Business Update

Press Release

August 6 2012

“Progress in all areas” investors told at business update.

£2.5 million from Allison Transmission strengthens customer commitment.

£600,000 licence payment received from Tata Motors for two new application areas.

A £2.5 million advance licence payment from Allison Transmission Inc. led a package of business news presented to investors at Torotrak’s (LSE: TRK) Annual General Meeting. Commercial and Finance Director Jeremy Deering said that Allison had now paid a cumulative £17.7 million in pre-production licence fees over the last forty months, showing its strong confidence in Torotrak’s fuel saving technologies.

“Last year we told investors that Torotrak was progressing from the innovation phase into the commercialisation phase, with significant restructuring to optimise our ability to focus resources on supporting our customers,” Deering told investors. “This strategy is paying off, with our ability to generate substantial pre production licence revenues and a growing list of licensees and partners helping to progress Torotrak commercialisation programmes.”

Torotrak is the leading global developer of gearless traction drives, a scalable technology that allows very precise mechanical control of speed and torque. The company focuses on the automotive and commercial vehicles industries, where tightening global emissions regulations place a premium on green technologies, and is developing applications in four areas that it believes offer strong opportunities. At the meeting, positive news was presented in each sector.

Main drive transmissions for heavy duty commercial vehicles.

Allison Transmission brings forward £2.5 million payment. Latest test results reveal additional potential in this market.

Allison Transmission’s production-intent programme will receive additional development resources from Torotrak following the US transmission specialist’s payment of £2.5 million.

This is an advance payment against its 2013, £10.6 million option to secure final exclusive rights to main drive transmission applications in heavy duty commercial vehicles and includes £1.25 million for Torotrak specialist engineering support. The new funding will be used to enhance the design and analysis programme currently led from Allison’s headquarters in Indianapolis. Torotrak has already conducted more than 25,000 hours of testing specifically for Allison in the last twelve months.

“This payment highlights the close and constructive working relationship that we have with Allison, as well as the company’s confidence in our progress towards full commercialisation,” commented Torotrak’s product director for commercial vehicle main drive transmissions, Steve Murray.

Torotrak also reported that it has completed a substantial test programme with a major European truck and bus manufacturer that also holds a licence for heavy duty applications. “A new investigation of performance in typical long-haul applications has delivered some very positive results,” said Murray. “We’ve previously shown that fuel economy gains in city buses and distribution trucks of around 20% are achievable. Now we can also report that meaningful fuel economy gains have been delivered in European long haul truck cycles. This means that we have a broader market for our technology, which is an exciting new development”.

M-KERS Heavy Duty – affordable mechanical hybrids for bus and truck

Successful in-vehicle testing continues progress towards fleet trials with a major bus manufacturer.

A preliminary development programme with Ricardo, Allison and major bus manufacturer Optare has confirmed that a Mechanical Kinetic Energy Recovery System (M-KERS), using a flywheel controlled by Torotrak’s variable drive, can deliver attractive fuel economy and emissions benefits. Testing with first-stage prototypes has allowed the development of a full system specification suitable for fleet trials, which the engineering team’s mathematical models predict will deliver a fuel saving of up to 20 percent for urban buses and trucks. The Torotrak-equipped M-KERS is expected to cost around one fifth the price of comparable battery and supercapacitor hybrid systems and to be significantly lighter allowing additional passengers or cargo.

“The results from this first-stage prototype investigation have created enough interest from potential customers for us to take the lead with the development of a production-representative system that can be evaluated in fleet trials,” said Torotrak’s CEO, Dick Elsy. “We hope to have the system ready in a little over 12 months. This is looking like a commercially very attractive system that offers operators substantial fuel savings without the cost, weight and other issues associated with battery-based technologies.”

M-KERS Automotive – affordable mechanical hybrids for passenger cars and LCVs

Volvo selects Torotrak technology for M-KERS programme.

Tata invests to secure Torotrak M-KERS technology.

Following the positive results generated by the FHSPV (Flywheel Hybrid Systems for Performance Vehicles) programme with partners that include Flybrid Automotive, Jaguar, Prodrive and Ford, Torotrak technology was selected for a passenger car M-KERS research programme with Volvo. This programme has progressed well this year, moving to prototype vehicles trials.

In a separate confirmation of the system’s potential, Torotrak has secured an additional £600,000 payment from Tata Motors to extend its licence to secure options on M-KERS (in heavy duty and passenger cars) and on V-Charge. “The relationship with Tata is re-energised across a range of potential applications,” Deering told investors. “V-Charge and M-KERS in particular could provide substantial benefits for Tata’s target applications and we very much hope to be able to move from evaluation to development in at least one of those areas”.

V-Charge variable forced-induction system for downsized engines

Major milestone passed as development vehicle validates performance predictions. Industry leaders confirm commercial potential.

Torotrak has integrated its patented compact variable drive technology with a proven, lightweight supercharger to create a new type of forced induction system that eliminates many of the compromises associated with today’s systems. V-Charge can boost torque from zero to 95 percent in less than 400 ms at any engine speed – around one third the time required by the latest generation of heavily-downsized small turbocharged engines in the critical low-speed range where poor response is noticed by drivers. Independent testing on a demonstration vehicle has confirmed the performance of the system and its commercial potential.

“These results show that V-Charge currently provides a unique and cost-effective route to affordable downsized engines that combine low CO2 with the driveability of a larger, naturally-aspirated engine,” says Torotrak’s product director for V-Charge, Andrew de Freitas. “Several major vehicle manufacturers have recently driven the demonstrator and confirmed that the performance, pricing and low noise relative to other solutions are all at levels that make V-Charge attractive for future model programmes. This has given us the confidence needed to begin discussions with potential supply partners to facilitate the next stage of development.

The relationship with Tata now also covers V-Charge, following the additional £600,000 payment to extend its licence.

Strengthening customer developments

New first tier partnerships help accelerate commercialisation.

In May 2012, Torotrak signed a co-operation and non-exclusive licence agreement with Univance Corporation, a leading Japanese manufacturer of high-quality transmissions and components. The deal follows almost two years of shared-cost research. “This is a major step forward in our ability to support our customers as they progress towards production,” explains Deering. “Univance has committed substantial investment so that we can provide high-quality, Torotrak-branded components for development programmes and low volume production. This relationship is a perfect complement to our in-house design, test and integration expertise.”

Torotrak has also strengthened its mathematical modelling capability, dramatically reducing the time required for initial concept evaluation from six weeks to just three days. Modelling has recently been carried out with a major manufacturer of off-highway vehicles to explore the many additional benefits that the Torotrak technology brings to this sector.

Other new relationships are focussed on the smaller drives currently used for automotive M-KERS and for V-Charge. “Our specialist partners are helping us ensure cost-competitive performance without compromising durability,” explains Deering. “We are looking in particular at traction fluids and the manufacture of the disks and rollers. Having validated solutions supported by independent specialist suppliers will accelerate commercialisation and give our customers confidence that they can progress quickly and easily towards cost-competitive production.”

About Torotrak

Torotrak (LSE: TRK) is the leading global developer of gearless traction drive technologies, focussing on applications that increase efficiency and reduce CO2 emissions in vehicles. These include the V-Charge variable-drive supercharger, engine auxiliary drives, IVT and CVT main drive transmissions and a variable speed transmission that enables efficient energy recovery using a mechanically-driven flywheel (M-KERS). The company’s engineering team works with proven, global tier one technology partners to provide a validated route from prototypes to production. Customers include major vehicle manufacturers and their suppliers in the light duty, heavy duty and off-highway sectors.