It assesses the company’s strategic planning around the low-carbon transition, and how this is operationalized by the company. It also assesses scenario stress testing, which is an important management tool for preparing for the low-carbon transition.
Of the companies with fleet targets fully aligned to the low-carbon pathway, only Groupe PSA has embedded its target into a public transition plan. In fact, Groupe PSA is one of the few companies in the entire sample that have evidence of robust transition planning.
Many of the companies assessed have ambitions for future electric vehicles (for example, Volkswagen, Daimler, Chongqing Changan). However, with 24 of the 25 companies currently deriving more than 90 percent of their sales from internal combustion engine (ICE) vehicles (and more than 99 percent for 16 of the these), more than an electric vehicle commitment is required. Companies need to strategically map out the intermediate steps to overhaul their fleet, and then go beyond to map out the strategic repositioning that the low carbon economy will demand of auto manufacturers.
Some of the companies in the sample – BMW, Toyota and Honda – demonstrated aspects of transition planning. Groupe PSA’s transition planning covered most of the aspects that the ACT auto methodology envisages for a strong transition plan. Groupe PSA’s planning covers the timeframe of its fleet emissions target in detail (2018-2034) and states some headline ambitions for 2050. Within this plan, Groupe PSA outlines its future vehicle portfolio as well as the roadmap for carbon neutral production from all its industrial operations by 2050. More importantly, Groupe PSA’s transition planning considers aspects beyond vehicle manufacturing and outlines the company’s strategy for advancing in the mobility services sector through its Free2Move service brand. Moreover, Groupe PSA’s transition planning and targets have been informed by scenario analysis which considers moderate economic growth and stringent environmental regulation, and the group has embedded low-carbon stress testing into its business strategy through shadow carbon pricing.
Many of the companies did demonstrate awareness of scenario analysis, with 12 companies reporting the use of 2-degree scenario analysis to inform target setting. However, few companies have taken the analysis beyond target setting to account for shocks and stressors in current and future business models. For 14 of the 25 companies, no adequate evidence of low-carbon stress testing was identified.
Despite the lack of dedicated low carbon transition plan documents, it is notable that Chinese companies are mapping out comprehensive “New Energy Vehicle” (NEV) (i.e., low-carbon vehicle) strategies, to increase their low-carbon vehicle share, which they are compelled to do by regulation in China. Since 2013, the Chinese government has been providing subsidies for the manufacturing of NEVs. These subsidies decreased gradually over 2013-2015, and their impact shows in the high performing low-carbon vehicle shares of companies such as BAIC and FAW. Chinese companies are driven by the NEV transition, rather than the low-carbon transition. It remains to be seen whether the NEV market in China is mature enough to generate a sustainable and stable profit for auto manufacturers without the subsidy.