Cars, Composition and Climate Change

The Automotive Industry in an Extinction Rebellion World – Part 2.

As COP26 approaches and countries and individuals review their carbon footprint, the automotive industry is firmly in focus. Moreover, throughout the pandemic the sector has remained centre stage in global business, whether suffering from lockdowns, facing chip supply shortages, or confronting technological and regulatory change.

The past 18 months have seen unprecedented disruption to both sales and the web of global supply chains upon which the industry depends, yet the fundamental challenges it faces remain the same.  At the same time, the automotive industry has felt more acutely than most sectors the rise of ESG; for established industry players, as well as disruptive newcomers, a well-evidenced ESG capability has become essential for access to capital and the licence to operate.

As investors start to prioritise the environment, automotive valuations have reflected a clear investor preference for electric vehicle (EV) disruptors over industry stalwarts, but we are also seeing evidence of the resilience and adaptability of the more established OEMs, which are also embracing ESG.

The Auto Sector – Pre-pandemic

In early 2020 Fidelio and Freespee co-hosted a Board breakfast on the subject of “The Automotive industry in an Extinction Rebellion world” – one of our last face-to-face events before breakfasts became webinars, and roundtables moved online. Though the world has changed significantly in the interim, the key strategic priorities for the automotive sector remain consistent and relevant:

  1. The Path to Net Zero
  2. Boards and Government – Owning the Narrative
  3. Consumer Focus
  4. Diversity, Talent, and Innovation

The Auto Sector – What’s New?

In many ways the pandemic has simply thrown these strategic imperatives into sharper relief. It has opened the minds of both Boards and Executives to the pace of change: the scale and speed of external impacts on the business but also the extraordinary ability of individuals and companies to adapt, including through digital adoption. This is reflected in some of the key developments in the sector since Fidelio’s February 2020 Board breakfast:

  • The trend towards online retail has not spared the sector, with the success of start-ups in used cars and the embracing of innovative distribution models by new brands.
  • The value proposition is being sharply defined by supply and demand with a surge of interest in used vehicles as lead times on new vehicles are stretched.
  • Electric vehicles have gone from strength to strength among both challengers and, importantly, incumbents who have refused to let a good crisis go to waste. Significant challenges in affordability and the establishment of national charging networks remain. As a society we need to make sure that this transition is a just one.
  • Truly self-driving vehicles remain more a vision than a reality, with most manufacturers downplaying the arrival of “Level 4” or “Brain Off” vehicles any time soon.
  • Innovation in all aspects of vehicles continues apace, with electric drive systems and battery recyclability a particular focus. Traditionally the automotive sector was quite closed and hierarchical and the need for innovation is bringing in new talent from different backgrounds and sectors.
  • Hand in hand with the need to promote innovation, attract talent and satisfy the appetite of investors for ESG, we are seeing a much greater focus on diversity. Fidelio is involved here particularly at Board and Executive level and in the first instance with a focus on gender but, as in other sectors, this is opening up a much broader D&I discussion, which is critical for any company or sector that wants to remain an employer of choice.

To read the Overture “Automotive in the Extinction Rebellion World: How Diversity and Innovation Can Contribute to the Industry’s Response to Climate Change” please click here.

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