SUSTAINABILITY TRENDS AND THE AUTOMOTIVE INDUSTRY: TRUCKIFICATION AND ELECTRIFICATION - How did the world's major automakers compare on climate ...
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SUSTAINABILITY TRENDS AND THE AUTOMOTIVE INDUSTRY: TRUCKIFICATION AND ELECTRIFICATION How did the world’s major automakers compare on climate impact management over the past decade? September 2020
Contents Background...........................................................................3 Climate risk analysis model������������������������������������������ 5 Stage 1: Initial engagement on climate change impact������������������������������������������������������������������ 9 Stage 2: Building the capacity for systematic management of climate change impacts��������������� 10 Stage 3: Transforming the core����������������������������������12 Stage 4: Competitive differentiation on decarbonization��������������������������������������������������������21 Integrating the stages to reveal maturity and momentum �������������������������������������������������������������22 Refinitiv ESG and climate change impact maturity scores ��������������������������������������������������������������24
Background
With the truckification story as the backdrop, we now turn
to a broader analysis of how the major global automakers
are positioned to decarbonize their fleets during this
decade. This transformation will be more challenging.
Greater technical and financial risks will need to be taken
and even greater rewards for leaders will accrue to those
automakers that come out on top.
We take a comprehensive look at the climate impact
management performance of the major automakers over
the previous decade.
3/25
Background
What’s needed to compare company climate change
impact management capability
The approach must include change over time in
1 company goals and intent, as well as execution on the
central ESG challenge – in this case decarbonization.
The data must be granular, fact-based and
2
product-level because in the automobile sector the most
material climate impacts (and potential improvements)
result from product use and product innovations.
The analysis must be forward-looking that takes past
3 performance, rate of change and future commitments
into a comprehensive assessment.
4/25
Climate Risk Analysis Model
Climate risk analysis FIGURE 14
CONSTELLATION’S MATURITY AND MOMENTUM MODEL INTEGRATES BOTH ESG
model Figure 14
AND GRANULAR PRODUCT, PROCESS AND ASSET-LEVEL DATA
Stage 4:
Constellation’s Maturity and Momentum Model COMPETITIVE DIFFERENTIATION
• 2°C Pathway Alignment to 2030
Constellation’s Maturity and Momentum (M2) Model is • Market Share & Sales Leadership in ZEVs & PHVs
Sales, Operational, TRANSFORMATION
• Up-to-date
built around the concept of a maturity curve analysis. and Production • Granular product level
Constellation founders Lubin and Esty argued that Forecast Data •
•
Forward-looking
Relied on by regulators
companies face a sustainability imperative similar to Stage 3:
the quality, digitalization and globalization imperatives TRANSFORMING THE CORE
• Emission Performance of the Fleet
in previous decades. Adapting to and exploiting such
+
• Company Projections of Alternative Drive Vehicle Sales
SCOPE OF VISION
megatrends require companies to build new capabilities • Current Percentage of Sales from Alternative Drive Vehicles
• Company Governance Structures to Decarbonize
that enable competitive differentiation and ultimately
competitive advantage if they are to prosper in a Stage 2:
changing landscape. Toyota did it with quality, Walmart SYSTEMATIC MANAGEMENT
• Energy Intensity of Vehicle Production
with globalization, Amazon with digitalization. They each • Public Emission Reduction Targets TRANSPARENCY
• Verification of Emissions Impacts • Accessible historical data
climbed the learning curve by combining vision and Refinitiv ESG • Traceable data
execution. • Disclosure levels
Stage 1:
Maturity curve analysis is a widely used technique for
INITIAL ENGAGEMENT
assessing corporate capability development in areas such • Reporting Emissions Impacts
• Reporting Policy on Emissions or Climate Change
as information technology, quality, supply chain, human
resources, and other management disciplines. We have
adopted the approach and have developed a four-stage CAPACITY TO EXECUTE
model that can be used to plot change over time on key
sustainability themes. Moving up the decarbonization Constellation’s four-stage model represents the typical pathway firms follow as they expand the scope of vision
maturity curve has become imperative for the auto sector. and capacity to execute a decarbonization strategy. Not all firms seek leadership on decarbonization. Some will
Therefore, it is essential to understand how organizations take a more defensive wait-and-see position. A firm’s position on the maturity curve and its rate of change provide
are responding to the challenge. a good indication of transition risks and opportunities in the emerging decarbonized market.
5/25The automobile
Climate Risk Analysis
sectorModel
transformation
FIGURE 15
STAGES 1 AND 2 OF CONSTELLATION’S MATURITY CURVE MODEL FOCUS
ON ENGAGEMENT AND TRANSPARENCY
Stage 4:
Stages 1 and 2 of the model reflect a firm’s initial engagement and
COMPETITIVE DIFFERENTIATION
systematic management of climate impacts, assessing the level of • 2°C Pathway Alignment to 2030
• Market Share & Sales Leadership in ZEVs & PHVs
commitment, transparency and external reporting on these factors. Sales, Operational,
Refinitiv’s ESG key performance indicators (KPIs) and relevant data and Production
Forecast Data
points provide the information necessary to define if and when the
Stage 3:
transparency milestones in Stages 1 and 2 were disclosed by each TRANSFORMING THE CORE
of the automakers, with the data tracked and updated annually. • Emission Performance of the Fleet
+
• Company Projections of Alternative Drive Vehicle Sales
SCOPE OF VISION
• Current Percentage of Sales from Alternative Drive Vehicles
• Company Governance Structures to Decarbonize
Intensity
Stage 2:
SYSTEMATIC MANAGEMENT • Estimated CO2 equivalents
emission total
• Energy intensity of Vehicle Production
• CO2 equivalent emission
• Public Emission Reduction Targets indirect, scope 3
• Verification of Emissions Impacts
• CO2 equivalent emission
Refinitiv ESG indirect, scope 2
Refinitiv ESG • CO2 equivalent emission
direct, scope 1
Stage 1: • Target emissions
INITIAL ENGAGEMENT • Policy emissions
• Reporting Emissions Impacts
• Reporting Policy on Emissions or Climate Change
CAPACITY TO EXECUTE
6/25The automobile
Climate Risk Analysis
sectorModel
transformation
Historical climate data is easily extracted from Eikon,
building the base for Constellation’s M2 Model
FIGURE
Figure 1616
EXTRACTION OF CLIMATE DATA FROM EIKON
Refinitiv ESG’s climate metrics
Source: Refinitiv Eikon, June 2020
7/25The automobile
Climate Risk Analysis
sectorModel
transformation
FIGURE 17
STAGES 3 AND 4 OF CONSTELLATION’S MATURITY CURVE MODEL FOR THE AUTO SECTOR
FOCUS ON THE MANAGEMENT OF TRANSITION RISKS AND OPPORTUNITIES
Stages 3 and 4 of the Constellation M2 Model focus
Figure 17
on granular sales and operational data on the current
Stage 4:
and planned fleet of cars and light-duty vehicles in the
COMPETITIVE DIFFERENTIATION
• 2°C Pathway Alignment to 2030 automobile sector and the emissions they produce – the
• Market Share & Sales Leadership in ZEVs & PHVs
Sales, Operational, • MarkLines source of nearly 90% of total greenhouse gas (GHG)
• Transition Pathway Initiative
and Production • Urgentem emissions impacts in the automobile sector.
Forecast Data • Constellation
Stage 3: Current and historical data reflecting the scope of product
TRANSFORMING THE CORE transformation, alignment with the 2°C Pathway, and
• Emission Performance of the Fleet leadership in ultra-low and zero-emission production and
+
• Company Projections of Alternative Drive Vehicle Sales
sales are captured for each of the automobile majors.
SCOPE OF VISION
• Current Percentage of Sales from Alternative Drive Vehicles
• Company Governance Structures to Decarbonize
In this way, we can assess both current firm-level maturity
Stage 2: and momentum in transitioning to a decarbonized
SYSTEMATIC MANAGEMENT fleet, and each firm’s exposure to transition risk and
• Energy Intensity of Vehicle Production
• Public Emission Reduction Targets opportunity. The M2 Model was designed to assess
• Verification of Emissions Impacts
Refinitiv ESG
how incumbents in a sector - in this case, the major ICE
Refinitiv ESG automobile manufacturers - progress over time to take
Stage 1: their large-scale operations on the innovation pathway
INITIAL ENGAGEMENT to decarbonization. In the analysis, we include the sector
• Reporting Emissions Impacts
• Reporting Policy on Emissions or Climate Change
disruptors, such as Tesla, BYD and BAIC, which already
demonstrate product innovation but must now progress on
their journey to scale up production.
CAPACITY TO EXECUTE
8/25Climate Risk Analysis Model - Stage 1
Stage 1 of the
FIGURE 18
THE FIRST STEP ON THE JOURNEY
transition journey:
Stage 4:
Stage 1 - Initial Engagement on Climate Impact COMPETITIVE DIFFERENTIATION
• 2°C Pathway Alignment to 2030
Initial engagement on Rank Company Step 1
Reported Policy on Emissions
Step 2
Reporting Emissions Impacts
• Market Share & Sales Leadership in ZEVs & PHVs
climate change impact 1 Toyota
– Refinitiv ESG data
2015 or Earlier
– Refinitiv ESG data
2015 or Earlier Stage 3:
1 Volkswagen 2015 or Earlier 2015 or Earlier
TRANSFORMING THE CORE
1 Daimler 2015 or Earlier 2015 or Earlier • Emission Performance of the Fleet
SCOPE OF VISION
1 Hyundai 2015 or Earlier 2015 or Earlier • Company Projections of Alternative Drive Vehicle Sales
• Current Percentage of Sales from Alternative Drive Vehicles
The Refinitiv data for Stage 1 – Initial engagement 1 Honda 2015 or Earlier 2015 or Earlier • Company Governance Structures to Decarbonize
1 Renault 2015 or Earlier 2015 or Earlier
on climate change – indicates the first year in 1 Kia 2015 or Earlier Partial 2016 / Complete 2017
which the company disclosed information relevant Stage 2:
1 Peugeot 2015 or Earlier 2015 or Earlier
SYSTEMATIC MANAGEMENT
to each transparency milestone. For each column, 1 Nissan 2015 or Earlier 2015 or Earlier • Energy Intensity of Vehicle Production
1 Mazda 2015 or Earlier 2015 or Earlier • Public Emission Reduction Targets
the year indicates when reporting began and the • Verification of Emissions Impacts
1 BMW 2015 or Earlier 2015 or Earlier
green color signifies that disclosure continues to 1 Suzuki 2015 or Earlier Partial 2015 or Earlier
the current period. As shown in figure 18, having a 1 GM 2015 or Earlier 2015 or Earlier
Stage 1:
1 Ford 2015 or Earlier 2015 or Earlier
policy (Step 1) is now and has been table stakes for all INITIAL ENGAGEMENT
1 Mitsubishi 2015 or Earlier 2016
major developed and almost all emerging economy 1 FCA 2015 or Earlier 2015 or Earlier
• Reporting Emissions Impacts – Refinitiv data
• Reporting Policy on Emissions or Climate Change – Refinitiv data
automakers. 1 Isuzu 2015 or Earlier 2015 or Earlier
1 Tata 2015 or Earlier 2015 or Earlier
Step 2 – Reporting GHG emissions is now and has CAPACITY TO EXECUTE
1 Subaru 2015 or Earlier 2015 or Earlier
been standard procedure for all developed economy 1 Mahindra 2015 or Earlier 2015 or Earlier
21 Tesla 2015 or Earlier Partial 2018
incumbents.
21 Geely 2015 or Earlier Partial 2016
21 BAIC 2016 Partial 2017
Of note, electric vehicle “disruptors” such as Tesla in
21 BYD 2015 or Earlier No Reporting
the U.S. and Geely in China, are just getting started 21 Dongfeng 2015 or Earlier No Reporting
on the reporting and transparency agenda, despite 21 GAC 2015 or Earlier Partial 2018
their product innovations. This may reflect their 27 Great Wall No Policy No Reporting
relative management maturity, as well as emerging
governance practices in the APEC region. Best Worst
Source: Constellation, Refinitiv ESG, and Urgentem 2020
9/25Climate Risk Analysis Model - Stage 2
- Stage 2
Stage 2: Building the FIGURE 19
THE NEXT STEP UP THE CURVE
capacity for systematic
Stage 4:
Stage 2 - Building the Capacity for Systematic Management of Climate Impacts COMPETITIVE DIFFERENTIATION
• 2°C Pathway Alignment to 2030
management of climate
Step 3 Step 4 Step 5
• Market Share & Sales Leadership in ZEVs & PHVs
Rank Company Verification of Emissions Public Emissions Reduction Emissions Intensity
Impacts – Refinitiv ESG data Targets – Refinitiv ESG data of Vehicle Production
change impacts 1
2
Peugeot
Renault
Partial 2015 / Complete 2017
2015 or Earlier
2015 or Earlier
2015 or Earlier
100
97
Stage 3:
3 Tata 2015 or Earlier 2015 or Earlier 95
TRANSFORMING THE CORE
4 BMW 2015 or Earlier 2015 or Earlier 95 • Emission Performance of the Fleet
SCOPE OF VISION
5 Kia 2018 2015 or Earlier 94 • Company Projections of Alternative Drive Vehicle Sales
• Current Percentage of Sales from Alternative Drive Vehicles
As companies mature into Stage 2, they recognize 6 Mahindra 2015 or Earlier 2015 or Earlier 93 • Company Governance Structures to Decarbonize
and respond to the need for greater transparency on 7 Mazda Partial Pre 2015 / Complete 2017 2015 or Earlier 91
8 Isuzu 2016 2015 or Earlier 89
key issues including external verification of complete Stage 2:
9 Nissan 2015 or Earlier 2015 or Earlier 81
SYSTEMATIC MANAGEMENT
emissions reporting, publicly announced improvement 10 Hyundai Partial Pre 2015 / Complete 2017 2015 or Earlier 80 • Energy Intensity of Vehicle Production
targets, and progress on becoming more energy- 11 GM 2015 or Earlier 2015 or Earlier 78 • Public Emission Reduction Targets
• Verification of Emissions Impacts
12 VW 2015 or Earlier 2015 or Earlier 73
efficient operators.
13 Toyota 2015 or Earlier 2015 or Earlier 71
As the data indicate, Verification of emissions impacts 14 FCA 2015 or Earlier 2015 or Earlier 70 Stage 1:
(Step 3) has also become a sector norm among
15 Ford Partial Pre 2015 / Complete 2017 2015 or Earlier 66 INITIAL ENGAGEMENT
16 Honda 2015 or Earlier 2015 or Earlier 52 • Reporting Emissions Impacts
the automobile majors. Figure 19 reports the year 17 Daimler 2015 or Earlier 2015 or Earlier 51
• Reporting Policy on Emissions or Climate Change
verification began and the color reflects the current 18 Subaru Partial 2018 2015 or Earlier 78
status, with those in green having complete and 19 Suzuki No Verification 2015 or Earlier 96 CAPACITY TO EXECUTE
20 Mitsubishi No Verification 2015 or Earlier 93
verified scopes 1, 2 and 3 emissions reported. 21 BAIC No Verification No Targets 50
22 Geely No Verification 2015 or Earlier 0
22 BYD No Verification 2017 0
22 Dongfeng No Verification 2017 0
25 Tesla No Verification No Targets 39
26 GAC No Verification No Targets 0
26 Great Wall No Verification No Targets 0
Best Worst
Source: Constellation, Refinitiv ESG, and Urgentem 2020
10/25Climate Risk Analysis Model - Stage 2
On Step 4 – Public emissions reduction targets – all
major original equipment manufacturers (OEMs) have
at least near-term targets. Here too, APEC firms and
disruptors such as Tesla are generally less mature in
their reporting, despite the disruptors’ obvious market-
leading emissions performance.
While energy consumption and related manufacturing
emissions, Step 5 – Emissions intensity of vehicle
production, only account for approximately 10% of
the total automobile sector footprint, some OEMs,
such as BMW, have invested in reducing their energy
intensity. Other OEMs’ products simply require less
“Transparency was the starting point
energy to produce on a unit basis, such as Tata and
Mahindra. Others have low-emissions intensities due
to production location, such as Renault and Peugeot
in France which utilizes low-carbon electricity. While but managing climate impact is about
accurate performance on this factor may not represent
a real difference in management maturity, the data are
transformation”
useful to see the range in intensity.
As Schroder’ Global Head of Sustainable Investment
Andrew Howard points out, transparency and
disclosure are the starting points for firms making the
journey to a sustainable future, but the challenge has Andrew Howard
now shifted to transformation. For Howard, getting Global Head of Sustainable Investment, Schroders
a read on transformation is critical. Read the full
interview with Andrew Howard here.
11/25Prospects
Climate Risk
forAnalysis
the future
Model - Stage 3
Stage 3: Transforming the
FIGURE 20
MANAGING CLIMATE IMPACT
core – strategy becomes
Stage 4:
TAKES SHAPE COMPETITIVE DIFFERENTIATION
• 2°C Pathway Alignment to 2030
execution in the drive to Stage 3 - Transforming the Core
Step 6
• Market Share & Sales Leadership in ZEVs & PHVs
decarbonize Rank Company Company Governance
Structures to Decarbonize Stage 3:
1 VW 100.0 TRANSFORMING THE CORE
1 BMW 100.0 • Emission Performance of the Fleet
SCOPE OF VISION
• Company Projections of Alternative Drive Vehicle Sales
3 Renault 97.4 • Current Percentage of Sales from Alternative Drive Vehicles
Stage 3 of the maturity curve is focused on metrics that 4 Mahindra 75.0 • Company Governance Structures to Decarbonize
indicate the level of ambition and progress on executing a 5 Nissan 62.5
6 Hyundai 53.6 Stage 2:
transition strategy, and Stage 4 gauges current and future 6 Kia 53.6
SYSTEMATIC MANAGEMENT
competitiveness in the emerging sustainable auto maker 8 Tata 51.3 • Energy Intensity of Vehicle Production
race. 9 GM 51.1 • Public Emission Reduction Targets
• Verification of Emissions Impacts
10 Peugeot 51.0
11 FCA 50.3
12 Daimler 50.2 Stage 1:
13 Tesla 50.0 INITIAL ENGAGEMENT
13 Ford 50.0 • Reporting Emissions Impacts
• Reporting Policy on Emissions or Climate Change
13 Honda 50.0
13 Mazda 50.0
17 Toyota 25.0 CAPACITY TO EXECUTE
17 Isuzu 25.0
19 Geely 0.0
19 BYD 0.0
19 Suzuki 0.0
19 GAC 0.0
19 BAIC 0.0
19 Mitsubishi 0.0
19 Subaru 0.0
19 Dongfeng 0.0
19 Great Wall 0.0
Best Worst
Source: Constellation, 2020
12/25Climate Risk Analysis Model - Stage 3
Step 6: Evolving governance to support changing priorities It is becoming standard practice among the major automakers to establish
Progress on climate impact management in the automobile sector governance policy that supports the decarbonization agenda by:
requires the transformation of core processes, including supplier 1. Linking executive compensation to achieving climate goals.
networks, manufacturing processes, and most importantly, product
innovation to achieve decarbonization. 2. Using an internal price on carbon as a planning mechanism.
Stage 3 metrics reveal the scope of progress and contribute to 3. Supporting a strong climate policy.
understanding the transition risks and opportunities for each firm. The Among the organizations that now stand at the top of the sector on
major automakers performing well on Stage 3 metrics, as a whole, likely climate-related governance are:
will have less transition risk and increased exposure to business benefits
from the decarbonization opportunity. 1. VW, making a comeback from diesel-gate, along with BMW
and Renault.
Step 6 – Company governance structures to decarbonize
2. Toyota and most Japanese OEMs have historically not reported
An early and important signal to the organization regarding the case for utilizing (or have not utilized) these change mechanisms, aside
change among the traditional ICE automakers is changes in corporate from Nissan showing moderate performance.
governance that reflect the strategic priority of managing climate impacts.
While the disruptors (companies challenging the incumbents with product Like emissions transparency, many companies in emerging markets
innovation) may have less need for these change management tools, the do not have as strong or transparent governance structures despite
incumbents need to drive change. leadership on decarbonization.
13/25Prospects
Climate Risk
forAnalysis
the future
Model - Stage 3
Step 7: Gaining experience in building and selling FIGURE 21
alternative drive vehicles MANAGING CLIMATE IMPACT Stage 4:
Transforming the core in the auto sector is about product innovation – and TAKES SHAPE COMPETITIVE DIFFERENTIATION
• 2°C Pathway Alignment to 2030
in the next step up the maturity curve, we observe the degree to which Stage 3 - Transforming the Core • Market Share & Sales Leadership in ZEVs & PHVs
each automaker is delivering product innovation that reduces climate Step 7
impacts. The Stage 3, Step 7 metric measures current sales of alternative Rank Company Current Percentage of Sales
drive vehicles, including HVs, PHVs and ZEVs, by assessing the degree from Alternative Drive Vehicles Stage 3:
to which the automakers have successfully integrated alternative drive 1 Tesla 100.0 TRANSFORMING THE CORE
1 BYD 100.0 • Emission Performance of the Fleet
SCOPE OF VISION
vehicles into their product lines and built an experience base with these 3 BAIC 49.1
• Company Projections of Alternative Drive Vehicle Sales
• Current Percentage of Sales from Alternative Drive Vehicles
vehicles. The scoring generates points for each automaker based on the 4 GAC 33.3 • Company Governance Structures to Decarbonize
5 Toyota 10.1
percentage of 2019 production among ZEVs, PHVs and HVs, with the
6 Geely 7.5 Stage 2:
highest unit value given to ZEV, then PHVs and HVs, respectively. Not 7 BMW 6.5
SYSTEMATIC MANAGEMENT
surprisingly, the disruptors are in the lead. Tesla and BMW are the only 8 Great Wall 5.7 • Energy Intensity of Vehicle Production
• Public Emission Reduction Targets
makers outside of the APEC companies to be among the top 10 leaders 9 Nissan 5.4
• Verification of Emissions Impacts
10 Dongfeng 5.0
on delivering alternative drive vehicles. 11 Kia 4.5
1. Except for Tesla, EVs have been largely produced and sold in APEC. 12 Mitsubishi 4.0 Stage 1:
13 Honda 3.7 INITIAL ENGAGEMENT
14 Hyundai 3.5
2. Toyota, though the long-term leader in HVs, has sold relatively few • Reporting Emissions Impacts
• Reporting Policy on Emissions or Climate Change
15 Tata 3.0
EV products. 16 Renault 2.9
17 Suzuki 2.1
3. Chinese automobile makers – BYD, BAIC, GAC and Geely – are 18 GM 2.0
CAPACITY TO EXECUTE
positioned to become major alternative drive vehicle producers. 18 Subaru 2.0
20 Daimler 1.9
4. Among the majors, Ford, GM, VW, Daimler and FCA are still selling very 21 VW 1.6
small numbers of alternative drive vehicles. 22 Ford 0.9
23 Peugeot 0.6
24 FCA 0.2
25 Mazda 0.1
26 Mahindra 0.0
26 Isuzu 0.0
Best Worst
Source: Constellation, 2020
14/25Climate Risk Analysis Model - Stage 3
A closer look at production breakouts
A CLOSER LOOK AT SOME OF THE ACTUAL PRODUCTION BREAKOUTS
FIGURE 22
#1 Tesla #2 BYD #3 BAIC #4 GAC #5 Toyota #6 Geely #7 BMW
15.4% 10.5% 15.1% 2.6% 3.5% 1.7% 4.0% While disruptors such as Tesla, BYD,
31.5% 0.5% 0.5% BAIC and GAC have material alternative
53.1% 0.05%
drive vehicles sales, and a few of the
incumbents have significant hybrid
100.0% 15.4% 84.6% 89.0% 84.4% 93.9% 94.3% production experience, the market remains
overwhelmingly dominated by ICE vehicles.
#8 Great Wall #9 Nissan #10 Dongfeng #11 Kia #12 Mitsubishi #13 Honda #14 Hyundai Figure 22 shows where the transformation
3.5% 4.1% 1.8% 3.13% 0.02% 3.3% 0.9% 0.5% 0.1% 3.6% 5.4% 0.1% 1.8% 1.3%
0.1%
1.0% 0.2%
journey is and how far there is to go.
0.2%
Companies are ranked based on their
scoring for Step 7, the current percentage
of sales from alternative drive vehicles. In
96.4% 94.2% 96.84% 94.8% 95.8% 94.3% 96.7%
this step, ZEV sales are weighted greater
than PHV sales, which in turn are weighted
#15 Tata #16 Renault #17 Suzuki #18 GM #19 Subaru #20 Daimler #21 VW
1.6% 1.8% 3.2% 0.01% 0.1% 1.1% 0.1% 2.7% 0.3% 0.7% 0.7% greater than HV sales.
0.1% 0.4% 0.1% 0.9% 0.001% 0.5%
97.9% 98.2% 96.8% 98.7% 97.0% 98.4% 98.8%
#22 Ford #23 Peugeot #24 FCA #25 Mazda #26 Mahindra #27 Isuzu
1.2% 0.2% 0.01% 0.20% 0.12% 0.04% 0.1% 0.01%
= ZEV
0.0002% = HV
= PHV
= ICE
98.6% 99.79% 99.84% 99.9% 99.9% 100.0%
Source: MarkLines Data; Constellation Analysis
15/25Climate Risk Analysis Model - Stage 3
Step 8: Emissions performance of the sold fleet – where FIGURE 23
the rubber meets the road MANAGING CLIMATE IMPACT Stage 4:
The critical indicator of progress is what comes out of the aggregate TAKES SHAPE COMPETITIVE DIFFERENTIATION
• 2°C Pathway Alignment to 2030
tailpipes of each automaker’s fleet. This calculation is made up of the Stage 3 - Transforming the Core • Market Share & Sales Leadership in ZEVs & PHVs
grams of CO2 per kilometer of the 2019 sold fleet of each automaker Step 8
(Step 8), which provides the most relevant benchmark to assess the Rank Company Emissions Performance of
size of the gap between where companies are today and where they the Fleet Stage 3:
will need to go to meet the decarbonization challenge. 1 Tesla 100.0 TRANSFORMING THE CORE
1 BYD 100.0 • Emission Performance of the Fleet
SCOPE OF VISION
• Company Projections of Alternative Drive Vehicle Sales
1 BAIC 100.0
Key observations: • Current Percentage of Sales from Alternative Drive Vehicles
1 Geely 100.0 • Company Governance Structures to Decarbonize
1. The disruptors (EV leader Tesla, plus the group of APEC innovators 5 Suzuki 92.9
6 Peugeot 80.4 Stage 2:
including BYD, BAIC and Geely) are as expected at the top of the 7 GAC 75.0
SYSTEMATIC MANAGEMENT
chart. 8 Toyota 74.4 • Energy Intensity of Vehicle Production
9 Renault 72.4 • Public Emission Reduction Targets
2. Most of the top 10 leaders on emissions performance of the sold 10 Hyundai 63.2
• Verification of Emissions Impacts
fleet achieve their results by building a large percentage of smaller, 11 Kia 59.4
12 Honda 58.1 Stage 1:
fuel-efficient ICE vehicles. Suzuki, Peugeot and Renault do not
13 Mazda 54.9
have significant current sales of alternative drive vehicles and may INITIAL ENGAGEMENT
14 Nissan 54.6 • Reporting Emissions Impacts
have difficulty extending fleet emissions gains without significant 15 VW 52.7 • Reporting Policy on Emissions or Climate Change
technology advances. 16 Daimler 52.3
17 BMW 46.7
CAPACITY TO EXECUTE
3. Toyota’s long success with hybrids puts it towards the top of 18 Mitsubishi 36.4
19 GM 36.2
the major automakers, but will the company’s dominance and
20 Subaru 22.4
commitment to this older technology be a help or barrier to true EV 21 Ford 16.0
leadership? 22 Great Wall 1.8
23 Dongfeng 1.6
4. Near the bottom are well-known brands such as Subaru, Ford and 24 Tata 0.9
FCA that generally lack the technology and production experience 25 Mahindra 0.0
25 FCA 0.0
with alternative vehicles. Without significant new investments and 25 Isuzu 0.0
partnerships with innovators, they have a long, steep climb ahead.
Best Worst
Source: Constellation, 2020
16/25Climate Risk Analysis Model - Stage 3
Step 9: Setting future targets for alternative vehicle FIGURE 24
production – where the rubber meets the sky MANAGING CLIMATE IMPACT Stage 4:
Step 9 – Company projections for future alternative drive vehicle TAKES SHAPE COMPETITIVE DIFFERENTIATION
• 2°C Pathway Alignment to 2030
sales Stage 3 - Transforming the Core • Market Share & Sales Leadership in ZEVs & PHVs
Step 9
A clear indicator of increasing maturity in managing climate risk is
Rank Company
the strength and clarity of publicly disclosed plans to shift production Current Projections For
Alternative Drive Production Stage 3:
of alternative drive vehicles (Step 9). We have developed a rule- 1 Tesla 100.0 TRANSFORMING THE CORE
based quantitative method to assess the announced plans from the 1 BAIC 100.0 • Emission Performance of the Fleet
SCOPE OF VISION
• Company Projections of Alternative Drive Vehicle Sales
automakers for production and sales of new and existing alternative 1 VW 100.0 • Current Percentage of Sales from Alternative Drive Vehicles
4 Daimler 77.8 • Company Governance Structures to Decarbonize
drive vehicles. As previously calculated, the ranking considers the 5 Geely 68.1
type of vehicles being forecast (HV, PHV and ZEV), the specificity 6 Honda 57.6 Stage 2:
of volumes and time frame of the forecast. The highest weight is 7 Toyota 56.5
SYSTEMATIC MANAGEMENT
8 Mazda 41.7
given to ZEVs, PHVs and HVs, respectively, while shorter timelines • Energy Intensity of Vehicle Production
• Public Emission Reduction Targets
9 Hyundai 37.6
of production and sales are also weighted higher than long-term 10 Kia 36.9
• Verification of Emissions Impacts
projections. 11 Ford 30.5
12 BMW 29.7 Stage 1:
13 Renault 22.7
INITIAL ENGAGEMENT
14 GAC 22.3 • Reporting Emissions Impacts
15 Nissan 20.6 • Reporting Policy on Emissions or Climate Change
16 Dongfeng 18.7
17 Peugeot 13.5
CAPACITY TO EXECUTE
18 FCA 13.4
19 GM 11.8
20 Mahindra 7.1
21 Subaru 4.6
22 Mitsubishi 4.4
23 Tata 3.2
24 Suzuki 2.4
25 BYD 0.0
25 Isuzu 0.0
25 Great Wall 0.0
Best Worst
Source: Constellation, 2020
17/25Climate Risk Analysis Model - Stage 3
Looking at the relationship between planned versus actual sales of FIGURE
Figure 2525
alternative drive vehicles, we can make some key observations:
ALTERNATIVE DRIVE VEHICLES: 2019 PROJECTIONS & SALES
1. Among the ICE majors, VW and Daimler are making the strongest
commitment to a relatively rapid fleet-wide transformation, but are
starting from a relatively low base of alternative drive experience. #1 #2
Given the recent market turmoil due to the COVID-19 pandemic BAIC Tesla
shutdown, careful attention should be paid to plan changes from these VW 100
would-be alternative drive leaders.
COMPANY PROJECTIONS OF ALTERNATIVE
2. Tesla and BAIC are fully committed to ZEV, but can they profitably Daimler
80
scale up production?
#3
DRIVE VEHICLE SALES
Geely
3. Toyota, the most experienced alternative drive automobile major, has Honda
not yet asserted its future leadership strategy and plans in the ZEV 60
Toyota
market. // // //
0 2 Hyundai 4 6 8 10 35 50 100
KIA
4. Among the incumbents, FCA, GM, Subaru and Mitsubishi are near Mazda 40
the bottom of the laggard quadrant in terms of both current sales of Ford
Renault BMW
alternative drive vehicles and announced plans for fleet transformation, #4 Dongfeng
FCA Nissan
posing especially significant transition risks. While some are beginning Peugeot
20
GM GAC
to invest more heavily (e.g., Ford), there is a big gap to close on Suburu Mitsubishi #5
Mahindra Great Wall
decarbonization execution. Suzuki
Isuzu Tata 0 BYD
5. Disruptors like BYD are already bringing many alternative drive
vehicles to market, but their projections are unknown. CURRENT PERCENTAGE OF SALES FROM ALTERNATIVE DRIVE VEHICLES
CHINA FRANCE GERMANY INDIA JAPAN SOUTH KOREA ITALY/U.S. U.S.
Source: MarkLines Data; Constellation Analysis
18/25Climate Risk Analysis Model - Stage 3
As automakers begin to execute on their projections, increasing their
sales of alternative drive vehicles, it is important to understand the
total life cycle emissions of their fleets
As figure 26 shows, petrol and diesel ICE vehicles emit Figure 26
FIGURE 26
much greater CO2 than electric vehicles, but how much TODAY PETROL AND DIESEL CARS EMIT ALMOST 3 TIMES
greater depends heavily on the carbon intensity of the
MORE CO₂ THAN THE AVERAGE EU ELECTRIC CAR
electricity that charges an EV. Taking battery production
into account, a vehicle charged in Poland is emitting 3.5 300
times more CO2 than one charged on the cleaner energy Driving (fuel/electricity production and use)
grid in Sweden. Car production
Battery production
Realizing the full potential benefit of electrification
CO₂ emissions in 2030
will require transforming our electricity generation 200
and distribution system. Progress on this front varies -29%*
significantly within and across country boundaries.
-56% -57% -58%
100 -62% -63%
-65% -67%
-77% -79%
0
an
d
um ai
n en
K
s
ly
L
L
y
ce
7
l gi Sp ed
nd
an
O
SE
-2
U
Ita
Po l
an
TR
EU
Be Sw
rla
m
IE
Fr
er
PE
D
he
G
et
N
SCENARIO WHERE AVERAGE EU ELECTRICITY IS USED TO PRODUCE THE BATTERIES AND THE CARS
*CO₂ savings compared to the average of both diesel and petrol emissions Souce: transev.eu/lca
Source: Transport & Environment, 2020
19/25Climate Risk Analysis Model - Stage 3
As EV, PHV and HV growth
continues, so will battery FIGURE 27
recovery, reuse and recycling ELECTRIC-VEHICLE (EV) BATTERY LIFE CYCLE, ILLUSTRATIVE
EV performance standards usually require batteries to retain 80% of New battery Battery
their total usable capacity. Once they fall below this threshold, they can When an EV battery pack manufacturing
still be reused to provide significant value for stationary energy storage can no longer meet
its performance
markets where less-frequent cycling is required. From grid storage to data requirement, it is
center backup power to EV charging stations, second-life applications replaced by a new Electric
battery pack. The vehicle
for EV batteries will continue to expand alongside the EV market. Current
used battery pack
estimates have second-life batteries lasting for an additional 7-10 years. is removed from
For batteries that cannot be reused, recycling is the next best thing. the car for one of Recycling Packs can
three destinations. Raw-material
Though current recycling rates are only at 50%, new innovative processes, Used battery be processed to
extraction and
pack extract valuable
such as the one developed by Fortum with a recovery rate of 80%, show reprocessing
rare-earth materials.
promise for the future.1
Disposal If packs
Recycling Packs can be
are damaged or in
repurposed for a
regions without
second-life application in
proper market
energy-storage services
structures or
that is suitable to their
regulations, packs Junkyard Battery second-life application
reduced performance
may be thrown away. refurbishing in stationary strorage1
capabilities.
company
1 Eg, improve grid performance, integrate renewables, charge EVs, etc.
Source: Expert interviews; market research reports; McKinsey analysis
Source: McKinsey & Company, 2020
1 https://www.fortum.com/products-and-services/fortum-battery-solutions/recycling/
lithium-ion-battery-recycling-solution
20/25Climate Risk Analysis Model - Stage 4
Stage 4: Competitive FIGURE 28
REALIZING SUSTAINABLE VALUE
differentiation on decarbonization
Stage 4:
Stage 4 - Competitive Differentiation on Decarbonization COMPETITIVE DIFFERENTIATION
• 2°C Pathway Alignment to 2030
– realizing sustainable value Step 10
Market Share
Step 11
2°C Pathway
• Market Share & Sales Leadership in ZEVs & PHVs
Rank Company & Sales Alignment to
Companies that score well on the Stage 4 criteria are positioned to realize Leadership in 2030
ZEVs & PHVs Stage 3:
enhanced business value as the vehicle marketplace decarbonizes. TRANSFORMING THE CORE
1 Tesla 100.0 100.0
• Emission Performance of the Fleet
SCOPE OF VISION
Step 10: Capturing market share and sales growth from ZEVs 2 BYD 100.0 100.0 •
•
Company Projections of Alternative Drive Vehicle Sales
Current Percentage of Sales from Alternative Drive Vehicles
3 BAIC 47.7 100.0
and PHVs 4 Geely 37.3 100.0
• Company Governance Structures to Decarbonize
While company market share and sales rankings (Step 10) are important 5 VW 30.1 92.8
6 GAC 20.6 100.0 Stage 2:
indicators of the ability to compete, they represent leadership in the currently 7 Daimler 12.5 100.0 SYSTEMATIC MANAGEMENT
small market for PHVs and ZEVs. Also, they may not indicate whether firms 8 Hyundai 16.0 96.1
• Energy Intensity of Vehicle Production
• Public Emission Reduction Targets
have the capacity to scale up production as the alternative drive market grows 9 Renault 14.0 94.4 • Verification of Emissions Impacts
10 Peugeot 1.8 100.0
to become a major component of total sales.
11 Nissan 19.9 83.4
Stage 1:
Step 11: Alignment with the 2°C Pathway 12
13
Mazda
Kia
0.0
13.8
97.7
84.0 INITIAL ENGAGEMENT
The top 10 companies in green are on or will be on the pathway to 2°C GHG 14 Toyota 14.5 82.8
• Reporting Emissions Impacts
• Reporting Policy on Emissions or Climate Change
emissions alignment if publicly announced plans are successfully executed. 15 BMW 38.5 57.7
16 Honda 4.4 85.7
1. Step 11 measures fleet emissions alignment with the goals of the Paris 17 Suzuki 0.0 74.8 CAPACITY TO EXECUTE
18 GM 21.5 40.4
accord’s 2°C pathway, assessing whether each company’s sold fleet is
19 Mitsubishi 15.2 29.5
decarbonizing over time in a manner consistent a 2°C world. It is a critical 20 Subaru 1.0 19.1
barometer of company performance against planetary boundaries. 21 Dongfeng 10.1 3.5
22 Great Wall 12.2 1.8
2. Step 11 utilizes the trend in emissions levels of sold fleets. Companies in 23 Tata 6.7 1.0
yellow, and even more so in red, will need to increase their commitment to 24 FCA 1.9 4.0
25 Ford 2.7 0.0
decarbonization to make the transition to alignment with the 2°C pathway. 26 Mahindra 0.0 0.0
27 Isuzu 0.0 0.0
3. Peugeot is an outlier in the green category in that its trajectory on a
2°C pathway is based on its high MPG ICE fleet, not their success with
alternative drive vehicles. It remains to be seen whether it can develop the Best Worst
competency in alternative drive vehicles to remain on a 2°C pathway. Source: Constellation, 2020
21/25Climate Risk Analysis Model - Stage 4
Integrating the stages to reveal
Maturity and Momentum
Figure 29 brings the M2 analysis together into one view. Looking at overall
M2 scores, many of the disruptors are at the top of the chart because of
the extremely strong decarbonization performance factors in Stages 3 and
4 of the maturity curve. While the challenge for the Incumbents is to climb
up the maturity curve, the disruptors start with the decarbonized product
innovation and will need to work their way down the curve as they add policy,
disclosure, and governance to their capability set.
22/25Maturity and momentum
FIGURE 29
CONSTELLATION’S COMPLETE AUTOMOBILE SECTOR MATURITY CURVE
CONSTELLATION’S AUTOMOBILE SECTOR MATURITY MODEL 2019
Stage 3 – Stage 1 – Stage 2 – Stage 3 – Stage 4 –
Transforming Initial Engagement on Building the Capacity for Systematic Transforming Business Operations/Products to Competitive Differentiation
the Core Climate Change Management of Climate Impacts Drive Fundamental Changes in Climate Impacts on Decarbonization
Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Step 7 Step 8 Step 9 Step 10 Step 11 Maturity Momentum
Score Score
Reported Policy Reporting Verification of Public Emissions Emissions Company Current Emissions Company Market Share & 2°C Pathway
on Emissions Emissions Emissions Reduction Intensity Governance Percentage Performance Projections for Sales Leadership Alignment
Rank Company or Climate Impacts – Impacts – Targets – of Vehicle Structures to of Sales from of the Fleet Alternative Drive in ZEVs and to 2030
Change – Refinitiv ESG Refinitiv ESG Refinitiv ESG Production Decarbonize Alternative Drive Production PHVs
Refinitiv ESG data data data Vehicles
data
1 Tesla 100 25 0 0 39 50.0 100 100 100 100 100 83.8 1.8
2 BYD 100 0 0 100 0 0 100 100 0 100 100 70.0 0
3 BAIC 100 25 0 0 50 0 49.1 100 100 47.7 100 65.2 3.6
4 VW 100 100 100 100 73 100 1.6 52.7 100 30.1 92.8 62.2 8.0
5 Renault 100 100 100 100 97 97.4 2.9 72.4 22.7 14.0 94.4 57.8 6.2
6 Toyota 100 100 100 100 71 25.0 10.1 74.4 56.5 14.5 82.8 54.5 5.7
7 Peugeot 100 100 100 100 100 51.0 0.6 80.4 13.5 1.8 100 54.1 5.0
8 Daimler 100 100 100 100 51 50.2 1.9 52.3 77.8 12.5 100 54.0 6.1
9 Hyundai 100 100 100 100 80 53.6 3.5 63.2 37.6 16.0 96.1 53.9 8.5
10 Geely 100 25 0 100 0 0 7.5 100 68.1 37.3 100 53.4 6.2
11 Kia 100 100 100 100 94 53.6 4.5 59.4 36.9 13.8 84.0 51.9 10.1
12 BMW 100 100 100 100 95 100 6.5 46.7 29.7 38.5 57.7 51.6 3.7
13 Mazda 100 100 100 100 91 50.0 0.1 54.9 41.7 0 97.7 50.6 7.1
14 Honda 100 100 100 100 52 50.0 3.7 58.1 57.6 4.4 85.7 50.3 7.7
15 Nissan 100 100 100 100 81 62.5 5.4 54.6 20.6 19.9 83.4 50.2 4.3
16 GAC 100 25 0 0 0 0 33.3 75.0 22.3 20.6 100 43.8 20.0
17 Suzuki 100 100 0 100 96 0 2.1 92.9 2.4 0 74.8 42.7 4.4
18 GM 100 100 100 100 78 51.1 2.0 36.2 11.8 21.5 40.4 37.8 1.9
19 Mitsubishi 100 100 0 100 93 0 4.0 36.4 4.4 15.2 29.5 26.9 1.5
20 Ford 100 100 100 100 66 50.0 0.9 16.0 30.5 2.7 0 26.3 2.4
21 Mahindra 100 100 100 100 93 75.0 0 0 7.1 0 0 23.5 0.7
22 Tata 100 100 100 100 95 51.3 3.0 0.9 3.2 6.7 1.0 23.1 1.4
23 FCA 100 100 100 100 70 50.3 0.2 0 13.4 1.9 4.0 22.0 1.5
24 Subaru 100 100 25 100 78 0 2.0 22.4 4.6 1.0 19.1 20.9 2.7
25 Isuzu 100 100 100 100 89 25.0 0 0 0 0 0 18.8 0.3
26 Dongfeng 100 0 0 100 0 0 5.0 1.6 18.7 10.1 3.5 9.8 0.8
27 Great Wall 0 0 0 0 0 0 5.7 1.8 0 12.2 1.8 3.2 1.6
Source: Constellation, 2020
Best Worst
23/25ESG and climate change impact
FIGURE 30
Refinitiv ESG and climate MEASURING DIFFERENT ASPECTS OF
SUSTAINABILITY PERFORMANCE
change impact maturity scores
Climate Impact Refinitiv ESG
Rank Company
Maturity Scores Scores
1 Tesla 83.8 51.2
2 BYD 70.0 55.2
Assessing how overall ESG scores align with climate impact analytics, 3 BAIC 65.2 46.4
we see an interesting complementarity. The M2 analytics, focused 4 VW 62.2 83.7
on climate impact management, give a different view of company 5 Renault 57.8 81.0
performance from the Refinitiv overall ESG scores. Though the 6 Toyota 54.5 76.6
disruptors’ lack of transparency yields low Refinitiv ESG scores, many 7 Peugeot 54.1 82.9
8 Daimler 54.0 92.0
with top ESG ratings, such as FCA, Ford, and GM, are not among the
9 Hyundai 53.9 67.3
M2 Leaders. It may be that the general management capabilities of 10 Geely 53.4 60.3
the ESG Leaders will rapidly advance the climate risk strategies, but it 11 Kia 51.9 59.4
is not yet observable in our analysis. 12 BMW 51.6 86.4
13 Mazda 50.6 65.0
14 Honda 50.3 88.3
15 Nissan 50.2 75.4
16 GAC 43.8 54.7
17 Suzuki 42.7 60.0
18 GM 37.8 90.3
19 Mitsubishi 26.9 71.4
20 Ford 26.3 87.3
21 Mahindra 23.5 78.3
22 Tata 23.1 74.9
23 FCA 22.0 90.3
24 Subaru 20.9 48.3
25 Isuzu 18.8 65.5
26 Dongfeng 9.8 59.1
27 Great Wall 3.2 28.3 Best Worst
Source: Constellation and Refinitiv ESG, 2020
24/25Summary
Acronyms:
• CO2 – carbon dioxide
This is chapter 2 of the Sustainability Trends and The Automotive Industry: Truckification and
• GHG – greenhouse gas Electrification report. Discover more in this series:
• EV – electric vehicle
Overview of the Sustainability Trends and The Automotive Industry report
• ZEV – zero-emission vehicle
• PHV – plug-in hybrid vehicle Chapter 1: How have recent trends in market demand complicated decarbonization for automakers?
• HV – hybrid vehicle Chapter 3: How are automakers positioned to manage the sustainability imperative and associated
• APEC – Asia-Pacific Economic Cooperation transition risk and opportunity in the coming decade?
• KPI – key performance indicator
• ESG – environmental, social and governance
• ICE – internal combustion engine
• MPG – miles per gallon
• M2 – Maturity and Momentum
• OEM – original equipment manufacturer
25/25Refinitiv data and solutions At Refinitiv, we strive to be the trusted and preferred partner for environmental, social and governance (ESG) data and solutions, and are committed to bringing to the market an array of best-in-class data, analytics and fully integrated workflow solutions. Refinitiv ESG Data We understand the increasingly critical need for ESG information, and the solutions we offer enable customers to act with confidence on consistently captured and standardized transparent information and insights. We have deep domain expertise and have been providing ESG solutions to the financial industry since the early 2000s. Designed to help you make sound, sustainable investment decisions, our ESG data covers 80% of global market cap and over 450 metrics. Our ESG data is available through Eikon®, Excel® add-in, Datastream®, Datastream Data Loader (DDL), QA Direct® and the Elektron Data Platform Cloud API. For more information, visit us online at refinitiv.com/esg This research report was conducted in partnership with Constellation Research refinitiv.com/esg RE1260262/9-20
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