ESG Factors Driving the Growth of Electric Passenger Cars Industry

Sustainability for mobility has prompted electric passenger cars industry players to prioritize environmental, social and governance (ESG) goals. Heightened demand for decarbonization and the need to bring sustainability perspectives into management have encouraged incumbent companies to foster their ESG strategies. Climate change response has become global, suggesting an emphasis on the environment throughout the value chain, including design, manufacturing, procurement, logistics and disposal. 

Premium automotive brands have shifted their attention toward sustainability to improve customer trust, boost compliance, enhance investor confidence and bolster brand reputation. A transition towards electric brands comes against the backdrop of soaring inflation, supply chain disruption and higher interest rates. In an unexpected turn of events, the exorbitant price of lithium propelled production costs for EVs; Russia’s Ukraine invasion and surging energy prices have had an overarching influence on the global economy. 

AB Volvo Redefines Scope 3 Emissions for Consumer-Driven Culture

Although 2022 was a year full of challenges for automakers, 2023 has promised to provide compelling opportunities to navigate ESG strategies. Predominantly, AB Volvo has taken a giant stride to combat climate change—contemplating minimizing scope 1 & scope 2 emissions by 50% by 2030. The Swedish multinational company aims to cut scope 3 emissions by 40% per vehicle Km from trucks and buses, respectively, and 30% from construction equipment by 2030. The automotive giant has upped its efforts to do away with conventional energy sources and adopt renewable sources. During 2022, there was a 32% reduction in tailpipe emissions per average vehicle (vis-à-vis 2018 baseline). The company is gearing up to develop renewable electricity for vehicle charging, alluding strong demand for bio-based materials. 

Is your business one of participants to the Electric Passenger Cars Industry? Contact us for focused consultation around ESG Investing, and help you build sustainable business practices

Toyota Prioritizes Social Sustainability

Workplace safety, reduction in accidents and diversity are shaping the future of transportation as automakers inject funds into state-of-the-art products and services. With the demand for personal vehicles soaring, sustainable development has become invaluable to creating a prosperous society. To illustrate, Toyota Australia has powered 7,883 solar panels to its Altona Toyota Parts Centre, which produces 2.5MW. In FY 2022, the auto giant incentivized Toyota and Lexus customers to recycle 1,954 hybrid batteries to foster battery recycling. The automotive brand donated USD 3.4 million to community partners working in sustainability, education, traffic safety, social justice and the environment. Moreover, Toyota Kirloskar Motor, a Joint Venture between Toyota and Kirloskar, trained around 43,673 supplier members to boost environment and social performance. 

Mercedes-Benz Ups Governance Stewardship

Decision-making bodies have exhibited concerted efforts toward transparency, ethics & compliance, robust corporate governance and board diversity to bolster their ESG performance. In 2021, Mercedes-Benz made a resource conservation policy to minimize the energy consumption per vehicle for cars by 43% and 25% for Vans by 2030. The Luxury vehicle company has introduced supply chain policies to allow purchasers to track material data with the help of blockchain technology. The automotive brand has propelled its diversity and equity portfolio to keep up with the Sustainable Development Goals, including gender equality and reduced inequalities. As of December 2021, Mercedes-Benz had 22.5% of women in senior management positions, while the Board of Management had 3 women and 5 men. 

The competitive scenario indicates that forward-looking companies could focus on organic and inorganic strategies to expand their global footprint. In doing so, well-established players will likely invest in technological advancements, innovations, product offerings, collaborations, R&D activities and mergers & acquisitions. The electric passenger cars market size stood at USD 120.81 billion in 2020 and will witness a healthy CAGR of 32.5% between 2021 and 2028. The outlook suggests that the sustainability and success of automakers could depend upon sound corporate governance, bullish environmental targets and social sustainability. 

About Astra – ESG Solutions by Grand View Research

Astra is the Environmental, Social, and Governance (ESG) arm of Grand View Research Inc. - a global market research publishing & management consulting firm.

Astra offers comprehensive ESG thematic assessment & scores across diverse impact & socially responsible investment topics, including both public and private companies along with intuitive dashboards. Our ESG solutions are powered by robust fundamental & alternative information. Astra specializes in consulting services that equip corporates and the investment community with the in-depth ESG research and actionable insight they need to support their bottom lines and their values. We have supported our clients across diverse ESG consulting projects & advisory services, including climate strategies & assessment, ESG benchmarking, stakeholder engagement programs, active ownership, developing ESG investment strategies, ESG data services, build corporate sustainability reports. Astra team includes a pool of industry experts and ESG enthusiasts who possess extensive end-end ESG research and consulting experience at a global level.

For more ESG Thematic reports, please visit Astra ESG Solutions, powered by Grand View Research

Significance of ESG to Stay Ahead of the Game in Electric Passenger Cars Industry

 A notable surge in the adoption of electric mobility, underpinned by developments in autonomous and driver-assistance systems (ADAS), mobility sharing and digitization has fostered the electric passenger cars industry size. The need for decarbonization and uptake in climate-specific funds have boded well for stakeholders promoting ESG goals. With motor vehicles being one of the principal contributors to GHG emissions, automakers are likely to prioritize environmental, social and governance pillars. Moreover, soaring demand for personal vehicles across emerging economies and the need for product safety will remain invaluable to bolster the sustainability quotient. 

Electric Passenger Cars Industry ESG

Stakeholders, such as governments, consumers and investors, are encouraging OEMs to become carbon-free and propel ESG metrics. For instance, investors expect companies to emphasize ESG aspects, with consumers exhibiting traction toward the brand that values ethical and sustainable value chain. Industry leaders are likely to prioritize ESG to simplify compliance, enhance customer trust, foster investor confidence and propel brand reputation. Companies are likely to adopt United Nations Sustainable Development Goals, greenhouse gas protocol, International Labor Organization (ILO), Sustainability Accounting Standards Board (SASB), United Nations Global Compact (UNGC) and International Organization for Standardization (ISO). 

Bullish demand for minerals, including aluminum, copper, lithium, cobalt and nickel poses major concerns. High emissions and waste and water pollution from mineral extraction and processing could subside the social and environmental upsides of EVs. Stakeholders are slated to focus on fostering eco-friendly manufacturing and propelling sustainability. For instance, SQM, one of the largest producers of lithium in the world, contemplates boosting capacity two-fold by 2025. It is geared to minimize water usage by 50% and become carbon neutral by 2030. 

Environmental Perspective

Government regulations have put pressure on automakers to enhance fuel efficiency amidst emissions stemming from vehicle usage instead of the process of manufacturing vehicles. Climate change regulations have compelled auto companies to bolster fuel efficiency. To illustrate, Toyota aims 30% reduction of global average CO2 emissions by 2025. The company also rolled out Green Purchasing Guidelines to emphasize purchasing low-environmental-footprint parts and equipment. As minimizing carbon emissions has become business-imperative, companies are expected to report Scope 1, 2—mandatory to report— Scope 3—voluntary—to gain a sustainable competitive edge. General Motor Company aims 72% reduction of Scope 1 and 2 emissions by 2035. Besides, MMC uses Total Quality Management tools, such as Plan-Do-Check-Act (PDCA), to monitor the progress of its goals. 

Regulators, Investors and stakeholders have exhibited an increased inclination for stringent emission standards as an emphasis on the environmental consequences of their business activities could augur well for society. In September 2022, General Motors Co announced its support for forming rigorous federal emissions standards to help ensure that at least 50% of new vehicles sold would be zero-emission by 2030. The company has an audacious goal of doing away with tailpipe emissions from new light-duty vehicles by 2035. In a bid to expedite its shift to an all-electric future, GM plans to manufacture over one million units of EV capacity in North America and China by 2025.

Social Perspective

An uptick in the number of car accidents has posed challenges to automakers to propel product safety for brand value and reputation. Toyota Motor Corporation is at the top with a social disclosure score of 67%. The company has adopted Zero Casualties from Traffic Accidents goal and is offering support to drivers to eliminate traffic fatalities. The automotive giant has ramped up investments in autonomous vehicles with an infusion of USD 500 million in autonomous ridesharing and Uber. Amidst a surge in demand for passenger vehicles, Toyota has introduced programs that can augment the useful life of its models and reuse/recycle end-of-life vehicles. 

Auto companies are poised to prioritize a decent work environment and economic growth as a vast supply chain exposes companies to the risk of human rights violations. For instance, in April 2022, General Motors asked suppliers to ink a new ESG Partnership Pledge to commit to human rights, climate and sustainable procurement. The automotive behemoth vies for a certain score by 2025 for issues including diversity and non-discrimination, employee health and safety, and child and forced labor, among others. Meanwhile, MMC witnessed the highest employee turnover—around 3.33%—in the fiscal year 2020. Companies are likely to focus on measures to prevent modern slavery and protect the human rights of foreign workers. Toyota annually issues a statement on “Toyota’s action taken for Forced Labor of Migrant Workers (Statement on the Modern Slavery Acts)” within its report to foster awareness of forced labor at production sites in Japan and across the world.

Is your business one of participants of the Global Electric Passenger Cars Industry? Contact us for focused consultation around ESG Investing, and help you build sustainable business practices.

Governance Perspective

Industry partners and other stakeholders prioritize transparency and sustainability reports to analyze and propel, including but not limited to gender diversity, directors’ roles and equity. Stakeholders have reinforced the significance of independent directors in enhancing governance and sustainability portfolios. Needless to say, independent directors act as a watchdog to oversee the operation and functioning of the senior management from a neutral perspective. Notably, GM has 12 independent directors out of 13. Moreover, 54% of its directors are women, with 67% of board committees chaired by women. The company asserted the Audit Committee would review and oversee the Sustainability Report from 2022.

Ford Motor Company and GM have a governance score of more than 70%. The former has a bullish cybersecurity program, while the latter and MMC have a cybersecurity committee. Ford has been complying with global cybersecurity standards for automakers and has adopted the Automotive Consumer Protection Principles. VW has augmented its ESG portfolio following the diesel-engine scandal wherein pervasive cheating was done on emissions tests. Volkswagen Group has underscored its efforts on transparency in the procurement of battery raw materials. For instance, in September 2020, VW joined forces with RCS Global to emphasize auditing suppliers for conformance with safe working conditions, human rights and environmental protection. 

The competitive landscape alludes to the infusion of funds into organic and inorganic strategies to foster their sustainability profiles. To illustrate, in April 2022, Mercedes-Benz announced it would cut CO2 emissions by half per passenger car over the lifecycle by the decade-end. It aims for around 50% share of BEVs and plug-in hybrids by 2025. With EVs being an essential part of sustainable transportation, stakeholders expect robust growth. The electric passenger cars market size garnered USD 120.81 billion in 2020 and is expected to depict a 32.5% CAGR from 2021 to 2028. The future of passenger vehicles could be electric and prompt stakeholders to underpin their ESG goals.

About Astra – ESG Solutions By Grand View Research

Astra is the Environmental, Social, and Governance (ESG) arm of Grand View Research Inc. - a global market research publishing & management consulting firm.

Astra offers comprehensive ESG thematic assessment & scores across diverse impact & socially responsible investment topics, including both public and private companies along with intuitive dashboards. Our ESG solutions are powered by robust fundamental & alternative information. Astra specializes in consulting services that equip corporates and the investment community with the in-depth ESG research and actionable insight they need to support their bottom lines and their values. We have supported our clients across diverse ESG consulting projects & advisory services, including climate strategies & assessment, ESG benchmarking, stakeholder engagement programs, active ownership, developing ESG investment strategies, ESG data services, build corporate sustainability reports. Astra team includes a pool of industry experts and ESG enthusiasts who possess extensive end-end ESG research and consulting experience at a global level.

For more ESG Thematic reports, please visit Astra ESG Solutions, powered by Grand View Research