The automotive industry plays a significant role in global CO₂ emissions, with road transport contributing to 16% of human-made carbon dioxide emissions, according to the International Organisation of Motor Vehicle Manufacturers (OICA). The sector’s impact is further amplified by the annual production of 80 million vehicles. To address this, many automakers have committed to reducing their carbon footprints and adopting sustainable practices, including transitioning to alternative fuel vehicles, with an increasing emphasis on electric vehicles (EVs).
Historically, efforts to reduce automotive emissions have been concentrated on the tailpipe, with governments introducing stricter exhaust standards and promoting zero-emission vehicles. A collaboration between McKinsey and the World Economic Forum highlighted that 80% of a petrol or diesel vehicle’s emissions occur from the exhaust. However, addressing emissions must now go beyond the tailpipe, as the production of materials for vehicles, including metals like steel and aluminum, significantly contributes to emissions.
The future of the automotive industry is electric. Despite occasional dips in EV sales in certain regions, the tipping point is approaching where battery electric vehicles (BEVs) will outnumber internal combustion engine (ICE) vehicles. McKinsey predicts that annual EV sales could reach 40 million units by 2030, with China leading global adoption. This shift toward EVs is being driven by improvements in vehicle models, extended ranges, and increasing consumer demand, further reducing the emphasis on tailpipe emissions.
Stellantis’ Strategy for Supply Chain Sustainability
Stellantis, one of the largest automakers globally, has identified supply chain sustainability as a priority. The company revealed that 50% of the carbon footprint in its electric vehicles comes from purchased parts, with batteries, steel, and aluminum accounting for around 70% of these emissions. Stellantis aims to reduce CO₂ emissions from its EV parts by 40% by 2030, targeting key components responsible for 80% of its purchased part emissions, focusing on enhancing sustainability in manufacturing and sourcing.
While automakers have faced challenges due to supply chain disruptions from the pandemic and geopolitical tensions, the urgency of supply chain sustainability cannot be ignored. McKinsey predicts that, without intervention, material emissions could account for 60% of a vehicle’s lifecycle emissions by 2040. The automotive industry relies heavily on energy-intensive materials like aluminum, steel, and various minerals, all of which contribute significantly to overall emissions during extraction, processing, and manufacturing.
Steel and aluminum production are major contributors to global CO₂ emissions. Steel production alone accounts for 7-9% of global emissions due to its dependence on coal and energy-intensive processes. The automotive sector is a significant consumer of these materials, with the industry using substantial amounts of both steel and aluminum. The global push for decarbonizing these processes is essential to reducing the automotive industry’s overall carbon footprint.
Innovations for Decarbonizing Supply Chains
To decarbonize automotive supply chains, the industry is exploring several innovative approaches. McKinsey highlights that large lithium-ion batteries, essential for EVs, contribute significantly to production emissions. Shifting battery production to regions with low-carbon electricity grids and increasing recycling efforts, such as using recycled scrap in electric arc furnaces for steel production, are key strategies. Additionally, decarbonizing materials like steel and aluminum using hydrogen instead of traditional coal can significantly lower emissions in the supply chain.
Stellantis has committed to achieving carbon neutrality by 2038 and halving CO₂ emissions by 2030. Its strategy involves engaging suppliers to optimize resource use and reduce emissions across its supply chain. The company is also exploring greater vertical integration, a strategy where automakers gain more control over various stages of production. This approach, already successful for Chinese automakers like BYD, allows for more sustainable practices, lower production costs, and quicker transitions to EVs. Vertical integration could be a significant advantage for automakers aiming to streamline supply chains and reduce their carbon footprints.
