Carbon Emissions: An Unused Marketing Opportunity for Automotive Manufacturers
Cars produce a lot of CO₂, hardly a shocking statement. Collectively they are responsible for around 11% of the world’s total CO₂ emissions¹, which whilst considerable, is understandable when you consider that there are more than one billion cars on the roads globally.
Cars are therefore a key focus of policy makers in the fight against climate change, however, what is not often considered is the amount of energy that is required to manufacture the vehicles in the first place. Shifting consumers to more environmentally friendly cars, initially requires an enormous amount of energy to manufacture the new vehicles.
When you consider the energy needed to manufacture a new electric car, as well as the source of energy for electricity generation, it typically takes several years before replacing your existing petrol/gasoline car with an electric one actually results in a net benefit for the environment. In some countries with a particularly poor energy mix — largely driven by a high reliance on coal — it is arguably better for drivers to simply continue driving their existing car.
Whilst governments worldwide are targeting the 11% of global CO₂ emissions stemming from the 1 billion cars on the roads globally, the additional 2% of global emissions stemming from manufacturing and selling just 80m new passenger cars a year² receives relatively minimal attention let alone consumer criticism.
The manufacturing emissions of the automotive industry are not widely known or publicised, in part due to them being dwarfed by those of more energy intensive industry sectors such as Iron & Steel, Cement and Chemicals & Petrochemicals:
Despite having a similar level of emissions to the aviation industry, which receives a huge amount of environmental criticism, even to determine the CO₂ footprint of the automotive manufacturing industry required a fair bit of digging. It had to be estimated using the emissions data reported in the individual environmental and sustainability reports of the 12 largest automotive manufacturers³, which account for around 80% of the world’s passenger car production. Collectively these companies emit over 500 million tonnes of CO₂ each year, which when averaged across the total number of vehicles produced comes to a figure of 7.4 tonnes per car. Applying that across the 80 million cars manufactured each year, gets us to a total output of 590 million tonnes of CO₂ (2% of the global 33Gt of carbon emissions):
The emissions values above take into what are known as Scope 1, 2 and 3 emissions excluding those that stem from the actual usage of the finished cars. As such they encapsulate not just the direct emissions coming from the manufacturer’s factories, but all indirect emissions as well, such as those stemming from the electricity source used to power the factories, created by the suppliers of the parts that they purchase and even generated by the network of dealerships and all business travel. In essence, all emissions from every activity required to put a car on the road and also dispose of it at the end of its life. Emissions from the usage of the vehicle are not included since the choice to generate those emissions comes from the owner of the vehicle not the manufacturer.
590 million tonnes of carbon is enormous — the amount of carbon sequestered by 770 million acres of forest in a year⁴ — and if governments are going to be serious and consistent about tackling automotive emissions then reductions need to not only be sought in the usage of vehicles but also in their production.
What is most interesting, however, is not the total emissions figure but in the individual figures of each OEM. These highlight considerable differences in relative efficiency, which if they were communicated effectively, could be used as a source of competitive differentiation for the manufacturers and also help guide consumers towards making a more balanced and environmentally considerate decision. For consumers who take into account emissions when selecting a new car, their choice could be completely nullified when you consider the emissions stemming from production. Despite an average of 7.4 tonnes of CO₂ per car produced, this ranges from 1.0 to 13.9 tonnes across the 12 automotive groups analysed.
With average CO₂ emissions from driving of 2.2 and 5.1 tonnes p.a. in Europe and the US respectively, selecting a vehicle from a low-emitting manufacturer could account for 2.5 to 6 years of driving before you even match the emissions of the most polluting manufacturers.
In view of this, perhaps regulators should enforce manufacturers to present this information to potential customers to allow them to make an informed decision, and also to encourage lower impact production methods. Alongside the mandatory WLTP fuel efficiency and emissions figures in the brochure related to driving the vehicle, could sit an additional metric — CO₂ from manufacturing this vehicle. Additionally, using a standardised vehicle lifetime mileage figure, you could present the consumer with a total lifetime CO₂ emissions value for the vehicle that is directly comparable to other vehicles. A 40% lower g/km figure of one vehicle is largely meaningless if the emissions from manufacturing were 13 times larger than the alternative.
Getting regulators to enact changes, however, is rarely a quick thing. It could stand as a prude move by Hyundai-Kia and Suzuki, given their far lower level of emissions, to start advertising it freely and leverage it as a source of competitive advantage. With the competitive landscape for mainstream electric vehicles becoming increasingly challenging as all major manufacturers are beginning to roll out electric vehicles, further emphasising the firm’s vehicles for being even more environmentally friendly than another manufacturer’s EVs seems a logical move to make. Especially when you consider that surveys, across North America, Europe and China, continually suggest that the environmental benefit generated by electric cars is one of the main purchase drivers for consumers alongside lower running costs⁵.
Hyundai-Kia and Suzuki’s advantage is likely to remain for some time. Reorganising an entire supply chain and production methodologies to be less carbon intensive, particularly amongst your supplier base, is something that takes a long time to achieve. Many marketing campaigns within the automotive sector last only as long as a model is in production, or until it is bettered by a competitor. A leading environmental footprint could be leveraged to establish a new lifelong brand identity for being the most environmentally friendly automotive company.
Volvo has long leveraged its lifelong position as a leader in vehicle safety and is nearing its self imposed deadline of achieving zero fatalities in its new vehicles by 2020. Could this be the opportunity for Hyundai-Kia, Suzuki or perhaps a more ambitious manufacturer to establish itself as the environmentally friendly car company and set the first target of achieving zero carbon emissions from both manufacturing and use of its vehicles?
