. Just a technology supplier, or could CODA become the US nameplate for this fast growing Chinese auto
maker?
Think before you leap… Lithium battery pioneer ENER1 jumped into the vertical integration game by investing heavily in
previously bankrupt THINK GLOBAL, the Norwegian EV manufacturer. Production delays, poor sales and accounting
issues plagued THINK, which again declared bankruptcy in June 2011. ENER1, which touts customers like Chinese Tier 1
auto supplier Wanxiang Group and car manufacturer Volvo, has endured mounting losses from operations, capital
investments and acquisitions. The company is currently restating financials and is under threat from NASDAQ delisting.
In a heated duel with competitor Ener1, lithium Ion battery maker A123 SYSTEMS won the right to supply the battery
system for the Fisker Karma high performance plug-in hybrid. Whether a quid pro quo was involved is uncertain, but
A123 also participated in a Fisker investment round in the amount of $23 million. Not withstanding the equity position in
Fisker, A123 is the prime battery supplier for several GM programs and Chinese auto company Shanghai Auto, indicating
that product quality and production capacity drove the Fisker decision.
39

40. BATTERIES
NANOTECHNOLOGY WILL DELIVER
Energy density may triple; Power density may increase 10x; Costs cut in half
Metals:
“Aluminum-Celmet increases the amount of positive active material per unit area. Sumitomo Electric indicates that in the
case of automotive onboard battery packs, such replacement will increase battery capacity 1.5 to 3 times. Alternatively, with
no change in capacity, battery volume can be reduced by one-third to two-thirds.”
“Envia has developed a cathode material based on inexpensive metals (including manganese) that stores more energy per
unit of weight than anything else in use today – twice the energy density of lithium cobalt oxide. Because of the material’s
stability at higher voltages, it is able to access high capacities with long cycle life. The combination of high capacity and low
cost metals helps to significantly lower the price per kilowatt-hour (kWh) of energy storage. By putting more energy in each
battery, the number of batteries required decreases – by 50% in Envia’s case, dramatically reducing the overall cost of the
application..”
Silicon:
“Nexeon has patented a unique way of structuring silicon so that it delivers extended cycle life and significantly increases
battery capacity. In contrast to carbon, Nexeon’s silicon anode materials have a much higher capacity for lithium and as a
result are capable of almost ten times the gravimetre capacity per gram (mAh/g).”
Material neutral:
“Xerion Advanced Battery is exploring a novel method of using nanotechnology to increase ion transport and energy
extraction to produce a new electrode architecture called StructurePore. This architecture is an electrode structure on the
sub-micron scale that consists of an open-celled, porous metallic lattice conformably coated with the active electrode
material. The StructurePore architecture has been demonstrated with prototype batteries using both Li-ion and NiMH
chemistries. “
Source: company websites
40

41. BATTERIES
TRANSACTIONS
Select Middle-Market Transactions 2007-2011 (Average values, $MM)
$233
$130
Mergers and
$42 Acquisitions
$18
$15 Private Placement
$5
Transaction Value Target EBITDA Target Revenue
Implied EBITDA Multiple: 10.06
Implied Revenue Multiple: 1.18
Source: Capital IQ
41

42. NATURAL GAS VEHICLES
42

43. NATURAL GAS VEHICLES
THEMES
• CNG (compressed natural gas) growing rapidly in India as third major fuel type for vehicles
with a 5 year 26% CAGR and is mandated for New Delhi’s public transit buses
• Pakistan, Iran, Argentina and Brazil are the largest users of CNG for vehicles, although
Brazil’s growth has stalled in favor of ethanol based fuels
• NG is a preferred alternative fuel for heavy trucks because of the economic cost benefit vs
hybrid technology or electric technology
• Major fleet operators including United Parcel Service have deployed hundreds of CNG
vehicles for local routes in the US market
• LNG (liquefied natural gas) is a potential substitute for diesel given 60% energy density ratio
and lower price. However, given infrastructure requirements, cost-benefit can be
challenging.
43

44. NATURAL GAS VEHICLES
TRENDS
Total NGV Sold (# of cumulative units)
8,000,000
7,000,000
6,000,000
5,000,000
ASIA‐PACIFIC
EUROPE
4,000,000
NORTH AMERICA
LATIN AMERICA
3,000,000 AFRICA
2,000,000
1,000,000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: International Association for Natural Gas Vehicles
44

45. NATURAL GAS VEHICLES
TRANSACTION FOCUS
FAB Industries and Enviromech Industries merge to form Agility Fuel Systems.
Summary:
On January 6, 2011, FAB Industries and Enviromech Industries merged to form Agility Fuel Systems, Inc. Both US
companies are leading providers of alternative fuel systems for the transportation industry. Together, Agility
manufactures and markets fuel systems, including compressed industrial gas systems, for heavy duty trucks, buses, and
specialty vehicles.
Transaction:
Cleantech PE firm Element Partners provided ~$22 million to facilitate the transaction and provide growth capital for the
combined entity. On a combined basis, Agility is thought to have approximately $50 million in annual sales. Valuation for
the transaction was not disclosed.
Strategy:
Fleet customers looking for scale implementations require advanced system engineering capabilities, installation
expertise, service support, equipment supply, fueling infrastructure, contingency planning and geographic coverage. By
combining, the two entities could solidify their US market leadership position through scale and capability.
End Game:
Given Element’s participation, Agility potentially sets up well for a strategic acquisition by a larger CNG player looking to
vertically integrate:
Westport (heavy duty engines)
Fuel Systems Solutions (machinery, autos, stationary)
Clean Energy Fuels (NG fuel supplier)
Source: Capital IQ
45

46. NATURAL GAS VEHICLES
TRANSACTIONS
Select Middle-Market Transactions 2007-2011 (Average values, $MM)
$99
$43
$4
Transaction Value Target EBITDA Target Revenue
Implied EBITDA Multiple: 11.06
Implied Revenue Multiple: 2.38
Source: Capital IQ
46

47. CHINA
47

48. CHINA
THEMES
Government Policy: 2009 Auto Industry Revitalization Plan
- Encourage manufacturer and supplier consolidation
- Focus on unit output and demand
- Acquisition of world-class technologies Chinese Automotive Transactions
- Subsidize “green” technology
- Establish brand equity for domestic producers
Accelerating M&A
- There have been 262 M&A transactions between 2007-2011 in the Chinese
automotive industry compared to 84 transactions from 2002-2006
- Nearly 185 of the 264 M&A transactions from 2007-2011 were auto part and
equipment companies, signaling very active supply chain consolidation
- Outbound cross-border deals to expand – Geeley acquires Volvo
182 Other
Chinese Consumers Prefer Foreign Nameplates Auto
- Quality, design and brand recognition more important than price for many Manufacturers
- Brand sales, June 2011:
Europe 22% Auto Parts &
Equipment
US 20%
Japan 18%
China 40% 58 54
Tier 2,3 Penetration 16
- Ford, in its Changan joint venture is putting a much greater emphasis on Tier 2 and 26
10
3 cities such as Chengdu, Sichuan, Suzhou and Jiansu, to capture the growth and
lack of automotive depth in these central growing locations 2002-2006 2007-2011
- Some tier 2 and 3 sized cities with over a million people don’t yet have Ford
dealerships Source: Capital IQ
Source: Detnews.com: Ford ‘close’ to upping stake in China venture: Aug 10
48

49. CHINA
ON HYBRID TECHNOLOGY
Chinese Execs pessimistic in near term; some OEM’s see opportunity
Honda will likely start producing electric-gasoline
Will Hybrid purchasing accelerate over the next 24 hybrid cars in China in "two to three years" if its sales
months? push succeeds, said Seiji Kuraishi, chief of Honda's
China operations. Honda plans to launch five hybrid
models next year: the Insight, the CR-Z, a hybrid
80%
version of the Fit, a significantly redesigned hybrid
version of the Civic and a hybrid model for Honda's
70% upper-scale brand Acura. All are small cars.
The Japanese auto maker is determined to make
60%
hybrid technology popular in China, Mr. Kuraishi said.
Current green-car technology efforts in China are
50% largely focused on electric cars rather than hybrids,
which use both electricity and gasoline
40% Yes The push comes as auto makers brace for stringent
No new Chinese fuel-economy standards expected to
30% be phased in over the coming years. Beijing has yet
to detail the requirements. But Mr. Kuraishi said the
20% company expects they will give its hybrids—and its
Honda and Acura brand names—more appeal. "It's
a big opportunity for us," Mr. Kuraishi said, citing the
10% boost Honda and other Japanese auto makers
received from tougher new fuel-efficiency standards
0% in the U.S. in decades past.
Global China
Source: Deloitte; Driving for Success: A review of outbound Automotive Source: WSJ Online; Honda Plans Push for Hybrids in
M&A from China; August 2010 China; 9/15/11
49

50. CHINA
COMPANY FOCUS
BYD Company is expected to deliver an electric car to the US market in Q2 of 2012. The e6, is an all-
electric sedan originally projected to leapfrog other electric vehicles in the market with its combination
of range, pricing, and style.
BYD took advantage of the available subsidies and resources provided by the Chinese government to
develop battery and EV drivetrain technology. The e6, is expected to get 140-200 miles per charge with
a 120v charge time under 6 hours. The car is priced very reasonably at roughly $35,000 after incentives,
which should generate sales given its purported capabilities.
To support the company’s ambitious growth plans, BYD raised ~$230 million from Warren Buffet’s
MidAmerican Energy Holdings Co., a Berkshire Hathaway company.
Along the way however, BYD has seen sales growth in China deteriorate, and significant loss of
profitability in 2011. With competition heating up in the global EV market, the once apparent advantage
for BYD as a price competitive exporter are in question. Also, reports have emerged that the e6 may not
be as range capable as originally touted, and that the quality and finishes of the vehicle may not
resonate with US consumers.
Brand awareness and distribution are also open questions. BYD is currently talking to potential US
automotive dealers hoping to secure 20 in the first year. The Company expects to ship its first vehicles
to the US in mid-2012, almost 2 years behind schedule.
All eyes will be on e6 sales, both as a barometer of EV demand, and more importantly whether Chinese
manufacturers will be able to establish a beach head in the brand focused US market.
50

51. CHINA
TRANSACTIONS
Announced Transaction Value
Date Target Type ($USDmm) Buyers Sellers Business Description
07/18/2011 Suzhou Tysan Precision M&A 24.04 Cheung Who Tech Ltd., Auto Tysan Suzhou Tysan Precision Engineering Co., Ltd.,
Engineering Co., Ltd. Element Company, Ltd. Corporation Pte., manufactures and markets seat recliners and other
Ltd. auto components.
06/02/2011 China Avic Avionics Private Placement 394.47 AviChina Industry & N/A China Avic Avionics Equipment Co., Ltd. engages in
Equipment Co., Ltd. Technology Co. Ltd.; Aviation the research and manufacture of small displacement
Industry Corporation of China cars.
06/01/2011 Ningbo Huaxiang Buyback 30.91 N/A N/A Ningbo Huaxiang Electronic Co., Ltd. engages in the
Electronic Co. design, development, production, and sale of auto
parts.
05/27/2011 Zhejiang Century Huatong Public Offering 160.55 N/A N/A Zhejiang Century Huatong Automotive Part Co., Ltd
Automotive Part Co., Ltd. manufactures and supplies auto parts.
05/26/2011 Chaowei Power Holdings Buyback N/A N/A N/A Chaowei Power Holdings Limited principally engages
Ltd. in the production of motive battery products for
electrically powered vehicles in China.
05/05/2011 BYD Company Ltd. Public Offering 219.91 N/A N/A BYD Company Limited engages in the research,
development, manufacture, and sale of rechargeable
batteries and auto related products.
04/15/2011 Shenyang Brilliance Jinbei M&A 45.90 Shenyang XinJinBei Dalian Huaxia Shenyang Brilliance Jinbei Automobile Co., Ltd.
Automobile Co., Ltd. Investment and Development Northern manufactures automobiles in China.
Co., Ltd. Investment
Company Ltd.
03/28/2011 Dongfeng Yulon Motor Co., Private Placement 182.76 Yulon Motor Co. Ltd. N/A Luxgen Motor Co. Ltd. manufactures and markets
Ltd. passenger cars that include sport-utility vehicles and
multi-purpose vehicles.
11/10/2010 Chongqing Changan Private Placement 532.03 China Changan Automobile N/A Chongqing Changan Automobile Company Ltd.,
Automobile Co., Ltd. Group Company Limited together with its subsidiaries, develops,
manufactures, and sells automobiles, engines, and
related components.
08/21/2010 Zhejiang Wanfeng Auto Private Placement 122.23 Wanfeng Auto Holding Group N/A Zhejiang Wanfeng Auto Wheel Co., Ltd. engages in the
Wheel Co., Ltd Co., Ltd. manufacture and supply of aluminum alloy wheels for
automobiles.
Source: Capital IQ
51

52. INDIA
52

53. INDIA
THEMES
Consumer demand shifting emphasis from price to innovation and design
Rising demand can be attributed to an increase in discretionary income, availability of car loans, lower
interest rates and promotional prices
- With only 9% households owning vehicles, the new capital availability will accelerate market growth
- First time buyers are upgrading to premium compact cars, the fastest growing segment, increasing from 11% to
22% of the overall market share
Imports are challenging the Maruti, Nyundaia and Tata, which own 73% of the market
- Fiat Palio Stile Entry compact
- Toyota ETIOS Entry sedan
- Toyota Liva Premium compact
- Honda Brio Premium compact
- Volkswagen Vento Premium sedan
- Nissan Teana Premium sedan
Mergers and acquisitions are dominated by small supplier consolidation and supply chain integration.
That will continue through the next five years and beyond.
The Indian consumer is value driven, so brand premium is far less important than “bang for the buck”.
Electric infrastructure cannot support EV’s, even on a small scale. Hybrids are too costly. Efficient IC
engines will dominate the market, with premium paid for luxury rather than power or mpg.
53

54. INDIA
THE PLAYERS
Domestic Manufacturers Market Share
Company Market Cap Revenue EBITDA EBITDA Maruti Hyundai Tata Motors Mahindra
($MM) ($MM) ($MM) MULTIPLE Toyota Honda Others
Tata Motors 13,076.0 27,921.4 4,099.1 5.94x
Mahindra 9,544.3 8,395.8 1,372.9 9.6x 15.0% 17.5%
Bajaj Auto 9,342.1 3,842.5 1,040.1 8.9x 2.0%
3.0% 4.4%
Hero Honda 8,233.1 4,675.3 594.5 13.8x
7.0% 7.0%
Maruti 7,717.0 8,347.3 797.8 8.9x
Suzuki
14.0% 8.5%
Bajaj Auto 9,342.1 3,842.5 1,040.1 8.9x
Ashok 1,565.6 2,554.5 279.6 7.5x 12.9%
Leyland 14.0%
TVS Motors 547.3 1,045.6 48.9 14.6x
14.1%
Ford plans to open two India-based manufacturing plants by 2014,
45.0%
an investment of $1bn
35.6%
- The first manufacturing plant will have production capacity of 240,000 units
annually
- The engine plant will be able to produce 270,000 engines annually
Source: Deutsche Bank: Maruti Suzuki Ltd. (July, 2011) Unit Volume Revenue
54

55. INDIA
TRENDS
Vehicle Segment Market Share
Entry compact Premium Compact Entry Sedan Premium Sedan & above
21.0% 20.7% 19.5%
23.8%
13.6% 13.6%
10.9% 14.2%
10.6% 15.6% 21.0% 21.5%
54.8%
49.2% 44.8% 45.4%
FY08 FY09 FY10 FY11E
Deutsche Bank: Maruti Suzuki Ltd. (July, 2011)
55

56. INDIA
CASE STUDY
Mahindra Acquires Control of REVA Electric
Transaction Summary:
Mahindra & Mahindra (M&M) acquired a 55.2% stake in REVA Electric Vehicle Co. on May 26, 2010 by a
combination of equity purchase from equity sponsors as well as a $10mm cash infusion.
M&M’s acquisition of REVA was strategically implemented to take advantage of REVA’s innovation and
R&D in the EV market. M&M plans on using its large distribution network to increase economies of scale
to narrow the gap in pricing between REVA’s EV cars verses petrol based cars.
REVA’s NXR model is currently priced at $15,000 for the lead acid battery, and $21,000 for the lithium
battery. Through leasing of batteries consumers can save over $1,000 off the price of the vehicle. Indian
state governments are working to further reduce the pricing through subsidizing the EV market as a
green initiative. The Delhi government in particular is promoting EV vehicles through its tax rebates of
up to 29.5% off the cost (15% subsidy on the base price of the REVA, a 12.5% VAT exemption, and road tax
and registration exemption).
REVA has been able to increase its vehicles range per charge through the development of the NXR, (100
miles per charge) doubling the range per charge of the G-Wiz, REVA’s first car produced. Realizing the
rapid innovation and newfound affordability of pricing, REVA is positioning itself for a much larger
demand by building a manufacturing facility with the capacity of producing 30,000 cars annually, nearly
ten times the number of REVA vehicles currently on the road.
Mahindra is targeting near term domestic sales of 2,500 units, and a considerable expansion of its REVA
exports into the European market.
Source: FINPRO Electric Vehicle India: (2011)
56

57. INDIA
TRANSACTIONS
Announced Transaction Value
Date Target Type ($USDmm) Buyers Sellers Business Description [Target]
03/15/2011 Rasandik Auto Components Pvt M&A 1.98 N/A Rasandik Rasandik Auto Components manufactures and
Ltd. Engineering supplies automotive components.
Industries India
Ltd.
03/17/2011 Hindustan Composites Ltd., Jalna M&A 1.29 Spitmaan Group Hindustan Hindustan Composites engages in the development,
Unit Composites Ltd. manufacture, and marketing of asbestos industrial
products and friction materials
12/16/2010 Hero Honda Motors Ltd. M&A 843.52 Hero Investments Honda Motor Co., Hero Honda Motors Limited manufactures and sells
(BSE:500182) Private Limited Ltd. motorcycles in India.
10/29/2010 Steel Strips Wheels Ltd. Private 9.77 Sumitomo Metal N/A Steel Strips Wheels Limited engages in the
Placement Industries Ltd. manufacture and marketing of steel wheels for
passenger cars, multi utility vehicles, tractors, trucks,
and two and three wheelers.
06/28/2010 Synergies Castings Limited M&A 2.5 Superior Industries N/A Synergies Castings Limited engages in the
International, Inc. manufacture of alloy wheels and other precision
aluminium castings.
06/26/2010 Lumax Auto Technologies Ltd. Private 5.13 Sheela Finance Private N/A Lumax Auto Technologies Limited manufactures and
Placement Limited; Orange sells auto components primarily in India.
Mauritius Investments
Ltd.
06/05/2010 Amtek Auto Ltd. Private 22.85 N/A N/A Amtek Auto Limited engages in the manufacture,
Placement assembly, and sale of auto components.
05/26/2010 Mahindra REVA Electric Vehicle Co M&A N/A Mahindra & Mahindra Draper Fisher Mahindra REVA Electric Vehicle Co Ltd. manufactures
Ltd. Ltd. Jurvetson; Global and sells electric vehicles.
Environment
Fund
01/25/2010 Exedy India Limited M&A 4.3 Exedy Corp. N/A Exedy India Ltd. manufactures and sells various auto
clutch products and components in India.
Source: Capital IQ
57

58. BRAZIL
58

59. BRAZIL
THEMES
• Competition has become intense in the Brazilian market as most international OEMs have
developed a presence.
• Consumer discretionary income remains the key driver for market growth and producers
are looking for ways to hit lower price points while maintaining margins.
• Auto financing has expanded since 2000, constituting 35% of outstanding consumer credit.
Average car loan interest rates range between 30-40%, due to higher default rates.
• Tax burden, which can amount to up to 30% of the value of the vehicle provides additional
resistance in the market, which has grown 4-8% annually over the last two decades.
• The Brazilian supplier base is transitioning from commodity to engineered products,
although labor costs tend to be 25% higher than India and China.
• Flex fuel technology in particular could be a strong export as multinationals seek to
consolidate powertrain platforms over diverse markets.
Source: Business Week; Brazil Credit Growth Slows, Auto Financing Rates Jump; 1/26/11
59

60. BRAZIL
TRENDS
Growth Factors
• The Brazilian automotive industry is expected to Fleet Average Age (Years, 2010)
grow 8% annually through 2016 which is a 50% 14
increase from 2010 levels
12
• Growth is largely attributed to a low
concentration of cars per inhabitant and the a 10
retiring vehicle fleet
8
6
Light Vehicles per 1,000 Inhabitants 4
1,400
2
1,200 0
1,000
800
600 • Volkswagen, Toyota, and Honda have announced
expanding their manufacturing capacity to
400 capture a greater portion of the demand
200 • Credit is considered the biggest risk to demand;
however auto loan duration remains healthy at
0 3.5 years
US Japan W New Russia Brazil China India
Europe EU
Source: Morgan Stanley: FIAT The Truth About Brazil (July, 2011)
60

61. BRAZIL
THE PLAYERS
International OEMS dominate
100%
90% And the Chinese are Coming…
"Brazil is increasingly becoming one of the world's most
80% Other important markets and no company wants to be left out,"
Chery Automobile President Yin Tongyue said while laying a
Honda cornerstone of the factory. "This is our biggest investment
70%
outside China and will be the base of exports for all of South
Toyota America."
60%
Hyundai
About 85% of the company's production will be directed at
50% Renault Brazil, where Chery expects to have a 1% share of the market
of more than 3.5 million vehicles sold a year. The remaining
PSA 15% will be exported to other Latin American countries.
40%
Ford The Jacarei plant will lead to the arrival of about 20 Chinese
parts suppliers, as well as local producers to manufacture
30% GM compact cars. The factory represents a $400 million
investment by Chery and China's Development Bank. Chery
20%
Volkswagen currently has 12 factories that only assemble cars from
imported parts.
FIAT
10% - Wall Street Journal Online, Paulo Winterstein, July 2011
0%
2000 2010
Source: Morgan Stanley: FIAT The Truth About Brazil (July, 2011);
61

62. BRAZIL
EV POTENTIAL
Not Charged Up
Ethanol
- As the second leading ethanol producer in the world, flex fuel is a much 2010 Vehicle Registrations by Fuel
more affordable solution in Brazil than it is in other countries
Diesel
5%
High Taxes Petrol
- Brazil’s high import taxes makes HEV or EV penetration very 8%
challenging
Electricity Cost
- Electricity cost in Rio and Sao Paulo are $0.18 and $0.19 per kWh
respectively compared to the US average of $0.09 per kWh
Flex
Infrastructure Fuel
- Urban charging requirements and the power grid could not handle auto 87%
electrification
Source: ANFAVEA, 2010
62

63. BRAZIL
TRANSACTIONS
Announced Transaction Value
Date Target Type ($USDmm) Buyers Sellers Business Description [Target]
04/04/2011 Mahle Metal Leve S.A. Public 172.21 NTN Corp. (TSE:6472) Mahle GmbH MAHLE Metal Leve S.A. engages in the
(BOVESPA:LEVE3) Offering development and production of components
and systems for automobiles worldwide.
01/12/2011 Flexitech do Brazil M&A 9.7 Flexitech Europe SAS Trelleborg Auto Flexitech do Brazil manufactures brake hoses
Brasil Ltda. for light vehicles.
09/27/2010 WVR Rolamentos LTDA M&A N/A Dayco Products, LLC N/A WVR Rolamentos LTDA manufactures
automotive tensioners and pulleys.
04/30/2010 Autometal S/A. Public 263.92 N/A N/A Autometal S.A. and its subsidiaries engage in
(BOVESPA:AUTM3) Offering the design, manufacture, and sale of
components and sub-assemblies for the
automotive market.
03/01/2010 MMC Automotores do M&A N/A BTG Pactual Gama N/A MMC Automotores do Brasil S/A manufactures,
Brasil S/A Participações assembles, and distributes Mitsubishi brand
vehicles in Brazil.
08/04/2009 Arvin Innovation, Inc., M&A 180.0 Iochpe-Maxion S.A. Arvin Innovation, Steel Wheel Business manufactures
Steel Wheel Business (BOVESPA:MYPK3) Inc. automobile steel wheels and is located in
Brazil.
01/09/2009 Sawem Industrial Ltda., M&A 3.57 Brembo Do Brasil Ltda. Sawem Industrial Sawem Industrial Ltda. Engages in the
Business Manufacturing Ltda. manufacturing of automobile parts and
Iron Flywheel equipment.
11/28/2008 Vanzin Industrial Auto M&A N/A Tuper S/A N/A Vanzin Industrial Auto Peças Ltda.
Peças Ltda. Manufactures and markets auto components
and parts.
03/12/2008 Powertrain do Brasil - M&A 112.08 Fiat Powertrain Old Carco LLC Tritec Motors Ltda. Manufactures gasoline
Trotec Motors Ltda. Technologies S.p.A. engines in Brazil.
Source: CapitalIQ
63

64. ABOUT HEADWATERS
64