Business model transformation and decarbonization within the autos sector
A look at business model transformation and decarbonization within the auto manufacturing sector
This interactive was produced independently by Reuters and is sponsored by
Elon Musk’s Tesla Inc is best positioned among global automakers to manage the risk associated with transitioning to a less carbon-intensive business, a Reuters analysis shows. Most other major automakers still have some ways to go to deliver a transition in line with global climate goals.
The analysis of 27 global automakers was compiled in partnership with Constellation Research & Technology, a research firm that provides sector-based performance analytics.
Split into four stages, the analysis takes into account more than 10 metrics, including a company’s willingness to report emission targets, its market share in zero-emission vehicle sales and whether its production plans are aligned with the 2015 Paris Agreement, which aims to limit the rise in average global temperatures to “well below” 2 degrees Celsius above pre-industrial levels. A maturity and momentum score is then assigned to determine an automaker’s progress in decarbonization.
Metrics for maturity and momentum scores
1. Initial engagement
Assesses a company’s transparency in reporting emission impacts and acknowledging climate change as relevant to its business
2. Systematic management
Examines the automaker’s verification of its carbon emissions, its public emission reduction targets, and the emissions intensity of vehicle production
3. Transforming the core
Measures a company’s progress in transforming its business to achieve low-carbon goals. Metrics include governance structures, sales and projections derived from alternative drive vehicles, and emissions performance of its fleet
4. Competitive differentiation
Examines an automaker’s market share and leadership in zero-emission vehicles and if its fleet’s average emissions are aligned with the 2C pathway
The maturity score measures how much an automaker is innovating and if it is showing continuous commitment to decarbonize. The momentum score measures the rate at which maturity is changing over time.
Explore the data
Circles sized according to companies’ total vehicle sales. Higher maturity and momentum scores suggest that the automaker is further along in its business model transformation
Transition leaders within the autos sector
Based on the maturity and momentum model, Tesla — which only produces electric vehicles — is ranked the highest and continues to lead the sector in terms of decarbonization. It has budgeted up to $5 billion for capex for 2019-2020 and recently opened a new vehicle and battery plant in China. While it has a much larger stock market value compared with other legacy automakers on expectations of tremendous growth, the electric carmaker produces only a fraction of the cars of its rivals and questions remain surrounding the company’s durability in the long term.
Tesla and many carmakers are spending billions of dollars in investments to develop and procure batteries and electric vehicles over the next five to 10 years but customer demand for electrified vehicles remains tepid. In North America, the world’s second-largest automobile market, after China, sales for bigger, petroleum-fueled SUVs and trucks continue to increase, as demand for passenger cars declines.
Pure electric cars, trucks and SUVs are expected to account for only about 5% of North American vehicles built by Detroit automakers General Motors Co and Ford Motor Co, in 2026.
The COVID-19 pandemic has also disrupted demand for cars, with automakers including Tesla forced to furlough workers and close factories.
Although GM has said its vehicle electrification plans have not changed, the pandemic is likely to delay investment, development and production plans for electric vehicles at other automakers as they adjust priorities and reallocate capital spending. How the global economy recovers from the crisis and how far governments adopt new EV targets as part of “green stimulus” packages will have a direct impact on how fast automakers accelerate to produce low-emissions vehicles and shift to a low-carbon future.
Projections for global vehicle electrification
Millions of electrified vehicles in China, North America and Western Europe
Automakers in China may not meet the government’s ambitious targets for electrification, but analysts expect that 10% of vehicle production in 2026 will be pure electric and another 5% hybrid gasoline-electric. Ranked second and third according to the Reuters analysis, China’s BYD and BAIC have laid out ambitious plans to further electrify their fleets. BYD is spending $3 billion to quadruple EV battery production capacity in China. It is also increasing investment in its Denza electric vehicle venture with its German partner Daimler.
BAIC plans to end sales of combustion-engine vehicles by 2025 and is jointly investing $1.9 billion with Daimler in EV development, while affiliate BJEV is investing $1.5 billion to produce 500,000 EVs a year through 2022.
Still catching up
While Constellation data shows that Toyota’s public decarbonization targets are only a little bolder than the industry average, its proven capacity to build hybrids may bode well for its EV ambitions, the data suggests. The largest car manufacturer in the world by market capitalization said last year that it is aiming for half its global sales to be from electrified vehicles by 2025. Pure EV sales currently account for only a small fraction of the Japanese automaker’s overall sales.
Volkswagen has announced some of the most aggressive long-term plans to decarbonize its fleet, but the company still has to prove it can build EVs at scale, and has led the field in ramping up sales of mid- and large SUVs, the data shows.
See here for Constellation Research and Technology’s full methodology
Constellation Research & Technology; MarkLines; Refinitiv; AutoForecast Solutions; Reuters reporting
By Reuters Graphics Additional reporting by Matthew Green and Detroit bureau Editing by Matthew Lewis
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