Failure to meet emissions targets could see the world’s largest automotive companies hit with financial penalties of up to €940m (£830m), with firms now being urged to rapidly address environmental regulation.
A new report by CDP reveals that the zero-emission and plug-in hybrid vehicle market will be worth a potential $1trn by 2030, and that traditional automobile companies have responded with increased investment in innovation.
However, it highlights how, in the EU alone, emissions must be reduced by a fifth over the next five years, and that some firms will have to increase their share of sales from electric vehicles (EVs) to 20% as a result.
“The auto sector is the poster child for the future of industry as we know it,” CDP CEO, Paul Simpson, said. “Auto manufacturers should quickly adopt new business models to ensure their survival in the low-carbon transition.”
The research involved analysing 16 of the world’s largest publicly listed automotive companies, with a total market capitalisation of $790bn.
These firms have invested more than $11bn in autonomous and shared vehicle companies since 2015, and have set a huge number of aggressive electric vehicle targets in the last year.
Despite this, over one-fifth of automotive company profits are expected to shift to tech suppliers and ride-sharing services such as Uber and Google by 2030.
“Tech and software disrupters have forced this high-emitting industry to innovate at a pace faster than it perhaps feels comfortable with,” Simpson continued.
“It is promising to see traditional carmakers step up to the mark to meet global shifts in demand for EVs – only time will tell if new market entrants such as Uber and Google will alter consumer demands in the long-term.”
The CDP report assesses companies across three key areas aligned with the recommendations from Mark Carney’s Task Force on Climate-related Financial Disclosures.
BMW, Daimler and Toyota were found to be the best performing companies on climate-related metrics, while Subaru, FCA and Suzuki rank the lowest.
The report warns that investors will increasingly expect auto companies to disclose how they are adjusting their business models to manage transition risks, while also generating revenue from transition to a low-carbon economy.
“Traditional carmakers may see these challenges as threats to existing business models,” CDP senior analyst, Luke Fletcher, said. “To be successful they must embrace the new opportunities and markets that will become available over the coming years."
