Earlier this month, our chair and co-founder James Bidwell took part in a panel discussion at the RAC Club looking at how renewable energy will in the future be powering the world. The discussion focused on the urgency of the challenge, and how collaboration between business, government, NGOs, and consumers will be critical in making this happen.
The automotive industry itself is undergoing huge disruption through the phasing out of fossil fuels. Surface transport creates more emissions than any other sector in the UK, producing over a quarter of all greenhouse gas emissions in 2019, with most of these emissions – approximately 55.4% – generated by the burning of petrol and diesel for passenger cars. As such, there is a huge impetus to decarbonise the automotive industry.
The urgency is clear, consumers are switching
Last week, the government released its long-awaited Net Zero Strategy, which indicates a direction of travel towards decarbonising the transport sector, as part of the government’s wider commitments to decarbonise industry and deliver net-zero emissions by 2050. From 2030, a ban will be placed on the sale of new petrol and diesel cars, and from 2035, all new cars and vans must be zero-emission at the tailpipe. Alongside this, there is new investment promised to support the transition to electric vehicles, a further £620 million to fund ownership grants and deploy charging infrastructure.
Across the transport sector, there are broader targets to be delivered. Many of these have been outlined in the Transport Decarbonisation Plan, published in July of this year, in which the government announced its plan to decarbonise the entire transport system in the UK and pledged to invest £432m into removing the emissions of road vehicles.
There is also strong public support for decarbonising the sector. Today’s consumers are increasingly reaching into their pockets to demand change and assessing brand value through the lens of purpose, values, and a commitment to sustainability. Indeed, proof of this can be found in the rapid uptake of electric car sales, which represented just over 10% of all cars sold in 2020, a leap from 2.5% in 2018. What’s more, last month UK electric car sales neared the figures for the entirety of 2019, with around 33,000 EVs registered in just one month, reflecting not only a growing consumer appetite to switch to cleaner technologies but also the expanding range of models now on the market.
Timescales are tough
However, decarbonising the transport sector represents a huge task, never attempted before on such an accelerated timescale. In its 2021 Progress Report to Parliament, the Climate Change Committee highlighted the urgent need for electric vehicle uptake, alongside the widespread deployment of supporting infrastructure, which it says must happen within the next decade if the UK is to meet its climate mitigation goals.
The lack of electric vehicle infrastructure to support rising consumer demand currently represents the biggest challenge to decarbonising the sector. Expanding electric vehicle ownership will depend to a large degree on the availability of charging points and a skilled workforce to support the costs and practicalities of ownership.
Whilst government investment will be key to deploying electric vehicle infrastructure, the scaling up of low-carbon technologies across the transport sector will ultimately require collaboration between industry, government, and local authorities, to ensure that infrastructure rollout aligns with consumer demand. The operating models of automotive firms have historically been honed around a very lean, just in time, manufacturing process, with the internal combustion engine at its core. As such, wholesale business transformation across the automotive industry will be critical to decarbonising the transport sector.
Most business leaders understand this but perhaps don’t know where to start in transforming their manufacturing processes and overcoming obstacles in infrastructure availability. Is it possible to decarbonise the transport sector and how can existing organisations accelerate the transition within their own organisations?
Clarity on purpose, fuelled by sustainability, is the way forward
In our view, decarbonising the industry can only be achieved if automotive organisations commit to a wholesale transformation of purpose and operating models, with sustainability at the heart of strategic intent.
This is no longer a question of quick fixes in isolation, for instance, changing from one fuel to another, but rather a fundamental shift in focus to deliver the solutions consumers will want in the future. In the case of the automotive industry, there is a clear direction of travel towards electric vehicle ownership, as demonstrated by the sharp growth in electric vehicle sales, which represented just 2% of global car sales in 2016, a number that is projected to rise to at least 40% by 2030 and almost 100% by 2040. This works in tandem with the ever-expanding scope of options available to consumers, with almost every mainstream car manufacturer now offering an electric, or at the very least hybrid, vehicle.
Indeed, today’s industry leaders are those innovating to commit to the task at hand, with electric vehicle and cleantech company Tesla currently leading the charge as the bestselling car in the UK. Following suit, Rolls-Royce recently promised to sell only electric vehicles by 2030 and Ford is now set to invest 11.4 billion dollars towards its own EV transition.
Although businesses are making the transition to electric vehicles within their own organisations, supporting infrastructure remains insufficient. This is largely due to the lack of coordination between industry players, with individual brands each supplying their own electric vehicle infrastructure systems, resulting in a fragmented and somewhat clumsy execution. Whilst the UK government’s pledge to invest £620 million in electric vehicle infrastructure is certainly promising, what is truly needed is a collaborative approach between business and government, in order to standardise infrastructure and boost a nationwide rollout.
If there is one thing that the pandemic has taught us, it is to expect the unexpected. Last month, we were reminded of this once again when fuel shortages sparked chaos at the petrol pumps and brought to the fore the reality of our current dependence on fossil fuels. With COP26 on the horizon, the climate agenda is set to take centre stage in Glasgow and beyond. There is no doubt that the aftermath of COP26 will be felt by organisations across sectors, starting with the highest emitters.
As the road to net-zero takes shape, automotive organisations have everything to gain by acting in anticipation of disruption, rather than waiting for it to disrupt them. The transition from the internal combustion engine (ICE) to cleaner energy sources will only be achieved if automotive organisations place sustainability at the heart of their corporate strategies.
