THE AUTOMOTIVE INDUSTRY

OSCM ASSIGNMENT

Ankita Das Podder (BLP008);Arghagni Saha (BLP012);Arnab Chakraborty

(BLP013);Kaustav Palit (BLP025);Pubali Dutta (BLP040)
SOIL | PGP 2021
CONTENTS

ABSTRACT................................................................................................................................................................................................... 3
INTRODUCTION .......................................................................................................................................................................................... 3
WHY AUTOMOTIVE INDUSTRY? ................................................................................................................................................................. 3
CHANGING PARADIGM IN THE INDUSTRY ................................................................................................................................................. 5
Five Megatrends Impacting the Indian Automotive Industry ................................................................................................................ 5
Macro-Economic Indicators of automobile Industry ................................................................................................................................. 7
Political factors................................................................................................................................................................................... 7
Economic factors ................................................................................................................................................................................ 7
Social factors ...................................................................................................................................................................................... 7
Technological factors ......................................................................................................................................................................... 7
Environmental factors........................................................................................................................................................................ 8
Legal factors ....................................................................................................................................................................................... 8
STAKEHOLDERS OF AUTOMOTIVE INDUSTRY ............................................................................................................................................ 9
INDUSTRY SCENARIO ............................................................................................................................................................................... 10
DEPENDENCY ON OTHER FIELDS .............................................................................................................................................................. 11
Manufacturing Industry ....................................................................................................................................................................... 11
Sales and service organization ............................................................................................................................................................. 11
Economic and social significance ......................................................................................................................................................... 11
Highway development ......................................................................................................................................................................... 12
Social effects ........................................................................................................................................................................................ 12
Recreational travel ............................................................................................................................................................................... 12
Breakthrough Technologies in Automotive Industry ............................................................................................................................... 13
Internet Of Things: .............................................................................................................................................................................. 13
Cloud Computing Models:................................................................................................................................................................... 13
Big Data: .............................................................................................................................................................................................. 13
AI and Analytics: .................................................................................................................................................................................. 14
3D Printing: .......................................................................................................................................................................................... 14
Blockchain: .......................................................................................................................................................................................... 14
Trends and Opportunities: ................................................................................................................................................................... 16
Increased R&D spending .................................................................................................................................................................. 16
Shift in Hiring Needs: Engineers and Computer Scientists Lead the Way ........................................................................................ 16
Connected and Autonomous Vehicles Are Gaining Rapid Momentum ........................................................................................... 17
Blockchain: ........................................................................................................................................................................................... 17
Daimler and LBBW Using Blockchain for Business-to-Business Payments: ..................................................................................... 17
Toyota and MIT Use Blockchain to Rate Driverless Vehicles: .......................................................................................................... 17

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 Big Data: ............................................................................................................................................................................................... 18
Toyota using Big Data to prevent accidents caused by accelerator-brake mix up: ......................................................................... 18
Automated Driving: .............................................................................................................................................................................. 18
Daimler Trucks established the Autonomous Technology Group: .................................................................................................. 18
Cloud Based Data Services: .................................................................................................................................................................. 18
Amazon to help Toyota build cloud-based data services: ............................................................................................................... 18
Caterpillar ............................................................................................................................................................................................ 18
Additive manufacturing or 3D printing: ........................................................................................................................................... 19
CAT Connect: .................................................................................................................................................................................... 19
CAT minestar: ................................................................................................................................................................................... 19
ACCUGRADE™ LASER GRADE CONTROL SYSTEM: ............................................................................................................................ 19
REMOTE-CONTROL DOZING AND EXCAVATING .............................................................................................................................. 19
Sustainability ............................................................................................................................................................................................ 20
Toyota’s Sustainable Development Goals............................................................................................................................................ 20
Exerting Greater Impact on Society by Utilizing Technologies and Sharing Aspirations ................................................................. 20
Global Efforts to Protect the Earth's Rich Biodiversity .................................................................................................................... 21
Shops will come to your place!? Experience an entirely new form of mobility. .............................................................................. 22
Technology can contribute to the environment when disseminated. Zero CO2 emissions challenge ............................................ 23
Daimler................................................................................................................................................................................................. 24
Sustainable Supply Chain ................................................................................................................................................................. 24
Environmental statements of the plants ......................................................................................................................................... 25
Mercedes-Benz Cars plants to become CO₂-neutral........................................................................................................................ 25
Solar Panels at Daimler .................................................................................................................................................................... 25
The new painting processes ............................................................................................................................................................. 25
Goodbye to all that paper!............................................................................................................................................................... 26
Combined heat and power at Daimler ............................................................................................................................................. 26
Biodiversity at Daimler ..................................................................................................................................................................... 26
Caterpillar ............................................................................................................................................................................................ 27
Energy & Emissions .......................................................................................................................................................................... 27
Fuel Economy & Emissions .............................................................................................................................................................. 28
Materials .......................................................................................................................................................................................... 28
Remanufacturing ............................................................................................................................................................................. 29

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ABSTRACT

The automobile industry is one of the most important drivers of economic growth of India and one with high participation in global
value chains. The growth of this sector has been on the back of strong government support which has helped it carve a unique path
among the manufacturing sectors of India. The automobiles produced in the country uniquely cater to the demands of low- and
middle-income groups of population which makes this sector stand out among the other automobile-producing countries. This chapter
analyzes the roles of government policy, infrastructure, and other enabling factors in the expansion of the automobile and automotive
component sectors of India. In 2017, India became the world’s fourth largest automobile market, and the demand for Indian vehicles
continues to grow in the domestic and international markets. To meet the future needs of customers (including the electrical vehicles)
and stay ahead of competition, manufacturers are now catching up on upgradation, digitization, and automation. The chapter also
analyzes India’s national policy in light of these developments.

INTRODUCTION

The Indian automotive industry is seeing significant transformation with respect to its sustainable growth and profitability. The
industry is crucial for the economy as it accounts for 7.1% of the country’s Gross Domestic Product (GDP) and as per Automotive
Mission Plan (AMP) 2016–26, its contribution is projected to increase to 12%. India is expected to emerge as the world’s third-largest
passenger vehicle market by 2021. The fundamentals for growth drivers in the automotive industry remain intact and the sector is
likely to see an increased upward trend in demand in the coming years as the economic environment improves and investments
increase. The Government’s ‘Make in India’ initiative has played an important role in elevating the country’s position and it has
improved on nine out of ten parameters for ease of doing business in the last three to four years. Today, India is looked upon as a
favorable destination for low-cost manufacturing. The World Economic Forum has ranked it 30th on the Global Manufacturing Index
which assesses the manufacturing capabilities of countries. The industry attracted Foreign Direct Investment (FDI) worth US$20.85
billion during the period April 2000 to December 2018, according to data released by the Government’s Department of Industrial
Policy and Promotion (DIPP). In this scenario, India’s automotive industry (including component manufacturing) is expected to reach
US$51.4–282.8 billion by 2026. There are a number of key trends that are shaping the industry today, which are expected to have a
significant bearing on its ability to realize the objectives of the AMP. In addition to automation of various processes to meet these
goals, the sector is also expected to generate additional direct and indirect jobs.

WHY AUTOMOTIVE INDUSTRY?

4th largest automobile market

• India became the fourth largest auto market in 2019 displacing Germany with about 3.99 million units sold in the passenger
and commercial vehicles categories. India is expected to displace Japan as the third largest auto market by2021
• It was the seventh largest manufacturer of commercial vehicles in2019.
• Presence of established domestic and international original equipment manufacturers (OEMs).
• Strong market in terms of domestic demand and exports.
Segmented market
• Automobile sector split into four segments, each having few market leader
• Two wheelers and passenger vehicles dominate the domestic demand.
• Two wheelers accounted for 80.9% of the domestic demand in FY20.
Growth prospects
• Automobile exports reached 4.77 million vehicles in FY20, growing at a CAGR of 6.94% between FY16-FY20.
• Indian automotive industry (including component manufacturing) is expected to reach Rs16-18 trillion (US$251-282billion)
by 2026.Strong policy support from the Government.

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4
CHANGING PARADIGM IN THE INDUSTRY
Currently, India’s automotive industry is at an inflexion point and is witnessing five megatrends that are expected to transform the
industry in a big way. Rapidly evolving customer needs, the disruptive impact of technology, the dynamic regulatory environment,
changing mobility patterns and global interconnectedness are all impacting the way auto companies are doing business today globally
and in India. The industry has never witnessed this magnitude of multi-dimensional change till now.

FIVE MEGATRENDS IMPACTING THE INDIAN AUTOMOTIVE INDUSTRY

RAPIDLY EVOLVING CUSTOMER EXPECTATIONS:

In view of the increasing disparity and gap between middle class population growth versus middle class average income growth,
customers’ purchase patterns are bifurcating between luxury and economical vehicles. And with disparate and varying spend capacity,
high levels of awareness of products, rapidly evolving expectations and the demand for personalized products and services, customers
are taking the center stage in the automotive ecosystem in the country today. In this scenario, development of organizational
capabilities that are aligned to business lines and/or segments and are dynamic will help the industry understand changing customer
needs and deliver accordingly to meet these needs.

DISRUPTIVE IMPACT OF TECHNOLOGY:

The car of the future will be electrified, automated, shared, connected and updated yearly to make driving easier, safer, cheaper and
more comfortable. In addition, with increasing acceptance of digital solutions, a new wave of emerging technologies is on the cusp of
affecting the industry at three levels:
a) Vehicles (electric, driverless and connected; with smart sensors, real time vehicle tracking, geo fencing, driver analysis and
remote diagnostics)
b) Supply chain and operations (digitized trucking, upcoming logistics hubs, automated warehouses, robotics, augmented reality
and IoT)
c) Business models (mobility as a service and vehicle sharing)
The Indian Government has the ambitious target of ensuring that only electric vehicles are sold in the country within the next few
years. The Ministry of Heavy Industries has shortlisted 11 cities in the country for introduction of electric vehicles (EVs) in their public
transport systems under the Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicles in India (FAME) scheme6. The first
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phase of the scheme has been extended to March 2019. In February 2019, the Government approved the FAME-II scheme with a fund
requirement of INR 10,000 crore (US$1.39 billion) for FY20-22. The number of vehicles supported under the FAME scheme increased
to 192,451 in March 2018 from 5,197 units in June 2015. Going forward, with new technologies coming in, organizations’ technology
capital will be the key differentiator. Digital transformation and speed of execution will be the key requirements for the survival of
most automotive organizations.

DYNAMIC REGULATORY ENVIRONMENT:

India, an emerging economy, has been traditionally looked upon as a favorable destination for low-cost manufacturing. However,
regulatory pressure and the benefit of industry enablers are expected to have a disruptive effect on the portfolios of vehicles and the
automotive supply chain. Major regulatory interventions such as the following are planned:
a) Adoption of BSVI norms in Delhi/NCR by 2019 and pan India by 2020 for all new four-wheeler vehicles sold
b) Change in tax structure―GST and resultant costs
c) Government investment on the automotive sector and its plans for infrastructure development (Pradhan Mantri Gram
Parivahan Yojana, Bharatmala Pariyojana, etc.)
d) Adoption of safety standards in line with international norms
e) Formulation of end-of-life or scrappage policies
f) Implementation of Corporate Average Fuel Efficiency norms4 under which manufacturers need to improve their fuel
efficiency by 10% between 2017 and 2021 and 30% or more by 2022
g) Adoption of EVs and alternative fuels through FAME-2
Stringent vehicle-related standards are leading to a shift in vehicular technology. Automotive organizations therefore need to invest
in developing various technical skills that are relevant in this era of changing vehicular technologies.

CHANGING FACE OF MOBILITY INFRASTRUCTURE:

Self-driving vehicles, ride-hailing services and other technologies are transforming mobility. The development of alternative modes of
mobility (e.g., autonomous vehicles and electric vehicles) alongside that of smart infrastructure (e.g., smart cities, optimization of
parking space, artificial intelligence (AI)-driven traffic lights and the focus on enablement of EV-charging infrastructure) is projected to
transform mobility infrastructure. In this environment, India’s efforts to support EVs are likely to focus on two-wheelers, public
transport and fleet operations such as taxis and three-wheelers. According to the report by Bloomberg New Energy Finance (BNEF),
India will see much progress on electric two-wheelers, rickshaws and electric buses over the next 10 years and by 2040, EVs will
constitute 40% of the total passenger vehicle fleet in the country. However, while transportation infrastructure continues to be
augmented, EV-charging infrastructure (with less than 1000 charging stations in India) is yet to take off. In this scenario, the industry
is expected to face unique challenges with changing mobility infrastructure, the specifications of fast-charging standards and
exploration of enhanced technology options.

GLOBALLY INTERCONNECTED INDUSTRY:

Global and local markets offer a sustained growth potential for the Indian automotive industry. An increase of FDI in India and the
emergence and adoption of globally emerging megatrends and technologies in the country are expected to result in the country’s
increased dependence on other countries at every step of the automotive value chain, e.g., R&D, purchase of raw material, power
electronics, manufacturing support and sales. Therefore, automotive organizations’ ability to put in place and implement effective
global and local strategies to manage risks and build their capability to drive their strategies will be of paramount importance.

These megatrends are already affecting the industry, and as we look ahead, we realize that thriving in this changing environment will
require automotive organizations (across the value chain) to make several fundamental changes in their way of working in order to
drive profitable growth and remain relevant in the market. This will also mean a shift in the way the industry thinks about talent and
capability requirements in the future. These changes will also offer an opportunity to automotive industry participants to use
digitalization as an enabler to create a unique competitive advantage across the value chain. The industry will therefore need to gear
itself for a cultural shift, structural changes, job disruptions and major skill and capability building to compete with global players,
maintain and create a competitive edge, and cater according to global requirements and standards.
Achieving success in the digital world will require new ways of thinking, especially in the area of talent. The need for transformation
of the workforce in the digital age will require much more than simple automation of routine processes. It will be about collaboration
between technology and talent to unleash organizations’ full potential. This will mean finding people with the right skills and
capabilities or providing the workforce with the required skills, while protecting employees’ experience and helping them build a
trusting relationship with society.
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MACRO-ECONOMIC INDICATORS OF AUTOMOBILE INDUSTRY
There is a need to identify the uncontrollable key factors that will have an impact on the industry.
An industry’s success depends on the ability of its executives to manage its marketing system in relation to its external macro-economic
environment. Here we have done the PESTLE ANALYSIS.

Political factors
• In 2002, the Indian government formulated an auto policy that aimed at promoting integrated, phased, and self-sustained
growth of the Indian automotive industry.
• Allows automatic approval for foreign equity investment up to 100% in the automotive sector and does not lay down any
minimum investment criteria
• Govt. has granted concessions, such as reduced interest rates for export financing.
• Formulation of an appropriate auto fuel policy to ensure availability of adequate amount of appropriate fuel to meet emission
norms
• Establish an international hub for manufacturing small, affordable passenger cars well as tractor and two wheelers
• Ensure a balanced transition to open trade at minimal risk to the Indian economy and local industry
• Assist development of vehicle propelled by alternate energy source.
• Lying emphasis on R&D activities carried out by companies in India by giving a weighted tax deduction of up to 150% for in
house research and R&D activities.
• Plan to have a terminal life policy for CVs along with incentives for replacement for such vehicles

Economic factors
• Economic pressures on the industry are causing automobile companies to reorganize the traditional sales process.
• Weighted tax deduction of up to 150% for in-house research and R & D activities
• More than 90% of the CV purchase is on credit. Finance availability to CV buyers has grown in scope during the last few years.
• The increased enforcement of overloading restrictions has also contributed to an increase in the no. of CVs plying on Indian
roads.
• Several Indian firms have partnered with global players. While some have formed joint ventures with equity participation,
other also has entered into technology tie-ups.
• Exports have decreased in FY 2012-13, But domestic sales have increased
• The Indian economy has grown at 8.5% per annum. The manufacturing sector has grown at 8-10 % per annum in the last few
years
• Contributes about 4 per cent in India's Gross Domestic Product (GDP).
• 5 percent in India's industrial production.
• Generated about 4.5 lakh of direct employment

Social factors
• Since changed lifestyle of people, leads to increased purchase of automobiles, so automobile sector has a large customer
base to serve.
• The average family size is 4, which makes it favorable to buy a four-wheeler.
• Growth in urbanization, 4th largest economy by ppp index.
• Upward migration of household income levels.
• 85% of cars are financed in India.
• Car priced below USD 12000 accounts for nearly 80% of the market.
• Vehicles priced between USD 7000-12000 form the largest segment in the passenger car market.
• Indian customers are highly discerning, educated and well informed. They are price sensitive and put a lot of emphasis on
value for money.
• Preference for small and compact cars.
• Preference for fuel efficient cars with low running costs

Technological factors
• More and more emphasis is being laid on R & D activities carried out by companies in India
• Technological solutions help in integrating the supply chain, hence reduce losses and increase profitability.
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 • The Government of India is promoting National Automotive Testing and R&D Infrastructure Project (NATRIP) to support the
growth of the auto industry in India
• With the entry of global companies into the Indian market, advanced technologies, both in product and production process
have developed
• With the development or evolution of alternate fuels, hybrid cars have made entry into the market
• Internet makes it easy to collect and analyze customer feedback
• Few global companies have setup R &D centers in India.
• Major global players like Audi, BMW, Hyundai etc. have setup their manufacturing units in India.

Environmental factors
• Physical infrastructure such as roads and bridges affect the use of automobiles.
• Physical conditions like environmental situation affect the use of automobiles.
• Increasing number of vehicles on road is also increasing the pollution.
• Option could be electric vehicles
• Best option is Biofuel

Legal factors
• The automotive regulations in India are governed by the Ministry of Shipping, Road Transport & Highways
• The principal instrument governing the automotive sector in India is the Motor Vehicles Act, 1988 (MVA) along with the
Central Motor Vehicles Rules 1989 (CMVR)
• The Act governs emission norms and safety standards in India
• For preparing safety standards, consideration is on various aspects. The Indian standards and norms are at par with
international standards

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STAKEHOLDERS OF AUTOMOTIVE INDUSTRY

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INDUSTRY SCENARIO
The automobile sector of India is one of the largest in the world and accounts for over 7.1% of India's gross domestic product (GDP).
It also contributes to nearly 22% of the country's manufacturing GDP. The $118 bn Automobile industry is expected to reach $300
bn by 2026.
India's annual production has been 30.91 MN vehicles in 2019 as against 29.08 MN in 2018, registering a healthy growth of 6.26%.
India is expected to emerge as the world’s third-largest passenger vehicle market by 2021.
In FY 2018-19, sale of passenger vehicles has increased by 2.70%, two-wheeler by 4.86% and three-wheeler by 10.27% as compared
to FY 2017-18.
In April-March 2019, overall automobile exports grew by 14.50%.
The overall Commercial Vehicles segment registered a growth of 17.55% in April- March 2019. Indian auto sector's contribution to the
GDP in the current fiscal may come down to 7 per cent from 7.5 per cent in 2018-19 with overall revenue of the original equipment
manufacturers (OEM) expected to dip by up to 6 per cent in 2019-20, according to a study.
As per Acuite Ratings & Research, the total domestic sales of the automobile industry, including, passenger vehicles, commercial
vehicles, two wheelers and three wheelers, were expected to decline by 6-7 per cent this fiscal as compared with 2018-19 to around
25 million units.
It also expects the sectoral revenue to decline by 5-6 per cent year-on-year (y-o-y) to Rs 3-3.2 trillion as compared to Rs 3.35 trillion in
2018-19.
In the second quarter (July-September) of this fiscal itself, the ratings firm expects OEM revenues to drop by 23-25 per cent to Rs 0.6
trillion as compared with 0.8 trillion in the same period previous fiscal, leading to sector's contribution to Gross Value Addition (GVA)
of the country to decline - thus affecting its overall contribution to the GDP.
"As recent as 2018-19, the sector had attained a size equivalent to 7.5 per cent. We assess that this number is likely to decline to 7 per
cent in 2019-20," Acuite Ratings & Research said.
The understanding is influenced by the fact that the sector follows push model, wherein the OEMs drive the entire automotive
ecosystem, it added.

Consequently, any decline in revenue and sales of these entities will directly impact the auto ancillary players and dealers as well, the
study noted.
As per the government's automotive mission plan, the sector's contribution expected to reach 12 per cent by 2026.
Similarly, the continuously weak sentiment among consumers may not provide respite even during the festive season and the overall
automobile industry sales are expected to remain below similar periods in the past, the study noted.

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Recent trends in retail sales indicate that despite high discounts and offers, major players in the industry have failed to attract buyers
for purchasing vehicles even at the onset of festival season, the report said.
Weak rural demand is one of the primary reasons for the slowdown in the sector, it added.

DEPENDENCY ON OTHER FIELDS

MANUFACTURING INDUSTRY

The bulk of the world’s new cars come from the moving assembly line introduced by Ford, but the process is much more refined and
elaborated today. The need for careful control over the flow of materials is an incentive for automobile firms to manufacture their
own components, sometimes directly but more often through subsidiaries. Yet complete integration does not exist, nor is it desirable.
Tires, batteries, and dashboard instruments are generally procured from outside sources. In addition, and for the same reasons, the
largest companies support outside suppliers even for items of in-house manufacture. First, it may be more economical to buy
externally than to provide additional internal facilities for the purpose. Second, the supplier firm may have special equipment and
capability. Third, the outside supplier provides a check on the costs of the in-house operation. American companies rely more than
others on independent suppliers.

SALES AND SERVICE ORGANIZATION

Mass production implies mass consumption, which in turn requires an elaborate distributive organization to sell the cars and to
develop confidence among customers that adequate service will be available. In the early days of the industry, cars were sold directly
from the factory or through independent dealers, who might handle several different makes. Many bicycle manufacturers simply used
their existing sales outlets when they added horseless carriages to their line. When sales in large quantities became the objective,
however, more elaborate and better organized techniques of distribution became essential.

In the United States the restricted franchise dealership became the uniform and almost exclusive method of selling new cars. In this
system, dealers may sell only the particular make of new car specified in their franchise, must accept a quota of cars specified by the
manufacturer, and must pay cash on delivery. In return the dealers receive some guarantee of sales territory and may be assisted in
various ways by the manufacturer—financing or aid in advertising, for example. Contracts also specify that dealers must maintain
service facilities according to standards approved by the manufacturer .

ECONOMIC AND SOCIAL SIGNIFICANCE

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The automotive industry has become a vital element in the economy of the industrialized countries—motor vehicle production and
sales are one of the major indexes of the state of the economy in those countries. For such countries as the United
Kingdom, Japan, France, Italy, Sweden, Germany, and South Korea, motor vehicle exports are essential to the maintenance of
healthy international trade balances.

The effect of motor vehicle manufacturing on other industries is very great. Almost one-fifth of American steel production and nearly
three-fifths of its rubber output go to the automotive industry, which is also the largest single consumer of machine tools. Moreover,
the special requirements of automotive mass production have had a profound influence on the design and development of highly
specialized machine tools and have stimulated technological advances in petroleum refining, steelmaking, paint and plate-glass
manufacturing, and other industrial processes. The indirect effects are also considerable through the many auto-related businesses,
such as motor freight operators and highway construction firms. In addition, truck transportation has grown steadily throughout the
world.

HIGHWAY DEVELOPMENT

Before the advent of the motor vehicle, roads in most parts of the world were generally poor. The available methods of road transport
were so costly and inefficient that, unless there were special considerations such as military movements, it was not worthwhile to
maintain roads for other than local traffic. The general use of automobiles created a strong demand for better highways. The first
response was to provide for the improvement of existing road networks. Experience subsequently demonstrated that roads
for automobile traffic needed to be differentiated functionally, depending on whether they were intended for through traffic or
local traffic. Main arteries are best designed as freeways (motorways, AUTOSTRADE , or AUTOBAHNEN )—i.e., divided highways
with complete control of access and no intersections at grade.

SOCIAL EFFECTS

A historian has said that Henry Ford freed common people from the limitations of their geography. The statement cogently
summarizes the social transformations still proceeding throughout the world as a result of the motor vehicle. It has created mobility
on a scale never known before, and the total effect on living habits and social customs is still incalculable.

The automobile has radically changed urban life by accelerating the outward expansion of population into the suburbs and beyond.
As with other automobile-related phenomena, the trend is most conspicuous in the United States but is rapidly appearing elsewhere.
The decentralizing trend is accentuated by the fact that highway transportation encourages business and industry to move outward
to sites where land is cheaper, where access by car and truck is easier than in crowded cities, and where space is available for the one-
story structures that permit optimum use of modern materials-handling techniques. Yet the effect on rural life has been, if anything,
more pronounced than the effect on cities.

RECREATIONAL TRAVEL

One of the conspicuous effects of the automobile has been to permit nearly everyone in the automotive countries to travel for
recreation. The motor vehicle allows for such auxiliary devices as trailers (called caravans in Europe), campers, trailers for boats and
off-road vehicles, and bicycle and ski racks, which broaden the scope of recreational opportunities.

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BREAKTHROUGH TECHNOLOGIES IN AUTOMOTIVE INDUSTRY

INTERNET OF THINGS:

Using IoT and sensor technology, data can be gathered on things like steering, braking and how effectively a car
navigates the road then inserted into the testing cycle to continuously improve autonomous driving capabilities.
Beyond autonomous driving development, IoT data is providing fuel for many other business opportunities such
as predictive maintenance, connected car functionality, and data monetization
CLOUD COMPUTING MODELS:

With the increased demand for computing and data in the auto industry, there is a tremendous amount of
collaborative innovation going on in terms of computing capacity, data ingestion, data pipelines, and AI and
analytics-based algorithms. Auto companies have new computing needs that only cloud and hybrid computing
models can address by providing access to increased capacity on demand when companies have compute-
intensive, storage-intensive workloads, or both. Cloud providers are investing significant R&D resources in these
areas and car companies are collaborating with these providers to leverage innovation to accelerate their path
to the right outcomes.
BIG DATA:

Data gathered through IoT and other means can be leveraged to provide drivers with value-added services via
in-car apps. For example, real-time driving data can be used to provide information for navigation apps that
13
alert drivers to road conditions, traffic hazards and items of interest nearby. Automakers need to manage in-car
software assets in a coherent manner, which includes testing, deploying the software in the right way, and
tracking it so there’s a record of what’s deployed if something breaks.
AI AND ANALYTICS:

Companies will need to deploy the right industry-based analytics and AI platforms to put all that data to good
use. For cars to become fully automated there is a strong need to employ AI, analytics, data management and
digital workflows to speed up testing and simulation, and the product development life cycle. Analytics can be
applied in many ways, from assessing production efficiency for reducing waste and costs to analyse customer
sentiment to predict failures and anticipate recalls.
3D PRINTING:

3D printing helps the automotive industry in three primary ways. Firstly, it enables rapid prototyping with 3D
printed models that accelerate the design and testing phases of production. Secondly, it allows manufacturers
to print spare parts to match their requirements. Lastly, additive manufacturing of composite materials leads to
automotive parts that are lighter, stronger, and more durable.
BLOCKCHAIN:

Blockchain finds multiple applications in the automotive industry. These include sharing vehicle data over a
secure network for connectivity and shared mobility solutions such as ride-hailing, urban transportation, and
deliveries. Moreover, it finds application in verifying the supply chain of spare parts or making sure that the raw
materials and spare parts are sourced exclusively from legal and trusted sources.

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Why it’s needed:

1. Agile Supply Chain

2. Self-monitoring capabilities
3. Capacity for customization
4. Lowering Emissions and Pollution
5. Improving Safety
Challenges:

1. Contractor Integration
2. Data Security
3. Data management
Future Prospects:

1. More Fuel-efficient rides

2. Predictive Vehicle Technology
3. Self-driving Technology
4. Cars-as-a-service (CaaS)

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TRENDS AND OPPORTUNITIES:

INCREASED R&D SPENDING

SHIFT IN HIRING NEEDS: ENGINEERS AND COMPUTER SCIENTISTS LEAD THE WAY

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CONNECTED AND AUTONOMOUS VEHICLES ARE GAINING RAPID MOMENTUM

BLOCKCHAIN:

DAIMLER AND LBBW USING BLOCKCHAIN FOR BUSINESS -TO-BUSINESS PAYMENTS:

Automaker Daimler has successfully conducted their first blockchain-based payment with the major commercial
banking company, Landesbank Baden-Württemberg (LBBW). Although this isn’t the first time a car
manufacturer has used blockchain to conduct a payment, it is a huge step forward for the whole industry as
Daimler and LBBW have successfully completed a major financial transaction on blockchain without involving
any traditional methods.

The entire transaction, including the origination, distribution, allocation and execution of the loan agreement
to the confirmation of repayment and interest payments, was carried out through blockchain. Both companies
have expressed their interest in developing the technology further. It will be interesting to see what comes out
from this partnership.

TOYOTA AND MIT USE BLOCKCHAIN TO RATE DRIVERLESS VEHICLES:

Japanese vehicle manufacturer Toyota has paired with Massachusetts Institute of Technology (MIT) to build
safer autonomous vehicles. The partnership was developed in order to enable better autonomous vehicle data
management.

At the moment, autonomous vehicles are being tested all around the globe. Yet, much of their information is
confined to various systems. Blockchain has the ability to log and share vast amounts of data. With Toyota and
MIT’s blockchain, vehicle manufacturers will be able to share autonomous vehicle data in real time. With this
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shared information, self-driving vehicles will become a product of tomorrow rather than ten or so years from
now.

BIG DATA:

TOYOTA USING BI G DATA TO PREVENT ACCIDENTS CAUSED BY ACCELERATOR -BRAKE MIX UP:
Toyota realized that its customers in its home country are increasingly aging — which means, safety is going to
be more important than ever before. According to government data from a report published in 2018, 15 percent
of road accidents in Japan are caused by drivers who are 75 years or older. The most common cause of those
accidents is drivers mistaking the accelerator for the break. While the Japanese government is actively
encouraging elderly drivers to give up their licenses, the rise in accidents was also a good reason for automakers
such as Toyota to revisit ‘safety’ features in manual cars.
The company started equipping its vehicles with an emergency safety system going forward that will use big
data to determine if the accelerator was pressed intentionally or unintentionally. If the algorithm determines
the use of the accelerator was unintentional, it will ignore it in hopes to prevent an accident. This new feature
was developed by leveraging data collected from Toyota’s line of internet-connected cars, providing a glimpse
into the exciting future that we’re headed towards, powered by big data, artificial intelligence, machine learning,
edge and cloud computing, and other interesting technologies.
AUTOMATED DRIVING:

DAIMLER TRUCKS ESTABLISHED THE AUTONOMOUS TECHNOLOGY GROUP:

As part of its roadmap, Daimler Trucks established the Autonomous Technology Group as a global organization
for automated driving, bringing together its worldwide expertise and activities. The main tasks of the new unit
comprise overall strategy and implementation of the automated driving roadmap, including research and
development as well as setting up the required operations infrastructure and network, heading towards the
series production of highly automated trucks. Highly automated driving is characterized as automated travel
between defined hubs and in defined areas without any expectation of the system that a user will respond to a
request to intervene.

CLOUD BASED DATA SERVICES:

AMAZON TO HELP TOYOTA BUILD CLOUD -BASED DATA SERVICES:

Amazon.com Inc.'s cloud computing unit will help Toyota Motor Corp. build a platform to help manage and
monetize data gathered from the automaker's global vehicle fleet.

Toyota said its Mobility Services Platform will enable it to process and analyse data that can be used to develop
vehicle services from ride and car sharing to behaviour-based insurance and maintenance notifications.

CATERPILLAR

Caterpillar is helping create solutions to solve the customers' biggest problems by using the Lean Innovation
principles of rapid prototyping, ethnographic research and agile development.

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ADDITIVE MANUFACTURING OR 3D PRINTING:
Caterpillar’s continued focus on 3D printing is to bring the additive manufacturing technology from a prototype
solution to a main manufacturing method and to use the technology to keep the customers and factories
running optimally.

CAT CONNECT:
Cat Connect makes smart use of technology and services to improve customer jobsite efficiency. Using the data
from technology-equipped machines, customers get more information and insight into their equipment and
operations than ever before.

CAT MINESTAR:
MineStar is the mining industry’s most comprehensive and thoroughly integrated suite of technology
offerings. Fleet management, guidance technologies and machine health applications allow significant
improvements in your operations and maintenance organizations. Safety technologies help keep people safe
when they’re in, on or around equipment. And you can further optimize your operation with MineStar
automation technologies, including fully autonomous hauling — a safety and productivity game-changer.

ACCUGRADE™ LASER GRADE CONTROL SYSTEM:

The AccuGrade Grade Control System provides customers increased productivity while drastically reducing
costs. This revolutionary Caterpillar solution is factory integrated, sensor-independent and features a suite of
products that includes cross slope, sonic, laser, GPS and ATS technology.

For decades, the world’s mines have relied on Cat autonomous products to keep people out of harm’s way.
Along the way, they’ve discovered numerous other advantages, including better efficiency, greater productivity
and lower costs. Now, Cat® automated solutions — and their benefits — are making their way into the
construction industry as they work to make sure operations of all sizes can work more safely and productively.

REMOTE-CONTROL DOZING AND EXCAVATING

Dozing on steep slopes, or around unstable surfaces or in other hazardous conditions is a major challenge. Now
one can keep working safely and productively without putting the operators at risk with Cat Command for dozing
and Cat Command for excavation remote-control options.

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SUSTAINABILITY

TOYOTA’S SUSTAINABLE DEVELOPMENT GOALS

EXERTING GREATER IMPACT ON SOCIETY BY UTILIZING TECHNOLOGIES AND SHARING ASPIRATIONS

Reducing CO2 emissions is a global challenge. To achieve this goal, it is important to further promote the widespread adoption and
use of electrified vehicles in the global market. While various types of electrified vehicles, including battery electric vehicles (BEV) and
fuel cell electric vehicles (FCEV), have been developed, promoting the widespread use of them requires more time and cost, especially
in regard to battery and infrastructure development. Therefore, to speed up the pace of reductions in CO2 emissions, now is the time
for Toyota to share their aspirations with many stakeholders and work in collaboration with their partners. Accordingly, Toyota has
decided to grant royalty-free licenses on approximately 23,740 patents it holds for vehicle electrification-related technologies. These
are advanced technologies that Toyota has been employing for higher performance, making things more compact, and the reduction
of costs through the long-standing development of hybrid vehicles, which serve as core technologies that can be applied to the
development of various types of electrified vehicles. Concurrently with the sharing of technologies, Toyota will eagerly work toward
the proliferation of electrified vehicles. For the purpose of reducing CO2 emissions globally, Toyota aspire to help make electrified
vehicles "standard" cars.

In additional to its environmental initiatives, Toyota is also making efforts in the area of vehicle safety. On that front, Toyota have
developed and evolved a virtual human body model software application which enables computer simulation and analysis of injuries
to the human body as caused in vehicle collisions. This software is known as the "Total Human Model for Safety" or "THUMS." Toyota
has decided to make its THUMS software freely available from 2021. Compared to the physical crash dummies commonly used in real-
life vehicle collision tests, THUMS is able to analyze collision-related injuries in more detail, because it precisely models the shapes
and durability of the human body. Additionally, conducting simulations on computers enables repeated analysis of a range of different
collision patterns, while dramatically reducing the development lead times and costs associated with collision testing. Free access to
THUMS, and its subsequent use by a wider variety of users, are expected to help enhance vehicle safety across the entire automotive
industry, and reduce traffic injuries and fatalities to create a safer society.

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GLOBAL EFFORTS TO PROTECT THE EARTH'S RICH BIODIVERSITY
Toyota considers the efforts it makes to conserve the earth's complex and diverse ecosystem equally important to efforts it is making
to tackle climate change. Under the Toyota Environmental Challenge 2050, which espouses the "Challenge of Establishing a Future
Society in Harmony with Nature," Toyota help various global projects to protect biodiversity in collaboration with international
organizations, NGOs, and NPOs.

In 2016, Toyota formed a partnership with the International Union for Conservation of Nature (IUCN) to raise awareness of the world's
biodiversity crisis with the aim of enriching The IUCN Red List of Threatened SpeciesTM (IUCN Red List). Under the IUCN-Toyota Red
List Partnership, over 28,000 new Red List assessments of animals, plants and fungi will be carried to make the IUCN Red List a true
Barometer of Life. The assessments include a number of threatened fish and reptile species which are only found in Japan and
collectively will be used to inform conservation action at local, national and global levels.

Meanwhile, upon receipt of the Global 500 Award from the United Nations Environment Programme (UNEP) in 1999, Toyota launched
the Toyota Environmental Activities Grant Program. Under the themes of climate change and biodiversity, we have offered support
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for environmental activities carried out by NGOs and NPOs both in and outside Japan. Through this approximately 20-year-long
program, a total of 413 projects in 57 countries and regions around the world have been supported (as of August 2020).

SHOPS WILL COME TO YOUR PLACE!? EXPERIENCE AN ENTIRELY NEW FORM OF MOBILITY .
Based on the desire to offer a "new mobility" that makes people's daily lives better, Toyota has developed e-Palette, a next-generation
electric car. Under the concept of "Move" for All, it is aimed at providing all people with freedom of movement and also moving their
hearts through such movements. With a roomy interior space, this electrified and connected car employing automated driving
technology is not only a safe and reliable means of transportation for people but also a Mobility-as-a Service (MaaS) vehicle available
for multiple purposes, from distribution to sales of things. It emits no CO2 while driving. Large sliding doors, low floors, and electric
ramps combined with automated driving control, which enables the car to fully pull over to a sidewalk or a station, can allow people
in wheelchairs or elderly people to get into/out of the car and travel easily and smoothly. Establishing an environment that enables all
people to move freely and pleasantly is very important in creating a sustainable society in which they can continue to live for a long
time. e-Palette not only supports the movement of people but also delivers various goods and services to people, demonstrating the
unconventional value of mobility. e-Palette contributes to the creation of new mobility services, envisioning the future of mobility, in
which people will communicate with mobility.

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TECHNOLOGY CAN CONTRIBUTE TO THE ENVIRONMENT WHEN DISSEMINATED. ZERO CO2 EMISSIONS CHALLENGE
Tackling climate change is one of the most important social issues of today. In order to reduce CO2 emissions, the spread of electrified
vehicles is crucial. In response to rising expectations for electrified vehicles, Toyota has been taking advantage of its experience in the
development of hybrid electric vehicle (HEV) technology for over 20 years and has been advancing development in all fields of HEV,
PHEV, FCEV and BEV. The Toyota Environment Challenge 2050 aims at a long-term goal of reducing CO2 emissions from new vehicles
during driving by 90 percent from the level of 2010. According to the milestones for the spread of electrified vehicles announced at
the end of 2017, the target sales volume of electrified vehicles for 2030 is set at over 5.5 million. Currently, electrification of vehicles
is advancing faster than this target thanks to a significant increase in HEV sales, and the target is likely to be achieved about five years
ahead of schedule. Toyota is also working on the development of various types of zero-emission vehicles, such as BEV and FCEV. In
2020, starting with China, Toyota will launch a mass-production BEV it has been developing. Believing that environmental technologies
can contribute to society when they are disseminated, we will accelerate our efforts to further promote electrification, with the aim
of providing the value of zero CO2 emissions.

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DAIMLER

SUSTAINABLE SUPPLY CHAIN

WHAT MAKES A SUPPLY CHAIN REALLY SUSTAINABLE?

Every vehicle that’s on the road has to be produced, transported, and eventually recycled. Battery-electric vehicles in particular require
manufacturers to begin with the supply chain if they wish to become sustainable. That’s because a large part of the CO2 emissions
that are produced by an electric vehicle during its lifecycle arises in the supply chain, i.e., before the vehicle even rolls off the assembly
line in one of our plants.

At the moment, electric vehicles still give rise to 80 percent higher CO2 emissions during production than is the case with automobiles
equipped with combustion engines. However, they produce about 65 percent less CO2 in operating status, provided they use a
conventional electricity mix. As a result, their total emissions of CO2 during their entire lifecycle are at least 40 percent lower than
that of combustion engine vehicles over the same distance.

If a battery-powered car can run solely on electricity generated from renewable resources, its CO2 emissions over the entire lifecycle
will be 70 percent lower than those of a combustion engine vehicle. This huge potential reduction in CO2 emissions is an undisputed
advantage of electric vehicles. Moreover, it’s the reason why these vehicles are considered the big hopefuls when it comes to
sustainable private transport.

AMBITION2039 — OUR STRATEGY FOR CLIMATE-NEUTRAL MOBILITY

In its Ambition2039 strategy, Mercedes-Benz has set itself the clear goal of making its fleet of new vehicles CO2-neutral in less than
three product cycles. Moreover, Mercedes-Benz want half of their car sales to be plug-in hybrids or all-electric vehicles in 2030.

THREE FIELDS OF ACTION FOR A SUSTAINABLE SUPPLY CHAIN

The first field of action addresses a very important topic: the upholding of human rights in all of the stages of the supply chain.
“Although we only have a contract with our direct suppliers, we go far beyond that when it comes to the upholding of human rights.
In cooperation with our compliance and human rights experts at Integrity and Legal Affairs, we also examine the situation on the
ground and work together with independent partners to make sure our ethical standards are adhered to.”

With regard to our second field of action, CO2 reduction, alternative drive systems are especially affected by the upstream supply
chain. For these systems, the supply chain accounts for a large part of the entire lifecycle’s CO2 balance. That’s why sourcing team is
taking part in workshops with existing suppliers to develop measures for shaping the path to CO2 neutrality. For example, they are
working together to come up with ideas on how to eliminate blast furnaces from steel production.

Moreover, sourcing team is talking with the suppliers about whether and how production might be able to switch to green electricity.
Daimler is setting a good example here: In 2018, Mercedes-Benz Cars became the first major industrial customer to obtain electricity
from German wind power facilities whose subsidies in accordance with Germany’s Renewable Energy Act (EEG) are due to expire after
2020. The associated contract ensures that six citizen-owned wind farms can continue to operate. In addition, the way in which CO2
emissions are addressed will play an important role in future supply contracts.

The third field of action, resource conservation, deals with approaches for increasing the share of recycled materials in the supplied
parts and for ideally creating a closed loop system. By 2030, Daimler AG aims to reduce the use of the most important primary raw
materials for electric drive systems by 40 percent. Specifically, the objective is to make appropriate technical improvements in order
to reduce the use of primary raw materials. This will especially be done by using secondary materials wherever this is technologically
possible and makes sense from a business standpoint.

A simple but effective example of this would be a more precise separation of the various types of scrap metal. Steel, for example, can
be recycled very efficiently in certain cases. Daimler also aims to reduce the amount of waste as well as the use of other production
materials and resources such as water. Furthermore, it plans to introduce industry-specific technical innovations and improvements
that would boost energy efficiency, for example. In the last step, the company could offset unavoidable CO2 emissions in the supply
chain. When doing so, they will especially focus on the CO2-intensive raw materials aluminum and steel as well as on those used in
batteries.

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BLOCKCHAIN TECHNOLOGY MAKES SUPPLY CHAIN MORE TRANSPARENT
There are also indications that progress is being made in the digital realm that will increase transparency in the supply chain and thus
make it more sustainable. Blockchain technology, for example, could potentially completely revolutionize procurement processes.
This could affect nearly the entire value chain.

ENVIRONMENTAL STATEMENTS OF THE PLANTS

Beyond the certification of the environmental management systems to ISO 14001 standards, all German production sites of Daimler
AG, take part in the European eco audit system (EMAS).

MERCEDES-BENZ CARS PLANTS TO BECOME CO₂ -NEUTRAL

In Germany and Europe, Mercedes-Benz Cars paves the way for green production. All German plants will be supplied with CO₂-neutral
energy. The preparations for exclusively green electricity for a climate-friendly production in Europe are already well advanced.

In Germany, Mercedes-Benz Cars has eight vehicle and powertrain plants (Bremen, Rastatt, Sindelfingen, Berlin, Hamburg, Kamenz,
Kölleda, Stuttgart-Untertürkheim), which either purchase electricity or operate their own power plants. In the future, 100 percent of
additional purchased electricity will come from verifiable renewable sources, such as wind- and hydropower. This corresponds to
about three quarters of the required electricity in the German plants. Already existing highly efficient gas CHP systems additionally
generate local heat and power at our factories. The thereby resulting CO₂-emissions are compensated by qualified environmental
projects.

• New plants in Germany and Europe are planned with a CO₂-neutral energy supply from the start:
• Already today, the entire electricity demand of the smart plant in Hambach (France) is obtained from renewable energy
sources.
• At the location Kecskemét (Hungary) a second plant with a highly flexible and efficient production, which will be supplied
CO₂-neutral, is currently built.
• In Jawor (Poland), a new CO₂-neutral engine plant is built. The plant will start operating in 2019.
• The “Factory 56” is currently built in the Sindelfingen plant (Germany). According to its slogan – digital, flexible, green - it will
set standards within the worldwide automobile production. The production hall uses renewable energy and reduces water
consumption and waste significantly. On the roof of “Factory 56” there is a photovoltaic system which supplies the shop with
self-produced green electricity.

SOLAR PANELS AT DAIMLER

In several locations in Germany, Japan, the United States, and India, Daimler operates photovoltaic installations on roofs or provides
roof space for the use of operating companies. More than 70,000 square meters of roof space are used for CO₂-neutral electricity
production in this manner.

Daimler India Commercial Vehicles, Chennai

The green energy revolution is a euphemism for Daimler’s Oragadam plant. The installed solar power generation capacity has increased
from 0.8 to 3.3 Megawatts over the last three years. With three solar photovoltaic plants, installed strategically to harness solar power
throughout the year, the commissioned installation has the capacity to electrify over 800 houses in India. The new solar power field,
built on previously idle stretches of land within the test track area, consists of more than 10,000 new polycrystalline photovoltaic panels.
Thanks to the upgrade, the share of solar power is now covering up to 28 percent of the average daytime electrical power need of
DICV’s operations on site.

THE NEW PAINTING PROCESSES

The new painting process will enable the facility to manufacture vehicles in an even more environmentally friendly and resource-
efficient manner in the future. The dry separation process now being used at the plant vacuums off excess overspray in a permanent
air current and then collects it on plastic lamellae. The paint deposits can then be brushed off and properly disposed of, after which
the lamellae are reinstalled and used again. Up until now, overspray has been collected in a water cycle and then drained off as paint
sludge.

Advantages
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The new process offers a major benefit in that it lowers electricity consumption by as much as 18,000 kWh per year, which corresponds
to the average amount of energy used by six two-person households each year. In addition, the dry separation process reduces the
amount of hazardous waste produced every year by nine tons and lowers natural gas consumption by 60,000 cubic meters and water
consumption by 4,000 liters per year. Lower noise levels and aerosol emissions also improve work conditions in the paint shop.

GOODBYE TO ALL THAT PAPER!

The future is paperless – Daimler is working towards this objective on a continuous basis. Many Daimler plants have already taken
measures to reduce or even eliminate paper.

In the forge of the Mercedes-Benz plant in Untertürkheim, the lead plant in the global Powertrain production network, a completely
digital process chain has been in place for the production of massive-formed parts, such as steering knuckles, since 2015.

Where a plethora of technical drawings was previously circulated, everything now places in digital form up to the creation of the
optimally formable overall product.

Previously, there was an assembly and component drawing for each product and tool along the way, with all the necessary drawing
information. These drawings consisted of several sheets of paper in large-scale A0 and A1 format. Every time a design modification or
improvement took place, the drawings for each area, such as pre-planning, NC programming, tool production, tool assembly,
measuring technology and production, had to be printed out in several copies and the drawing statuses archived for documentation
purposes. This created vast volumes of paper.

As a result of improved computer performance, software development, state-of-the-art CAx programs, operating systems and
databases, it is now possible to implement the entire process chain in digital form.

The basis is provided by a central data model and the systems are interconnected. Data control is ensured by means of authorizations
and change histories.

COMBINED HEAT AND POWER AT DAIMLER

The expansion of combined heat and power (CHP) units is an important pillar of the eco-friendly energy supply system. Since 2011
Daimler have set up 52 CHP modules with capacity of around 215 MW. With these modules alone, they can cover around 6 percent
of our electricity and heating requirements under optimized CO₂ conditions.

Mercedes-Benz plant Hamburg

The modern CHP plant will cover the facility's basic demand for heating and much of its demand for electricity in the future. It works
with a 16-cylinder V-engine with a flange-mounted synchronous generator as well as a heat buffer storage unit with a capacity of
100,000 liters of water, and operates with an efficiency of almost 90 percent. Weighing around 14 tons and with a total combustion
capacity of 3.2 megawatts, the system would be able to cover the average heating and electricity requirements of around 640 homes.
The CHP plant, situated on the northern edge of the plant, is scheduled to commence operation in November 2016 following a nine-
month period of construction.

BIODIVERSITY AT DAIMLER
Daimler's production plants around the world cover a total area of around 5,200 hectares. This is the size of about 7,300 soccer pitches.
Sixty five percent of this area is sealed by buildings and roads. As a limited public resource, floor space is used as efficiently as possible,
for example by building densely with several floors. Outdoor areas within our plants are also designed to serve as a habitat for
indigenous plants and animals. In this way, the company facilitates biodiversity even amidst the industrial architecture.

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CATERPILLAR

ENERGY & EMISSIONS

Global demand for energy is expected to increase significantly over the next 25 years according to the International Energy Agency,
and Caterpillar will continue to play a key role by providing products and services to industries that enable access to reliable energy.
As a global energy consumer and industrial manufacturer, as well as a major manufacturer of energy conversion and power generation
products, Caterpillar has a fundamental interest in, and understanding of, energy needs around the world.

ENERGY GOAL
Reduce energy intensity by 50% from 2006 to 2020.

32% Operational energy intensity decreased 32% from 2006 to 2019, and increased 1% from 2018 to 2019. While absolute energy
decreased slightly from 2018 to 2019, it decreased by 12% overall from 2006 to 2019. These results reflect Caterpillar’s increased
productivity and efficiency.

GHG EMISSIONS GOAL

Reduce greenhouse gas emissions intensity by 50% from 2006 to 2020.

54% GHG emissions intensity decreased 54% from 2006 to 2019, achieving the 2020 target. In addition, the absolute GHG emissions
decreased by 20% from 2018 to 2019, and decreased by 41% from 2006 to 2019. Increases in productivity and efficiency have helped
Caterpillar to achieve our 2020 GHG emissions goal.

ALTERNATIVE/RENEWABLE GOAL
Use alternative/renewable sources to meet 20% of our energy needs by 2020.

35.5% of the electrical energy was from renewable or alternative sources in 2019. In addition, the use of renewable energy increased
from 2018 to 2019

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FUEL ECONOMY & EMISSIONS
Caterpillar is focused on energy and emissions reduction in their own business, and helping customers decrease their carbon footprints
through machinery and power solutions that contribute to lowering greenhouse gas emissions. Supported by Enterprise Technology
Strategy, research and development focus areas include high-efficiency energy conversion and electrification, working to increase
power density, expand the use of alternative fuels, maximize efficiency of power systems and introduce more electrification into our
product lines.

SYSTEMS OPTIMIZATION GOAL

Increase managed fleet hours by 100% from 2013 to 2020.

510% Caterpillar Job Site Solutions (JSS) helps customers realize savings through reduced operator and repair needs, as well as
decreased fuel use and associated emissions. Demand from customers continues to grow for solutions provided by the JSS team
working together with CAT dealers.

MATERIALS
Caterpillar is the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas
turbines and diesel-electric locomotives. Across the world today, 1.8 million Caterpillar construction machines are active, and more
than 20 million engines have been built. What goes into these machines matters. Caterpillar responsibly sources the raw materials
used to build their products. And they keep those materials in circulation for as long as possible through remanufacturing and rebuild
programs that reduce waste, extend equipment life and save customers money.

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Caterpillar sources these materials from a network of more than 28,000 suppliers who ship more than 800,000 parts and components
to Caterpillar every year. A key consideration is responsible sourcing of minerals used in products. Tin, tungsten, tantalum and gold
(3TG), collectively known as “conflict minerals,” have been associated with human rights violations

REMANUFACTURING
For more than 45 years, Caterpillar’s remanufacturing and rebuild businesses have provided customers with quality equipment that
delivers the best economic proposition for their business. The engineering and manufacturing expertise, field population and dealer
organization make it possible for them to offer remanufactured products and components through Cat Reman, Progress Rail Services
and Solar Turbines, and rebuild options through dealers.

Remanufacturing and rebuild options deliver multiple sustainability benefits and help Caterpillar contribute to the circular economy.
Through these businesses, they recycle millions of pounds of end-of-life iron annually. Because Caterpillar is in the business of
returning end-of-life components to same-as-when-new condition, they reduce waste and minimize the need for raw material, energy
and water to produce new parts. Through remanufacturing, they make a significant contribution to sustainable development —
extending the value of the energy and water consumed in a component’s original manufacture and keeping high-value nonrenewable
resources in circulation for multiple lifetimes.

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