Cars, climate and competitiveness

Low carbon link to motor industry success

Would-be investors in the motor industry would be well advised to put their money into green-minded car manufacturers. It’s these companies, led by Toyota, who will gain significant competitive advantage over the next decade. That’s the thrust of a new report by Zurich-based Sustainable Asset Management (SAM) and the World Resources Institute (WRI) of Washington DC - based on research which WRI president Jonathan Lash says is aimed at driving change by helping investors make better-informed decisions.

Overall, the report estimates that forward-looking companies could increase revenue by 8% by 2015, while those who don’t adapt could see revenue fall by up to 10%. Changing Drivers: The Impact of Climate Change on Competitiveness and Value Creation in the Automotive Industry uses new indicators of motor company performance to analyse how emerging climate change policies will impact the world’s top 10 carmakers. Ranking each company according to low emissions, fuel efficiency and other environmental indicators, the researchers conclude that Toyota is best placed to comply with emerging regulations and commercialise greener technology cars such as hybrids and fuel cell driven models.

The other companies surveyed were BMW, DaimlerChrysler, Ford, General Motors, Honda, Nissan, PSA Peugeot Citroën Group, Renault and Volkswagen. “The global auto market in which companies compete is increasingly being defined by concern over climate change,” said Lash. “From Europe to Japan to California, new policies and commitments are challenging companies to make less carbon intensive, more fuel efficient vehicles.”

The report argues that as climate change policies start to bite, companies producing low carbon vehicles - with Toyota in the lead - should see market share increase and competitive advantage grow. By contrast, ones producing more carbon intensive vehicles and lagging in the race to develop lower carbon technologies are likely to suffer from lower sales, increased costs, and reduced profits. WRI and SAM developed two key new industry performance indicators in their research:

• ‘Carbon intensity of profits’ captures the degree to which current profits are derived from high carbon-emitting vehicles;
• ‘Value exposure’ estimates the costs manufacturers face in meeting new carbon constraints.

The report concludes that such costs could vary by a factor of 25 across the industry. - Polly Ghazi

28 January 2004

Polly Ghazi