Auto execs see long road to being profitable, carbon neutral

PARIS -- Automakers need to change the way they tackle the huge challenge of achieving carbon neutrality by looking at it as a business opportunity, attendees of the Automotive News Europe Congress held in Paris last month were told.

Global companies such as Hyundai, Toyota and Renault have set ambitious targets to become carbon neutral amid a mandated shift to electrification.

Selling more electric vehicles in Europe and globally will help cut their overall carbon footprint in the use phase, but also exposes them to a very different raw-material supply chain that increases CO2 use in the production phase.

The same companies are also being encouraged to take a closer look at their existing fleet and establish how to either extend the life of cars already on the road or, if they're terminally broken, recycle parts or materials.

The topic of sustainability "dominates each forum we go to," Toyota Europe Chief Operating Officer Matt Harrison told attendees at the Paris event.

"The majority of questions are not on financial performance, market share, volumes or product but on this topic. It's what people care about," Harrison said.

Only by looking at the problem from a business perspective can companies make it work, said Fredrika Klaren, who is Polestar's head of sustainability.

"How can a company ever expect to be profitable going forward without sustainability at the core of their offer and their business and their brand?" she said. "To me, that equation is impossible."

Battery-electric vehicles have long been heralded as the best replacement for internal combustion engines to cut the need to burn fossil fuel.

However, the extra CO2 needed to make the batteries in particular has come under greater scrutiny recently, in part due to Polestar's 2020 Life Cycle Assessment report that concluded the reduction in CO2 emitted during the production and use phase of the highest-spec Polestar 2 electric fastback sedan compared to a Volvo XC40 diesel dropped to as low as 14 percent depending on the energy mix.
 

Even much of that report boiled down to guesswork due to the lack of transparency in the supply chain.

"[Automakers] know their Tier 1s and that is basically it," Klaren said. "We had to use generic numbers, so we are not really reflecting the true situation in the supply chains."

‘Corrupt industry'

Klaren also warned that automakers needed to tackle "the most notoriously corrupt industry in the world" -- the metals and mining industry -- in its bid to create a realistic carbon footprint figure.

"We have to face this head-on as an industry if we are ever to rely on our data," she said.

Raw material mining and refining might be increasing the carbon footprint of vehicles in the production phase, but electric cars are still much cleaner throughout their life cycle if you take into account gas production, said Martin Sander, head of Ford's Model e electric division in Europe.

"When you look at the sustainability of the whole combustion-engine model, and the way we are pumping oil out of planet -- including from oil sands in Canada -- you have to ask yourself is that the right thing to do?" he said.

Sander also pointed to the notorious inefficiency of combustion engines -- as low as 30 percent -- when generating power from fossil fuels.

"Overall, the balance for electric vehicles is much better at Ford," he said.

Hundreds of gigawatt hours

Stripping CO2 production out of the battery chain is hard, but not impossible. Right now, battery plants are energy-intensive, said Sebastian Wolf, head of Volkswagen Group's PowerCo battery division.

"We are talking multiple hundred gigawatt hours per year of energy," he the Congress.

VW is addressing this with renewable energy at its planned battery plant in Sagunto, Spain, that is due to start production in 2026 with initially 30 percent of its electricity generated by 240 hectares of solar panels planned nearby.

VW will also ship battery components across Europe using trucks that run on electric power instead of diesel, Wolf said.

Battery technology will change, reducing the need for key minerals such as cobalt or nickel that need to travel thousands of miles from mine to refining center and production line.

Sodium iron batteries could be good low-cost, lower-carbon alternative to lithium ion for vehicle applications where energy density was less important, Wolf said.

Battery management, recycling

Battery management is another key aspect to extend battery life, and therefore vehicle life, as well as possibly reducing battery size requirements.

Kamel Azzouz, head of research and innovation at Valeo Thermal Systems, told the Congress about a new method to cool battery cells directly using a dielectric (non-conducting) fluid developed by TotalEnergies delivered via a Valeo thermal system. Better cooling increases range and allows more frequent fast charging.

Recycling battery materials will also play a much more important role as they come to the end of their life.

Their core minerals will be much easier to access for a much reduced carbon bill, Anna Sosnowik, business development manager for Ascend Elements in Europe, told the Congress. "The performance of the material is as good or even better than virgin material," she said.

‘We need mining'

Thinking we can do without mining altogether, however, is unrealistic, argued Colin Mackey, managing director of Rio Tinto's European Operations, including the company's Jadar lithium project in Serbia.

"Recycling is fantastic, it's going to make a difference, but we need mining. There just isn't enough recycling," he said.

It's not true to say mining is always the bad guy though, Mackey said in defense of his industry.

"The reality is that sustainable mining is possible. We do have a legacy; We have been around a long time and we have not always got it right. But we have learnt from that," he said.

Mackey referenced Rio Tinto's gradual shift to electrify its truck fleet as an example of actions in the industry to cut its carbon bill.

The additional cost to electrify and reduce the carbon footprint is real, however.

Higher cost ‘just the reality'

"We are already paying more for the raw materials for those eco-friendly vehicles," Hyundai Europe CEO Michael Cole, said. "We have to accept that it's like when you go to the supermarket and the organic food is more expensive than the non-organic. That's just the reality."

Recycled battery materials currently cost more than virgin, Ascend's Sosnowik admitted, although the company was working to bring that down.

The huge amount of power meanwhile needed to make batteries is cripplingly expensive. "The energy cost in Europe is killing the industry," PowerCo's Wolf said.

New revenue streams

But there are money-making opportunities within the wider push to lower carbon output, and not just from a brand-building perspective. For example, Toyota forecasts that its business unit focused on recycling and refurbishing used vehicles could one day generate 15 percent of its profit.

"If you define the full scope of that, then there is a huge opportunity to create additional new revenue streams," Harrison said.

The key was tracking used vehicles, maximizing their resale, extending their useful life then disposing of them in the most profitable way possible, which also means wasting very little.

Renault is another looking to squeeze more use out of its cars, and the Congress event included a visit to the company's "Refactory" at the repurposed Flins facility, near Paris. There Renault employs 2,000 people stripping and refurbing used cars within the company's The Future is Neutral business unit.

"This is an industry that will be booming because of regulation," Renault CEO Luca de Meo told the Congress.

The use of Flins for the Refactory was partly to give new life to a once-thriving car plant and avoid the "social bomb" of shutting it, de Meo said.

Renault is now on the hunt for other businesses to either buy or partner with to help grow The Future is Neutral.

Collaboration is key

Getting together with companies you perhaps don't normally work with will be key to reducing the carbon footprint.

Polestar's Klaren encouraged car companies to collaborate on establishing a more accurate carbon footprint of their (often common) supply chain.

The industry was perhaps too secretive when it came to carbon-reducing technology, argued Valeo's Azzouz.

"When we have a breakthrough, we need to find some way to break that confidentiality," he said.

Meanwhile Rio Tinto has invested in companies well outside its core mining interests as it seeks to understand its new customers.

"We even started up a little lab to look at battery technologies. Not because we want to make batteries but so we can learn the language," Mackey said.

For Klaren at Polestar, however, the automotive industry is not moving nearly fast enough. The company's recent research suggests that the car industry has 80 gigatons of carbon left to emit if it want to do its part to cap the average warming across the global to 1.5 C, the target set by the 2015 Paris Agreement.

That would require vehicle makers to stop selling fossil-fuel cars after 2032 globally, to reduce production emissions by 80 percent by the same date and for countries globally to only produce renewable energy by 2033. She said: "If we do this as an industry together at the same time, within this time frame, we have a shot."