Driving Toward Sustainability: The Auto Sector and Climate Action

Throughout history, the manufacturing industry has stood as a cornerstone of the global economy, driving progress and innovation across a multitude of sectors. Yet, in recent years, a pivotal challenge has emerged: the pressing need to address the environmental impact of its direct and indirect emissions (Scope 1, 2 & 3). As the World Economic Forum reveals, the manufacturing sector contributes a staggering one-fifth of global carbon emissions and consumes over half of the world's energy resources. This realization has ignited a seismic shift in focus toward sustainability, with companies worldwide embracing renewable energy, innovative technologies, and circular economy models to mitigate their environmental footprint.

However, amid this transformative journey, one sector stands out as a pivotal player: the automotive industry. With its annual production of 60 million vehicles and an alarming emission of over 74 million tons of CO2, the automotive sector has become ground zero in the fight against climate change. Looking forward to 2050, with automakers committing to reduce CO2 emissions by 90% under the Paris Agreement, the sense of urgency is undeniable. As we strive toward a greener future, the urgency to decarbonize the automotive industry reverberates louder than ever, echoing through discussions and summits like the Mexico Nearshoring Summit, where I had the honor of moderating the panel, The Energy Factor: Decarbonizing Mexico's Automotive Industry. Alongside industry leaders, we explored Mexico's automotive landscape, and how it can pave the way toward a more sustainable tomorrow.

In Mexico, the automotive sector has experienced significant growth in recent decades, solidifying the country's position as the seventh-largest producer and fourth-largest exporter of vehicles globally. However, this growth has been accompanied by environmental concerns, including CO2 emissions and air pollution. In response to these challenges, automotive companies have initiated strategies within their facilities to diminish their environmental impact. Consider BMW's San Luis Potosi plant as an exemplary case, where a circular economy initiative fosters the recycling of 100% of waste. Through meticulous sorting and repurposing processes, the plant adeptly diverts a significant volume of material from landfills annually, totaling approximately 2,000 tons of cardboard, 1,000 tons of wood, 19.9 tons of PET, and 10.7 tons of aluminum. Additionally, forward-thinking companies are leveraging renewable energy sources to power their operations. Nissan's Mexican plants have become a benchmark for sustainability in automotive manufacturing by assembling 2.5 million vehicles with CO2-free energy, thus avoiding the emission of 668,000 tons of CO2. For instance, at its Aguascalientes plant, 90% of the energy used comes from greenhouse gas-free sources, such as biogas and wind power. Similarly, Audi Mexico Solar Park, with a capacity to generate 12,757 megawatt-hours (MWh) annually, is designed to supply energy to the company's Puebla plant, aligning perfectly with Audi's global commitment to achieving carbon neutrality across all its facilities by 2025.

As we witness these commendable initiatives, it becomes evident that the automotive industry is deeply committed to environmental stewardship and is setting the stage for sustainable manufacturing practices. However, it's crucial to recognize that the journey toward decarbonization goes beyond the factory walls. Value chain emissions (Scope 3), comprising a significant 85% to 95% of the industry's total, represent the indirect greenhouse gases emitted across the entire value chain (customers, suppliers, distributors, among others). Thus, to effectively combat them, fostering greater collaboration with all stakeholders involved is imperative, and while this poses a multifaceted challenge, it's indispensable for encouraging sustainable industrial economies.

Starting with suppliers, the automotive industry is spearheading initiatives to instill eco-conscious practices from the ground up. Audi's implementation of Sustainability Ratings sets a precedent, ensuring suppliers adhere to stringent environmental standards. Similarly, Mercedes-Benz's pledge to achieve carbon neutrality among its suppliers by 2039 is a bold step toward reducing emissions across the board. These efforts, combined with suppliers' own sustainability initiatives, are revolutionizing the industry's approach to decarbonization. At Solfium, we're proud to play a role in this transformative journey. Take, for example, our partnership with Brose, the world's fourth-largest family-owned automotive supplier. By implementing solar energy solutions not only within Brose's facilities but also catalyzing its adoption across its network of suppliers, a substantial reduction in CO2 emissions is achieved. Likewise, esteemed Solfium clients like Michelin, Swoboda, EXO-S, and Fischer are standing shoulder to shoulder with us, actively embracing sustainable practices and recognizing the pivotal role of renewable energy in driving meaningful change.

Although suppliers play a crucial role, it's essential to recognize that end-users also contribute to Scope 3 emissions. This is where the adoption of electric vehicles (EVs) emerges as a promising solution. With consumers increasingly prioritizing sustainability, the surge in EV sales, including a significant 44.3% increase in Mexico in 2023, reflects a global shift toward greener transportation options. By reducing reliance on fossil fuels, EVs offer a tangible means of lowering Scope 3 emissions. Remarkably, just one electric vehicle can significantly slash CO2 emissions by 3.7 tons compared to traditional gasoline-powered cars, highlighting their environmental impact. Thus, embracing EVs transcends mere strategy; it signifies a proactive response to evolving consumer demands and a pivotal stride toward a more sustainable automotive industry.

Nevertheless, while the involvement of all the value chain players in the automotive industry is crucial for achieving significant CO2 reductions in the country, the participation and support of the government are equally vital. Firstly, Mexico needs to accelerate the adoption of EVs as it lags many nations in automotive decarbonization efforts. While the European Union’s climate strategy includes a goal to cut transport emissions by 90% by 2050, the Climate Initiative Mexico aims for 90% of the vehicle fleet in Mexico to consist of electric and fuel cell vehicles by 2060. Furthermore, addressing the glaring reality of Mexico's current insufficient EV charging infrastructure, which in addition predominantly relies on non-renewable sources, is essential. This contradiction undermines the essence of EV adoption – why eliminate emissions at the tailpipe if the energy source perpetuates pollution? Hence, the introduction of solar-powered charging stations emerges as a potential solution. 

Secondly, regulatory frameworks in Mexico are poised to be instrumental in advancing decarbonization endeavors within the automotive sector. Although recent NOM-163 mandates more stringent controls on CO2 emissions for new vehicles, and the implementation of this regulation by 2030 is forecasted to prevent the emission of 8.9 million tons of CO2, further measures are imperative to address emissions comprehensively from the root. Internationally, exemplary initiatives provide models for effective action. For instance, last year, the European Parliament prohibited the sale of new gasoline and diesel cars in the European Union starting from 2035. Moreover, when it comes to larger vehicles, California's Advanced Clean Truck Regulation sets a precedent by requiring heavy-duty trucks to be zero-emission vehicles, with implementation commencing this year and full enforcement scheduled for 2035. 

The journey toward a more sustainable automotive industry is intricate, marked by a convergence of regulatory frameworks, technological advancements, consumer preferences, and global initiatives. While strides have been made in embracing electric vehicles, integrating renewable energy sources, and adopting circular economy practices, challenges persist, particularly regarding Scope 3 emissions and regulatory compliance. However, within these challenges lie opportunities for collaboration, innovation, and transformative change. By harmonizing efforts across governments, businesses, and consumers, the automotive sector can steer toward a more sustainable future.