GM to Go Carbon Natural by 2040

On Thursday, GM announced a transformation to its global products and operations toward becoming carbon neutral by 2040. “General Motors is joining governments and companies around the globe working to establish a safer, greener, and better world,” said Mary Barra, GM Chairman and CEO. “We encourage others to follow suit and make a significant impact on our industry and on the economy as a whole.”

The company's focus will be on "offering zero-emissions vehicles," while building the necessary charging infrastructure to promote their adoption. The automaker also stated that it will maintain high-quality jobs "needed" to meet these "ambitious" goals.

The announcement comes soon after Joe Biden's swearing-in as the 46th President of the US. The new US administration has a strong stance on policies aiming to tackle climate change, promoting clean energies while strengthening the US’ manufacturing footprint. That being said, GM had already made an investment of US$4.5 billion in EV production before the election.

GM plans to decarbonize its portfolio by transitioning to battery electric vehicles or other zero-emissions vehicle technology and sourcing renewable energy. Decarbonizing implies the company seeks to mitigate its environmental impact by cutting emissions. Meanwhile, it will also rely on carbon credits, which are permits for emitting greenhouse gases obtained from other environmental initiatives. "As one of the world’s largest automakers, we hope to set an example of responsible leadership in a world that is faced with climate change," wrote Barra on her personal LinkedIn account.

Environmental Pillars

GM's strategy is based on three pillars: electrification, renewable energy and carbon offsets and credits. Seventy-five percent of the goal, according to GM, relies on GM's products. The commitment is for 30 percent of all new models by 2025 and 40 percent of the company's models in the US to be battery electric.

The company will source 100 percent of the energy it uses at its US sites from renewable generation by 2030 and at global sites – including Mexico – by 2035. The remaining carbon emissions will be offset by GM's investment in carbon credits. GM's carbon neutral commitment also applies to its global product portfolio and owned operations. The company announced that is working with some of its largest suppliers to create a sustainability council to share best practices and set ambitious targets to "reduce emissions, increase transparency and source more sustainable materials."

What Role Will Mexico Play?

The company has traditionally been the top producer and exporter of light vehicles in the country, being the US its main destination. This implies an extensive supply chain network that will need to adjust its compliance and accountability processes to meet new decarbonized standards.

The transition toward a fully electrified portfolio will not be smooth from the suppliers’ perspective. On the one hand, USMCA is increasing the RVC of a vehicle, while according to the Center for Automotive Research (CAR), “in every scenario, average vehicle prices rose and sales fell.” According to the Automotive Industry Action Group (AIAG)’s survey on the future of the automotive supply chain, “the transition to EVs is forcing manufacturers to walk a delicate line as they invest heavily in new electric technologies and components while simultaneously meeting continued market demand for ICE vehicles.”

Sales in the US have been around 17 million new vehicles a year since 2016 and in 2020 they were above 14 million. With a nascent EV supply chain and USMCA strict RVC requirements, there is a clear opportunity for Tier 1 and Tier 2 suppliers in the country to strengthen their relationships with customers and even look for new long-term partnerships.