1. 1 Demand for Biofuels: E85, Flex-Fuel Vehicles, and Intermediate Ethanol Blends US Chamber of Commerce Demand for Biofuels: E85, Flex-Fuel Vehicles, and Intermediate Ethanol Blends US Chamber of Commerce September 27, 2007 Tom Stricker, Director Technical & Regulatory Affairs Toyota Motor North America, Inc. September 27, 2007 Tom Stricker, Director Technical & Regulatory Affairs Toyota Motor North America, Inc.

2. 2 Awareness of Issues Three issues: energy, CO 2, and air quality Global development of industry & technology in the 21st century Global development of industry & technology in the 21st century Accelerated consumption of fossil fuels Automotive Powertrain Issues 1. Energy Issues 3. Air Quality Issues Population growth (in USA, Asia, etc.) Growing number of motor vehicles Growing number of motor vehicles 2. CO 2 Issues (global warming measures)

3. 3 Right Time Right Place Right Vehicle Gaseous fuel ElectricityHydrogen Synthetic fuel Bio fuel Hybrid Technology Gasoline / Diesel Ultimate eco-car Toyota’s Approach No silver bullet, but hybrid is beneficial to all types

4. 4 Biofuels (Ethanol) Discussion Overview Some Benefits of Ethanol Benefits/Challenges of Expanding Ethanol - Low-Level Blends - High-Level Blends - Mid-Level Blends Food for Fuel Thought!

5. 5 Some Benefits of Ethanol Domestic Resource Job Creation Energy Security/Diversity Potential CO2 Reductions Source: LiveScience Image Gallery Grinnell Glacier c. 19402004

6. 6 Low-Level Blends (E10 ↓ ) All-Vehicle CompatibilityGood Energy Content BTU vs. Gasoline Blending Infrastructure  Legal Fuel Other Non-Auto Equipment

7. 7 High-Level Blends (E85) High Oil Displacement~8M FFV’s on the Road  Legal Fuel Key Challenges: Customer Value, Fuel Availability, Fuel Supply

8. 8 High-Level Blends (E85) – Customer Factors Main Reasons to Consider FFV Main Reasons Not to Consider FFV  Decrease oil dependence  Lower fuel costs  Better for the environment  Availability of refueling  Never thought about it  Cost Consumers Appear Both Educated and Uneducated at the Same Time

9. 9 High-Level Blends (E85) – Potential Vehicle Mods. Key upgrades for Ford Taurus FFV Widely reported Big-3 cost of $150-200 per vehicle

10. 10 High-Level Blends (E85) – Customer Factors Source: DOE Clean Cities Alternative Fuel Price Report July 2007 Lower Energy Density = Lower MPG and Reduced Range Current E85 Fuel Cost > Current Gasoline Cost

11. 11 High-Level Blends (E85) – Customer Factors Definitely/Probably Consider Flex Fuel technology loses about 1/3 of its considerers upon learning about the reduction in fuel economy and the loss of driving range per fill-up. Q: Assume that today your preferred manufacturer offered a vehicle that met your needs for vehicle size and your tastes for vehicle styling, to what extent would you consider purchasing this vehicle as your next new vehicle if it had the following vehicle technology…? (Definitely would consider, Probably would consider, Might or might not consider, Probably would NOT consider, Definitely would NOT consider) Q: Now that you have read about each of the advanced technologies, assume that today your preferred manufacturer offered a vehicle that met your needs for vehicle size and your tastes for vehicle styling, to what extent would you consider purchasing this vehicle as your next new vehicle if it had the following vehicle technology…? (Definitely would consider, Probably would consider, Might or might not consider, Probably would NOT consider, Definitely would NOT consider) 50% 34%

12. 12 High-Level Blends (E85) – Availability Source: DOE Alternative Fuels Data Center (as of May 2007) Only about 1,200+ pumps nationwide – focus in the mid-west

13. 13 High-Level Blends (E85) – Supply 31% 37% 47% An Analysis of the Effects of an Expansion in Biofuel Demand on U.S. Agriculture, U.S. Department of Agriculture, May 2007 % Corn Crop 12B 15B 20B

14. 14 High-Level Blends (E85) – Supply Estimate of Cellulosic Ethanol Potential DOE Target for Cellulosic Ethanol Cost % US Gasoline Demand $/gallon Source: USDA, DOE $1.04 $2.50 $3.50 30% 0%

15. 15 Mid-Level Blends (E20) High Oil Displacement~8M “E20” Vehicles on the Road   Legal Fuel and FFV Other Key Challenges: Emissions, Near-Zero Fuel Availability, Non-Autos

16. 16 Mid-Level Blends (E20) – Potential Vehicle Concerns (1) (2) (3), (4) (5) (6) (*): Only some vehicles Item (1)Fuel cap valve rubber (*) (2)Tank gasket (*) (3)Fuel pump (*) (4)Sender gauge (5)Fuel delivery (*) (6)Pulsation dumper (*) Potential Issues: Materials failures, Evaporative Emissions, Hot Re-Start, Idle Quality Potential Issues: Materials failures, Evaporative Emissions, Hot Re-Start, Idle Quality

17. 17 Toyota View Biofuels (ethanol) have a key role to play Low-level (E10) makes sense - Interested in exploring all options – concern about E11+ usage - Cooperation with/among CRC, EPA, DOE, etc. Still examining the best way to use “excess” ethanol 2009 Toyota Tundra FFV - Support biofuels policy - Pockets of demand (rejection criteria for some) - Cautious approach while assessing customers, fuel supply and infrastructure

18. 18 Food for Thought (Not Toyota Position) Assume corn reaches 15B and cellulose reaches 15B in the next 15 years (cost-competitive) - total 30B gallons This is about 20% of future gasoline demand Let manufacturers choose between E20 and E85 vehicles - substantially greater potential for large ethanol- capable fleet (E20) at much lower cost Distribute “excess” ethanol as E20 rather than E85 - Four times as many refueling locations with same amount of ethanol - 1/4 to 1/8 the mpg, range and cost hit of E85 for consumers Still Challenges: Fuel Spec, Certification Fuel, Misfueling (E10 vehicles and non-automotive applications) Still Challenges: Fuel Spec, Certification Fuel, Misfueling (E10 vehicles and non-automotive applications)

19. 19 TODAY for TOMORROW TODAY for TOMORROW