Roe East, Cummins, Inc.

Natural Gas and the Commercial Vehicle Industry Utica Summit 2014 Canton, Ohio

Cummins Inc. and Cummins Bridgeway

Natural gas engines have been providing power to the world for over 150 years.

Natural gas vehicle use has evolved and grown significantly in the last decade.

Natural Gas Vehicle Production Regional Haul

Refuse/Waste

Urban Transit 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Natural gas buses are used in transit, BRT, school, and shuttle service nationwide.

Most North American transit and school bus manufacturers offer natural gas options.

Natural gas trucks are available today in configurations to meet most business needs.

Almost all heavy-duty trucks brands in North America offer natural gas options.

Natural gas vehicles are factory-built with natural gas engines & fuel systems.

LNG Tanks Natural Gas Engine

– OR – CNG Tanks

Cummins manufacturers two NG engine models today, and are introducing two more.

ISB6.7 G

ISL G

ISX12 G

2015 Displ: 6.7 L Power: 260 hp Torque: 660 lb-ft

8.9 L 320 hp 1000 lb-ft

12 L 400 hp 1450 lb-ft

ISX 15 G

2016 15 L TBD hp TBD lb-ft

Other natural gas engines include models by Westport Innovations and (soon) Volvo.

Too shy for photo

HD15L 475 HP

D13 TBD HP (2014)

Natural Gas Engine – How does it work?

ISX12 G 400 HP 1450 Lb-ft Spark Ignited 100% Nat Gas CNG or LNG

First Production ISX12 G on Cummins assembly line in Jamestown, NY (4/9/13)

Natural Gas Engine – How does it work?

Cooled Recirculated Exhaust

Natural Gas

Air

Natural Gas Engine – How does it work?

Spark Plugs & Coils

Natural Gas Engine – How does it work?

Catalytic Converter

Turbocharger

Low engine-out emissions allow SI natural gas engines to use three-way catalyst.  Reduces three harmful emissions: NOX, CO, HC  Maintenance-free Catalyst Inlet

Catalyst Outlet

NOX

N2

CO

CO2

HC

H2O

NG commodity prices translate into a ~40% price advantage at the retail pump in US. U.S. Retail Pump Price (DGE)

5

40%

4 3 2 1 0

g a t n a v ad

$4.00 $1.60

$2.40 $1.90

e

Wellhead Price

2.4

0.5

Natural Gas

Diesel

Cost savings from switching to natural gas can be significant commercial vehicles.

Savings per year

Diesel = $4.00/gal Natural Gas= $2.40/gal Fuel Usage

$500

$24,600

Fuel Savings @ equal efficiency

= 15,000 gal

Does lower engine efficiency offset the fuel cost advantage of natural gas?

Savings per year

MPG

Diesel = $4.00/gal Natural Gas= $2.40/gal Fuel Usage NG$500 Efficiency

$24,600

$18,100

Fuel Savings Fuel Savings @ actual @ equal efficiency efficiency

= 15,000 gal = 85%

Do higher maintenance costs offset the fuel cost advantage of natural gas?

Savings per year

MPG Maintenance + Spark plugs

+ GEO oil + Valve adjust - DPF & SCR maintenance

$24,600

$18,100

$17,600

Net Fuel Savings Fuel Savings @ actual Operating Cost @ equal Savings efficiency efficiency

Current natural gas prices generate < 3 year payback for â&#x20AC;&#x153;high fuel useâ&#x20AC;? vehicles.

Economic Payback from Natural Gas 6.0 5.0

$1.50 fuel price differential < 3 year payback

4.0 3.0

rs) ck(Y ayb tP Fle

2.0 1.0 0.0 $1.00

$1.25

$1.50

$1.75

$2.00

$2.25

Fuel Price Differential

Annual Fuel Consumption: 15,000 gal diesel Vehicle Price Differential: $50k

$2.50

$2.75

$3.00

Today’s population of NG fuel stations is insufficient for variable route, long haul fleets.

Fuel Station Population in U.S. 140,000

# of Stations

120,000

Participants entering market: • Pilot/Flying J with Clean Energy • Travel America with Shell • ENN (China) via Blu • Kwik Stop

121,446

100,000 80,000 60,000

51,007

40,000 20,000 0 Gasoline Stations

6,000 Truck Stops

605

35 LNG Stations

 Early adopters operate vehicles on fixed routes, and/or invest in private fuel stations.

Today’s natural gas fuel tanks are large and heavy compared to diesel tanks.

150 DGE capacity comparison

Diesel

CNG

LNG

Size Penalty

Baseline

4x

2x

Weight Penalty*

Baseline

2000 lbs

300 lbs

Cost Penalty

Baseline

~$30,000

~$25,000

* Net of engine & aftertreatment weight differences

• ARPA-E Funding - $30 million for new CNG tank technology • New players: Trilogy, 3M, others entering CNG tank market.

Natural gas adoption rate in the commercial vehicle market will be driven by four factors  Low natural gas prices (relative to diesel)  Increased number of natural gas fuel stations  Reduction in natural gas fuel tank size, weight, cost  Expanded availability of natural gas vehicles

All four factors will trend favorably for natural gas in the next five years.

The natural gas adoption rate will continue to increase.

Market Segment

2018 NG Market Adoption Rate

Transit Bus

15-20%

Refuse Truck

50-60%

HD Truck

5-10%

Summary  Natural gas is an opportunity for truck & bus fleets to dramatically reduce their operating costs.  Natural gas engines and vehicles are available in a wide variety of configurations – a vehicle for every need.  Switching from diesel to natural gas is not without challenges, but expect natural gas commercial vehicles to be a significant portion of the market in five years.