Cutting an entire fleet’s carbon dioxide (CO2) emissions by 20% in a single year is an ambitious undertaking – but it’s one that Oliver Zipse, CEO of German car manufacturer BMW, is confident his company can achieve.
“This year alone, we will achieve an improvement of around 20% in Europe,” Zipse said at an industry conference early in 2020.
A major driver behind this commitment is the European Union’s looming 2021 emissions reduction deadline and the promise of even stricter regulations to follow. The regulation presents carmakers with a stark choice among three options:
- They can miss the 2021 target and pay a potentially crippling fine of €95 per additional gram of CO2 per car sold.
- Or, to avoid fines, they can pool their CO2 credits with other companies to meet the target– a short-term measure at best.
- Finally, they can innovate to develop economical, low-emission cars that meet the regulatory requirement. For companies like BMW, innovation is the obvious path.
MEETING THE MARKET
BMW’s growing portfolio of electrified vehicles (EVs) will play a major part in meeting its emissions reduction target. In the coming years it plans to drive its EV sales to new levels, Zipse said: from 8.6% of EU sales in 2019 to 25% by 2021, 30% by 2025 and 50% by 2030.
“A product can only be purposeful if a customer wants it, desires it, and uses it. Hence, we are focusing on: what will our customers – who are all citizens of this planet – want in the future?”
Oliver Zipse, CEO, BMW
The company is not alone in its focus on boosting the appeal of EV technology in today’s markets. Toyota, for instance, is extending its hybrid car strategy into almost every market segment. Meanwhile the Renault-Nissan Alliance is investing heavily in R&D for affordable mass market EVs.
But demand for large, powerful vehicles hasn’t disappeared, so it’s essential to make room for the internal combustion engine in each company’s emission reduction strategies. BMW, for example, aims to achieve one third of its target over the next year with more efficient internal combustion engines, and the other two thirds with electric motors.
This pragmatic approach, Zipse has suggested, is the only way to ensure the widespread adoption – and therefore the effectiveness – of low-emission vehicles.
“We are focusing on the question: which technologies have the greatest leverage to reduce global greenhouse gas emissions?” Zipse said at the Frankfurt Motor Show in 2019. “For us, it’s about having a real effect… A product can only be purposeful if a customer wants it, desires it, and uses it. Hence, we are focusing on: what will our customers – who are all citizens of this planet – want in the future? What kind of drivetrains, technologies and services? And how do we achieve, at the same time, the best result for climate protection?”
RIGHTING THE BALANCE
While innovating for more efficient vehicles might satisfy many markets now, where a company chooses to build its cars can offset any gains.
“There are really two ways to achieve the EU’s CO2 emissions targets: electrifying cars, and reducing their size and weight,” said Nicolas Meilhan, senior advisor with the EV consultancy EV-Volumes.com. “Neither of these come cheap. Batteries for electric cars have high production costs and low margins, which are driving some manufacturers to move production to cheaper locations, which use high-emission, coal-powered electricity. This can massively reduce the environmental gains over the vehicle’s lifetime.”
SUVs are the second-highest contributor to increasing global CO2 emissions since 2010, after the power sector and ahead of heavy industry, trucks and aviation.
International Energy Agency, World Energy Outlook 2019
Lighter, smaller cars could hold the answer, but the market’s preferences for large, heavy sports utility vehicles (SUVs) are working against this option.
“Most of the work done to develop lightweight materials and components in the past has been aimed at maintaining the vehicle’s weight while increasing its size,” Meilhan said. “All the efficiency gains achieved in the last 20 years – on the powertrain, through lighter components and better aerodynamics – have been nullified by the fact that cars have gained an average 10 kilograms in weight every year.”
Which means that the challenge for manufacturers is not just to engineer lighter cars, but to convince consumers that small is beautiful. “To reap the environmental rewards of those efficiency gains and substantially reduce CO2 emissions from passenger cars, it’s crucial to reorient the market towards smaller, lighter cars,” Meilhan said.
DRIVING NEW VALUE
Meilhan points to French car manufacturer Gazelle Tech as a model to emulate. “Gazelle Tech has almost halved the weight – and the fuel consumption – of its cars by making them entirely from composite materials while meeting all safety standards,” he said.
By partnering with a virtual prototyping software company, Gazelle Tech eliminated the cost of creating multiple physical prototypes. The result is a 10-piece composite frame that can easily be assembled by hand.
Accessibility is central to Gazelle Tech’s vision. While electric motors are targeted for European markets, the company is making an internal combustion engine version available for emerging economies. It also is building connectivity into its cars to support car-pooling.
To make manufacturing more efficient, the company has developed modular micro-factories that can be quickly installed close to customers, further reducing energy consumption and enabling Gazelle Tech to tailor its cars to local markets.
“They are particularly suited to emerging countries wishing to develop an automotive industry,” the company says of the factories on its website. “The deployment of these production units is accompanied by a transfer of technology to adapt our vehicles to local specificities.”
Another example comes from the US, where startup Canoo is drawing on talent from the technology and automotive industries to position itself as “the Netflix of cars,” with a model that allows customers to sign up for monthly subscriptions to EVs for private and commercial use. Described as “an urban loft on wheels,” Canoo’s first vehicle has room for seven people, combining the interior space of a large SUV with the footprint of a compact car.
THE ROAD AHEAD
In the race toward the EU emissions deadline, new technologies, skills and partnerships are proving essential to overcoming innovation roadblocks and engaging customers.
“Manufacturers will have to innovate across everything they do,” London-based consultant PA Consulting observed in a 2018 report. “That starts with getting the product right by focusing on R&D, leveraging partnerships and using agile approaches.”
As the industry rises to the challenge, some inspiring and innovative collaborations could emerge.
“The automotive industry has always been deeply pragmatic, and it will continue to be so,” said Peter Wells, professor of business and sustainability and director of the Centre for Automotive Industry Research at Cardiff Business School in Wales. “Important collaborations for its future will be across traditional industry boundaries: with the technology sector, energy suppliers, car sharing groups and the diverse array of new entrants around electrification, such as those from consumer electronics.”
Transparency also will be essential as companies encounter increased scrutiny from regulators and consumers.
“Car manufacturers need to retain public, political, investor and regulatory trust,” Wells said. “Along with the accumulating pressure on climate change and carbon emissions, and the nascent interest in the circular economy, the basic legitimacy of the industry and the products or services it supplies is under the spotlight.”
Transport and energy consultant Meilhan believes that far-reaching regulatory support is a crucial next step to support manufacturers’ efforts.
“One way to reorient the market would be to penalize manufacturers that sell heavier cars and use the funds to incentivize and subsidize the production and sale of lighter cars,” he said. “This could extend to electrification, with a carbon footprint standard so manufacturers who use high-emission electricity to produce their vehicles are penalized to subsidize those who build cars in low-carbon areas.”
A long road remains to be traveled before zero-emission transport becomes a reality. But as the industry works towards the EU targets, its collaborative efforts could transform not only the car and its relation to the environment, but also the networks, business models and experiences that extend through its lifecycle.
