18 January 2018: The global auto industry must rapidly adapt to technological changes and strengthen environmental regulations or risk falling behind, according to a report by CDP. The report ranks 16 of the world’s largest publicly listed auto companies on readiness for a low carbon transition.

The companies included in the report titled, ‘Driving Disruption: Which automotive companies will seize the opportunities in a low-carbon economy?’, have a total market capitalization of US$790 billion and represent over 75% of the global passenger vehicle market. According to CDP’s ranking, BMW, Daimler and Toyota are the best performing car companies on climate-related metrics.

The authors explain that the car industry is “facing a double hit of disruption from EVs [electric vehicles] and autonomous and shared driving,” with over a fifth of profits likely to shift to technology companies like Uber and Google by 2030. Over 30% of new car sales are projected to be zero emissions and plug-in hybrid by 2030, representing a potential US$1 trillion market. By 2022, EVs could become as affordable as petrol and diesel cars, making it easier for car makers to profit from a low-carbon economy. Accelerating the deployment of such vehicles is critical for reducing carbon emissions meeting the temperature goals of the Paris Agreement on climate change.

CDP CEO Paul Simpson said technology and software disrupters have forced the car industry to innovate quickly to ensure their survival in the low-carbon transition. Traditional car companies are increasingly investing (over US$11 billion since 2015) in autonomous and shared vehicle companies, and setting aggressive electric and autonomous vehicle targets. For example, General Motors is working towards an ‘All Electric-future.’ However, nearly 50% of car makers risk penalties by missing their emissions targets, and in the EU, some companies will need to increase their share of EV sales by 20% in order to meet the EU’s 2021 targets.

For traditional car engines, complying with emissions regulations will increase to over US$2,200 per vehicle by 2025.

The report details a number of risks and opportunities for the car industry. For example, governance and remuneration structures must be aligned with the low carbon transition, and the cost to comply with emissions regulations for traditional car engines is expected to increase threefold by 2025 to over US$2,200 per vehicle. In addition, China is critical, says CDP, as it accounts for 29% of global passenger vehicle sales, and has set aggressive targets for new energy vehicles such as EVs beginning in 2019.

CDP leverages investor and buyer power to motivate companies to disclose and manage environmental impacts, and drive companies and governments to reduce their emissions, safeguard water resources and protect forests. CDP has reported on the oil and gas, steel, cement, automotive, electric utilities, chemicals and mining industries in recent years. [UNFCCC Press Release] [CDP Press Release] [Publication: Driving Disruption]