MARKET RESEARCH

MARKET RESEARCH PACKAGE FOR THE EUROPEAN CAR INDUSTRY

THE EUROPEAN CAR MARKET

The European motor industry is the world's largest car market, having exceeded the US market in total units
sold (excluding light trucks). It is also an extremely competitive arena. Some of the patterns to emerge from
this market over the last few years are listed below.

1. Sales Figures1

2008 did not start well. The first 6 months saw a 2% fall in sales, August 2008 then experienced a 16%
drop on the sales of August 2007 and a cumulative 4.3% fall for the first eight months. January 2009
saw a 59% fall in car production in the UK and the Spanish market fell by 38% ; overall easily the worst
sales figures for over a decade. Forecasts are gloomy but companies and countries are fighting back.
Germany saw a 40% expansion in the market demand in January, in response to the government’s
scrapping incentive scheme. So too France (+8%) and Spain and to a lesser extent Italy (+0.2%). The
UK’s programme started hesitantly in the second quarter of 2009. Results are not expected to be as
significant as in Germany and Italy.

In 2008 car sales in Europe, including the new EU member countries, fell by 8.8% to just over 14.7m
(16m in 2007). This was a sudden fall in a market that previously saw an increase of nearly 5% between
2005 and 2007 (15.25m in 2005).

The last strong rise in sales was in 1998 (14.3m), continuing into 1999, however, in 2000 sales fell by
2.2% (14.7m), 2001 was a flat year with sales holding close to 2000 levels but at the expense of profit
margins. In 2002 sales fell by 3%, 2003 saw an increase of nearly 5% but this was a result of an
expanding marketplace, in reality there was another fall of 1% when comparing sales in the same EU
member countries. However, 2004 saw a genuine 2% increase in registrations, remained stable in
2005, showed the substantial 4% rise in 2006 but the percentage increase dropped to 1% in 2007, and
then fell by over 8% in 2008. Profit margins were squeezed in the late 90's, recovered by 2000 but fell
again in 2001, they started to recover in 2004 but are now under severe pressure.

2. Pricing structures

Selling prices in Europe continue to be under pressure as manufacturers try to cope with over supply
and consumer expectation for pan-European price standardisation. Tax differences across Europe have
also been blamed. The battle in the UK between local distributors and direct imports from Europe
subsided significantly once UK distributors lowered prices. However, this stabilization initially brought a
return to price increases, with average prices throughout Europe rising at a greater rate in 2005 than
2004, with MPVs seeing the largest increases- in line with the fact that this was the only sector
sustaining growth at that time. With the high fuel prices of 2007/2008 and increased taxation on larger
cars, buyers are shifting towards more fuel efficient cars, dual fuel and even electric cars, which are able
to attract better margins. Against this is the general trend to lower prices to attract the reduced number
of buyers in the market.

3. Mergers, takeovers, joint ventures and strategic alliances

After a very difficult economic period, most companies were back in profit by 1998/9 but the pressure of
over supply created a series of mergers and takeovers, a move that had proved to be successful for
PSA, the long standing partnership that was created in 1975 between Peugeot and Citroen.

1 Figures are approximate as they vary in different sources. In this document the majority are taken from the ACEA.
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Release 8.3
 The biggest ever merger took place in 1998 between Daimler Benz and Chrysler. It had mixed fortunes
but finally ended with the sale of Chrysler to a private equity group in 2007, for one fifth of the price
originally paid, following poor sales performance by Chrysler. Overall the company saw profits rise but
only because of the growth within Daimler Benz. Post-sale, the companies were known as the Daimler
Group and Chrysler Holding LLC. Daimler still held 19.9% of Chrysler which, in October 2008, it
declared to have zero value. Chrysler is now owned by Fiat; more details below.

Ford bought Volvo in 1999 and Land Rover from BMW in 2000, to add to the Jaguar and Aston Martin
marques they already owned. However, the struggle to maintain profitability resulted in the company
selling Aston Martin in March 2007 and then Jaguar and Land Rover to Tata Motors in 2008. It has also
been rumoured that BMW was interested in purchasing Volvo but the idea has been ruled out by the
German manufacturer.

In a successful rescue bid, Renault took an initial 36.8% stake in the loss-making Nissan in 1999 and
increased this to 44.4% in 2001 after profits had soared, at this time Nissan also strengthened the tie by
investing 15% in Renault. Ironically it is now Nissan that is helping Renault through a difficult period.
Despite Renault's sale of its 17.88% stake in the Nissan Diesel Motor Co. Ltd, the relationship continues
to be strong and they have developed a new common navigation and communication system that is
being used on the Nissan Pathfinder and the Renault Laguna. In 2006 discussions were held on a
possible alliance between the two companies and GM but no agreement was reached.

In 2000 GM bought the rest of Saab Automotive (they already owned 50%). However, Saab continued
to struggle and with the economic downturn of 2008, went in to a tail spin. Saab filed for
"reorganisation" in Sweden (equivalent to Chapter 11 bankruptcy) in February 2009, hoping for a
Government rescue, which did not materialize. Saab is currently up for sale and bidders include the
supercar maker, Koenigsegg. In 2002 GM purchased the bankrupt Daewoo and rebadged many models
as Chevrolet in some markets, with some success. GM and Fiat formed a partnership in 2000 but this
was dissolved in 2005 when GM refused to purchase the remaining 50% of Fiat, an option that the latter
was allowed to enforce under the terms of the original agreement. GM argued that the clause had been
invalidated by changes within the Italian company and after heavy dispute Fiat secured $2billion as a
result of the breakdown, which provided the capital needed to build a more profitable future. In 2008
GM's position deteriorated dramatically, along with some other US car makers, notably Chrysler. At the
end of May 2009 GM sold off its European operations to the Canadian company Magna International
and filed for bankruptcy in the USA. Strangely this may give the company the best possible chance of
future survival, though the majority share will be owned by the US Government.

Fiat has rebounded (yet again) and in 2009 stepped in to rescue Chrysler from bankruptcy. It has taken
a large stake in the company, alongside US and Canadian government support and that of the
automobile unions of US and Canada. The US private equity fund Cerberus Capital Management, who
bought Chrysler from Daimler lost out in a major way with the bankruptcy of Chrysler. Fiat bid for Opel,
the German arm of GM, but lost out to Magna International, the Canadian auto parts maker.

Although mergers and takeovers of the big manufacturing companies has practically come to a
standstill, the principal of companies working in alliance is playing an increasing part in car manufacture
as companies try to improve profit margins and develop new markets. The approach is two-fold; the first
one is where major manufacturers work together on named projects, sharing research and some
production facilities (e.g. shared platforms), mainly still in Europe. The second is the formulation of joint
ventures with companies in Eastern Europe and the Far East which has benefits for all concerned : the
major manufacturers can use the existing production facilities and distribution networks in these
countries, enabling them to break into emerging markets, and the local companies profit from the
investment made in their companies. The downside for European workers is that in some cases leading
manufacturers have moved production of a model from the domestic plant to one in Eastern Europe
where overheads are lower, resulting in redundancies in the "Western" European factories.

Examples of the two types of alliance are as follows.

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3.1 Shared Research and Production Facilities

Since the end of the GM/Fiat partnership, the latter has been busy looking for project alliances with
other companies. A joint venture has been signed with Tata for research and development and
marketing, as well as future production and distribution of cars, and there are rumours of a possible
alliance with Mercedes-Benz/Daimler. The company has also signed an agreement with China's
Chery Automobile to jointly manufacture engines and for assembly and distribution of the Fiat, Alfa
Romeo and Chery brands.

Chrysler has also formed an alliance with Chery to develop, manufacture and distribute Chery-made
small and sub-compact cars in North America, Europe and other major automotive markets under
the Chrysler group brands.

In mid-2005 PSA and BMW announced a plan to cooperate in the design and production of new small
four-cylinder petrol engines that are to be used in both companies' cars and it has been reported
recently that there is interest in inviting Mercedes to join this venture. BMW has announced that it
wishes to cooperate more with Mercedes; the former already collaborates with Daimler on a number of
projects, the latest being research in the field of hybrid drive.

There are currently positive talks being held between Volkswagen and Proton regarding a possible
strategic alliance but nothing has yet been settled.

4.2 Alliances for Production and Distribution of Cars in Eastern Europe and East Asia

India is one of the fastest growing markets in the world and all the major companies are looking for
routes into the marketplace. Audi has local assembly of the A6 in India, at the Skoda Auto India
company and also plans to expand its dealership presence in the country; Daimler now manufactures
the C-, E- and S-classes in the State of Maharashtra, India. BMW may choose a new car factory in India
to boost output of the Mini; Ford plans to spend $500m expanding its operations in the country to begin
production of a new small car within the next two years and construct an engine manufacturing plant by
2010. Renault-Nissan invested in a new plant in June 2008 which should begin operations in 2010,
producing vehicles for export and the local market. Fiat signed a deal with Tata that will provide the
opportunity to produce and distribute cars in India in the future and Peugeot invested in a feasibility
study for a possible re-entry into India.

In other countries, Toyota began building the Yaris in China in 2008 as part of a joint venture with
Guangzhou Automobile Group that covers production and sales; PSA has signed a memorandum of
understanding with the Chinese company Hafei that is expected to result in a joint venture to build
compact MPVs to compete on the Chinese domestic market and Nissan has threatened to move
production of 30,000 vehicles per annum from Spain to Thailand if wage disputes cannot be settled at
the Spanish plant.

Within Eastern Europe, Fiat began building two minicars at the Fiat plant in Poland in 2008. These are
the Fiat 500 and the new Ford Ka, for Ford Europe. Both cars are doing relatively well despite the
recession. Mitsubishi is considering building a plant in Russia, possibly in partnership with PSA.

5. The Internet

The internet is an extremely effective medium for car promotion with a steadily increasing level of sales.
Although moving slowly, many industry observers still predict major changes in passenger car retailing
because of the power and influence of the internet. Major companies continue to make changes in the
structure of dealerships in anticipation of further advances and the websites are becoming increasingly
sophisticated, allowing potential customers to explore the marketplace from their own homes.

6. Export of American products to Europe

The US market has traditionally been more profitable than Europe. However, increasing penetration by
Japanese companies setting up US-based factories ("transplants") has increased competition. US
manufacturers are now exporting to Europe. Chrysler has had success overseas with the 300 series.

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SALES DETAILS

In 2008 European sales for most of the major manufacturers fell dramatically, after a sustained period of growth.
Toyota saw a 17.2% fall following the successful 11.6% rise in 2006 and 10.9% in 2007. Volkswagen fell by
4.1% after improving performance in previous years (6.5% increase in 2006, 8.4% increase in 2007). BMW also
suffered with reduction of 3.5% compared to 8.5% 3% in the previous year and 3% in 2006 (but not quite as
good as the 9.1% increase seen between 2004 and 2005). Ford performed poorly with a fall of 14.8% after an
increase of 8.3% in 2007 and 0.2% rise in 2006. Fiat fell by 5.6% after its remarkable turnaround with an 11.7%
improvement in sales in 2007, building on the 17.9% increase achieved in 2006 after several years of dropping
figures. The Japanese companies did not perform well. Mazda was an exception with a 1.8% rise after a drop of
6.2% in 2007. Suzuki fell by 13.1% after achieving the best percentage increase of the year at 31.7% in 2007.
Honda fell by 15% after an impressive 22.5% growth the year before.

Other companies to fall included PSA (9.1%), which reversed the positive result achieved in 2007 when sales
increased for the first time since 2002 (5.5%). The fall was dramatically more than the 2.5% and 2.1%
experienced in 2005 and 2006 respectively. Renault-Nissan also fell (4.2%) after good results in 2007 (7.6%
increase) following a 3-year increasing slide (2.5% in 2004, 4.9% in 2005 and 10.6% in 2006). GM saw a 14.5%
fall after a 9.8% rise in 2007, compensating for the previous year's drop of 1.5%. The joint figures of the Korean
marques (Daewoo, Hyundai and Kia) fell by 11.7% after falling sales of 2.4% in 2005 and 1.6% in 2006, and an
increase of 5.6% in sales in 2007. DaimlerChrysler fell 4.6% which was an improvement after a fall of 10.3%. in
2007. As in the previous 3 years, VW was the top selling European car maker in 2008, followed by PSA. Ford
fell to fourth place below Renault-Nissan in third place.

Unprecedented falls in sales can be attributed to the surge in fuel prices early in 2008 followed by the collapse
of financial markets, due to major failures in the banking systems. Some companies fared better than others but
in such a turbulent environment sales alone are not an easy measure. Honda for instance shut down its
factories until June 2009 but retained much of their workforce, albeit on reduced pay, rather than sell cars at
massive discounts, while others maintained sales at painfully low prices. Government schemes to boost sales
seemed to work in Germany and Italy where indigenous manufacturers dominated the market. The jury is still
out on the UK "Bangers for cash" scheme.

The fall was preceded by a period of strong growth with companies launching a large number of new models
with the aim of enticing consumers into purchasing new vehicles. This trend is likely to continue as economies
come out of recession and buyers change their requirements toward more fuel efficient vehicles.

The Japanese and Koreans continue to increase their investment in Europe as they strive to continue improving
market share. The Chinese manufacturer Chery Automobile began exporting cars to Eastern Europe in 2007,
with the aim of having a European plant within five years and Tata is preparing to launch new models in Europe,
strengthened by their ownership of Jaguar/Land Rover.

PROFIT MARGINS

Despite growth in sales for the majority, during the first five years of the decade nearly all companies have
suffered from decreasing profits. 2005 began a turnaround for a few companies that continued into 2006 and
2007 and crashed heavily in 2008/2009.

The remarkable turnaround at Fiat continues, almost despite the economic crisis. Its automobile division which
made a loss of EUR281m in 2005 achieved a EUR291m profit in 2006. This continued into 2007 when the profit
rose to EUR803. Growth slowed considerably in 2008 with the recession but not as badly as with most
companies. Its recent acquisition of Chrysler will be a challenge. Fiat’s results prove that effective leadership
and good organisation can have a dramatic effect.

A surge in popularity of models also gave BMW its most successful year ever in 2006, with profits rising by 28%,
providing relief after the company suffered from falling profits in 2005. Despite a downturn in 2007 when some
market share was lost to Mercedes-Benz the company still managed to increase profit to EUR3.1bn (EUR2.9bn
in 2006). However, 2008 saw an incredible 89% fall in profits, although part of the low profits was a result of
several exceptional items recorded in quarter 4 and the company has already started to change strategies.

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2007 was a record year for Volkswagen, improved productivity and rising demand in Asia and Eastern Europe
boosted operating profits by 40% to EUR6.15bn. Cost cutting and capital gains in earlier years also contributed
to the large profits. Against the backdrop of serious decline in the industry, success continued in 2008 as 2007's
results were surpassed with a 3% increase in operating profits to EUR6.3bn, a 15% increase in net profit and a
4.5% rise in sales. Within the group the luxury brand of Audi posted record sales and profits with a 4.1%
increase in sales and a 1.7% improvement in profits. Skoda and Bentley both reported losses and Seat lost
EUR78m following its revival in 2007 when it turned a profit of EUR8m, following losses of nearly EUR5 million
in 2006. VW's profits came from strong sales in the first three quarters of 2008. The dramatic drop-off in
revenue at the end of the year is expected to set the trend for 2009, confirmed by a predicted operating loss of
EUR279m in the first quarter. However, Directors are confident that the company's market share will continue to
increase and their target is to do better than the overall market while the crisis continues.

Porsche more than doubled its annual profit In the 2006/2007 fiscal year from EUR2.11bn to EUR5.85bn, strong
demand for sports cars in Europe and Asia boosting its fortunes. In 2008/2009 Porsche earned more profits
than revenues in the first half of its financial year, thanks to controversial dealings in Volkswagen options that
left many hedge funds nursing heavy losses. The luxury sports car-maker reported that it enjoyed a EUR6.8bn
(£6.3bn) windfall from its share options in VW, whose value soared late 2008 after it emerged that Porsche
controlled most of the company. But Porsche also gave its first signal that the global recession has caught up
with it by warning that sales would drop in 2009, as high-rolling consumers opt for less conspicuous products.
First-half sales revenues were down 13% to EUR3bn as pre-tax profits quadrupled to EUR7.3bn.

Toyota posted record pre-tax profits in 2007 but forecast a 50% fall for 2008/2009, the first in nine years. The
downturn has been blamed on the recession, a stronger yen, slow sales in the US, rising costs and a suffering
credit market. Cost cutting success resulted in Renault boosting its operating margin by 27.4% in 2007 and
PSA's margin increased from 2% to 2.9% with income being boosted by the introduction of new models.
However 2008/2009 figures are expected to be very poor, despite a recovering market in France due to the
Government scrappage scheme.

Daimler reaped the benefit of selling Chrysler by achieving a rise of 74% in EBIT (earnings before interest and
tax), however, the net profit rose by just 5% and revenue was actually flat. Quarter 1 2009 sales (year on year)
were 34% down on the previous period. Ford reduced losses and showed a profit for the first time in two years
in 2007 but have reverted to losses in 2008/2009.

A number of factors were instrumental in causing the initial drop in profits, namely, continuous over-capacity of
up to 30%, rising raw material costs (particularly steel), severe price competitiveness, the introduction of
expensive promotional offers in an attempt to attract more customers, the negative impact of a strong Euro and
the cost of Euro IV emissions compliance. These problems are likely to continue and manufacturers will have to
keep tight control if they are to achieve any increase in profitability or even to maintain the status quo.

Some of the measures taken by manufacturers to reduce losses/improve profits have included reducing
production, closing plants, both permanently and temporarily, squeezing suppliers, job cuts and the search for
new sources of revenue through downstream activities such as finance divisions. Production has been lowered
by many of the major companies to reduce a stock problem and in some cases to avoid redundancies by
introducing shorter working weeks. Some major players, namely Ford, VW and GM have asked employees to
accept long-term wage freezes and in GM's case to impose longer working hours. VW was forced to put a
major redundancy programme into effect, Nissan made redundancies in Spain, BMW has threatened job cuts
and Ford sold Jaguar and Land Rover. These measures are likely to continue until a balance of supply and
demand is restored.
INDIVIDUAL MARKET SIZES

The most significant event with regard to market size is that that the Russian new car market broke through the
2m unit barrier for the first time in 2007, with 2.35m new cars registered it became the fourth largest market in
Europe. Mid 2008 the Russian car market was actually poised to replace Germany as the largest single market
in Europe, however, the recession hit very hard and in October sales fell dramatically and finally Germany
retained its dominant position with Russia climbing to a position of second biggest market with 2.7m sales. Italy
marginally squeezed into third place with sales of 21.6m just above the UK in fourth position with a total of
21.3m, followed by France with 20.5m sales and then Spain with the much lower sales figure of 11.6m.

Germany has consistently had the largest market over the years but the 3.09m sales achieved in 2008 was
lower than the 3.15m unit sales of 2007, representing a 1.8% decrease, and in turn this was a drop of 9.2% on
the 3.47m achieved in 2006, following the year on year increase that had been achieved since 2003.
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In 2008 most countries sales fell, even in those countries that saw an increase in 2007. The largest fall was in
Iceland where figures fell by 43% (6.9% fall in 2007); Spain fell by 28% (1.2% drop in 2007); Ireland by 18.6%
(4.4% increase in 2007); Sweden by 17% (increased by 8.5% in 2007); Norway by 14.4% (increased by 18.3%
in 2007); Italy by 13.3% (rise of 7.2% in 2007); the UK by 11.3% (2.5% increase in 2007); Greece by 4.5%,
counteracting the 4.5% increase in 2007; Switzerland by 2.9% (5.7% rise in 2007); Austria by 1.5% (3.4% drop
in 2007) and the Netherlands by 1.1% (4.5% increase in 2007). The French market fell by only 0.7% after a
3.2% rise in sales in 2007 that counteracted the 2006 decrease of 3.3%.

Exceptions where sales actually increased were in Finland, where a rise of 11.4% followed a fall of 14% in 2007;
Portugal (5.7% increase to consolidate the 3.7% increase of 2007 and totally offsetting the 5.7% drop in 2006);
Belgium (2.1% increase following a decrease of 0.3% in 2007) and Luxembourg (2% rise building on the 1%
increase achieved in 2007).

The other area of significant growth over recent years has been the Asian car manufacturers, culminating in
Toyota's achievement of becoming the top global car maker in terms of sales in 2006, ending GM's run of
81 years in this position. In 2008 Japanese brands took 14.3% of the European market share (14.6% in 2007,
14.2% in 2006 and 13.5% in 2005), selling 2.1m units. Korean car manufacturers have also had an increasingly
important impact on the marketplace since 1998 although levels have stabilized over the past three years.
There have been complaints from some US and European manufacturers that the success is due to the
Japanese and Koreans keeping their currencies artificially low and are asking for government intervention.
However, this is unlikely to be forthcoming given that, unlike their European and American counterparts,
Japanese, Korean and more recently Chinese companies are currently investing heavily in Europe, providing
locally produced vehicles and valuable sources of employment.

Eastern European registrations increased steadily in the mid nineties but then dropped quite dramatically
between 1998 and 2003. However, the ten traditionally Eastern European states that joined the EU in 2004
offer a potential new customer base of 76m people and sales have since increased over time. 2008 figures for
the region totalled 1.18m units, down from 1.21m units in 2007 which was up from 1.06m units in 2006 and from
900,000 in 2003. Added to this there is the phenomenal success seen in Russia. The marketplace outside of
Russia is still relatively small but the competitiveness of the European market makes the area a key target for all
car manufacturing companies as it has a much larger potential for growth, with most countries seeing large
percentage increases each year. This fact, coupled with the low cost base of the area, is resulting in many
manufacturers moving their production facilities to the region.

Although Eastern Europe is a seen as a key area of growth by the main car producers, there are some that see
China and India as being worthy of substantially more effort as the potential markets are considerably bigger.

MARKET SECTORS

Market sectors are broken down into four main categories : City, Medium, Large and Luxury.

The growth in the city class did appear to be slowing until recently and prices did fall, in contrast to the general
trend of increasing prices. However, with increasing fuel and taxation costs, sales of city cars are increasing
again, with some of the middle sector age groups replacing large and medium-sized models with smaller ones,
particularly as many of the new models produced are larger than their older model equivalents, e.g. the Clio,
Corsa and Peugeot 207 have considerably more room inside than the previous models. Fiat has taken this
concept one step further with the launch of an SUV version of the Panda, priced very competitively, it will be
interesting to follow sales levels, if successful other manufacturers may follow with similar designs. Another
notable trend has been the recent growth of vehicles of vehicles with engine sizes under 1 litre, and electric
vehicles.

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In terms of popularity, five of the top ten best selling models in Europe in 2008 were from the city car category
and four were from the medium sector. The restyled VW Golf regained its first position and was the only model
to increase in sales in 2008. The city sector Renault Clio and Ford Fiesta/Fusion both rose in position in the 'top
ten', demoting the medium-sized Opel/Vauxhall Astra to seventh place. One explanation for the decline in sales
of the latter is that GM cut its production in favour of the Corsa when it was relaunched, a move which initially
proved successful as sales of the Corsa increased by 41.7% in 2007; however, as the new model settled into
the marketplace the surge in sales slowed and there was a drop of 10.4% in 2008, although it maintained its
place as fourth most popular car in Europe. As in the last few years, the only large car to feature in the table
was the VW Passat. See the following page for more details of the 'top ten' and their sales figures.

Financial pressures amongst buyers, and market sentiment, are likely to result in a further shift in purchasing
pattern, with people moving from large cars to the medium, or city sector.

The large car market continues to struggle, with the diesel and business sector the only areas to be maintaining
sales, albeit with falling margins. The VW Passat remained in top ten best selling list but sales dropped 9.4%
between 2006 and 2007, and a further 15.5% in 2008, surely a sign of things to come given the economic
climate. The SUV and MPV models still dominate the large car sector as sales and consequently production of
the traditional saloons such as the Renault Laguna, Ford Mondeo and Peugeot 407 drop rapidly. However,
companies are investing a considerable amount in re-launching cars in this sector to increase their appeal:
Renault has redesigned the Laguna, Ford launched a new Mondeo and VW/Audi produced a new TT,
Mercedes has boosted sales with the new-look C-Class and the relative success of the Volvo V50, driven by
clever marketing, has made a significant contribution

BMW continued its 2007 achievement of outselling Mercedes-Benz in terms of sales in 2006, but much of this
success was due to sales of the 3-series (medium sector) and the mini (city sector). Mercedes did close the
gap with the success of the new S-class launched in September 2005 and improved the situation further with
record sales in 2007, undoubtedly helped by the launch of the new C-Class in September 2006. VW did not see
success with the relaunched Phaeton luxury sedan.

It is notable that the price gap between the prestige and volume car makers has narrowed over the last
10 years, widening its pool of potential customers and resulting in the market share of the volume
manufacturers, e.g. Ford, Renault, Vauxhall, reducing by 12% and that of the prestige marques, BMW,
Mercedes, Audi, increasing by 9%. The decline in the sale of luxury and premium large vehicles is likely to be a
result of rising fuel and taxation prices, the general economic climate and on a more positive note the fact that
the smaller cars are now being built to a standard that was previously only available in more expensive models.

For the purpose of this market segmentation the definitions of the car groupings, based primarily on dimensions
and average price, are as follows (all price ranges are approximate and can overlap).

City : supermini, minis and small; prices up to £14,500, e.g. Ford Fiesta, Nissan Micra, Peugeot 107.

Medium : price range £12,000 to £21,000, e.g. Vauxhall Astra, Renault Scenic, VW Golf, Mercedes B-Class.

Large : upper medium + multi-purpose vehicles; price range £15,000 to £45,000, e.g. Ford Mondeo, Alfa
Romeo 159, Land Rover Discovery, Jaguar X-Series, BMW 5-Series, Porsche Boxster.

Luxury : luxury saloons + specialist sports cars + dual-purpose vehicles (e.g. 4WD); price range £40,000 to
£100,000+, e.g. BMW 6 & 7-Series and X5, X6, Jaguar XJ and XF series, the perennial Range Rover, Mercedes
S-Class, Porsche 911 etc.

The following table quantifies the results of a market study made in 2008 on the division of car sales in Europe.
Car categories are shown on the horizontal axis and buyers' ages on the vertical axis. Values are given as
percentages (error level +/- 20%).

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 % of Total Market (total market : 14.25 million)
City Medium Large Luxury
Under 25 11.25 6.50 1.90 0.22
25 to 40 9.55 13.00 5.95 1.48
41 to 55 7.55 11.00 5.75 1.58
Over 55 7.75 9.50 5.50 1.52
Total (%) 36.10 40.00 19.10 4.80

TOP TEN BEST SELLING CARS IN EUROPE 2008

Variation on Year from

2008 Sales 2007 2008 UK Price Range
Model
(£)*
Sales position
1. Volkswagen Golf 458,253 +5.3% 2 £9,895 - £15,675
2. Peugeot 207 406,163 -7.2% 1 £12,245 - £25,345
3. Ford Focus 364,638 -10.3% 3 £11,945 - £20,270
4. Opel/Vauxhall Corsa 360,274 -10.4% 4 £7,595 - £18,320
5. Renault Clio 335,548 -12.2% 6 £12,900 - £19,750
6. Ford Fiesta 327,314 -8.0% 8 £7,495 - £14,995
7. Vauxhall/Opel Astra 320,856 -20.2% 5 £7,485 - £13,450
8. Volkswagen Polo 275,921 Not in Top Ten in 2007 £8,595 - £13,795
9. Volkswagen Passat 253,853 -15.5% 9 £15,825 - £26,365
10. BMW Series 3 251,140 -15.0% 10 £21,000 - £38,350

* Figures are rounded. The higher end prices are usually for sports versions and, where applicable, convertibles.

NEW REGISTRATION OF PASSENGER CARS

IN THE TOP TEN MARKETS IN EUROPE (,000s)

2002 2003 2004 2005 2006 2007 2008

Germany 3253 3236 3267 3319 3468 3148 3090
Italy 2271 2251 2264 2237 2326 2493 2162
UK 2564 2579 2567 2440 2345 2404 2132
France 2145 2009 2014 2068 2001 2065 2050
Spain 1332 1383 1517 1529 1635 1615 1161
Belgium 468 502 485 480 526 525 536
Netherlands 511 489 484 465 484 506 500
Austria 275 301 311 308 309 298 294
Switzerland 296 270 269 265 270 285 276
Sweden 255 261 264 274 283 307 254

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MARKET STATISTICS

The European market share (2001-2007) for each of the top 14 car manufacturers is given below.
21

19
% Market Share

VW
17
General Motors
15

13
Peugeot/Citroen

11

9
2002 2003 2004 2005 2006 2007 2008

7
6 BMW
% Market Share

5
4 Daimler (figures for 02-07
3 include Chrysler)
Toyota
2
1
0
2002 2003 2004 2005 2006 2007 2008

14
13
12 Fiat
% Market Share

11
10
Ford (figures 02-07 include
9 Jaguar, Land Rover & Volvo.08
8 comprise Ford & Volvo only)
7 Renault-Nissan

6
5
2002 2003 2004 2005 2006 2007 2008

4
3.5 Honda
3
% Market Share

2.5 Mazda
2
1.5 Mitsubishi
1
0.5 Korean
0
2002 2003 2004 2005 2006 2007 2008

9
COMMENTARY

The European marketplace has changed rapidly over the last decade.

The Volkswagen Group, owner of the Seat, Skoda, Audi, Volkswagen, Bentley, Bugatti and Lamborghini brands,
consistently maintained the largest market share throughout the 1990s. Sales are given in the chart over leaf.
VAG now holds the largest percentage of the market share in Europe at just under 21%. Despite its continuous
number one position, and partly because of its dash for growth, VAG's profitability has come under pressure,
influenced by its high cost base, currency fluctuations and the fall in the Eastern European market. Its broad
market coverage, including the USA, Asia and South America, and ability to launch impressive new models, has
enabled profitability to be maintained for the moment, although management are stating that the company will
not be able to survive long-term without job losses and changes in pay structures and working conditions. The
recent expansion of the Porsche share in VAG signals imminent changes, possibly in both organizations.

In 1996 the Italian market recovered with the re-introduction of Government incentive schemes which resulted in
a 20%+ rise in new car sales. This was followed by another increase to 39% in 1997, but then a small fall in
1998 of 1.6% as the schemes were withdrawn. In 1998 Fiat fell from the position of the third largest car
company in Europe in terms of sales to fourth behind PSA (Peugeot-Citroen) and to sixth between 1999 and
2005. A confident Fiat is now in 6th place, behind GM and Ford, but this is likely to change with their recent
acquisition of Chrysler.

Fiat's higher sales in the mid 90's was aided by Government incentives and therefore must be viewed in context.
Such schemes can distort markets with high sales being followed by sharp falls. There was a similar occurrence
in France when the Government terminated the incentive programme early in 1996. In 2003 Fiat announced
12,000 planned job losses and has seen a 50% drop in market sales since the end of the 1980's. 2004 was the
crisis point for the company, ending with the termination of the partnership with GM. However, a turnaround
plan, involving a new management team put into action in 2003 and the forging of new partnerships in 2004 and
2005 has been successful, with profits being shown for the first time in five years towards the end of 2005.
Profitability continued through to 2008 and is even predicted for 2009, against world wide trends.

Mergers and strategic alliances have been seen by some manufacturers as the best way forward to ensure
profitability. The BMW chief executive has expressed the belief that such links only provide short-term benefits
but the President of hugely successful Toyota has shown interest in forming an alliance with troubled
automakers. The evidence for both arguments is mixed (see pages 1 and 2 for details).

Increasing competition from the European-based operations of the major Japanese manufacturers continues to
change the European market. The Japanese have taken 25% of the US market, and Nissan, Toyota and Honda
are competing free of EC imposed quotas within Europe with their European built models. Against this trend the
strong appreciation of the Japanese currency in early 1990's caused a decline in their market share to 10.9%,
the lowest level for five years. A sharp turnaround has been seen now that the currency rise has been reversed.
On the basis of Japanese production in the UK, it is expected that the country will return to being a net exporter
of cars within the next five years, a status lost in the mid-70's.

Productivity and quality, the key words of the mid-80's, have reduced in significance, only because of
convergence by most manufacturers on the high standards set by the Japanese; in 2005 the EU car industry
pledged to put technology and quality before profit. In recent times foreign companies have invested 10 times
more per worker in modern machinery than their European counterparts and as a result most European
producers still lag behind the 90+ cars per worker per year Japanese benchmark. However, they are getting
closer (70-80% of the Japanese figures). Nissan's Sunderland UK plant has been the most productive plant in
Europe for seven consecutive years, producing an average of 90 cars per hour (approximately
99 cars/worker/year), Renault's Valladolid plant in Spain is not far behind with 89 cars/worker/year.

Prices are being kept in control partly at the cost of employment. In some instances workers are having to
accept lower wages or decreased benefits in an attempt to keep factories open and jobs safe as more and more
companies move production to Eastern Europe, China and India where wages are low and, in the case of the
latter two, the car industry is growing rapidly.

10
Europe continues to be the most competitive and challenging automobile marketplace, boosted by factors such
as surplus US capacity, demand and capacity in Eastern Europe, the Japanese, Korean and possibly the
Chinese push. The economic recession of 2008/2009 may actually improve the future prospects by taking out
some excess capacity. The challenge to this industry is the need to reduce the environmental impact of the
motor car, to levels acceptable to society, in the face of significant overcapacity, but with some growing markets
in Eastern Europe. If this battle is lost the Industry may well be facing terminal decline.

THE SPECIALIST MARKET

Overview

Worldwide sales of luxury vehicles fell 20% in 2008. During the recession of the early 80's, when the volume
producers were suffering heavy financial losses, the specialist producers remained profitable. By 1987 BMW,
Porsche, Mercedes Benz, Rolls Royce, Jaguar, Saab and Volvo were all making a profit. However, the situation
changed rapidly in the late 80's and early 1990's when the US market weakened, Japanese competition
intensified and recession returned. Despite the economic situation, BMW continued to increase sales volume
within Europe as a whole and in 1992 overtook Mercedes, a position subsequently lost with the DaimlerChrysler
merger. With its abandonment of the Rover Group but retention of the Mini, BMW increased sales and
profitability dramatically in 2001, a trend that continued until 2005 when the company experienced increased
sales but a drop in profits; this trend continued in 2006 but reversed slightly in 2007 then reverted again in 2008.
Mercedes targeted growth with the Chrysler merger and has continued this push even after the disposal of
Chrysler. Volkswagen strengthened its position in the luxury market with the purchase of Lamborghini, Rolls
Royce and Bugatti. Porsche made record sales and profits in 2006 and 2007, driven by strong sales of the
redesigned Boxster, Cayman S coupe and 911 models. Its move into the SUV market with the Cayenne was
seen as a stimulus for future growth. Sales of the Cayenne began well in 2004/05 but they slipped in 2006, then
returned strongly in 2007 (up 50% in some markets). Although customers are beginning to turn away from large
4x4s, it was Porsche’s belief that the niche luxury sector would not be affected – but this was not the case. First
the high fuel prices in 2008 dented sales and then the economic recession continued the stall, despite revised
Cayenne models. Fiat strengthened Ferrari's appeal to investors by separating the marque from the loss-
making Maserati and placing it in the Fiat Group as opposed to Fiat Auto.

The major features of the specialist marketplace over the last few years have been : 1) high fuel prices and the
recession of 2008/2009 denting specialist car sales; 2) the growth of alternative market sectors; and 3) the
continual demand for sports cars.

1. High fuel prices and the recession of 2008/2009

The specialist sector has long been relatively resistant to economic downturns. But the surge in fuel prices in
2008; quadrupling in some markets, took the industry by surprise and certainly made the buyers think hard
about fuel economy. This was quickly followed by the economic downturn which took out a lot of the “new
monied” buyers. In addition it became socially undesirable to be driving extravagant cars as unemployment rose
and many people were losing homes, pensions and savings. Hollywood took to electric cars and politicians
found a new excuse to tax larger cars. The impact is still being felt and it may be some time before to full impact
is seen.

2. Alternative Market Sectors

The alternative markets comprise, Multi Purpose Vehicles (MPVs), the traditional 4x4 off roaders and the Sports
Utility Vehicles (SUVs), all of which have proved to be lucrative from the 1990's through into the early years of
the 21st century. The trend now is towards smaller MPV’s and SUV’s rather than abandonment of the class.

The new categories of low emissions vehicles, hybrids and electric cars are fast growing – sales in the UK
doubled in 2007,and more than doubled again in 2008 according to Honda. Toyota announced that 28% of
Lexus sales were the hybrid powered Prius. These are covered in more detail below under "New Technologies".

The Multi-Purpose Vehicle (MPV/Minivan) Market

The MPV market can be divided into three categories, the mini sector, e.g. the Nissan Note, Vauxhall Meriva
Fiat Sedici and Ford Fusion; the compact/midi sector, e.g. the Citroen Xsara / Picasso, Renault Scenic, Ford C-
Max, Mercedes B-Class and the large sector, e.g. Ford S-Max, Renault Espace, Toyota Verso and VW Sharan.

11
Overall, this market grew substantially from 1995 onwards, and by 2000 sales exceeded 600,000 units. The
market continues to grow with a 22.8% increase in sales in 2004 compared to 2003 in the overall European
market and in the UK a 16.5% increase in 2007 over 2006. The market fell in 2008, as the recession hit.

The Renault Scenic has been the best selling model in the midi MPV class since its launch in 1997, well ahead
of its nearest rivals the Vauxhall/Opel Zafira, Volkswagen Touran and the Citroen Picasso. However, the C4 and
Xsara Picasso from Peugeot Citroen finally eclipsed the Scenic in 2007, with overall sales of 320,000 units. The
success of the sector has been at the expense of the traditional medium category models, although the latter did
show growth in 2004-2006 thanks to the launch of new models.

Sales of full size MPVs are slowing with a 10% decline in sales in 2004 compared to 2003. The growth of the
mini MPV looks set to continue, the only danger being that with more major manufacturers targeting this area
there could be over supply in the future. The Peugeot 307/308 and Honda's Jazz and Civic, smaller and far
more car-like than even the mini MPV, are also potential threats and the popularity of the sector has resulted in
higher than average prices rises, which could also slow down sales.

4x4 Off Roaders (Leisure/Luxury Market)

The original Range Rover from Land Rover (now owned by Ford but soon to move to new ownership under
Tata) can be said to have virtually created the off road market in Europe, which now exceeds 400,000 units per
year, up from under 60,000 units in 1979. Range Rover has since moved into the realm of the luxury car,
competing with the likes of BMW, Jaguar and Mercedes. Competition resulted in a fall in Land Rover's sales in
the early 2000s but made a strong recovery in 2005-2007, courtesy of the launch of the new Range Rover Sport
and the Discovery III, the latter being a cross between the leisure 4x4 and an SUV. Land Rover, celebrated its
60th birthday in 2008 year, saw worldwide sales in 2007 exceed 200,000 units for the first time ever, with UK
sales exceeding 50,000 units, also for the first time.

The M-Class has continued to be successful for Mercedes and for BMW the X-5, and now the super luxury X6.
They have established excellent sales by virtue of both strong off and on road performance. Other competitors
in the class include Toyota's ever popular Land Cruiser, Nissan’s X-Trail and stylish Mureno, Volkswagen's
Touareg, the Volvo XC70 and 90 and the Land Rover Discovery.

Porsche’s Cayenne sales slowed in 2006 but resumed selling well with 2007 world sales nearly 50% up on
2006, thanks in part to the introduction of a new model. A Cayenne electric hybrid has also been showcased.
The Volkswagen Touareg, which shares its chassis with the Cayenne, has also been selling well in the UK,
helped by very targeted advertising. The new, stylish Audi Q7 also looks good. These sectors were all hard hit
in 2008/2009.

The off-road market had been predicted to fall for several years but contrary to this sales grew steadily,
increasing by nearly 65% over the 6 years to 2007. The marketplace finds these products desirable despite
concerns about size, weight, fuel economy and emissions (which though higher than comparable modern
saloon cars are still much lower than the older cars). Range Rover’s new fuel efficient turbo diesel V8
demonstrates the manufacturer's response to market demands and stylish new designs from Audi, BMW with its
X-6, and new Volvos point to continued life in this sector. The fuel price increase of 2008 and subsequent
economic recession has had a strongly negative impact and early indications are that this market is suffering.

Sport Utility Vehicles (SUVs)

The off-road market has come under threat from the introduction of the new generation of SUVs, which descend
from passenger cars and have lightweight unibody frames and modern suspensions, they enjoy the high seat
and four-wheel drive of the off roader combined with passenger car handling and comfort. The advantages of
the lightweight SUVs over the traditional off roaders are nimbler handling, a peppy performance, quieter, more
fuel efficient and, moreover, cheaper, posing a serious threat to the ‘dinosaurs’ of the 4x4 market.

Land Rover responded to the new SUV market by introducing the smaller Freelander 4x4,which now competes
very favourably with the Honda CR-V and Toyota's RAV, all priced between £16,000 and £26,000 in UK. The
launch of the Freelander 2 in 2006 strengthened Land Rover's position in this sector, despite competition from
the luxury GL-Class SUV from Mercedes. Already successful in the US, the strong selling smaller BMW X-3,
could be a competitor, although with a price range of £25,000 to £35,500 the latter will be a competitor for the
Discovery and the Mitsubishi Shogun rather than the SUV market. Fiat’s smaller 4x4 could also threaten.

12
Sales figures show that there is definitely a market for both the large 4x4 models and the smaller and cheaper
SUVs but the trend seems to be moving in favour of the latter. It is possible that SUVs will account for up to half
of Europe's prestige car sales in the near future as companies improve model specifications, offering higher-
than-ever levels of high-tech, safety and 'infotainment' equipment, better fuel economy and even electric
versions.

3. Sports Cars

Roadsters

Over the last ten years the convertible market has grown from 17,706 to 98,316 units. In 2001 new convertibles
took 2.4% of the UK new car market and by 2006 the share had climbed to 5.3%.

Mazda’s MX-5 initially led the growth in the market with the brilliant combination of MGB and Lotus Elan.
European sales of the MX-5 slumped from 12,500 in 1991 to 4,900 in 1994 but the launch of a new model in
1998 revived Mazda's popularity and the launch of yet another new model in 2005 assured continued sales
growth in 2006 and 2007. Other impressive performers include the MGF (1995-2005), Lotus Elise, BMW Z3
followed by the Z4, Alfa Romeo's Spider, Mercedes SLK, the Audi TT roadster, Porsche's Boxster and the
promised new sub £40k roadst6er from Jaguar. The MGF was bought by Nanjing and returned to the UK in
2008, but only in small volumes.

The new coupé convertibles (CCs), with their electrically folding metal roof, have driven the 2005-2007 surge in
popularity of the sports car and have helped spread sales more evenly throughout the year. The concept started
with the Peugeot 206 and 307, now the 208 and 308. Mercedes followed suit with the SLK Class Roadster as
did Renault with the Mégane CC, Lexus with the SC and Vauxhall/Opel with the Tigra. It is likely that other
volume manufacturers will soon follow.

Approximately one quarter of the convertibles sold throughout Europe are purchased in the UK - despite the
climate! Only in Germany are sales figures greater but the percentage growth in the UK is far higher, 114%
since 1999 compared to 32% in Germany. It is interesting that there is a notable increase in the number of
women over 60 buying expensive convertibles!

Sports Coupés

European sports coupés saw a 32% increase in sales in the mid 1990’s, bringing the sector up to 37,426. The
Vauxhall Tigra had a particularly impressive début performance with sales of 6,787, ahead of the Ford Probe
(6,576) and Vauxhall Calibra (4,920) but behind the then sector leader, the BMW 3-Series coupé (9,751). Since
then the market has continued to grow. The Audi TT and Mazda RX8 have sold well. The new 2007 Audi TT
and the stunning Audi R-8 look continued this trend. New entries introduced in 2004 included the Nissan 350Z,
the Chrysler Crossfire (discontinued Nov 2007), the BMW Z4 coupé, the revised BMW 3-Series coupe and the
Porsche Cayman in 2006. VW has delivered a stunning new Corrado in 2008, which is selling well despite the
recession. The upper end of the market is dominated by the BMW's M5 and M6-Series and the Mercedes SLK
coupe with the Audi R-8 and new Jaguar XKR trying to upset the status quo. Over 80,000 SLKs were built in
2004. The legendary Porsche 911 leads the sector in dynamic performance but sells in much smaller numbers,
as does the new Jaguar XKR which provides stunning looks with effortless performance.

Variations on the coupé but targeted at the same market have been the hugely successful Subaru Impreza and
Mitsubishi Evo. These offer coupé style with blistering performance, 4-door convenience and 4-wheel drive
stability. They are often bought to participate in "track days" and sell at much lower prices than the
Porsche/Mercedes/Jaguar. It was predicted in 2007 that, overall, sports car sales in Europe will continue to
grow over the next few years, however the recession of 2008/2009 brought an end to this and a fall of
approximately 20% is likely over this period.

DIESEL CAR SALES IN EUROPE

As the advantages of diesel over petrol, petrol-electric hybrid and LPG increased with improved technology, so
the market share of diesels grew from 22% in 1996 to 32% in 2000, 43% in 2003, 47% in 2004 and 49% in
2005. It is predicted that this trend will continue with the percentage sale of petrol fuelled cars falling to 37.1% by
2015. There are a number of reasons for the growing popularity of diesel-fuelled cars:

13
 They are superior to petrol-consuming models in terms of fuel efficiency, an advantage that was
consolidated by the introduction of direct-injection car diesel engines and turbocharging and then taken
forward by Common Rail technology when invented by Fiat in 1997.

A diesel engine is 25% more efficient than an equivalent petrol engine, this directly translates into
reductions in carbon dioxide emissions, a very important factor as increasing global legislation demands
lower vehicle and greenhouse gas emissions.

The world's liquid fossil fuel resources are diminishing; recent price rises act as a reminder.

Indirectly, improved efficiency means that fewer shiploads of petroleum need to be transported, resulting
in less transportation linked pollution.

Politically, European governments see an advantage in encouraging development of diesel engines

because it keeps their car makers ahead of the US and Japanese competition - both nations are anti-
diesel, in America people care little about saving fuel and in Japan they push for petrol-electric hybrids
as most of their travelling is short-distance, in congested cities, and not least of all Toyota and Honda
have both invested in developing hybrid technology. However, both Toyota and Honda are launching
new diesel models into Europe and the USA, suggesting recognition that this is the way forward, and the
US Environment Protection Agency has developed a diesel engine that will meet near zero emission
standards as the country moves to becoming a net oil importer and sees the need to encourage the use
of diesel instead of petrol.

As a result, all manufacturers are stepping up diesel engine development and offering it as an alternative for
more and more models. The biggest block is the limited availability of diesel fuel stations in the USA.

So far the largest growth area for diesels has been the executive car sector, with diesels accounting for half the
executive cars sold in some countries, and nearly 20% of the total UK market. However, as petrol costs rise, the
leading manufacturers can see potential in targeting the younger generation and are increasing the availability
of diesel engines for smaller cars.

Emerging competition for both diesel and petrol/gasoline fuels is in the form of “renewables”, ethanol or plant oil
based fuels. These can be blended with both diesel and petrol/gasoline but there are concerns over the overall
environmental impact of these materials.

AUTOMATION

The use of robots in manufacturing industry has continued to grow steadily, driven more by the quality benefits
than the original idea of manpower replacement for dirty and repetitive work. The following table gives a
breakdown of the total number of installed industrial robots in the major industrial nations approximately 40% of
which are presently involved in automobile production.

NO. OF INSTALLED INDUSTRIAL ROBOTS IN MAJOR INDUSTRIAL NATIONS

1982 1985 1988 2002

21,000 93,000 176,000 220,000
6,000 20,000 32,600 42,000
2,300 8,800 17,700 21,700
450 4,000 8,300 12,600
790 4,150 8,026 9,000
713 3,208 5,034 7,000

14
First manufactured by Unimation in 1962 and based on an invention by George Devol, the use of industrial
robots initially spread quite slowly. The Stanford arm, invented in 1969, expanded use in automotive with the
PUMA name being the best known unit of this genre. The Japanese took a strong interest in the late 70’s and
now over two third’s of the world's industrial robots are made and used in Japan; where robotic applications
continue to expand in the manufacturing industries. This technology has spread in South East Asia and Korea
in particular has a fast expanding robotics use. In the USA the growth rate has slowed and industrialists are
looking for significant improvements in the technological skills of robots. This is emerging, with new machines
now capable of carrying out complex surgical procedures.

Advances in robot assembly lines continue to be evolutionary than revolutionary as smaller, nimbler robots
provide the flexibility required for a truly successful assembly line, the aluminium Audi A8 saloon car assembly
line being a case in point. It is estimated that it takes between two and three years to recoup the cost of
installing automation. The best results come from an integrated use of robots alongside humans, with robots
working on the monotonous, strenuous and dangerous tasks, as well as some of the more intricate work on
electronic components. The number of robots in the industry will continue to grow, perhaps most significantly in
the car makers’ suppliers who manufacture ever more complex component systems.

NEW TECHNOLOGY : ALTERNATIVE FUELS AND ELECTRIC CARS

Prompted by concern about atmospheric pollution, global warming and a decrease in fuel sources,
manufacturers have been researching alternative power systems for some time. A KPMG survey predicted that
for 84% of consumers, fuel efficiency will be a key factor in the next 5 years.

Alternative fuels, such as compressed natural gas, while lowering emission levels significantly give rise to
vehicles that are more expensive than equivalent petrol powered counterparts, less powerful and have a much
shorter range than petrol or diesel powered vehicles. The fuel is cheaper but the cost of building a commercial
refuelling unit is almost twice that of a petrol refuelling unit due to high equipment costs. Liquid alternatives to
petrol such as methanol and ethanol can be supplied using equipment similar to a petrol pump but have other
drawbacks. Methanol, while having very low emissions, is corrosive, conducts electricity and very dangerous in
accidents. Ethanol, also with low emissions, suffers as there is still a limited infrastructure to make or deliver it
to the motorist and there are increasing concerns about its overall environmental impact, particularly on food
prices.

Liquefied petroleum gas is the only readily available alternative fuel at the moment, with one million cars running
on it worldwide. It is cheaper than petrol and has a relatively high energy content but only gives slightly lowered
emissions and is seen as a compromise rather than a solution. Most cars can be converted to run on LPG, its
main benefit is fuel efficiency and therefore is mostly used for vehicles with a high petrol consumption. In the
US, the number of vehicles on the road in 2005 that ran on alternative fuels, was just over 8.3 million. A further
700,000 were sold in the first half of 2006 but the proportion of alternative fuel cars in the US is still under 4% of
over 230 million cars on the road.

Electric cars are politically backed in many European countries and the US. A breakthrough in battery
technology, possibly in the form of Lithium Titanate, will encourage many more manufacturers to put electric cars
into major production. At the end of 2005, the Norwegian company Think Nordic launched a new concept, a
plastic-bodied electric vehicle called “Think” -primarily for use in cities. The concept has gone down well and
expansion into several European cities is ongoing, along with plans for manufacture in the US. It is the first
electric car to seat four people and have a reasonable amount of baggage space. It has a top speed of 30 mph
(50 km/hr) and a range of 60 miles (100 km). The company aims to sell approximately 5,000 units annually.
Another product, Tesla Inc. of the USA, have launched an electric car at the top end of the luxury sports car
market. Based on a Lotus Elise “chassis” and selling at $100,000 it has done well, particularly with Hollywood’s
“green celebrities”.

Another interesting concept for the US is Phoenix Motorcars’ SUT, available from mid-2010. This battery
powered pick-up or SUV, has a range of over 100 miles, a top speed of +100 mph, and can reach 60 mph in
less than 10 seconds. The real breakthrough though is that it takes less than 10 minutes to charge compared to
the usual 2+ hours. These developments are largely due to the new lithium titanite battery developed and sold
to Phoenix Motors by Altairnano. GM is also planning to release their “Volt” battery car, once they return to
financial health. Finally an entrepreneurial plan to replace battery packs in just a few minutes, using a robotic
assembly, could do a great deal to increase sales of appropriately designed battery powered cars.

15