Good afternoon, ladies and gentlemen, and thank you very much to you all for coming to Johnson Matthey's investor event today. Just before we start, quick health and safety notice. If there is a fire alarm, if you could just make your way out via the fire exits, which are signposted in green. Also, the event is being webcast live, so could I ask you to please turn off mobile phones and devices? Thank you. With that, I'll hand over to Robert.
Thank you, Sally, and good afternoon, everybody. A very warm welcome to all of you to Johnson Matthey's Investor Day 2016, in which we are going to outline the growth opportunities from the evolving powertrain for Johnson Matthey. We have a full schedule for you this afternoon with presentations from me and a number of the JM team. There should, I hope, be plenty of opportunities for you to ask questions, both in the session here in this room but also out during the coffee breaks. Please take every opportunity you can to grab a JM person and get them to answer any questions that you might have. This is, after all, a session for you, and we hope that you get the benefit out of it that you are looking for. We aim to finish today around about 5:45 or something like that.
I know and I look forward to seeing many of you who are going to come for dinner and carry on the discussion there. As I said, our topic today is Johnson Matthey and our involvement in the evolution of the powertrain. I'll start by giving you an update on the good progress we're making in delivering our strategy, and then we'll explain why and how the automotive powertrain developments are good for Johnson Matthey, how they're diversifying, and as a result, creating new market opportunities for us. These require high-technology solutions in both emission control and battery technologies. In the presentations this afternoon, we'll show you how Johnson Matthey is well placed to create value for our shareholders and at the same time make a major contribution to improving air quality around the world. Today is all about the long term.
As a high-tech company providing with R&D and the timescales we work with R&D, we have to be long term. However, I'll start with a short-term overview on current trading. Yesterday, we did our Q3 statement, and sales for our continuing businesses were up 3% on last year. Underlying operating profit was, however, lower as it was adversely impacted by the challenging macroeconomic climate, which continued to weigh on process technologies and pressure on our products divisions. Our actions to reduce costs by about GBP 30 million are well underway. As I said in November, we expect about GBP 5 million of those savings to come through in the final quarter of this year and the rest into next year. ECT continues to perform well and had a strong third quarter. Fine chemicals and new business also made good progress too, so pleased about that.
Overall, the outlook for the full year is in line with market expectations. However, the external macroeconomic factors mean that trading conditions for us in some of our markets are very challenging right now. The oil price, about 40% lower than this time last year, has and will continue to limit opportunities in the chemical industry and how the investment plans are working there, and hence demand for new licenses and plant catalyst first fills for process technologies. China's slowed down. They have sufficient chemical capacity right now for the technologies we license, so the outlook for new plant builds is subdued. In addition, their review of their coal strategy also points to a reduced market for the coal-to-SNG technologies we have talked to you about in the past. Finally, PGM prices.
With platinum and palladium down 30% and 35% respectively on this time last year, the volumes and profitability in our PGM refining business are adversely impacted. Against this backdrop, it won't surprise you to hear that we expect these internal factors to limit the group's growth opportunities in the short run. The long term still looks very positive, with structural growth drivers being strong, and consequently, we continue to invest in the business in line with our strategy for growth. Here is our strategy, which we took you through last year, and I'd like to provide you a bit of an update on progress to date. Investment, as I said, Johnson Matthey is a long-term growth business, and we continue to invest for future growth.
That includes investment in R&D, which of course remains vitally important to the group and at the core of JM's competitive advantage. Though this has been a touch higher than 5% of sales in the last couple of years, I would expect it to come back closer to that 5% level for the years ahead. On CapEx, given the current business climate, this will be at around one and a half times depreciation for next year, at the lower end of the range that we gave you last year, but still investing for growth and ahead of our maintenance CapEx levels. Taken together, we're still investing for the future, but we are mindful of the current constraints on the business and have adjusted these investment levels accordingly. We've continued to build on our core strengths.
In the last 12 months, we've disposed of gold and silver refining and research chemicals, both of which were non-core. There remains plenty of organic growth opportunities across the group, and we will continue to invest in these going forward. We're also making very good progress in growing our new businesses, Division Two. Over the last year, we've established ourselves in battery technologies and in atmosphere control technologies, where we made a small acquisition back in May to help us on our way. Overall, I'm very pleased with the progress that we're making in the new businesses, Division. Turning next to operational excellence and sustainability. We've made lots of progress here as well, especially on improving the efficiency in our manufacturing plants. The two points I'd pull out are firstly to reiterate the increased focus we have across the whole company on health and safety.
Secondly, an update on the investment in upgrading our business systems, which we told you about a year ago. This program, which, as you know, is to install SAP across the group, is, I'm pleased to say, on track. We're rolling out on a site-by-site basis to mitigate the risk, and our first site is scheduled to come online in the summer this year. We continue to expect our overall investment to be around GBP 100 million over five years, with the costs largely being front-end loaded. I believe the annual cash savings of at least GBP 20 million per year can be facilitated by these business systems. Of course, these will be back-end loaded as greater savings will come as more and more sites come online. On customer focus, it's true what they say. Next year's profits are in our customers' pockets.
With customer focus, it's all about leveraging more value from the breadth of products and technology we can supply to our customers. It's about using the strength and reputation of JM's name to facilitate our entry into new markets. The automotive powertrain market is a great example of that, and hopefully, you'll hear more about that today. As you know, JM has a great reputation with OEMs for its emission control products, and now we're using this as we expand on our position in battery technologies. Last but not least, create value. JM has and will continue to create value for you, our shareholders.
The special dividend of GBP 150 per share was paid to you on Tuesday, and this return on capital from the proceeds of the two disposals recently made ensures we retain an efficient balance sheet whilst maintaining capacity to invest to grow in the future. Capital efficiency is absolutely embedded in what we do. A long-term target of 20% return on capital remains in place, but that will be quite challenging to achieve in the current environment in the next couple of years. However, I want to assure all of you that we remain focused upon delivering earnings growth at the same time as enhancing capital efficiency, and that our target of 20% return on capital for investments that we make is firmly in place.
We remain well placed to create value from a range of opportunities where JM can supply high-tech products that have a positive benefit on the world around us. Those global sustainability drivers that we talked about last year continue to provide opportunities for superior growth. Looking at these drivers, at the top, population growth, urbanization, and increasing wealth is driving demand for our products and is particularly relevant to the evolving powertrain as you'll hear about. It also links to growth in emerging markets, and there, JM is very well positioned across all of our divisions, especially in China today and longer term, potentially South America and other emerging markets. Moving on to natural resource constraints, energy security remains a key concern for a number of countries, particularly China and the U.S., and in turn, a major driver for PT's technologies.
Despite recent price weakness, recycling of PGMs remains a strategic service both for our customers and for JM. As you know, PGMs are a key raw material for our emission control business, and having that security of supply is strategically important for the group. Longer-term technologies to enable renewable and alternative energy sources provide opportunities for process technologies, and Alan Nelson, our new CTO, will talk a little bit more about that later today. Environmental factors, climate change, and regulation are a major driver for JM's business, and as I said before, legislation is our friend. Without a doubt, focus on air quality. Emissions and electrification have intensified over the past 12 months, and JM is very much, we believe, part of the solution, and you'll hear about that. Finally, the fourth driver, health and nutrition. The ongoing pressure on healthcare costs continues to tighten.
For JM, our biggest customers in the healthcare market are the generic pharmaceutical industry, and the pressure on overall healthcare costs will continue to drive demand for complex chemistry solutions for our fine chem business. As you can see, the drivers fundamentally haven't changed, and I'm confident that they will continue to provide opportunities for JM through the use of technology. Now to the topic of the day, powertrain technology. All four drivers that I've talked about drive the need for evolving technology for the powertrain. The increased demand for mobility through population growth, urbanisation, and increasing wealth will, without intervention, contribute to increased pollution. Linked to this are constraints on fuel availability and type. This is driving the need for improved fuel efficiency, alternative fuels, and ultimately, more sustainable energy production.
Of course, environmental factors and regulation to combat increased pollution are all driving ever-tighter emission standards, not only for regulated pollutants but also for CO2 and zero-emission vehicles. As a result, today's technology will need to evolve, and therein lies the opportunity for JM. Now, as we'll show you today, there is an imperative for improved air quality, and this is driving diversification in the powertrain technology. Hybridisation is set to increase, and these vehicles need both emission control systems and battery technologies. We hope to show you today that this is not a risk for JM; rather, it provides an increased opportunity for us. It's important not to forget that hybrids still have an internal combustion engine, and this is expected to remain the main powertrain technology over at least the next decade.
We expect that in 10 years' time, around 97% of vehicles will still have an internal combustion engine and hence require emission control to the same or even higher standards than today. This is positive for ECT, with increased demand for complex catalysts through increasing numbers of vehicles, including hybrids, and tightening legislation. This gives more value for JM over the next decade. The market as a whole, which we estimate today to be about $8 billion, and that's for light-duty and heavy-duty combined, is expected to reach more than $13 billion by 2025. We have a strong position in this market, which we expect to sustain over this period, and hence our medium-term targets that we talked about last year remain in place. Not only do we have a good position in emission control, the market for battery technologies is set to grow too.
JM is a player in the market today, and the opportunities for our existing technologies and the opportunities in the market, which you know are based on high-power-dense lithium-ion phosphate cathode materials, are set to grow over the next decade. Notwithstanding this, we're also investing R&D and actively pursuing other ways to enhance our position in the potentially very significant high-cathode, sorry, high-energy cathode materials market. You'll hear more about that today and why we believe that we can be successful. As a whole, we estimate that the market for automotive transport materials, cathode materials, that is, i.e., for cars, buses, and trucks, is around about $1 billion today, but by 2025, we'll be around about $8.5 billion.
From where we started just over three years ago, I'm very pleased with what we have achieved, and we have a clear roadmap for the future, which we are on track to deliver. Our aim is to get a double-digit market share of this market, which is partly predicated upon the further development of our current lithium iron phosphate technology. Why are we well placed to succeed? Success in this market starts with chemistry and its applications, and as you know, this is a sweet spot for JM. It's how we differentiate ourselves, and it's the combination of chemistry and applications know-how that underpin new powertrain technology solutions.
In both emission control and battery technologies, the chemistry requirements are complex and difficult to do, and it is this that enables JM to have high margins, high barriers to entry, and gives us opportunity to bring a constant stream of new products and new technologies to the market. Chemistry alone is not enough. It's the combination of that with applications knowledge of how to make the products actually work in real-life conditions for our customers that really matters. JM has extensive knowledge and experience of auto applications and the technology development plans of the OEMs. This will continue to support us in our ECT business, also as we expand our position in the battery technology space. In addition to our chemistry and applications know-how, our operational efficiency and customer focus give us an advantage in powertrain solutions.
We're experts in scaling up from the lab to full plant scale and in manufacturing our products efficiently and safely across the globe. Please don't assume that is as straightforward as it sounds. Once a material, catalyst, or product has been developed in the lab, it has to be scaled up to full production in a reliable, safe, and efficient way. That can be extremely challenging, and this is an absolute core competence for JM. Once we've then taken a product to full-scale production, we continue to drive operational efficiency across its lifetime, and it is this that you've seen has helped us grow our margins in ECT. Not only that, but we're well positioned in the supply chain.
In ECT, we're technically a tier-two supplier, but we have a tier-one relationship with the OEMs, and we believe that a similar model will evolve in the battery technology space too, and Martin will talk more about that later. Given the direct impact of the battery material on vehicle performance and the highly complex and technical nature of that battery material, we envisage a similar technical relationship with the OEMs. We can leverage the relationships and reputation we have today to support growth in our battery technologies business going forward. It is that combination of the chemistry and applications with the drive for operational efficiency and a strong customer focus, all stemming from our strong base in ECT, that I believe will give JM the advantage in powertrain solutions, and we're already well placed today to capture value from the evolving powertrain.
Before I hand over to Nick and John to summarise, for me, I would say we gave you a training update yesterday, and given the current environment, I'm pleased with the Q3 results. The challenging macro picture looks set to continue right now, and I do expect that will limit the short-term growth opportunities for JM. We are a long-term company. We'll be 200 years old next year, and our strategy is robust. We'll keep investing in the business to take advantage of the long-term structural growth drivers that remain firmly in place, and there are plenty of medium to long-term opportunities for our business. Evolution of the powertrain is one of these, and here, high-tech JM solutions will be needed to further improve air quality for an increasingly wealthy population.
The market for powertrain technologies is set to grow substantially to 2025, and you'll hear today that we expect JM's sales from those powertrain technologies to nearly double over this 10-year period, from just under $3 billion today to around $5.5 billion then. All of this growth is predicated upon our well-established emission control technologies business and our lithium-ion phosphate battery materials business. I do believe that JM is well placed to capture value and to deliver long-term sustained growth. Now I'll hand over to Nick and John, who will explain in more detail how we expect those markets to evolve.
Thank you, Robert. Good afternoon, everybody. My name's Nick Garner, and I look after new business and corporate development within Johnson Matthey.
In just a brief time, John and I would like to take you through how the key trends in powertrain evolution present Johnson Matthey with great opportunities. That is as a setup to a deeper dive that Chris, Andy, and Martin will take you through in particular areas later. This is very much just a quick overview. In our overview, the key highlights of these trends and opportunities are, well, the combination of tightening legislation and fuel economy, and one can interpret that as CO2 reduction, and in emissions such as NOx and particulate, is a clear driver for the adaptation of Johnson Matthey technologies. That is a well-established trend and one we see strongly continuing.
The internal combustion engine itself, in its various forms, will continue to grow through to 2025, with improving fuel efficiency requirements actually placing ever more demands on the emission abatement systems of those internal combustion engines, and therefore the requirement for more advanced systems, which we are well suited to deliver. Diesel. Diesel's an inherently more efficient powertrain, and that advantage will continue to be used, and more on that later. With the ongoing introduction of electrification, we are already delivering benefit to Johnson Matthey, and Martin will explain to what extent and what our plans look like going ahead. How is Johnson Matthey positioned today? We are very well placed in the emissions control environment. We've got a great reputation as a supplier of advanced technologies to the automotive industry, and we're also well placed in the lithium-ion sector.
We already have $60 million of sales in this particular sector of battery materials, cathode materials, and that represents approximately 5% of the market share today. I just want to make it clear that we focus on the automotive sector for our battery materials. We do not play in the wider and much larger electronic components into the energy storage for the wider electronics market. We have assessed this market to be far different characteristics to the automotive market, and it's less well suited to our business model, the business model of chemistry and application knowledge, which extracts value, as Robert has explained. We have extensive large global operations already established, and we have considerable track record and experience in this sector. Today, we are well set up to face the automotive sector in these two key technologies.
Going ahead, legislation is the key driver for increased value, but there are some others. Here are some well-established themes that continue to drive innovation and opportunities in the auto space. Alan will touch on a few of these as he talks about our technology portfolio later. There are two key drivers which we're going to focus on for the majority of this afternoon: regulation and electrification. As new technologies are adopted into the auto sector, our customer-led solutions-based approach, we think, enables us to develop rapidly and implement new products into this market. Turning then to the first of those drivers, legislation. Regulations of emissions continue to tighten around the world, and this is further restricted by the introduction of real-world standards. Real-world standards means different things depending on how you drive in the real world, naturally.
Tendentially, in light-duty vehicles, the real-world driving experience is more harder, motorway driving at speed, more acceleration than the standard cycle of the test. That kind of driving characteristics in the light-duty sector means higher rates of NOx production out of the cylinder, more gases to treat, and solutions involve more catalyst area, better catalysts. These are needed to convert the increasing flows coming through from the cylinder and the increasing levels of NOx. However, in heavy duty, a real-world experience, as against the standard cycle, is more variable. There is a lot more cold starts. There is a lot more idling. There is a lot more need at the edges of the capability to convert the gases to do that conversion effectively. That talks to more sophisticated emissions control systems to enable that to happen. Real-world driving, very, very positive move towards tightening the ability to control emissions.
As these key named pollutants are driven down, the need for fuel economy means that the internal combustion engine is used harder. It is driven harder and stressed further in order to drive out of it as much efficiency as possible. This kind of mode of operation tendentially will produce more NOx, even more NOx. Therefore, that further enhances the need for advanced emissions control systems. Chris and Andy will spend some time taking you through those later. Beyond squeezing the internal combustion engine still harder, there are other options to hit these fuel economy measures or CO2 reductions, and those are really about hybridisation, introducing some sort of electrical powertrain. This is further enforced by full electrification, which, of course, are necessary for zero-emission vehicles, which the mandates are established in the States and China.
Low-emission zones themselves, tendentially in large urban areas, also play into this virtuous combination of regulations between fuel economy and real-world emission standards, which require more emissions abatement and electrification. I teed it up here. Fuel economy then is an essential plank central to the regulations that are driving the evolution of the powertrain. A couple of minutes on diesel. Can't avoid it, sorry. Diesel engines, as I said earlier, are inherently more efficient than gasoline engines. A number of factors contribute to this, but principally, the higher compression expansion ratio just extracts more energy from the burnt gases into motive force and less into wasted heat out the exhaust pipe. Broadly, a number of calculations will give you an average of about 15% advantage of a diesel over its gasoline equivalent. They're inherently more efficient, good for CO2.
Further, diesel engines fitted with a modern emissions control system are clean. A dirty diesel fitted with a particulate filter and an advanced selective catalytic reduction system, such as in Euro 6B, meets the stringent standards of London and Paris ultra-low emission zones by 2020. Real-world driving further drives the cleanliness and the abatement systems from diesels, making them clean and efficient solutions. Fine. So far, so good. The other factor I'd just like to note is that people tend to keep buying them. In Europe, the monthly stats reveal that still approximately 50% of people are buying diesels in Europe, although we would agree with market analysts which will see this number reducing towards the low 40s towards 2025. With all this good news and wonderful stories of diesel, why on earth aren't they a universal panacea? Why aren't they everywhere? There are disadvantages clearly to diesel.
Efficient and clean, though they can be, the very fact that those high compression ratios drives a heavier and more robust engine block. That is a more expensive block, heavier to carry around. The emissionisation of the emission control of a diesel engine requires a more sophisticated system because of the types of gases coming out and the way the combustion happens. There is cost. Within that, there is a payoff: fuel economy against capital cost, a total cost of ownership calculation. For a person that wanted to drive a car regularly over long distances on motorways, that choice would probably drive them towards buying a diesel vehicle. That would be the most logical choice for them. Indeed, if you look at long-distance haulage trucks that do make that sort of calculation, they are universally diesel-driven.
However, someone that does short distances, maybe in a city environment, lots of start-stop, very little mileage, a small gasoline engine would suit them. Now, we all know that car purchasing decisions are not made by detailed total cost of ownership calculations or extremely rarely. That's a much more complicated area. However, we still see there are clear advantages to the diesel engine, and therefore, we see them maintaining a role in the future. Moving into the future, that and the second of those key drivers, which is really about electrification. What we have is a well-established historic trend of gasoline, diesel, internal combustion engines, and an increasing need to emissionise and drive emission control systems in that area. There is a lot further to go from those technologies because there is a lot further efficiency that can be dragged out of them.
However, the need for still further fuel efficiency and the ultra-low emissions regulations that are coming drive a much more diverse range of solutions, which all OEMs are adopting. From the mild hybrid, which has some electrical assist, which catches a bit of energy and then delivers that to help you a bit of motive source, gives you some fuel economy savings, through to a full hybrid, which will have the ability to drive around a car park, a couple of hundred meters of autonomous electric drive, slightly more, let's say, economy saving into the internal combustion engine, up until the proper electric vehicles, as I like to think of them, the plug-ins and the batteries, which have full electric drive chains, full capability to drive considerable distances, in this case of a plug-in, let's say, 50 kilometers, and considerable autonomy, therefore.
But the plug-in, I'd have to notice, as well as the range extended, still has an internal combustion engine on it. It still has that safety net. It is the hybrid solution. That is a predominant trend over the next 10 years or so. The pure electric vehicles themselves, zero emissions, are batteries and the fuel cell vehicle. John will pick up on the implications of these various ranges and the opportunities of the Johnson Matthey Letter. I just want to pick out, therefore, that five out of seven of those solutions have an internal combustion engine, which will need a full emission system to go with it. Another five out of those seven have a battery, ranging from very small batteries to really big batteries. They have batteries, and we play into all of those battery areas, and Martin will take you through those opportunities.
That's setting up the key trends and some of the terminology of what we're looking at in terms of hybridisation. I would now like to hand over to John, who will dig into some numbers and give you some ideas of scale around these opportunities for Johnson Matthey. Thank you.
You've got too much in your hand. There you go. Thank you, Nick. I'm John Walker, Division Director for the Emission Control Technologies Division. I'm going to continue this powertrain evolution story. I'm going to talk about the markets, then how technology adds value into these powertrains, and then put that together into a combined market outlook for powertrain technologies, and finally, highlight what this means for Johnson Matthey. Just when I show this market data, just quickly point out that our source of external data of our market data is LMC.
Now let's take a look at the light-duty market and put things in perspective over the next 10 years. As you can see from this data, in 2025, about 97% of cars still have an internal combustion engine, and this includes hybrids in that statement. Over the next 10 years, both the internal combustion gasoline engine and diesel engines both continue to grow in absolute terms. Diesels are still helpful in meeting tough CO2 standards. That 3% sliver that you see at the top, the little green bit there, those do not have an internal combustion engine, and those are the battery electric vehicles and the fuel cell vehicles. It is pretty clear from this chart that gasoline and diesel internal combustion engines remain major technologies in this timeframe.
Now I'm going to show you the market data for electrified powertrains in a little bit more detail. I don't know how well you can see that back there. The first point to make is that hybridisation of gasoline and diesel powertrains is increasing. Over 87% of these electrified powertrains still have either a gasoline or a diesel internal combustion engine. We expect to see around a three-to-one ratio of gasoline to diesel hybrids by 2025. Hybrids are not a bad thing for Johnson Matthey. They're actually a good thing for Johnson Matthey. As Nick said, these systems now have both an aftermarket treatment and battery technologies in them. The second point to make about this chart is, again, as I said, this is LMC data.
They've recently changed the way that they treat the mild hybrid sector there, and they've added in the 48-volt mild hybrids to this category. Forty-eight volt stop-start and coasting battery regeneration can give up to a 10-15% fuel economy benefit. It is very helpful with tougher regulations, and lithium iron phosphate is well suited to these applications. The 48-volt mild hybrid technology will be used on many hybrid vehicles. Just to be clear from a battery materials value standpoint, the larger battery and plug-in hybrids result in significantly more battery materials than mild hybrids. Likewise, when we move to full battery electric vehicles, that has even more battery materials, again, because of the larger battery size. In this timeframe, fuel cells and extended range electric vehicles remain niche.
There is actually a line on there for both of them, but you can't really see it on that graph. Beyond 2025, I think the powertrain evolution is very dependent on the progression of CO2 regulations. Very low CO2 regulations could drive more full battery electric vehicles and also fuel cell cars. For the next 10 years, the internal combustion engines remain key. Now, if we look at heavy duty, we see a similar story here. The regulated heavy-duty diesel engine market shows good growth. We have a compound annual growth rate from 2015- 2025 of 6% on these regulated engines. Legislation continues to tighten, driving more complex high-value-add emission solutions. What is different from the past to the future is where the growth is coming from.
Legislation is driving strong growth in Asia and South America, where we see a compound annual growth rate of 8% in regulated engines. By far, the biggest impact is in China, Euro 6 equivalent. Legislation is also driving first catalyst fitment on non-road vehicles in China. We also see growth in India when they follow suit on the Indian equivalent of Euro 6, but the timing of this is less certain. Catalyst market value will grow significantly more than the regulated engine growth rate. In Europe, we expect to see more filters being fitted to non-road vehicles once stage five is implemented. That sees a catalyst value benefit from post-2019 when that legislation kicks in. We also see the second generation of Euro 6 heavy-duty catalyst systems, which are new systems optimised for fuel economy benefits.
This is the second generation of technology for the same legislation, beginning to penetrate the market starting in 2017. This will help to maintain our European heavy-duty margins. In Europe, this results in a compound annual growth rate of regulated engines of 6%. We see the catalyst market value will grow at similar rates in Europe. There is a lack of any significant new legislation in North America till later in the plan, which results in a compound annual growth rate of regulated engines there of 3%. Here, we see catalyst values growing at a slightly lower rate than the regulated engine compound annual growth rate.
Moving a little bit, switching gears from the traditional ECT part to electrification, low emission zones, as Nick said, in cities, are going to drive more electrification of transport vehicles and more electrified buses manufactured in China for mostly domestic China, but also some export markets. Safety is critical for electric buses, where you have very large batteries and lots of passengers. High-quality LFP is, again, the preferred material of choice for those applications. Outside of cities, diesel powertrains are expected to remain the main technology for quite some time. We see global regulated engine compound annual growth rate of 6%. That is the global regulated engine rate. We see a catalyst market value growth rate of 10%. There are still lots of opportunities for the traditional ECT heavy-duty business. There are also new opportunities with electrified transport vehicles and electric buses for Johnson Matthey's Battery Technologies Group.
This is a kind of follow-on from Nick's intro. Now we're going to take a look at where Johnson Matthey earns value from these powertrains. We've tried to do it on this slide to show where to try to highlight where Johnson Matthey already has a technology presence. A big tick means we have a strong presence, and a small tick means that we have less of a presence. We then split out the potential value of the emission control part and the battery materials or the MEA value separately. You can see where the value is going to be captured in Johnson Matthey. We've already reviewed these first two in great detail in some of our previous meetings. It's clear that this value is captured in ECT. The baseline for all this, just to remind everybody, is a gasoline three-way catalyst emission control system.
For those gasoline systems, they have a future potential value doubling when Euro 6C comes into play and we start adding filters to gasoline vehicles. Likewise, on the diesel versions, we see a potential value for diesel from five to up to seven times compared to this base gasoline system. Five times the baseline gasoline system comes when we add the filter to the diesel system, another 20% when we do the NOx control, and that's for kind of the Euro 6B type applications. Real-world driving and advanced SCR is going to bring that up to seven times. That's when we get to Euro 6D with Andy and Chris will go through that.
Next, if we layer in the other light-duty powertrain variants, including hybrids, battery electric vehicles, and fuel cell vehicles, for the gasoline and diesel hybrids, the two on the left there, we see that Johnson Matthey has a strong technology presence. We have the same potential value in the emission control part because hybrids have an internal combustion engine. These smaller engines are basically using common aftertreatment systems to the base gasoline and diesel internal combustion engines. Even though the engines are generally smaller, they are working harder. The catalyst value for us is pretty much the same. The hybrids also have a battery.
In addition to the ECT part, we have the potential of adding another one-time value in the mild and full gasoline and diesel hybrids if we supply the battery materials, and up to 12 times more value for the plug-in and extended range hybrids that have bigger batteries. Looking at the next two, the battery electric vehicles and fuel cell vehicles, we see that Johnson Matthey has less of a technology presence here today. We are present in the battery electric vehicle market, but we need to expand our technology offerings in the future. In the fuel cell area, we make MEAs, as you all remember, electrode assemblies, but we have a bigger position in stationary than we do in automotive today. The potential value in battery electric vehicles is actually similar to a heavy-duty truck.
The potential value in fuel cells is very large, but as I already mentioned, the market is not developed yet and does not look like it'll do so in the 2025 timeframe. Finally, when we add in the trucks, here you see that Johnson Matthey has a very strong technology presence in all the categories: heavy-duty trucks, hybrids, and the battery electric buses, with all of these variants offering very high value to either ECT, battery technologies, or both. It is very clear from this chart that hybridisation and electrification offers added value for Johnson Matthey on top of our very strong position in ECT. Earlier we talked about the regulated engine market volumes and how legislation drives added value with a variety of different powertrain options.
What we've attempted to do here is create a combined market outlook for powertrain technologies, looking at both emission control catalyst and battery materials. Starting at the bottom green bit there, the light-duty market, light-duty market continues to offer good growth opportunities. We expect market shares in the light-duty sector to remain stable. Just to remind you, Johnson Matthey is in the kind of 30% range of that. The market as a whole is expected to grow from $6 billion in 2015 to more than $9 billion by 2025. That is a compound annual growth rate as you see there on the right of over 5% in this period. In heavy duty, which is the next purple bit there, we see strong growth in the heavy-duty sector. This is heavily weighted to China. We also see market growth in South America and India.
I've already given you a little bit of a health warning on India. We're taking a rather conservative approach just because the legislation is not really nailed down when it's going to be introduced. Maybe we're a little bit conservative in where we've done that. I think we're kind of assuming 2022 now, but we've kind of given a range of 2020-2025. Kind of a broad range there. You can take that comment with whatever you want. We see our heavy-duty market share moving from 60% or so today to around 50% by 2025. I've said that before. The heavy-duty market as a whole is growing from about $1.75 billion in 2015 to greater than $4 billion by 2025. Now, looking at the new part on this chart, we've added the light-duty and the heavy-duty battery materials.
We see significant expansion from a low base in the battery materials market for both light-duty and heavy-duty applications. The market will see a compound annual growth rate, as you see there, over 20% for the next 10 years. The whole battery materials market is around $1 billion today, growing to more than $8 billion by 2025. Where does Johnson Matthey fit into this market? If we look at our existing business in battery materials, which is predominantly LFP, as Nick was talking earlier, today the LFP market is around $300 million. We see that growing to about $1.5 billion by 2025. Our market share of the LFP market is stable at around 20% through this period. All three of these sectors offer good growth, good opportunities for JM with our current battery materials portfolio.
As you'll hear later, we have a strategy to expand our position in batteries beyond lithium iron phosphate. There is some potential to go beyond where our current position is. What is our strategy to capture this value? In the ECT business, we have market growth and legislation driving the need to develop next-generation technologies. We continue to invest in R&D and use our strengths in chemistry and applications to win in this area. Chris Morgan and Andy Walker will go through that in more detail later. We are still investing in ECT. We have capital projects for both light-duty and heavy-duty in Europe, the light-duty investment being for real-world driving and the heavy-duty investment being on the second generation of heavy-duty catalyst, as I mentioned earlier. We also have some continued investments in Asia, primarily in China.
As far as manufacturing excellence goes, we have a very strong culture of continuous improvement. We continue to improve our equipment effectiveness, and we are continuing to leverage those activities. In the electrified powertrains, we will use Johnson Matthey's brand and reputation to broaden our technology offering and customer base. We continue to invest in R&D, and we will expand our technology offering into other materials. We see GBP 50 million-GBP 100 million of CapEx in the next five years for the electrified, for the battery materials business, back-end loaded with some bolt-on acquisitions of less than GBP 50 million. Martin will get into this in more detail in his talk. Expanding our position as a key technology supplier for low-emission, low-carbon vehicles will also lead us to new customers and suppliers who are not in our existing portfolio. Key takeaways.
As powertrains evolve, there's increased opportunities for Johnson Matthey Technologies as the trends in the automotive market play out. The internal combustion engine is alive and well through the next decade and beyond. ECT still has lots of growth opportunities in both the light-duty and heavy-duty markets. To sum this all up, I'll try and do this similar to how I did this in the previous Investor Day sessions. I'll start with the ECT markets. On light-duty vehicles, if you go back to the charts on the previous slides, the catalyst market grows by over $3 billion in the next 10-year period in light-duty from around $6 billion today to over $9 billion by 2025. As I said, Johnson Matthey shares around 30% of that. That light-duty market will deliver at least $1 billion of additional growth for Johnson Matthey.
In the heavy-duty vehicles, we see this sector for catalysts growing at about $2.7 billion in this period. As I said, our share today is around 60%, moving to 50% by 2025. In heavy-duty, we also will deliver at least another $1 billion of additional value over this period. You can do that math. We're kind of rounding down, but you have calculators as well. If we then sum up ECT, we see the total market, light and heavy-duty, growing from around $8 billion today to around $14 billion by 2025. Johnson Matthey would expect to win over $2 billion of value from the traditional ECT markets. The battery materials market is still at an early stage of development, but is projected to grow strongly over the next 10 years.
A successful expansion of our battery materials portfolio and other legislation pulled forward will be upside for Johnson Matthey. We get good value from our current position in LFP, and we expect our share of this sector to remain stable over the next decade. With the market projected to grow from $300 million- $1.5 billion in 2025, there's an opportunity for Johnson Matthey to capture an additional quarter of a billion dollars of value for Johnson Matthey. If we sum this all up, the total market for ECT and current battery materials portfolio grows from about $8 billion today to over $15 billion in 2025. Johnson Matthey's combined sales for ECT and battery materials are a little over $2.8 billion today. We expect this to almost double by 2025. That would give us a compound annual growth rate of around 7% over this period.
You can see that Johnson Matthey is well placed to capture value from the evolving powertrains, where our advanced technologies will make a continued contribution to improving air quality around the world. With that, thank you, John.
Now, we have about 15 minutes or so before we break for coffee. Very happy, the three of us, to take any questions if anybody has any now, or we can do it over the coffee break. Tony, I think this lady here was the first.
Good afternoon. It is Yegenia Marcel from Berenberg. I just wanted to, sorry, to talk about diesel again, to ask about real-world driving standards. Because as far as I understand, the issue which VW had was with small-sized vehicles, and they were using L&T with the software. It is nothing wrong with the catalyst.
As far as I understand, it's very difficult to put SCR into small-sized vehicles because of the size of the SCR tank. If you use L&T, then the fuel efficiency of diesel car falls to the level of fuel efficiency of direct injection petrol. Do you see this as a threat for small-sized vehicles in particular? That's the first question. The second question is on LFP. Whether you are looking at other technologies, because obviously LFP is quite expensive for passenger vehicles, and that's why it's mostly using stationery. Are you considering acquisition to go to NMC, or you are not seeing this as a leading technology for electric vehicles going forward? Thank you.
Thank you. There are quite detailed questions, I have to say.
To some extent, if we answer all now, we're going to get into why bother coming to the next sessions. Because we are going to get into some of that detail. Chris will talk a little bit about the L&T versus SCR system. You're right, one of the issues is to do with size for smaller cars. Chris can go through that. He is planning to answer that question anyway. On the LFP side, again, Martin's going to answer that question later too. The long and the short of it is, you're absolutely right, lead not tracks. It's harder for a smaller car, which is why advanced SCR is going to be used for the bigger cars. That's true. John, isn't that true?
Who said it about we're looking at ways in how we can expand our market out of LFP into other high-energy materials, which is what we said. We'll talk a little bit about more in the next session. You have to stick around, I'm afraid. We'll try not to do a second question. Yeah. Is that working? That's working.
It's Andrew Benson from Citi. In terms of the risk profile of acquisitions or not making acquisitions, clearly you can spend a lot of money and get a dud technology, but equally you can not spend money and then miss out on a market that grows. I would imagine the risk of not being involved in the time when batteries become a sort of established commercial technology is quite high.
In that sense, would it make more sense to, if you like, up the risk curve on acquisition somewhat to make sure you're there at the ground floor with a range of technologies rather than just one technology at this point in time?
Nick, do you want to have a go at that one?
Happy to. I think the key is range of technologies are absolutely right. That remains our intention. It's about how to access them. We do look hard at M&A and appropriate available targets and continue to do so. Of high scale, we found precious few. A combination of more targeted M&A and in-licensing of technology is the way we would aim to access the ground floor, as you're saying, of these sort of evolving battery technologies area. I think the point is it is evolving.
I think the bus has not left yet, but it is kind of leaving. There is some urgency to sort of evolve your platforms and be there for sort of five years' time. That is the sort of timescale we are working to at the moment. I am not sure if that answers your question about upping the risk profile. What I can say is we look hard and we assess the long-term potential in terms of the sorts of targets we are looking. They do not necessarily meet the short-term criteria we would expect, but they clearly have to deliver to a long-term plan. Is that? Yes, that is fine.
Thank you. Peter, why do you not go next instead of next door? Then can we go to Martin after?
While the mic is here. Yes. On the cathode material, at the moment, nearly all the battery plants are in Asia.
Doesn't this imply a huge shift in your manufacturing base to shift your cathode material out to Asia so that you're adjacent to where the batteries, these large flat plate batteries, are made?
We have currently two plants. One of them is in China and the other is in Canada for various reasons, the Canadian one. Most of the product from Canada goes to Asia, as you point out, Peter. The current investment plans are primarily based on further investment in Asia. I think we're there. Okay. Martin?
Thanks. Martin Donawethy, Deutsche Bank. You've made the assumption of 20% market share remaining flat in the period. I was just wondering why you—I don't know if that's just for simplicity's sake, but also if you can talk to that.
How you see the competitive environment now and how you see that developing over time, both in LFP and whether you see—I know you have talked about expanding to other areas, but how you see those in terms of competitive environment as well. Maybe where—sorry, there are loads of these things. Maybe where you see your overall market share in battery materials 2025 across the piece. Probably an impossible one to answer, but just an idea of what you are thinking of.
I will ask the last one first. Our target, our aim is to get to double-digit market shares when we get to 2025, which is what I said. Some of that will be in what we would call our established market today, which is in lithium iron phosphate.
Of course, if we're successful at 20% with lithium-ion phosphate in 2025, that will not equate to a double-digit share of the whole market. We're going to have to, and we're going to try, and we're going to target getting into the high-energy material space. Hopefully, by the end of today, you'll get an idea of why we think we can be successful at that. The competitive environment, I think, as I was hopefully trying to point out, we're talking of the automotive batteries market itself. I think that's in a point of inflection and evolution. What this market is historically is dominated by electronics. It's power storage into the electronics market.
That follows a very different sort of supply chain and approach than the sort of the OEM-led supply chains that the automotive sector tends to have and the OEM sort of insistence on input into technology. Into that trend, I think we're very well placed. That is what we're seeing. LFP is effectively mainly used in the automotive sector because of its power qualities. Whereas high-energy materials are used broadly within energy storage and in consumer electronics. In LFP, our competitive position has been enhanced, certainly, as we've taken our abilities from ECT across into the automotive sector. 20%, it is a simple calculation, but there's logic behind it, and it does move over time. Big movies in LFP are things like buses. How you play into the bus market, particularly in China, is important. The assumptions around that.
It is not just a flat 20% throughout. There is some granularity down there. I am not going to go into it particularly, but there is. We come back to that, as well as sort of some of the milder hybrids. Less volume there, but they still add to the number, as it were. In other technologies, I go back to my comments. As that market evolves, we think we are well positioned because our approach to this market and the applications-led development into the automotive sector to bring in evolving energy materials. To the point, I think the bus is not less yet, but it is leaving pretty soon. We need to get those starting to be established in that sector within the next few years. I think I would also just ask, finally, on the LFP market, LFP is not just LFP, simple as that. It is emerging.
There's further technology to go and further developments to be made in that. As you're able to use your R&D and technology and enhance those products, then we would hope to maintain that share. That's our goal. It's not something we just plucked out of the air just because it's the same number. There's a bit more science behind how we got that.
Great. Thank you. Thank you.
Is that Adam with his hand up at the back there? Sorry, we might take a little bit of time to get the mic to you, but we'll get there as quickly as we can. Which way is it coming? Both ways. Both ways. Lucky old connector. Mel, well done. You won. Yeah.
Hi. One thing we should be talking about in a powertrain discussion is the fuel cell business.
Could we spend a few minutes just discussing where we see that going in the next 10 years or so? What kind of business do you think it will look like in 2025?
I think we're talking about today the automotive powertrain development. As I think John showed you on that chart, by 2025, the fuel cell vehicles will still be very, very much a niche play. The growth prospects for the automotive component of fuel cells is modest. We continue to look at the stationery element of it, but that's not the topic of today. As we said six months ago or four months ago, I think now when we did our results, we're looking at the overall R&D spend and the requirements that we have for investment requirements for fuel cells in light of where the market's going.
We still want to be part of a fuel cell business in the future. I think on the automotive side, over the next decade, it is going to be a small component. Anybody else before coffee? Yes. One just in front. Oh, good position.
Hi, it is Matthew Wall from Credit Suisse. I just wanted to touch on your diesel projections on the total cost of ownership. When you say for a higher mileage driver, you think it will be beneficial still, does that factor in the added cost of moving to SCR and advanced SCR and the fact that gasoline engines are improving efficiency continually as well?
I think we can answer that very short question. The answer is yes. Very good to dust it in more detail. We could give you much more detail. John, do you want to say any more other than yes? Yes.
Maybe you can tell us where the break even mileage is. I'm looking for a cup of coffee. I don't know.
I think the answer—I mean, we and LMC Automotive, when they put these projections out, aren't doing these in splendid isolation, ignoring what else is going on in the powertrain evolution, not just with hybridization, but gasoline, diesel, the improvements in both, etc. These are all factored in. At the same time, what are factored in? Remember, over the next decade, we're talking to the OEMs all the time. We understand what their powertrain developments are. We're factoring a whole series of information points that come into us to come up with that analysis.
There's one more, and then we'll go for coffee. Last one. Well done. You got your hand up just in time.
Hi, it's Alex Jude from Berkeley.
There's a lot of talk about the death of diesel, but what's your view on the death of the car? There are indications, for example, that younger people, millennials, are less attached to driving, carpooling, car sharing, taxis, Uber. All of these things potentially threaten the car ownership market in Western Europe. We talk a lot about the split within that without really ever wondering whether car sales might go down in the future. Is that something that you think about? Do you take into account in your internal planning and strategic processes? Yes. Go on.
Autonomous vehicles, car ownership, actually are interesting themes which come together. They were sort of briefly flashed up as themes there. I think over the next 10 years, and this is the data we—that does, you can see the vehicle numbers.
One of the factors that's moderating the inevitable growth of automobiles is car ownership, particularly in urban environments where car sharing or carpooling or other transport solutions. They're towards the end of the decade. If you took that curve on, at some point, it starts to curve down. Who's guessing out several decades? Those are factors that come to play in it. They're all enabled by these sort of technologies that come together because those are necessary, I think, to control the fleet, as it were. On the counter side to that one, if there is a shared vehicle, as it were, that's being used much more often. A personally owned vehicle tends to spend most of its time sitting unused. A vehicle that is used communally will be used harder. People want those vehicles not to be sort of tatty.
There is also a counter argument. I have not worked this through with anyone else yet, which increases the volume of new cars coming in and out of the fleet, as it were. A tendency to those things will certainly play into towards the end of this decade coming up, I would agree.
Thank you. Okay.
Should we break for coffee now? If we could, it is what, 2:40 P.M.? The schedule has us starting again at 3:00 P.M., where we will get into much more detail on the actual sort of emissions issues in light duty and heavy duty. Back at 3:00 P.M. if we could, please. As you can see on the slide, Dr. Chris Morgan and Dr. Andy Walker. Both work for, in John's business in emission control technologies.
They're going to go through, very much from an emissions control side, some of the developments over the next decade or so. I'll hand over to Chris.
Thank you, Robert. This next session we're going to focus on the prospects for emission control technologies. Specifically, what we'll do is outline the global growth trends in both vehicle and engine production, look at the incoming global regulatory trends, and as Nick and John have referred to, that's both the tightening of criteria pollutant legislation and the increasing focus on CO2 and fuel economy. We'll show how we maintain differentiation through our technology at Johnson Matthey, and highlight the opportunities that result as a combination of those regulatory, consumer, customer, and market drivers, and describe how those opportunities drive future sales growth in ECT. The way that we'll do it, we'll split into two sections.
I'll talk about the light duty market, then I'll hand over to Andy to talk about the heavy duty situation. To start with, in light duty, this is the LMC data looking at vehicle numbers. John presented this in total earlier, but looking at it split out by region, we see good growth around the world. A 3% global compound annual growth rate in light duty vehicles, particularly in the BRICS and the Asian markets. The rate of growth is faster there, Europe close to average, and perhaps lower growth in North America. There was a question raised just before the coffee break about shared mobility models and the impact that has, and Nick gave an answer to that question.
I think our view chimes with that as well, that yes, there'll be a proportion of predominantly urban, people who won't own a car who do today. If they are going to use these shared mobility models, they'd expect those cars to be in good condition, to be modern, and they will be used more heavily than standard vehicles, so there'll be a higher turnover of those vehicles. Those effects in our view will only have a very small impact on the overall vehicle market, and we see good growth over the next decade. Of course, that growth in vehicle production leads to a growth in demand for powertrain technologies, both catalyst systems and batteries. There's also been several mentions already about legislation and how important that is for us as a business.
As is traditional on these occasions, here is the roadmap of legislation tightening around the world. Very complicated chart, and I will go into the details over the next few slides, but really the key message from this first one is just as we go from left to right over the next 10 years, in every one of those markets, there is at least one change of legislation. Around the world, we are getting tighter and tighter legislation, which is driving improved requirements for the catalyst technology. We will start by focusing on Europe. The situation here has become much clearer over the last six months. We knew that Euro 6B would have taken full effect by last September, and that is now for all new vehicles sold in Europe. They have to comply with that level.
The big change for Euro 6B was the introduction of a tighter diesel NOx limit, reducing from 180- 80 mg per kilometer. That has meant the widespread use of diesel NOx control systems, and I'll talk more about those on a subsequent slide. The next round of legislation comes in September 2017, so-called Euro 6C. Here we get a tightening of the gasoline particle number limits that reduces by an order of magnitude, which will start to introduce gasoline particulate filters into the market. The real news of the last six months is the clarification around real-world driving emissions after years of negotiations in Brussels. Actually, just yesterday, a vote was held in the European Parliament where that legislation was ratified, and it's confirmed to be going ahead. It comes in two phases.
What we used to call RD Phase One now seems to be being called Euro 6D Temp, which is not very catchy, but seems to be the way the industry is referring to it. That comes into effect in 2017 for new models brought to the market and 2019 for all vehicles. What that legislation says in simple terms is that when you do a real-world drive, and a real-world drive has a very careful definition, which is roughly a third urban driving, a third rural driving, a third highway driving. When you do that drive, you put a portable emissions measurement system in the boot of your car. You measure how much NOx is generated throughout that two-hour drive, and then you have to ratio that amount of NOx against the current limits that apply to the European drive cycle today.
That ratio is called the conformity factor. The agreement is that from 2017 for new vehicles, you're not allowed to emit more than 2.1 times more NOx in a real-world drive than you are during the standard drive cycle. We're expecting a conformity factor to apply to particle number as well. Those negotiations are ongoing, and an announcement is expected in the next few months. That's Euro 6D Temp, and then Euro 6D Final or phase two comes into effect from 2020 for new models, 2021 for all vehicles. There we get a further tightening of conformity factors to 1.5 times for NOx. Again, we expect a tighter limit for particle number once those are announced. Those were confirmed yesterday in a vote in the European Parliament.
One other piece of information that came out during those discussions was the commissioner has an ambition to reduce those conformity factors to one by 2023. I think there's a lot of political pressure, built up around the VW scandal and the realization that vehicles do emit more under real-world driving than under the emissions test. There's no doubt that had an impact on the politicians and their braveness in setting these conformity factors. These are considerably lower than we would have expected six or nine months ago. I think that push towards one is genuine and really is only limited by the ability of the measurement system and the ability of the emissions control systems. There will be pressure to improve both of those and drive the conformity factors down as quickly as we can.
The impact of all of that for Johnson Matthey is that we need to have both gasoline particulate filters and advanced diesel NOx control systems available. As I'll show you later, where one of those, or one set of those, is already on sale, the other is very close. North America, the situation is rather more stable. California, the CARB, and the Environmental Protection Agency have previously announced their plans for the next 10 years. For CARB, the so-called LEV 3 legislation has a tightening over that period down to what is called the SULEV level. That is 30 milligrams per mile combined hydrocarbon and NOx, and a particle mass limit of 1 milligram per mile by 2025. The EPA has a very similar scheme for their Tier Three legislation.
Basically follows CARB, except for the particle mass limit, which comes in a little earlier and is higher at 3 mg per mile. That means more complexity in the current catalyst systems. More vehicles are going to have to meet the very lowest emission standards, so we need more robust catalyst systems and high conversion levels, with those catalysts. On top of that, in North America, there's an additional set of regulations around greenhouse gases, and particularly methane and N2O, which have very high greenhouse gas potential. There are caps on the amounts of those gases that vehicles are allowed to emit, which gives further constraints on catalyst system design. In Asia, again, there's been a lot of change over the last year in terms of the proposals for the next five to 10 years.
In Japan, they have introduced or proposed a new JP 18 standard, which is essentially the same emissions limits as today, but over a more demanding drive cycle, the World Harmonized Light Duty Test Cycle. In India, there's a recent proposal that they will jump straight from their Bharat Stage Four, Euro 4 equivalent legislation to Euro 6 equivalent Bharat Stage Six, skipping the Stage Five level. The introduction of that Bharat Stage Six has been brought forward to 2020, so earlier than was otherwise expected. In China, we're in the position where, with current proposals, Beijing, by the end of the decade, will have the most demanding emissions regulations anywhere in the world. They will leapfrog California. The proposals there at the moment are that from December 2017, all cars must meet the ULEV 70 standards. That's 70 mg per mi hydrocarbon plus NOx.
From 2020, all cars must meet SULEV 30. That is a tighter legislation than California. California is a fleet average of 30 mg per mi. In Beijing, the proposal will be a maximum amount for all vehicles. There will be a limit on particle mass. There have been lots of discussions about particle number, but as yet, no clear proposal on particle number. Perhaps that will come in a second phase of Beijing Six. The China national standards, in contrast, are still based upon the European emissions standards, and Euro Five equivalent will be adopted from 2017. From 2021, or perhaps 2020, from recent things that we have heard, there will be a Euro 6 equivalent adopted, probably using the World Harmonized Drive Cycle as in Japan, and probably including some particle number limits as well.
All of those mean that more advanced gasoline systems will be required, including particulate filters in China. There's still an ongoing debate between Beijing and the rest of China about whether it's the right thing to have two different emissions control legislation, and we'll watch this space over the next six months. That's the criteria of pollutants, the hydrocarbon, CO, and NOx. On top of that, as we mentioned several times, there's increasing tightening on CO2 limits or improving fuel economy standards around the world. This chart is generated by an organization called the ICCT. It's a fairly well-known chart within the industry, but just shows how in all the major markets, the CO2 performance is trending down over time. Europe at the moment is leading away with the 95 gram per kilometer fleet average by 2020, but, yeah, all markets are reducing.
That has two implications for Johnson Matthey. Firstly, more fuel-efficient engines means less waste heat entering the exhaust and lower operating temperatures for the catalyst system. That means we need to develop catalysts which work better at those low temperatures. Secondly, one way to improve the fleet average is increased electrification of vehicles, whether that's hybridization, mild, full plug-in, or full battery electric vehicles. As those trends continue downwards, that will play to Johnson Matthey's strength in both the battery materials and catalyst technology areas. What comes next? There have been unofficial discussions about Euro 7 for some time, but nothing formal.
Within the European Parliament, really the position is that while the complicated RDE legislation discussions have been ongoing, there have been no formal discussions on Euro Seven because there has been no desire to potentially derail RDE by bringing that into a new set of legislation. With RDE due to be concluded over the next year, it is likely those Euro 7 discussions will start soon. Likely topics for that next round of legislation are listed there. One very probable inclusion is fuel neutral limits. The diesel NOx limits have been reduced substantially for Euro 6, but still a diesel passenger car can emit 80 mg per kkm NOx compared to 60 mg per km for a gasoline vehicle. It is likely those two will be brought together, which will mean further tightening of diesel NOx control.
I said there's an ambition to reduce those conformity factors down towards one. If that isn't done through the standard RDE legislation, then it's likely to be included as part of Euro 7. Looking at where the major problems with air pollution are today in Europe, urban air control, urban air quality is a major issue. It is possible that NO2 limits will be introduced in the urban phase of the drive cycle. Also, other criteria points will be added, such as ammonia and N2O. We showed that chart of CO2 trending down over time, but also the European Commission has stated they have an ambition to reduce those CO2 emissions even further. No firm figures, but people have talked about values of 75-80 grams per kilometer by the middle of the 2020s.
If that is the case, that's likely to drive further hybridization, further electrification of vehicles in order to meet those targets. Initially that was very much focused on the regulation, both criteria of pollutants and CO2, but there are other technology drivers that we have to be aware of that inform our choice of catalyst targets for the future. Engine technology has come on enormously over the last 10- 15 years in response to many of the challenges that I've outlined on the previous slides. Today we see many more downsized turbocharged engines in the market, in order to deliver better fuel economy. In Europe in particular, many of those have stop-start in order to give better fuel economy over the drive cycle.
We're seeing increasing amounts of energy recuperation, mild and plug-in hybrids, and more of those coming in future cycle plans at the OEMs. On the gasoline side, a higher proportion of engines are now direct injection. That gives benefits for both power and fuel economy. Today, lean burn gasoline still remains a niche application, constrained by the cost and complexity of the control system and the catalyst system, compared to the fuel economy benefits that are obtained. Another issue in gasoline engines that we're seeing at the moment is a lot of effort to improve injectors and cylinder design in order to reduce the engine-out particle number emissions and reduce the demand or eliminate the demand for filters. On the diesel side, there's measures such as called EGR that help to reduce diesel engine-out NOx emissions and again help to reduce the load on the catalyst system.
In North America, those fuel economy targets, the CAFE targets, are leading to increased diesel penetration in some of the larger vehicles, the large SUV and light truck markets, in order to meet those tighter fuel economy regulations that are coming through. In terms of fuels, there's still some niche areas where compressed natural gas, like petroleum gas and ethanol, are important. Generally, most vehicles today use diesel or gasoline fuel with some biofuel blended in. The market for specific alternative fuel vehicles remains small, and we expect that to remain so. Perhaps not a technology driver, but certainly a development driver is system cost. We see catalyst systems becoming more complex, and there's a desire from the vehicle manufacturers to want to minimize the additional costs that those mean for the sale of their vehicles.
If we can reduce the cost of the system while delivering improved catalytic performance, then that's certainly to our advantage. Let's talk a little bit about the technologies then. I think this is a slide that many of you will have seen before, highlighting the clean diesel technologies. Today there are three families of catalysts that are being employed. I'd say all three are being used to meet Euro 6 B regulations. On the left-hand side, we have the NOx absorber catalysts. These are a precious metal-based catalyst that stores NOx during normal operation. You can purge the catalyst by running the engine rich by using excess fuel. Under those conditions, the NOx is desorbed and converted to nitrogen. This has the advantage of being compact. It's favored on smaller vehicles.
but it does require fuel addition in order to purge the catalyst. That penalty on fuel consumption, perhaps makes it less attractive on, on larger vehicles, but favored on smaller vehicles. The central and the right-hand box are the SCR-based systems, selective catalytic reduction. Here the chemistry is based on a base metal zeolite catalyst and the injection of urea, which generates ammonia in the exhaust. The ammonia is stored on the zeolite and reacts with NOx during the normal operation of the engine. It's good, particularly at higher speeds and higher temperatures. It gives a wide range of conversion. The disadvantage is you have the requirement to add the urea tank and urea injection system into the vehicle. That takes some space. It also adds cost for the OEM.
Back of the envelope figures we've heard are that, you know, perhaps EUR 500-EUR 600 additional cost to add to the urea injection system compared to the NOx absorber catalyst system. It does allow better NOx conversion. On the right-hand side, the advanced SCR is where we're combining the SCR coating onto the particulate filter. A very demanding system technically, but delivers benefits in terms of compactness and in terms of the rate at which the SCR component heats up. It's closer to the engine. It gets to its operating temperature more quickly, and therefore you get better NOx conversion, particularly in the urban environment. We're well positioned in all of those technologies. I guess the real question is, what do we see happening with the advent of the RDE limits?
Really what we expect and what we're seeing in conversations with our customers is that the NOx absorber catalyst becomes a much smaller part of the market going forwards. There will be a trend towards use of the SCR and advanced SCR system. Within that, a trend towards more of the advanced SCR. To answer the question that was asked earlier about NOx absorber catalysts and diesel vehicles, yes, it certainly is true it's harder to meet the tight conformity factors for RDE with the NOx absorber catalyst. That's one of the reasons why I expect more SCR. I think it's also true to say that that does have an impact on the share of diesel in smaller vehicles. You know, we are aware of a number of programs that have been cancelled or much reduced in size for small diesel engines.
Some of that reduction in diesel share that Nick and John referred to earlier from 50% down to the low to mid-forties is due to the reduction in sales of small diesel engines in favor of the high technology gasoline engines that are much more suited to those small city cars. We see more focus on the SCR and advanced SCR systems going forward. John talked earlier about the value to Johnson Matthey of five to seven times for these types of clean diesel systems. I think this trend is good for Johnson Matthey in two ways. Firstly, we have very strong technologies in the SCR area. We were very successful with today's customers, and we expect that to continue. That move to SCR is a good thing for Johnson Matthey.
Also within that value range, the SCR and advanced SCR system are at the higher end of that range, so it also delivers increased value to Johnson Matthey. The other trend that we expect for clean diesel, even with the advanced SCR system, there's a period early on in the drive cycle when the SCR catalyst is still cold and we need to deal with NOx that's emitted from the engine. I think a likely trend is that we will incorporate some of the chemistry currently employed in NOx absorber catalyst into the diesel oxidation catalyst in the front of those SCR and advanced SCR systems. That will help to trap some of the NOx emitted very early on after the vehicle is switched on and then release those and convert them over the SCR or SCRF component later on in driving.
Good technologies today, but more improvements to be made as well. This is an interesting slide that was released by an organization called Emissions Analytics back in November. They are an organization that have been taking a wide range of vehicles, commercially available today, and doing real-world driving. If we start with the blue line, which is the Euro 5 limit, 180 mg per km NOx, the blue dots are where the vehicles were during real-world testing. Now, I was to emphasize all of those vehicles met the Euro 5 limit over the drive cycle. What we're seeing here is the difference between a vehicle driving over the European drive cycle and a vehicle driving in real-world conditions.
Many of those vehicles are emitting three, four, five times as much as they do over the drive cycle and in the worst case, nearly ten times as much. Clearly, that is the problem that real-world driving had to address. How do we get systems that give good NOx conversion in the real world, not just in the laboratory? For me, the really encouraging thing about this slide is the purple dots. The purple line at the bottom is the Euro 6 NOx limit. The dashed pink and green lines are the phase two and phase one conformity factors for RDE. What we see with the purple lines, even before OEMs have to meet the RDE limits, is a significant reduction in real-world NOx. Those new advanced diesel systems are delivering much better NOx emissions in the real world.
Some of those systems are already meeting the Euro 6 limit, the conformity factor of one in the real world. A third of the vehicles that were tested are meeting the Euro 6 dTEMP, the phase one RDE conformity factors. This is manufacturers voluntarily fitting systems that are better than required in order to meet the conformity factors. I think it emphasizes the fact that it's technologically possible. You know, we can meet these in the future. Another interesting aspect to this is that from this year, when an OEM launches a new vehicle, they will have to publish the conformity factors. Even though there is no limit they have to meet until 2017, they'll be required to publish those figures.
Our expectation, and we've again seen this reflected in conversations with a number of OEMs, is that that will start to make emissions control competitive. We already see this for CO2 emissions today. There's an advantage in having a car that delivers lower CO2 emissions or better fuel economy than your competitor. We expect a similar thing to start to imply for NOx emissions. Nobody will want to be the worst for NOx emissions in the real world. Some OEMs will see an advantage in being able to be the best and sell vehicles as clean diesel and promote their environmental heritage. I think this is, me, it's something very strong. It's going to mean a drive for better and better emissions control systems. We can take advantage of that going into the future.
On the gasoline side, I've mentioned gasoline particulate filters a number of times. We are now in a position where we're going to launch two types of systems in this calendar year. One, on the left-hand side, is the traditional three-way catalyst with a coated gasoline filter downstream. That filter's primary role is to remove the particles from the exhaust system, but it will also have a three-way catalyst type coating on it that will deliver some additional conversion activity for any NOx and hydrocarbons that slip through the three-way catalyst. The second, more demanding system has what we're calling a three-way filter at the front of the system close to the engine. This is required to filter out the particulates and have all the activity of the traditional three-way catalyst.
That means a higher loading of catalyst, which adds some challenges in terms of the back pressure of that system. That has some advantages, particularly on smaller vehicles. It is a more compact system and enables those vehicles to meet the future limits. We are launching those systems this year. We are continuing development partnerships with a number of OEMs. We are aware that some applications will be able to meet that initial Euro 6 C limit, either through improved engine technology alone, that improvement in injector design and cylinder design I mentioned earlier, or some are using an uncoated GPF. Our expectation is that with the advent of particle number RDE limits, that will drive increased uptake of this coated gasoline filter technology. As John, I think, mentioned earlier, that additional technology increases the value of the gasoline after treatment system as well.
Oops, wrong slide, sorry. That is the technologies. We're well positioned today. Those are either on sale or about to be launched, but we can't rest on our laurels. We need to keep investing in R&D and improve our offering. When I was preparing these slides, I found it interesting that there are very similar themes in both gasoline and diesel catalyst development for the next few years. Temperature is a critical one. I've talked about the lower catalyst temperatures we see with more fuel-efficient engines. In both areas, we need catalysts that light off, become active at lower temperatures, and give you good conversion efficiency in those cooler conditions you see in urban driving, particularly relevant for RDE. Almost paradoxically, we also have low temperature, but also a requirement for increased thermal durability. Gasoline peak aging temperatures are increasing.
That's partly engine design, and the way that the injection strategy is used. It's also partly the removal of fuel enrichment to control peak temperatures. Generally seeing higher peak aging temperatures. On diesel systems, the requirement to regenerate components in the system to remove certain sulphur also leads to higher temperatures. We need to find catalyst systems that work well at low temperature, but also materials that give better thermal durability and survive longer under those conditions. The increased number of downsized turbocharged engines means there's also a drive to reduce system back pressure. Those engines have to work hard. If there's too much back pressure in the exhaust, then that minimizes or that affects the power delivery from the engine. If you can make the systems smaller and lower back pressure, that's an advantage.
To control cost, whatever we can do to remove precious metal content from the system is also beneficial for the OEMs. These themes are all critical for us to keep offering competitive products to our customers and protect our market position going forward. John mentioned the headline figure earlier on, in terms of the light duty sales, the catalyst market. We see that growing from $6 billion today to over $9 billion by 2025. If you break that down into different components, you can see European diesel, that dark green bar near the bottom, remains a very important sector. Those clean diesel technologies are critical to that. The RDE legislation and the introduction of GPFs provide further growth opportunities in Europe. Another significant area of growth is in Asia.
That's partly through increasing car sales and also tighter legislation, not just the Chinese regulations I mentioned earlier, but also on the diesel side, the introduction of filters in some markets such as Thailand. Generally, we're seeing the light duty market continues to grow faster than global vehicle sales. We would expect our market share to remain at about 30% throughout this period. To summarize the light duty section, emissions legislation is continuing to tighten around the world and perhaps at a faster rate than we've seen over the last few years. There's clearly increased pressure, both political and public, for clean vehicles. That has led to an increased uptake of the latest catalyst technologies. John said, "Matthew, you're very well placed.
We have a strong range of technologies in the clean diesel, advanced diesel systems, and we are about to launch gasoline particulate filters as well. We have to keep investing in R&D to further develop the catalyst and make sure we remain competitive over the next decade to maintain that market share. Hopefully you have seen from these slides that in combination, there is good opportunity for growth into the next decade for light duty catalysts supported by that increase in vehicle production, the tighter legislation, and the improved technologies. Thank you for your attention. I will wait for questions till after Andy has spoken.
Thanks very much, Chris. I'm Andy Walker. I'm the Divisional Technology Director for our ECT catalyst business. What I'm gonna do over the next 15- 20 minutes is really draw some parallels between what Chris has talked about on the passenger car side with where we see the heavy-duty diesel market going over the course of the next 10 years and a little bit beyond. What we can see, we'll break this down. We'll look again at what's gonna happen to the number of regulated engines, 'cause that's obviously one of the key drivers for us in this business. The other key driver is the legislation. We'll take a look at the legislation around the world.
We look at what that means in terms of JM value going forward and then the value of the total market of HDD, building up to the kind of headline figure that John gave in his earlier presentation. What you can see here is heavy-duty, regulated engines. We're continuing to see an increase in those numbers globally over the next 10 years. We see the more significant increases are in Asia, and these are dominated really by India and China, as you would expect. We'll talk about the legislative picture in a moment, as I said. There's also a bit of growth in North America, a bit of growth in Europe. You can see numbers of engines, 2.5 million going up to around about 4.5 million, something like that.
We've got a CAGR of around about 8%, something like that, over the next 10 years. If you look at legislation, again, as Chris said, these are fairly complicated slides. There will be a quiz just before dinner this evening for any of you there, so please pay close attention here. The key thing here is that as the colors change, as we move, as we move across the chart, we're seeing tighter legislation. Of course, tighter legislation offers new opportunities for the Johnson Matthey organization. What I'll do, as Chris did, is I'll take a look at some of these areas specifically. I think two of them to draw out immediately.
What we can see, as Chris and John both said, is one of the most dramatic changes recently has been in India, where we expected Euro 5 to come in around about 2020, sorry, 2025 or so. That's been brought forward. It looks like that could be as early as 2020. We're taking a relatively conservative view, as John said, with our numbers, which does mean that there is some potential for upside in these numbers because perhaps the middle of the road would say around about 2022 will be when the Indian heavy-duty diesel market moves to Euro 6, which obviously adds significant value for JM. If we start at the top of the picture with Europe, we've got Euro 6 in place today.
Euro 6 systems comprise an oxidation catalyst, a filter, an SCR system, which includes both an SCR component and an ammonia slip catalyst component. Four different catalyst components in these systems. What we can see going forward in Europe is the drive towards further improvements in fuel economy. As John mentioned, this is already leading to some new systems being developed. We're not actually relying on the next stage of legislation to drive a change in the systems that are being used because the drive for improved fuel efficiency and also the drive for lower-cost systems, which we can obtain by taking out precious metal, is what's driving these midterm changes between the emission regulation changes.
What we can do is we can leverage our information and our knowledge from what we've seen happen in Europe, where we're moving towards a relatively mature situation now in technology with these stage two systems that John mentioned, and look at what that's gonna mean for what we, what we're gonna see in India and China going forward, where, again, the focus there is going to be on meeting the emissions legislation but doing it at the lowest possible cost. We've already started on that journey in Europe. What we can see in Europe is we've got the potential to move from a Euro 6 to a Euro 7, probably partway through the next decade. This, again, as Chris mentioned, is likely gonna mean some different pollutants are gonna be the focus.
NO2, particularly in urban areas, has been a focus in London and in other major cities, particularly across Europe for several years now. N2O is something that's already regulated in North America in both heavy duty and light duty. The main focus for N2O is the greenhouse gas potential. N2O is about 300 times worse than CO2 on a molecular basis for global warming, which means that there's a strong focus on making sure that any catalyst systems that are applied to vehicles absolutely minimise the increase in N2O that comes from treating the NOx emissions.
If we look into, and the other thing that we will see with Euro 7, again, is this ongoing drive towards improved fuel efficiency, but we expect to see that being more formally regulated going forward in the European markets on that timescale. In North America, the EPA has already moved into the greenhouse gas phase one regulations. What we've seen here is formal regulations based around CO2 in fuel economy as well as N2O and methane. Very, very consistent with the picture that Chris painted in his earlier presentation. What's gonna happen in 2021 is they're gonna move to the second phase of this legislation, which is gonna tighten things further. We'll have further tightening in fuel efficiency. Engine efficiency is gonna have to improve by at least 4% on that sort of timeframe.
We will also see, on the back of that, a reduction in typical temperatures that the catalyst sees. That requires a new generation of catalysts with more capability to work effectively at lower temperatures. It will also mean that the engine out NOx emissions in general will tend to increase further because if you increase the fuel efficiency, you often get an increase in the NOx emissions coming out of the engine. The catalyst system has got to do more. Again, good opportunities for further technical development and further value addition for the JM organisation. As we move into EPA greenhouse gas phase two as well, there is further tightening on N2O. As I mentioned, there are some good opportunities there for new generations of catalysts to come through.
There is a lot of good technology still to come in the more developed markets. I'll skip California for the moment 'cause I'll come back to them towards the end because California really is moving very dramatically forward when it comes to driving down NOx emissions. I'll come to that in a second. As we look at Asia, we saw that the number of regulated engines in the Asian market is really what's the key underlying, the main driver behind the CAGRs that we just talked about in terms of regulated engine numbers globally.
What we can see here is that both in India and China, we're gonna have this movement from Euro 4 and Euro 5 systems, which in heavy duty is normally an SCR system, to a much higher value, typically for the JM group, around about a three times increase, threefold increase in value as we move towards these SCRT systems that we use in Europe today. The oxidation catalyst, the filter, and then the SCR system. Both in China and in India, we're gonna see this happen. In China, in Beijing, this legislation is gonna come in over the course of the next year or so. We'll have the initial numbers of these systems going into the Beijing market. We expect Shanghai and other major cities in China to follow on shortly beyond that as we move through 2018.
Somewhere in the 2020, 2021 timeframe, the formal Euro 6 legislation will be enacted nationwide across China. With the huge number of diesel engines that we have there in the heavy duty side and the additional value creation for JM, you know, you'll see what this does to the market as we move through the presentation. India, as I mentioned, looks like they're actually gonna skip Euro 5 and go straight from Euro 4 to Euro 6 as they are doing in the passenger car market that Chris referred to earlier. Again, we expect a similar increase in value, perhaps significantly earlier than we thought because it is looking as if that could be as early as 2020, although, as I say, we're taking a slightly more conservative view than that.
John mentioned in his presentation looking at the non-road market in Europe. What we've seen in the non-road heavy-duty diesel market is we've seen complete alignment really in the regulations between Europe, North America, and Japan, so the more advanced regulated markets. What Europe's decided to do, though, is become the first, the first place in the world to introduce a particle number regulation for the non-road market. What particle number regulation means is that filters will be required. While the current regulations globally in the non-road area can be met, for example, just with an SCR system, as soon as you introduce particle number, you can't do that anymore. The particle number regulation forces, mandates the fitment of filter technology on there.
What we can see here is the kind of systems that we've seen in Europe now on the on-road side and in the developed markets for several years, as well as in the non-road market. We're going to see some of these advanced SCR, so where we've got some of the SCR on the filter. This is being done for two reasons. First of all, as Chris mentioned, you put the SCR component closer to the engine. It gets hotter earlier after the vehicle starts working, so you get better NOx conversion over the cycle and over a typical working duty cycle. It's good for the environment from that perspective. The other thing is with a lot of non-road vehicles, you've got a tremendous constraint on the amount of space that you have available for catalyst treatment systems.
By compressing the system down towards this SCRF-type component, we see additional value creation there. Again, in moving from Tier 4B to Stage five, from SCR to SCRT, this sort of threefold increase in value for the JM organization is a good rule of thumb to use. What we are going to see as well in China. China at the moment, in the non-road space, there is no need for any aftertreatment. As we go through the next five years or so, what we will see, first of all, in Beijing, where obviously there is a lot of construction ongoing in Beijing and then some of the other major cities in China, we will see some non-road regulations being introduced there, which again will force the fitment of catalyst technology.
That will gradually tighten as we go through the next 10 years towards the kind of levels that we have in Europe, North America, and Japan today. Again, some significant additional value creation for JM in the non-road market within the emerging markets. California has some unique challenges associated with ozone. One of the key things that leads to ozone generation is having significant levels of NOx in the environment.
What California is looking at doing as we move through the next decade, so around about 2023 or so, is probably the best estimate at the moment, is to look at taking what is currently already the most stringent NOx emission legislation in the world, which is the U.S. regulations that were introduced in 2010, and reducing them by up to 90% in order to give them the power to really bring down the NOx emissions, which will really help them with the ozone problems that they have across California. We would also expect that legislation to permeate certainly into the northeastern states of North America, which usually follow California legislation. Certainly the California Air Resources Board and the EPA are in conversations already about whether this at some point would become a nationwide standard.
This will require significantly more complex and more capable emission control systems that we have in place at the moment. To give you an example, you know, of where we are, this is a chart which just shows NOx emissions on the bottom, particulate emissions. This is the NOx emission today of EPA 10. It is the lowest NOx emission anywhere in the world in terms of regulation for heavy duty. That is what California is planning to do with it. What this will do essentially is mean that a heavy-duty diesel vehicle driving on the highways of California will be as clean in terms of NOx on a per-mile basis as the most sophisticated gasoline systems on the market today.
A tremendous improvement in the NOx emissions from heavy-duty diesel vehicles will be mandated by this. If we look at where the engine-out NOx is gonna be, so how much NOx do we have to convert here? The engine-out NOx is pretty much where Chris is sitting over there, okay? What we're looking at is requiring something north of 99% NOx conversion from these systems. What this will mean is that as well as having systems that can convert NOx at high efficiency when the vehicle is moving and everything's warmed up and things like that, the assumption at the moment is we're gonna be hitting somewhere between 99.8-100% NOx conversion under those conditions. Once your vehicle's cruising along the highway, it's done. There's nothing coming out of the tailpipe at all in terms of NOx.
Because of the way the cycles are constructed and because a lot of these vehicles, you know, there is some stop-start, there are cold starts, the main focus of the technology now moves towards the low-temperature operation and particularly the cold starts. The challenge here is that SCR systems, because you need to inject urea to get the catalysis to go, they cannot really operate effectively at temperatures below about 170 degrees. You are starting off at room temperature, and before you get the system warm, what are you gonna do with the NOx that comes out? Because the way these regulations are constructed, you have to convert somewhere around about 98.5% of that NOx that comes out in the cold start before your SCR catalyst is hot enough to deal with it.
The approach that we're taking here with some very exciting technical developments, and obviously these are things that we've got patents on and things like that. What we're looking at here is what we call the cold-start concept. This stores the NOx when the system is too cold to deal with it and then releases it once the downstream SCRF and SCR system are warm enough to deal with it. We believe that by using this combination of technologies, so the NOx storage catalyst, the cold-start concept here with the advanced SCR, the SCRF system again as close to the engine as we can get it, so it's getting hot as possible, as quickly as possible, will be the way to drive towards meeting these emissions legislation, this next stage of emission legislation.
We do expect this to lead to a significant improvement, significant increase in the value of the systems realized by Johnson Matthey when we look at these California regulations. Similar to the picture that Chris presented, as we look at what we need to focus on going forward, you know, still the need for ongoing R&D spend. You would expect me to say that in front of the CEO, right? What we can see is the systems for enhanced NOx reduction are clearly required. This is better fuel efficiency, lower CO2, generally leading to lower temperatures, which leads to requirement for enhanced technology. The lower temperatures mean that we do need to do a significantly better job in low-temperature NOx conversion, as I just discussed. We mentioned N2O, significant challenge when it comes to greenhouse, global warming, greenhouse gases.
Continuing developments to pull down the N2O emissions from these systems, making the systems as small as possible, as light as possible, and doing what we can to minimize the cost. A lot of that focus is around minimizing the precious metal content that we have in these systems. Also, as Chris said, you know, we need to generate a lot of power from these engines. Making sure that we minimize the system back pressure by looking at the way that we add the wash coats to the catalysts and develop the formulations in that way. We have seen the increase in the number of regulated engines, and we have also seen the impact of regulations on technology trends going forward. What is that likely to mean in terms of the value of the market?
This is the total value of the market. This is sales XPGM, the way that we normally present it. As John mentioned, round about GBP 1.75 billion today, increasing to somewhere north of GBP 4 billion over the next 10 years. You can see here a lot of that is driven by the pink profile here, which is the big increase as we move into the Euro 6 equivalent regulations in the Chinese heavy-duty diesel market. Europe remains a strong contributor to this as well. We do see, as I mentioned, both India and also South America. We're looking at the Brazilian market again as we move into the next decade, tightening their emission control requirements and increasing the value opportunity for JM. Non-road, as I say, continues to add value.
That will step up again as we see the Chinese introduction of the technology. As John mentioned, as John highlighted, the stage five in Europe, which drives filters on non-road equipment. To summarize the overall picture for ECT, so this is the light and the heavy-duty side, what we can see is that regulations, which are clearly good for our business, are gonna continue to tighten over the course of the next 10 years. These are gonna be on the pollutants that we're used to and the ones that there's gonna be an increased focus on going forward, such as NO2, N2O, and particularly fuel economy and other greenhouse gases. The regulations obviously drive the need for technical improvements. There is a lot of value to be generated and obtained through that.
Within JM, we've talked a lot about we don't just offer the catalyst. We really look to offer the solution. We combine our catalyst knowledge with our applications knowledge, with our knowledge of the way that the customers are going to be using these catalysts, working very, very closely with the customers to make sure that our next generation development is very much aligned with what the customers are going to need and what the regulations are going to require going forward because there's a common theme there. I hope what we've done has shown that ECT is very well placed to continue to deliver significant value from the opportunities in the emission control area from the automotive sector. With that, we'll close this section and we'll be happy to take any questions from the audience.
If I'll join the guys up here. Happy to take any questions that any of you have. Just be aware, we'll be asking you, as Andy said, questions later on three-letter acronyms. I think, Simon at the back there, you had your hand up first, then I think Peter, and then Adam. We might go to Adam second just 'cause he's. Sorry. I didn't see you there. Yep. I think it's working.
Thanks. It's Simon from Exane here. Can I kick off on margins? Talked a lot about mar, market size. Sorry to see you rolling your eyes. Someone had to ask. It's how should we think about margins? I mean, I think the first half was sort of close to peak margins in ECT. I think the OEMs are feeling a bit of a pressure.
How should we think about margin progression as all these new technologies are brought in, about investments ahead of these new technology introductions and things like that? The second question was specifically on India. There's been a bit of focus on India. Should we think of India in the same way as China, I think, where you've indicated it does take a bit of time for the legislation to roll out, sort of three, four, five years? So it's something we shouldn't think of stepping up in the same way as Europe does.
Thanks. Okay. I will do the margin question and then I will hand over to Andy to do the India question. Look, I think when we did our results last November, we said that we did have pretty good margins in the first half.
We were helped by a little bit of a one-off gain. I can't remember exactly how much that was, but, you know, we were high 13-type % margin was where we were. I think throughout the decade, throughout through 2025, we would expect to have margins to be in the 13s-ish range. You know, some years we might be at the low end of that 13s, some end we might be at the higher end of that 13s, but it's in that sort of range. I don't think we're gonna get far north of that. At the same time, I don't think, you know, in the world as we see it today, you know, obviously with operational deleverage, if there was, if there was a, you know, a crash that happened, then it might go below, but we're in that sort of 13s-type range. Okay. And India.
I think on the India question, I mean, you know, as your point is very well made in the sense that the Chinese legislation does tend to take a while to get full traction and be fully introduced. In India, historically, it's been sharper than that. It's not the same as doing it in Europe, where you do have a defined date and then everything is beyond that. I think our assumptions would normally be that with India, certainly over a one to two-year period, we'd see that phasing into the full Euro 6 compliance.
Okay. Since you're just near, Adam, why don't we take the.
A question for Chris. Couple of questions on so-called Euro 6D temp and otherwise.
First, first one is I think we know what the test cycle is now, and you discussed the conformity factors. Do we know what the testing regime will be? Will it be a 100% portable measuring devices or will there still be a lab content? That's the first question.
I think that's still to be fully defined, but portable measurement system is the primary route. Okay. We have one of those systems. We're using it today. It's viable technology for NOx. That is one of the reasons why the particle number conformity factor is delayed because there's still some question about how accurate that portable measurement is.
Yeah. Okay.
The second question then is if, if it's mainly going to be portable measurement devices and those monitors today indicate that real driving emissions can sometimes be as much as six to ten times higher than existing limits, even with a conformity factor of two times initially, we're talking about levels which are three to five times the new conformity factors. The question is, how confident are you that advanced SCR can meet that challenge if, if indeed that is the case? Why does that drive only a 20% increase in value add on diesel and 10% on gasoline? Seems like it's a bigger challenge than you're suggesting.
The first part of that, I mean, when you look at the vehicles that are equipped with those advanced SCR and SCR systems, those are much lower in terms of the ratio.
Those are the ones that are typically down at one and a half to two rather than in the very high numbers. The ones that were in the top left of that chart at six to ten times are pre-Euro 6 systems with no NOx control. I think our experience, and borne out by that data, is that when you put a diesel NOx control system onto a vehicle and when you employ it properly using the right amount of urea, then you can certainly get down to the conformity factors quite readily.
I guess the question is, if I can just ask one final one, what would be the average Euro 6 real driving emission today in megagrams per kilometer? Is it, is it 300? Is it?
Today, looking at those numbers for the purple dots, the Euro 6 cars, then it's probably around two to three times the limit. As I say, those vehicles have those advanced diesel systems in order to meet the 80 milligrams per kilometer limit over the standard drive cycle. They're not necessarily designed and calibrated to work over the wider range of driving conditions that you experience in a real-world drive. That's possible. It's just a question of designing how much urea you inject and when, making sure the catalyst, the temperatures are in the right conditions. I think at the moment, systems are optimized around this part of the envelope that is for the Euro 6, the standard European drive cycle test. To be RDE compliant, they need to calibrate over a wider range, and that is happening.
Just to try and answer your question on value, remember the vast majority of value accretion when you go for the big step up that we had before, and Andy referred to the three times more value when you go to the SCRT system, is because you're putting another brick. A standard SER to an advanced SER, there's not another brick there. It's a more complex brick while you get some added value, but you don't get that big step up that you get when you put another component on. That is why it's a higher value, as we've already said and said for some time, but it's just not quite that big a step because of that.
All right.
I think we had two questions. Peter, if you still got a question. I haven't forgotten. We'll come back. Yes.
It was on the real-world testing again. If it's on vehicle, I mean, how do you reconcile winter to summer and sort of Italy to Scotland? I mean, surely it has to go to a lab system, a calibrated lab system in the end.
There are, there's a defined window of temperature, speed, altitude that you're allowed to use. Yes, the cynical view might be that you would choose to test your car in Spain in nice conditions rather than in Finland in nasty conditions. There's another phase being discussed. The RDE comes in four packages, and I can't remember if it's three or four, which way around it is. There is still a discussion to have about infield compliance and how that is going to be monitored.
As well as certification by the supplier when they launch the vehicle, there'll be an expectation for member states to do infield compliance testing and make sure vehicles are meeting the limits. You'd expect those to be done under a wider range of conditions rather than perhaps the most favorable conditions.
Are you ruling out a laboratory test?
I think the requirements for real-world driving are very clearly to put it on the road and measure it in that way. I think for development purposes, what we expect to do is to define a number of real-world compliance cycles and bring that back into the laboratory for development purposes. Because otherwise, and we know from experience today, we've defined two or three compliance cycles around Royston that we're running tests on.
You send the same car out on successive days, and you get a different answer. Because if you're stuck behind a tractor at a certain point on the road, you get a different answer. For development purposes, to know if system A is better or worse than system B, you need to have the same drive. We're taking, we're logging real-world drives and then replaying them in the laboratory. I suspect that is the way that many vehicle manufacturers will move in terms of designing their systems. The acid test will be a real-world drive. I mean, therein lies one of the challenges about the whole setting of the real-world driving emissions standards. Because as you said, it's Finland or Spain, and what temperature and conditions and altitude? Not just one, but an average of a thousand. Wow.
I think with the fact that numbers will be published, and I, you know, I've had conversations with engineers at many OEMs, you know, that emissions analytics data, they know anyone could take a car and drive it anywhere. If that's a proper real-world drive cycle, and your emissions are suddenly starting to be much higher, then that's going to put your organization into a discreditable position. I think there is an acceptance within the industry that they can't just take the softest case. They have to be robust in their engineering.
I think the other point you may wanna mention, Chris, is just, you know, how new this portable vision is. Yeah. Yeah. Yeah. That's true. Equipment is.
I mean, I think, you know, we took delivery of our system last summer, and, you know, there've been previous generations, but that was really the first time we could have had an up-to-date system. I don't know of anyone who's got more than about 18 months' experience of testing on the road. The people are learning fast as well.
Okay. Do you have a question over there?
Thanks a lot. I'm again with my questions. I have three. One is, on the size of the vehicle and the size of the engine. This chart on page 44, which showed discrepancies between real-world driving and controlled environment driving. Does the size of the engine play a role? Meaning that the smaller size engines tend to be less compliant? The second thing is, the second question is about pricing strategies.
Because, so if we small cars are being switched from diesel to direct injection petrol, obviously, I remember you had this chart which looked like teas when you introduce the product. The price is high, and then you need to improve efficiency to keep the margins because the price is falling. Three-way catalyst is an old technology, so which exists for quite a while. How, and the competitiveness, competitive edge probably is smaller than for advanced SCR where you can justify premium pricing. If we go to more direct injection petrol, more three-way catalysts, what will it do to your profitability? The last question is on India and China. Being from emerging market, myself, it's kind of very difficult to enforce any regulation, even if the intentions are very good at the beginning. Do you adjust your timelines for this?
How do you see enforcement of new regulation in China going forward and in India? Thank you.
You're welcome. Since you gave us three questions, each one of us will get the chance to answer a question. I thought I was gonna get two. You are. Why don't you go with the chart question? Okay. Chris.
I think there is some correlation between engine size, vehicle size, and the difference between on-cycle and real-world emissions. It's not a one-to-one correlation, but it's certainly true to say that if you have a very downsized engine in a larger vehicle, which some OEMs have used as an approach to improve fuel economy, then under those conditions, when the engine's working hard, you can generate more NOx when you go to those harder driving points off-cycle.
Yes, there is some correlation there. Equally, some larger vehicles with large engines, they do not work very hard over the range of speeds you have to do in real-world driving, and perhaps the NOx is a little lower. I think there is some correlation. I do not think you could say all of the points at the top are small, small engines. There is a tension there within the market that the direction that OEMs have been moving into to maximize the CO2 improvements is not necessarily the direction you go into to maximize RDE performance.
Okay. Yeah. Did you want to talk about India and China? India and China.
Okay. It is a valid point.
I mean, one of the things that we've seen historically, for example, in China in the gasoline industry is the fact that the Chinese government did start to take a hard line on compliance. And, you know, some of that comes from naming and shaming, and some of it just comes from saying, you know, these are, these are the regulations, and this is what you need to do to meet them. We expect to see that also going forward to Euro 6 and Heavy Duty.
Actually, when you look at the Beijing and the Euro 6 regulations, it looks like the onboard diagnostics regulation is going to be tougher than it is anywhere else in the world at the moment because it's going to involve, essentially, an increased connectivity angle, which means that the regulatory authorities would be able to have instruments by roadsides, which would be able to interrogate the vehicles as they pass in terms of what their emissions profile looks like. Not just in terms of, you know, focusing on the tailpipe, but also focusing on the onboard diagnostic system on the vehicle, which is what tells you whether the catalyst system is working properly or not.
We are seeing a very strong focus and a very strong position being taken by, by the governments in China and, you know, in India because India will follow on behind. China has more of a history, but we are seeing that, and we do see that as a very promising step forward for enforcement here.
Okay. Your last question about three-way catalyst, I think I draw your attention to Chris's slide 44 where we actually talked about gasoline filters and the filter technology and the fact that you've got three-way filters and, and, and stuff like that. Different technologies coming through. Three-way catalysts aren't commoditized commodity products yet.
With the advent of Euro 6.0 and the requirement for filters to be fitted on gasoline for the particular control, I think that technological advantage can still be there and we can still hold prices at a reasonable level.
Even with three-way catalysts, precious metal is still an important component of that cost. If we can improve our washcoats, make them more thermally durable, give better low-temperature performance without having to increase precious metal, that's another way we can deliver value.
Direct injection is much more complex than, as a woman who doesn't have any idea about how to drive.
In terms of the impact on the catalyst system, the composition of the gas and the temperature of the gas is broadly similar whether it's direct injection or port fuel injection.
It doesn't have a huge effect on the design of the three-way catalyst.
Thank you.
Now, I can see a couple of hands up, but I'm gonna have to call time, I'm afraid. Otherwise, we'll get behind. We've got another quick break. Ask your questions if you can during the break. We're a little bit behind schedule, but if we can come together again at, say, 25 past, then we're pretty much on time. Thank you.
Yeah, I think so. That's grand. Thank you. Thanks. One of the points that Chris made about. So what? You know. One, two, one, two. That's not going out into the room, is it, though? If we can get started. Martin, are you okay?
Yes, I'm good. We're on the home stretch now, so we've got two more sessions.
Not two more sessions, sorry, two more presentations. Firstly, from Martin Green, he's going to talk about battery technologies, and then from Alan Nelson, who, as I said already, is our new CTO, started in the summer last year. I'll hand over to Martin, and again, at the end of this, we'll have some opportunity for questions as well. Martin.
Thank you, Robert.
And good afternoon. As you've heard, I'm going to talk about battery technologies and our battery technologies businesses, and I'm going to go through where we are today, our view of the market, Johnson Matthey's position in it today, and our prospects as we see it for the next few years. I'll share with you our perspective of the technology landscape, and I'll explain why we're confident that J.M. will succeed in this area. To start with, a reminder of our overall strategy.
Our aim is to create a substantial new division for Johnson Matthey, supplying advanced materials into the lithium-ion battery industry, with a clear focus on the automotive sector. Our strategy to achieve this has been to build knowledge and market presence in the sector through some initial M&A, and then to grow that, to build on that through developing a broad technology portfolio. We're well down the line in executing that strategy. The initial build phase is essentially complete. In terms of M&A, what we did was initially acquire a systems integration business, the Axiom business there on the left. That gave us a really good understanding of the overall sector, and it brought deep applications knowledge on battery system design. We followed that with two other acquisitions, now in the material sector, and altogether, that was an investment of GBP 100 million.
That is the strategy and a bit of history. Where are we today? We have been integrating those businesses into a global operation, and today we have around 800 people, including 50 in R&D, working at five major sites worldwide, as you can see. We have the U.K. and Poland for our systems businesses, and Canada, Germany, and China, which is where our materials businesses operate. I will just pause here for a few minutes whilst we show a short video featuring our Canadian facility.
Vehicle ownership around the world continues to increase, with annual sales of cars expected to top 100 million by 2020. Increasing wealth, population, and urbanization are all driving vehicle demand, and at the same time, climate change and air quality both remain high on the global agenda.
Consequently, we're seeing ever-tightening legislation on emissions, including carbon dioxide, from cars, trucks, and buses, and as a result, the need for lower emission, lower carbon transport. Johnson Matthey has long been a leader in tackling emissions from traditional vehicles powered by the internal combustion engine. Now the company is applying its chemistry and applications expertise to create the advanced battery technologies required for the next generations of the automotive powertrain. There are numerous ways in which batteries are used to generate power for all types of vehicles, from micro, mild, and plug-in hybrids, right through to pure battery electric vehicles. The fundamental chemistry of a lithium-ion battery is common across them all. Lithium ions from the anode material shown on the right move across to the cathode on the left.
At the same time, a flow of electrons is generated, which is the power required for the vehicle. The cathode material in the battery cell is a key component in providing the electricity needed to power a vehicle, and there are a number of different classes of cathode material, each suited to a particular application. At Johnson Matthey's facility near Montreal, Canada, the company is manufacturing one particular type of cathode material, lithium iron phosphate, or LFP. A key characteristic of LFP is its power density. It has a complex chemical structure designed to release electrons quickly and efficiently, thus giving the boost of power when needed by the vehicle. At the same time, the structure of LFP needs to be very robust so that it can withstand the harsh and repetitive demands of charging and recharging in automotive applications.
Manufacturing LFP at scale requires a multi-step process with precise monitoring and quality control at each stage to ensure the exact specification of the final product, which can be optimized for each customer's application. Once raw materials are received, they're combined in large tanks where they undergo a chemical reaction to make an impure form of LFP. Excess liquid is removed by filtering, and the impure LFP that's collected is combined with other components, which help to optimize the performance of the final battery material product. The size, shape, and morphology of the LFP particles are key to the material's performance, and so the LFP undergoes a number of further manufacturing steps to ensure the right parameters. Given the precise chemical and physical properties required for high-performance LFP, process monitoring at key stages ensures the highest levels of traceability and control.
In addition, scientists at the site's dedicated analytical laboratories are also on hand to ensure that the very highest quality standards are maintained. Once all controls and checks are complete, the finished LFP is then bagged and safely packaged before it's shipped off-site to customers around the world. As legislation drives the increased need for a broader choice of powertrain options, demand for new, higher-performance battery materials is set to grow. As experts in the complex chemistry needed to develop these next-generation products, we at Johnson Matthey are already working on the solutions of the future for our customers. In addition, with a strong position in LFP and a clear strategic focus to expand our range of battery materials, we're well-positioned to benefit as a technology enabler for the evolving automotive powertrain.
Hopefully that gave you a bit of a flavor for the business.
For those of you who have ever been around any other Johnson Matthey facility, it should be quite familiar. Lots of pipes, lots of pops, lots of powder. Actually, the serious point on that is that this is a very familiar kind of processing technology for J.M. Those operations have an excellent supply history. They have strong customer relationships, and already we have substantial volumes. That volume is mainly into our target automotive sector. As Robert's already mentioned, we are suppliers on 15 automotive platforms. Overall, I think we have achieved our initial goal of establishing J.M. as a credible supplier into the lithium-ion battery industry. As I say, it is an initial goal. What you see is a snapshot of where we are today. In line with our strategy, as I have said, we will continue to invest.
We'll invest in R&D on new product development, and here in this sector, we're spending rather more than the group average of 5% of sales. We'll also invest in capacity expansion. As our product mix and our volumes expand, we plan to invest between GBP 50 million and GBP 100 million back-end loaded over the next five years. Also, we're busy evaluating options to accelerate our growth through further bolt-on technology acquisitions and licensing. In battery technologies, we're on track to achieve GBP 150 million of sales this year. That includes GBP 40 million, $60 million of automotive battery materials. Despite our increased R&D investment, we'll break even overall this current year. Our strategy talks a lot about automotive as a key focus area for us, and that's for a couple of reasons.
One of them I want to explain here because I think we're very well placed to serve that industry. Our existing supply chain, which we're sort of showing on the chart on the right-hand side there, gives us strong relationships across that sector. Somewhat unusually in this industry, we're present at two distinct points in the supply chain. This means we've got direct links both with cell developers but also with OEMs and tier ones. Through the companies we've bought, we're already a proven and long-term supplier into the lithium-ion battery sector in automotive. That history, of course, builds on J.M.'s reputation as a supplier of advanced technologies to the automotive industry. Our pedigree in automotive also means we understand how that industry works, how OEMs manage their supply chains to drive innovation.
We see parallels here between the developing battery sector and our experience in emission control, where, of course, we've been operating for many years in automotive. There's a very clear vertical structure in both of these cases, but OEMs are closely involved right the way down the supply chain, and that's particularly the case during the development process. It's not just linear; it's also multi-level. We see the same sort of approach developing in lithium-ion. I think this is going to give some really profound changes to the way that innovation is managed within the lithium-ion battery sector over the next two, three years as the sector reorientates itself into an automotive supply chain and away from just being an electronics supplier. We see that happening quite soon.
Now, just focusing on battery materials, this is how we see the total battery material market developing over the next 10 years. Cathode materials, I'm showing this in megawatt-hours. It also, of course, relates to other battery materials. Looking at cathode materials now, the largest market for lithium-ion batteries today, as you see the 2015 numbers here, is the electronics market, the largest single market. It's clearly a very well-established segment for lithium-ion batteries, and it's highly demanding for innovation in some segments. However, much of it is commoditized. Certainly, overall, as you can see, over the next 10 years, the market's flat in terms of growth. Conversely, in the EV, automotive, and heavy-duty markets shown here in blue, those two blue bars, sales are already substantial, and they're growing very strongly.
Together, these sectors already account for more than $1 billion a year, pardon, in terms of cathode materials. We predict that sales will rise to $8 billion by 2025. Over the 10 years, that is a compound rate of more than 20% a year. From the market dynamics, it is also a very good reason why we are focusing on automotive rather than the more mature, more commoditized electronics market. Within cathode materials, there are several key chemistry platforms, and you were not going to get away without some more three-letter acronyms, so here we go. The largest volume today in cathode materials is lithium cobalt oxide, or LCO, the one on the left. This is all in electronics. We think around 70% of the total electronics demand for lithium-ion is LCO-based. The automotive segment is very different.
LCO is not used at all in automotive because of safety and cost considerations. Instead, for automotive, the market splits into four main chemistry platforms that we're showing here. Firstly, lithium manganese oxide, or LMO, still used in volume, but it's being replaced progressively now with higher-performance materials. The two chemistry platforms which are all about maximizing energy, energy density. Firstly, the NMC family. These are complex oxides of nickel, manganese, and cobalt, and also NCA, lithium nickel cobalt aluminum oxide. It's a variant of this NCA which is used in the Tesla. Finally, on the right, lithium iron phosphate, LFP, which, as you see, is used for high power and for safety-critical applications. This is where LFP is, where J.M.'s operating today, as we've said. It's important to stress that these chemistry platforms are not single materials.
These are broad compositions, and that's why we're calling them chemistry platforms. Within each one, there's a range of different compositions, each with a different performance and often with a different cost profile too. Actually, it's more complicated than that even. Making a practical material that works in a real application means making a whole series of improvements, both chemical modifications such as adding dopants or compositional gradients across the particles, and physical state changes too. These sorts of material modifications are really very familiar to J.M. After all, designing and manufacturing high-performance structured materials is what we do. Before we even start talking about those enhancements, those changes, there are some fundamental strengths and weaknesses of the different platform chemistries at the core compositional level. No single material meets the needs of every application. There's no silver bullet.
Compromises have to be made, trading off performance in one area to maximize performance in some other areas that are even more important for that specific application, whether that's range or power or cycle life. Cycle life is just how long the battery pack will last or inherent safety. I'm going to plot some different materials that we showed on the previous chart against some of those key performance parameters. Firstly, LMO, lithium manganese oxide. Limited range, as you can see. Limited power handling, but good lifetime, good safety performance, and good on cost. On cost here, what I'm plotting is the intrinsic cost of the material, where higher means that the cost is closer to meeting the OEM targets as we understand them. LMO is good on cost. Now, two different examples of the LMC chemistry platform, two different materials.
Firstly, in the darker color, NMC 111. That's the more commoditized end of NMC. And the 111 just means that there are equal amounts of nickel, manganese, and cobalt in this material. As you can see, NMC 111 is an improvement on LMO in terms of power and range, but it comes at a higher cost, a lower cycle life, and it needs careful management to ensure system safety. The lighter line is NMC 811, so more nickel. So it's from the same family. It's an NMC, and it's a different composition from 111, and you can see it has very different properties. It's currently the state of the art in NMC. Everything here has been optimized for energy density. And as you can see, it does very well for range and energy density. But lifetime, cost, and intrinsic safety are, again, compromised.
It is a similar story for NCA, similar overall to that NMC 811 material. Good for energy-dense applications, but again, with issues on cost and on stability. Finally, this one is LFP, limited range capability, but excellent on power, the safest of all the chemistries, and very durable too. The message here is that no single material works well for every application. Choices have got to be made based on the demands of the specific applications that you are building for. That is what we are seeing in the marketplace. This is our view as to how those different chemistry platforms align with the different applications in the automotive sector. Moving across from small battery applications to large batteries on the right-hand side, it is showing the main trends between these two.
For starters, in hybrids, micro-hybrids, where it is important that they can handle periodic bursts of energy, for example, during braking, LFP cells are a prevalent technology. NCA and NMC are popular where electric-only range is the dominant requirement. That is often the case for PHEV, so plug-in hybrids, and battery-electric vehicles, BEVs. When you get into the large systems, the really large systems in heavy duty, safety rather than range becomes the critical characteristic. Range is important, but safety is even more important. Here, that is why LFP is dominant again. LMO, as I have said, is still used in volume for automotive applications. A couple of other points to make before I leave this. The first one is that these broad spreads horizontally are typically not the same material.
For example, the NMC on the left-hand side for hybrids is typically more like that NMC 111 and not the higher nickel versions, 532, 811, which are the ones which are used in pure battery electric vehicles. Finally, real-life cathode compositions are not just enhanced in the way I put on the previous slides, but increasingly, they're blended. It is a mixture of more than one material in the same cell. For example, we're seeing increasing examples where LFP is blended with an NMC formulation to give a combination of good range, but with enhanced safety. We're seeing that as a trend which is of much more interest in the industry. Now, I'm just going to move on and say a bit more about a couple of these application areas which are particularly relevant for J.M. today as an LFP focus.
Firstly, at the small battery end of things, start-stop and micro-hybrids. This is all about capturing fuel economy or CO2 benefits on what are essentially conventional powertrains. As time goes on, different configurations of these micro-hybrids are being developed. You saw how LMC has recently changed the way that they're categorizing it as well. This is the reason why. Lots of different variants are being developed, moving from a simple start-stop on the left all the way through to a complete mild hybrid on the right, increasing effectiveness, increasing complexity, increasing benefit, and increasing cost. LFP is the material of choice for most of these configurations. That is because it has unrivaled power handling capability. We see demand for LFP-based hybrids helping to drive our sales growth across both systems and materials over the next five years.
For materials, we see an incremental market potential of GBP 100 million a year in sales by 2025. The second sector I'm going to highlight is that of heavy-duty EVs. They're on the right-hand side of that other chart. This is perhaps less visible to us in Europe because most of the market's China. On the chart, the blue band is China bus, and the pink band is China truck. The little black bars is the rest of the world, everything. It is really a China plane. As you saw earlier in the total market chart, for materials, the bus and truck market is already nearly half the size of the automotive one. We see that staying the case out to 2025. In bus and truck, strong sales growth of EV buses and trucks, 30% a year over the next five years, this chart shows.
Perhaps moderating somewhat after that is going to generate a market we estimate to be worth more than GBP 1 billion a year by 2025. This is all LFP, driven by technical performance, but also by safety concerns, as I have said. As has already been mentioned, China just removed, just last week, its approval for NMC-based cells to be used in buses, meaning the bus market is going to stay LFP-based in China for the foreseeable future. That was due to safety concerns for NMC-containing cells. J.M. is really well placed to grow further here. We are building on our existing supply relationships with some major China bus producers. The final—there is a sip of water. The final area I wanted to touch on today is automotive plug-in vehicles, so full battery electric or plug-in hybrids.
This is going to be the largest single segment for lithium-ion batteries in automotive. In 2025, a modest plug-in vehicle penetration, just 3% as we've seen, generates a cathode material demand worth GBP 4 billion. That's up tenfold on today's market. Looking at today's vehicles, and from what we can see of future model plans, it's also this sector where we see most variety in terms of cell choice. Variants of LMO, NMC, NCA, and LFP are all used in volume in this sector. That is because these vehicles demand the biggest compromises currently on performance, because there's the biggest gap between what OEMs are asking for on the one hand and what the best materials can currently provide. That is range, safety, acceptable cost. As John said, Matthew, we have substantial sales in this sector today from LFP.
In fact, we reckon we've got a share of the total automotive cathode materials market of around 5%, all of that from LFP. We've got around 20%, as we've already said, of the automotive LFP market. Building on that, and in line with our strategy, we intend to expand our portfolio from LFP into other platform chemistries over the next few months. I can't say too much about that at this stage, but we're in advanced discussions with some third parties with a view to achieving that, initially through in-licensing. As a result of this expansion, in the medium term, we'll have cathode materials that will cover the full automotive spectrum. We also see opportunities across the whole sector through harnessing J.M.'s expertise in materials design to deliver improved performance. As I've said already, the current state-of-the-art materials fall far short of automotive targets in many areas.
The chart here shows BMW's view on battery performance currently and where it needs to go for a BEV. The landmark 2014 is their view on where the technology was at that time relative to what's required for a fully competitive BEV. That's the extreme of the shaded areas. The lines in 2025 show the improvement that's required relative to 2014 in order to meet BMW's targets for vehicles that they want to launch in those dates. These are big improvements across the board. Delivering those improvements will require advances both at the materials, the cell design, and at the system design level. Delivering them is going to require strong collaboration right the way across the supply chain. J.M.'s actively working with OEMs, as you might expect, and cell companies to build this collaboration.
We are using our materials expertise and systems insight to inform and guide these joint programs. In summary, we believe that J.M. is a credible player in the sector. In fact, we are more than that. We are more than just a credible player. With a 20% share of the automotive LFP market, we are firmly established in the key automotive cathode material platform that currently represents around 25% of the total automotive cathode material market. We are not exposed to commoditized markets, but we have a strong and clear focus and the majority of sales into this sector. We think we are well placed to build on this position into the future, both technically and in terms of our customer relationships. We continue to develop our strong position in LFP, and we are also broadening our material portfolio. We believe we have excellent prospects.
Today, although we have GBP 150 million in sales, as I've said, both our systems and our materials businesses are new. They're new businesses, and they're busy investing in the future. As a result, we're breaking even today for battery technologies, but I expect us to be firmly profitable within two to three years. In materials, we expect to grow our LFP sales this year, GBP 40 million, by an average of 20% a year between now and 2020. After that, we forecast annual growth from LFP perhaps moderating, more towards the mid-teens level out towards 2025. Over that period, we expect that to mean that we maintain our existing 20% share of the automotive LFP sector. Of course, post-2020, we'd also expect to see strong new sales coming through as vehicles incorporating our high-energy material platform start to come to the market.
Building our operational leverage in this way, from 2020, we'd expect our materials business to be generating operating margins of the same order that we have within ECT. Our battery systems activity, strongly synergistic with materials development, will also grow over that period. Because of the nature of that business, we expect margins here to be a bit lower. Overall then, we remain confident of achieving our long-term aim, which is building a substantial and value-accretive division for Johnson Matthey in battery technologies. Thank you. We'll take questions after Alan has spoken, but I'll hand over to Alan, who's going to talk about the broader innovation portfolio within Johnson Matthey. Thank you.
Thanks, Alan.
Thank you, sir.
Right. All right.
Good afternoon. Thanks, Martin. My name is Alan Nelson, and I'm the Chief Technology Officer for Johnson Matthey. As Robert had mentioned, I joined Johnson Matthey last summer from the Dow Chemical Company, where I led research and development for a number of market-facing businesses, ventures in business development, as well as corporate research. I'm delighted to join Johnson Matthey and bring my background in research and development to a technology-centric company with a long and robust history in innovation. Throughout the afternoon today, we've discussed several areas of innovation and growth for Johnson Matthey. Of course, these have been around emissions control systems, as well as lithium-ion batteries. I'd like to conclude our power train technology presentations this afternoon by discussing our innovation portfolio in depth to highlight how we invest for future growth. Firstly, I'll begin by discussing innovation.
That is how we see it, how we manage it, and most importantly, how we capture value from it. Secondly, I'll discuss several examples of innovation, firstly around the automotive powertrain system itself, and then several examples that begin to extend beyond the powertrain system. We innovate to effectively capture value and enable long-term growth. Innovation is more than coming up with a great idea. It's translating that great idea into a commercial success. That is, innovation is invention plus commercialization to create value capture from R&D investment. For Johnson Matthey, we view that system as an ecosystem, or as a cycle, if you will, that encompasses product design and formulation, application development, and most importantly, partnering with our customers to deliver them solutions. To be successful, you need sustained investment in innovation. Of course, we have a long history in innovation investment for growth.
The competitive landscape is changing, and today, you need to do more than just this. You also need to leverage external partnerships, access open innovations, understand economic viability, support strategic marketing. At Johnson Matthey, we combine all of these elements into our broad innovation strategy. At the center of this ecosystem is understanding our customers' needs and delivering them not just materials and products, but the solutions that they need. We work very closely with our customers to answer these three questions at the center of this ecosystem to create a win-win scenario for them, as well as for us. You're all well aware of our long-standing expertise in platinum group metal science and technology. We have been industry leaders in platinum group metals from our very early days, almost 200 years ago. Today, many of our products are not based on platinum group metals.
In fact, they're based on a range of what we refer to as advanced materials. These materials take many forms, from powdered or coated catalysts, coated components, all the way through to functional materials and devices. The design of these functional materials requires two key things. As you've already heard today, it requires a deep understanding of the science and technology. That is how these systems function at the smallest scale, and in-depth knowledge of how they're going to be used. This is how we differentiate ourselves from our competitors. In addition to our expertise in platinum-group metal chemistry and science, we have industry-leading expertise in chemistry and catalysis, functional materials, formulation science, and of course, advanced characterization. It's these skills and capabilities, together with that specialized applications experience, that allows us to develop new and sustainable products for our customers.
We have outstanding talent in these areas, and they extend across all of the businesses and divisions in Johnson Matthey. We leverage these technical skills and competencies broadly across all of the divisions so we can draw on world-class science and expertise across all of the divisions, which is a unique capability that we have and, quite frankly, a competitive advantage that many of our competitors do not have. This leveraging also includes a strong relationship between R&D and new business development to drive opportunity assessment in new technologies and in new markets. We're also unique in that we have an integrated portfolio management process that extends across all of the divisions to allow us to prioritize our innovation and investment across the entire company.
When most companies discuss innovation portfolio management, they tend to focus on R&D spending, either in total or as a % of revenue or as a % of sales, and the internal business allocation of that R&D funding. While this is useful, as it does provide a benchmark and indication of R&D activity within a company, measuring spending alone is insufficient to ensure innovation success. We know from experience there is a clear correlation between innovation measurement and innovation success. When you invest a significant amount in research, as we do at Johnson Matthey, you need a high level of rigor to manage and prioritize that R&D investment. To enhance our rigor and accelerate revenue growth, we recently expanded our innovation portfolio metrics to include productivity-based metrics. This is a new approach to how we're going to manage our innovation portfolio.
Moving forward, we'll use these metrics to drive even greater efficiency out of our R&D investment. NPV for the innovation portfolio will allow us to understand the potential return on that innovation investment. When we risk adjust this for the product development stage, we'll also be able to understand the timing of product commercialization and, more importantly, revenue generation. Innovation margin, that is the difference between new and established product margins, will ensure we're capturing higher value from our new product innovations in the marketplace. Patent advantage sales, not just simply counting or measuring the number of patents, but rather the revenue protected by our patent portfolio, will ensure we're defending our innovations from competition and commoditization in the marketplace. Going forward, we'll include these metrics in our innovation portfolio to improve and accelerate value capture and growth.
While we will not be reporting these numbers to you all today, you can expect that we will provide an update on these metrics and values at the next Capital Markets Day in about 12 months' time. We have been innovation leaders in automotive powertrain technology for many years. However, the changing landscape in automotive powertrains presents both new opportunities and challenges for the industry. As we look ahead, we segment the opportunities in automotive powertrain broadly across four different areas. The first is in the area of advanced materials. Of course, this includes our focus in advanced emissions control materials as well as systems. The opportunity landscape for advanced materials is rapidly expanding. One area of growth for us is in the area of lightweighting materials. That is to reduce vehicle weight and thereby improve fuel efficiency and improve overall vehicle emissions.
This will require innovation in both material science and advanced manufacturing. We have capabilities today in both of these areas to be innovation leaders and capture further value. I'll speak more about this in just a minute. Energy storage devices and systems. This is principally around the areas of lithium-ion batteries as well as fuel cell vehicles. Both present high growth opportunities in powertrain systems. These systems, we believe, will initially see moderate market adoption, as we've discussed, primarily in internal combustion hybrid-based systems. Clearly, long term, these systems could disrupt and eventually replace the internal combustion engine. Our investments in both of these areas are positioning us to be leading solution providers. The opportunities, however, do not stop there. Another opportunity is in alternative and low carbon fuels. These have the potential to diversify the industry away from the traditional fossil fuels into bio-renewable liquid fuels.
Today, these bio-renewable liquid fuels are being blended into the traditional fuels in selected markets. They will likely see expanded use through higher fuel blending targets. It is an area where we can leverage our strengths in both catalysis and process engineering in our process technologies division to develop sustainable solutions and fuels for the industry. Autonomous and driver assist systems will certainly provide unique opportunities, and many of these are emerging in the marketplace today. Although it is a new area, we can already see a number of opportunities on the horizon for autonomous systems. One clear area of opportunity for Johnson Matthey is in the area of advanced fuel efficiency and emissions control systems based on predictable braking and acceleration patterns, essentially changing driving styles.
We're actively working with our strong automotive customer base today to position us on the leading edge of technology and innovation in this area. Today, we're investing across all four of these areas, and I'd like to discuss several examples that highlight the strength and depth of our innovation portfolio. One example of successful technology development and innovation in partnership with our customers is certainly in the area of advanced emissions control systems. As Andy and Chris have discussed, we're a global leader in emissions control technology with extensive operations throughout the world in close proximity to our customer base. What differentiates us from others, as you've heard, is our ability to connect the material science with the application know-how, not just to provide products and materials, but to deliver the solutions to the industry.
For over 40 years, we've been successful at connecting the material properties with that application's know-how to meet the needs and the challenges of the industry. Over that period of time, just as well as today, we've maintained differentiation through investment in technology and customer service, a deep understanding of our markets and our customers, a critical understanding and translation of science into solutions, and of course, manufacturing excellence. Our goal is to not only develop the technical solutions that meet the increasing requirements on emissions, but also simultaneously reduce the amount of platinum group metals that go into these systems and improve the overall sustainability. In the face of tightening legislations, increasing legislations, we've done just that: reduced the amount of PGMs in all of these systems. It's an excellent example of not only innovation, but sustainability at work at Johnson Matthey.
We have been successful through focus. That focus is we innovate where material science and engineering drive success. As you've heard, industry-leading capabilities in material science and application know-how is also the essential foundation for our innovation platform in lithium-ion battery materials. Materials are a value-added component because they're essential for achieving the key requirements in that final lithium-ion battery. That is, the components: the cathode, the anode, the electrolyte, and the separator all function together as a system to deliver the power, the energy, the safety, and the lifetime in that final battery. The most important and highest value material in the lithium-ion battery today is the cathode material. It is essentially the material that controls those four properties to the greatest extent.
The challenge, as you've heard, for the industry is that there is no one cathode that can deliver the best of all four of those properties. Different materials are used for different applications. Our investment in lithium iron phosphate, or LFP, is a unique and differentiated material that provides class-leading performance across three of those four areas, namely power, safety, and lifetime. As Martin discussed earlier this afternoon, LFP is ideally suited for mild and micro-hybrid applications. As we all know, the limitation with LFP is the energy density. To this end, another class of materials, nickel, manganese, cobalt, or NMCs, are being developed as alternative high-energy cathodes. The important thing to remember, again, about NMCs is that they're not just one material, but rather a range of materials based on different compositions and different properties.
With all cathode materials, NMC does not have the best performance across all four of the requirements. Again, compromises are needed. As you have heard, we are looking to expand our material offerings in high-energy cathode materials. We are looking at a number of market entry options to give us a compositional range that will have the highest potential for long-term success. You can expect to hear more from us about expanding our cathode material offerings in the coming months. Harnessing the power of material science and application know-how is also the foundation for our innovations in fuel cell systems. We are an innovation leader in fuel cell technology.
To date, we have a number of notable innovations around fuel cells, including cathode catalysts that have four times the activity of the traditional platinum-only systems, anode catalysts that employ proprietary technology to resist poisons and loss of activity by corrosion, and membranes that have class-leading performance and quality. Together with our customers, we've developed the fuel cell catalysts and the membrane electrode assemblies, MEAs. We've developed these for both residential as well as automotive applications. The question on hydrogen fuel cells, specifically for automotive applications, really requires a two-part answer. The first answer is the fuel cell technology itself. This technology is readily available today. The second part of that answer is around hydrogen availability, what the industry generally calls the hydrogen economy. This is still developing in the marketplace.
What we see today is that while several automotive companies are investing in fuel cell vehicles long-term, there are, in fact, very few meaningful commercial programs over the next few years. This will undoubtedly limit fuel cell growth in automotive powertrains, despite fuel cell technology being readily available today. During this initial period of moderate growth, we're not standing still, however. We are broadening our application space by innovating in residential fuel cells to expand our technology base beyond transportation into other markets and new applications. An area of innovation that begins to expand beyond the typical automotive powertrain is the area of alternative fuels. Johnson Matthey is a top supplier of catalyst and process technology to industrial gas producers, refiners, and chemical manufacturers. One example of this is our CATASEL stackable structural reactor, or SSR, another three-letter acronym for you.
CATASEL is an excellent example of really clever technology that we acquired about a year ago to enable the highly efficient production of hydrogen and subsequently clean fuels. This technology can significantly increase capacity at existing facilities and reduce overall operating expenses. It's key technology because the efficient production of hydrogen enables fuel hydrotreating. That is, the removal of sulfur and nitrogen from petroleum enables the production of what the industry refers to as synthetic sweet blends, essentially synthetic clean fuels. Today, this technology has fairly moderate revenues in the range of about GBP 5 million per year. As petroleum feedstocks become heavier and the regulations on fuel quality increase, it has the potential to significantly expand in this market and beyond. Another example of innovation is our ultra-low emissions reforming technology. This is industry-leading process technology that uses less energy compared to other technologies.
It significantly reduces carbon emissions and thereby the overall footprint. This technology was recently selected by CECC and Northwest Innovations Works for a world-scale methanol facility to be located in Washington State in the U.S.A. Clean and efficient methanol can also enable the production of sustainable advanced materials, including Advantage olefins and, of course, subsequently polymers. This technology, as this technology gains momentum in the marketplace, will look to expand it into further applications to sustainable petroleum refining, fuel production, and even beyond. It is also an excellent example of yet another technology that was developed right here at Johnson Matthey in the U.K., extending beyond our geographic borders to have true global impact. We are also investing for long-term growth in the area of advanced materials. For example, the concept of vehicle lightweighting is an important consideration when discussing fuel efficiency and overall emissions.
One promising technology is around the area of three-dimensional printing, or additive layer manufacturing, ALM. This process creates parts layer by layer as opposed to the traditional milling and machining processes. It allows for the creation of very highly complex and irregular geometries that would not otherwise be possible with current techniques. The challenge for the ALM industry is to broaden the application and applicability beyond the novel parts, the plastic parts and bits that we're all familiar with, into highly complex metal parts for high-performance applications. This will require the production of very fine metal powders, essentially the raw materials that go into metal ALM. Here, we're utilizing our experience and expertise in our Precious Metals Products division to develop these powders for the industry.
It highlights the breadth and focus of Precious Metals Products well beyond our traditional areas in metals refining into new product and high-growth areas. It's also an excellent example of leveraging our capabilities across the divisions: metals and powder metallurgy in Precious Metals Products to enable the production of advanced materials and structures for our customers in ECT. Another area of longer-term growth investment is in the area of renewable engineering plastics. We're collaborating with several external partners today to leverage our expertise in catalysis and process engineering to enable renewable precursors for polyurethanes and for thermal plastics. These technologies have the potential for both lower feedstock costs and higher efficiency, leveraging the scale of broad chemical production. The global market for engineering plastics today is in the billions of pounds.
Even a moderate replacement of fossil fuel to renewable feedstocks could translate into a significant market opportunity for us. With these targeted investments, we'll be ready for the emergence of these new materials through these early-stage partnerships. It is worth noting, this investment in renewable materials is in direct response to our automotive customer base asking us to deliver more sustainable products. This is how we deliver innovation at Johnson Matthey. It is the combination of close customer partnerships and collaborations with a deep understanding of their end application requirements, combined with excellence in science and technology and innovating where materials science and engineering drive success. It is focused innovation portfolio management and productivity-based metrics to make investment-based decisions and drive even greater value out of R&D spending. All of this is supported by the great science and technology and people that we have in research and development.
It's been our innovation story since we began this journey many years ago. It'll be our foundation well into the future. At this point, I'd like to thank you for your attention. I think Martin and I will take some questions.
Shall we take some questions if you have any? You're handing them in, why not very quickly? I might limit you to just two questions this time rather than three.
Thanks a lot. It's really tough to limit myself. On LFP technology, because of the lower density, if we could talk a little bit about the cost, because obviously it's an important parameter. For example, GM, probably because they're using inferior technology, we're talking about $145 per kWh for their Volt in 2016, and Tesla is at 300. Where is LFP relative to that?
Second question is on China and trucks, because Chinese trucks, obviously it's a huge market, which is almost enormous, basically. The Chinese trucks are much cheaper as a selling price than the European trucks. If the technology, if LFP is a quite expensive technology, how does it work with a truck which costs $25,000? Thank you. Why don't you manage to do it in two? Martin, can you help me out here?
The first question I think is about how do we rationalize the GM $145 per kWh with LFP and its properties? Perhaps I should just clarify, first of all, LFP is not a high-cost technology. Actually, one of the advantages of LFP is that it's a low-cost technology, intrinsic cost. That's simply because cobalt and nickel are more expensive than iron.
If you talk about the intrinsic cost, it's a lower intrinsic cost. I think the other thing that's important is that these aren't commodities. There's a commodity element to them. What the $145 a kkWh number is, is the selling price of the cells from LG once incorporated into a system. There are 1,000 things that go into that. Those cells, I think for that application, were NMC-based cells, actually, from LG. I don't think you can compare them directly. I think that the system cost is the result of a whole series of different parameters. The right material is the one which fits that particular application. It's that right combination of performance and cost. Cost is one of the key angles. I think that's the comparison.
I think with regard to trucks, I think that the comment that LFP is actually an intrinsically low-cost technology also applies here. Again, the reason why China has adopted and continues to adopt LFP in its vehicles is because of extreme concern in China over the safety of EVs. If you take the most commoditized NMC 111 material today, that is cheaper on a kilowatt-hour basis than LFP on a kilowatt-hour basis. China is saying NMC-based cells are banned. It is the proof that safety is actually more important in those applications than just a kilowatt-hour.
I think just to finish off on that, on Martin's slide 72, we talked about the market opportunity for buses and trucks. Really, in China, the biggest opportunity for the materials side, electrification, really is very much more in the bus side than the truck side.
You are right.
Cheap trucks, just like your trucks in America or Europe, they go long miles. They go way out into the cities. They're not going to be electrified. As John said, the heavy-duty diesel market will stay diesel for a long, long time to come. The trucks that are market there in China are kind of delivery trucks staying inside the cities, a bit like buses, which are staying inside the cities, much, much smaller volumes, which is why I think it's a slightly different issue driven by that regulation.
Martin, you haven't asked the question yet. I'm sorry. I can't see who that's in the back. We'll come back to you after Martin.
Yeah. Martin Evans, JP Morgan. Just on fuel cells, because you did mention that you're not standing still despite slightly more moderate growth anticipated going forward.
I mean, through the years, as far as we're aware, you've never made money in fuel cells. I think last year you lost a short $10 million, it says here. I mean, at what point will you possibly have a look at this business more rigorously? It's often referred to as a hedge. Possibly with all the hydrogen moves going forward, you still see it as important in terms of that technology. Can you explain to us in simple terms why you are still fully committed to fuel cells? Because obviously, as the losses in new businesses decline as batteries break even, as a proportion of the whole, the fuel cells will stand out as hemorrhaging cash. I think I'll refer back to the answer I gave to Adam. I think it was after the last session, wasn't it?
Look, as Alan said, the growth in the market for fuel cells for automotive applications looks like it's still some time away. It looks like it'll be still very small, even in a decade's time. We need to look at our overall investment, as you said, look at our investment needs. That's what we're looking at. We're looking at it, and we have done for some time. We're looking at, well, like you look at everything. We're looking at that. Having been, we are already a pretty good player in that market. It's a tiny market today. We want to keep that option open to us. At the same time, today, look really hard at the stationary side, which has more potential. I think that's all I would say, really. Sorry, I'm going to go to the back first, Andrew.
I'll come back to you, even though that means the microphone's going to go walk for a while. I'm just out of courtesy.
Hi. Just two questions. First of all, on the battery materials, when you look at the rest of your businesses that you've been in, either currently or historically, your market shares tend to be much higher, and you have fewer competitors. When you look at the battery materials over the next couple of years, you're targeting sort of 20% market shares. What gives you confidence that, A, you've got the right technology, and, B, that the competition isn't going to increase much more aggressively so you're not going to quite gain the position you think you are? The second question is slightly simpler.
If you assume that going forward you have more batteries, is there enough lithium in the world to sustain the battery materials you need, or are we going to have to find more lithium sources?
Okay. I'll do the first one, Martin, and you can tell the memo about lithium. Look, I think Martin explained quite clearly sort of the role of how we think the world's going to evolve in the battery material space. It is still a fairly nascent market. The OEMs, we believe, are going to get more involved in the decision-making process around the battery materials that go into their batteries themselves. That undoubtedly, as the complexity tightens, as the complexity grows, as the challenges grow, which they are, much like the automotive catalyst side, it started off in the old days relatively easy.
As complexity grows, it gets harder and harder and harder, and you end up with fewer and fewer players. What we said was that our market share today in the lithium iron phosphate market is about 20%. All we're saying is that over the next decade, we think we'll hold it there or thereabouts, which is what could we grow it? Let's wait and see. Keeping it at that level, I think is okay. On the high-energy side, that's the one where we don't have an application today. We don't have a product today. We know we need to, as I think Nick said about the bus, the bus is moving, and we need to jump on the bus quite quickly. We're not there anywhere today.
To get to somewhere, I think it would be quite a good achievement if we can get there in 10 years' time. Therefore, overall market, we're targeting a 10% share, which on a market of over $8 billion, I think would be quite a good result if we can get there. These are markets that need high technology. If those are areas that we can succeed on, we have in the past, there's no reason why we can't in the future as we continue to apply our R&D and focus on making better materials. Lithium. Yeah. I think the simple answer to the question is, is there enough lithium in the world?
Yes, there is enough lithium in the world. In terms of absolute reserves, plenty of reserves for lithium. There are more reserves coming on stream all the time.
The question, I think, is more about the balance of supply and demand. The forecasts will change a bit, but 20-30% a year increase in demand for lithium over the next five years or so. That's the demand for it. The supply is predicted to rise in line with that. More sources coming on stream to match that increase in demand. We know because we've been operating in commodity markets in precious metals for a long time, we know that when you have an increase like that, there are likely to be some short-term supply imbalances. That's how I see the market developing. There's no fundamental shortage. That supply and demand will be matched in the medium term. There may be some short-term spikes when the weather's bad in Chile or whatever. That's how I would see it.
Okay. Still got a question, Andrew?
Yeah. You've got your position in LFP, and it would appear that the Chinese are favoring that at the moment. There's a safety issue surrounding alternative technologies. It looks like you're going to do quite well over the next while on that. Your objective is to develop a capability in businesses that have a poorer safety profile that are banned in China at the moment. I just want to validate their position. What you think of it is just a temporary measure because perhaps their local players haven't caught up in technology, or is this a serious issue and how surmountable that is? Obviously, NMC looks good for cars because you get range and blah, blah, blah. The realities of safety over the politics of saying there's an issue in order to help Chinese.
I just want to test that issue, its validity and the potential in those areas and how relevant safety is over performance and price, etc.
Okay. I think it's a very valid point. The reason why China has LFP is because 5, 10 years ago, EVs in China were terribly unsafe. The reason why they're terribly unsafe, when I was talking about safety, I'm talking about inherent safety of the material. LFP is an inherently very safe material. The Tesla is a safe car. The reason it's a safe car is because at a cell and a system level, it's been engineered to be safe. It's not saying that NMC and NCA are dangerous. It's saying that you need to engineer them correctly to be safe. I think it is very definitely a real concern in China.
It's proven to be a real concern in China because that's why they're in LFP. That's why everything was LFP five years ago because they mandated it because there were concerns over safety. They chose the most inherently safe technology. Will they move? As NMC has started to come in, they've started to have more safety problems because of the less mature control systems and all the engineering around it and the quality of the materials as well. This is a multilevel thing. I think that's an absolutely real thing. This isn't a protectionist measure, I don't think. There are real safety concerns with that material. As the technology improves, then that situation will change, I think. Peter. You've given us several teasers on your move into other cathode chemistries. Can you expand on that in any shape or form?
Timescale, cost, process, route, who, when? Peter, you know the answer to that question, do not you? Do I have to answer it? No. Just out of interest, you said you are a materials supplier to 15 automotive platforms. How many platforms would be supplied on the ECT side? Do you expect to trade off those relationships and therefore help to sustain that 20% market share that you cited for the automotive LFP operations? I am not sure if any of us know how many automotive platforms we are on. Hundreds. Hundreds. Loads. I mean, if you turn around and say, "How many automotive platforms are there?" We are roughly 30% of the world market, we are going to be on roughly 30%, if not more, of the platforms. It is a lot of platforms.
Part of the synergy at the commercial level between ECT and battery technologies is very real and it's very strong. It is more at the car company level. It is not the number of platforms that ECT does. It is the fact that ECT basically supplies everybody, all of the OEMs across the world. Therefore, the Johnson Matthey name is known. They have a direct, tangible relationship with Johnson Matthey as a developer and supplier of advanced technology. That is a great in to go in when we are looking to introduce ourselves as a developer and supplier of advanced technology. I would say it is at an OEM level. It is a very relevant strength. Today, we do have some common shared customers. In the future, we expect there to be more. Absolutely. Any other questions? Oh, Peter's going again.
One more again. Oh, sorry. I can see there's a general feeling about dinner.
Quick one. Having failed on the last one. You're keen to hold on to the technical know-how, for example, on the compositions. But equally, I get the view that people like LG are saying, "We'd like to have the technology for blending the powders, and we just want to buy the base powders." How's that going to split? Who's going to grab that? Go on.
I think that's a facet of what I was trying to explain on this way that the industry is changing. I think as an electronics supply chain, then it's a more linear relationship. A cell company develops a product. It then goes and says, "Look, I've got a product." The electronics companies will take that.
They may hear about it a year or two years in advance when it's still being developed. They'll launch a product because they can base the design on it. In automotive, it's different. We know in automotive, the timescales are longer. This is a regulated market. The automotive companies can't choose what the requirement is. They have to come up with competitive vehicles. They have to come up with them with a certain range or whatever. They are much more involved throughout the supply chain. I think the comment's right for the lithium-ion industry as it currently supplies the electronics industry. I think that model is changing. We're certainly seeing that changing. We're involved. We're invited in to go and talk to OEMs all the time. We're working closely.
We're being directed to work closely with cell companies by OEMs in order to get that collaboration going.
Okay. I'm going to call it a day there on questions. Is that the doofer? I will just, if I can, just say a few words to sum up and finish off the day. Well done for surviving and getting through to the end. I hope you found it a useful session. What did we talk about today? We really started the day talking about our strategy. We've got a robust strategy, very much focusing on the key four major growth drivers and sustainability drivers, which are still strong, and give us real opportunity using high-value technology to grow our business. The focus is for us, as we said last year, and we repeated quite a lot today, it's about chemistry and its applications.
That link between the two is absolutely fundamental to our business. It's no good having a bunch of people in white coats coming up with some great chemistry idea. It's no use to our customer and also then when you get to the manufacturing, if you can't even make it. Lots of opportunities for the company. What we really focused on today was the opportunity in the powertrain. Hopefully, you've understood a little bit more about that. Fundamentally, how that air quality issue is really what's at the heart of the evolution of the powertrain and how it supports growth for JM. Legislation is continuing. We've said for some time, we always worry, you always worry, is that the end of legislation?
I think both Andy and Chris showed you from a light duty and a heavy duty point, pretty much every country or every region has more legislative changes to come in the next decade or so. That is continuing to advance the development of the catalysts for emission control. The internal combustion engine is, we believe, and it is not just us saying this. This is us in discussion with the OEMs, our customers, but also in discussion with external parties. The internal combustion engine, at least for the next decade, will still be the primary source of automotive power, or at least will be on roughly 97%. Okay, we might be wrong with 97, but call it 95-plus. It is going to be a very large, significant component of the overall powertrain. It gives us great opportunities within ECT.
Also, as we showed today, there's more and more electrification, more and more diversification of the powertrain. That's where having a battery technologies business and a clear roadmap is really beneficial for us into the future. You heard a bit about the advantage of JM and the advantage that we have. The chemistry and the applications, the customer focus, that link between the OEMs, as we just were talking about just a second ago, that OEM link between what we do in emission control and also what we can do on the battery material side is hugely important. I just want to go back again to say the issue about the operational efficiency and operational effectiveness is not simple. How you scale up and how you manufacture at scale is a huge issue and something that we're really good at.
We have been driving hard over the last few years, not just driving efficiency on it, but actually that just basic scale-up capability is a huge attribute of the company. Finally, to summarize it all, oh, did not mean to do that. Finally, to summarize it all, we have got a robust strategy. The drivers are good and strong. The evolution of the powertrain will demand further high-technology solutions. The roadmap for our emission control business is very clear. If you look at the growth over the next decade, it is about $5 billion worth of growth in the market. If we are able to capture our fair share, which you have heard about, and we are very, very well established in that market, that gives us good growth opportunities over the next decade in emission control. In battery technologies, we started only three years ago.
I am very pleased with the progress we have made. Martin and Nick and the team have done a great job in getting us at this stage very quickly. I think the opportunities for the future are still strong and give us lots of potential for the medium term to grow this business, predicated on the LFP position that we already have today. I am confident we will succeed in these markets. Therefore, with the success in these markets and the rest of the potential of the group as a whole, I am absolutely confident that we have sustained long-term growth drivers for the group as a whole. That is all I wanted to say for the day. I wanted to finish it off there. I just wanted to say a few words, if I could, just to thank some people. These presentations do not happen easily.
There's an awful lot of work that goes into the background to get these done. Trust me, there's been a lot of work and a lot of late nights to get these done well. Hopefully, it was helpful for you, the shareholder. That's what we've done it for, for you. Use the opportunity to talk to people over dinner for those of you coming to dinner. We'll be around for a little bit longer before we go to dinner. If you've got any other questions, please make the most of those. Thank you, guys, for all your work and effort and what you've done. Also, thank you to Sally and her team for putting it all together. It's, again, a lot of work. Thank you very much to them. Thank you to you for sitting with us for the last four hours.
We said we'd finish at about 5:45, and we're not far off it. 6:30, I think, for drinks for those that are coming just down the road. I think hopefully everybody knows where they're going. Thank you very much. We'll see you in June when we do our full year results. For those of you interested, we'll probably do another one of these in another year's time. Thank you very much.