What Daimler’s move on carbon-neutral cars says about the industry

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Workers clean a prototype of a Mercedes-Benz car before a laying of the foundation ceremony of the new ACCUMOTIVE battery factory in Kamenz, Germany, 22 May 2017. Daimler AG lays the foundation of a lithium-ion battery factory with an investment of around €500 million. [EPA/FILIP SINGER]

Daimler, one of the world’s leading manufacturers of premium vehicles, has announced new commitments to make its entire passenger car fleet carbon neutral by the close of 2039. This is the most ambitious timeline among any of the leading automakers and signals a rapid acceleration in the shift towards zero-carbon transport, writes Nigel Topping.

Nigel Topping is CEO of the We Mean Business coalition.

Daimler, one of the world’s leading producers of premium cars and commercial vehicles, is engineering a new future for the sector with its bold new climate commitment to make its entire passenger car fleet carbon neutral by the close of 2039.

The goal will see the Mercedes-Benz owner transform its entire operations – from the 2.4 million cars it produces annually (2018), to its production plants around the world and its supply chain – over the next two decades.

The move comes as incoming CEO Ola Källenius sets out his strategic vision for the company, which can trace its roots back to the late 1800s with the invention of the modern internal combustion engine.

“Let’s be clear what this means for us: a fundamental transformation of our company within less than three product cycles. That’s not much time when you consider that fossil fuels have dominated our business since the invention of the car by Carl Benz and Gottlieb Daimler some 130 years ago,” Källenius said.

In 2018, Daimler made strong commitments to electrify its range with an investment of $11.7 billion, stating that by 2022 it would bring more than ten all-electric vehicles (EVs) to market and electrify its entire Mercedes‑Benz portfolio.

By 2030 Daimler aims to have electric models make up more than half of its total car sales, including all-electric models and plug-in hybrids. In addition to cars, Daimler also aims to electrify its vans, trucks and buses, by rapidly transferring technology between the divisions. The company is focusing on battery electric mobility, but is also pursuing other solutions, including fuel cells or even eFuels as an option.

As part of the latest commitment, Daimler is striving for carbon-neutral production, using its Factory 56 in Sindelfingen, Germany, or its engine factory in Jawor, Poland, as good examples of how to use renewable energy and start carbon-neutral from the beginning. The company is moving from a value chain to a value cycle; Mercedes cars have a potential-recycling ratio of 85%. Plus Daimler is working with suppliers to strive towards carbon neutrality.

Daimler is also seeking close alignment with its workforce and their representatives to help manage the transition effectively and fairly.

“We prefer doing what our founders have done: They became system architects of a new mobility without horses. Today, our task is individual mobility without emissions,” Källenius said.

“As a company founded by engineers, we believe technology can also help to engineer a better future,” he added.

Sector shifts gears

These commitments to accelerating the transition to the zero-carbon transport future come as many of the world’s largest automakers race to electrify their fleets and cut emissions. Together these moves send a powerful signal that the transport sector is regearing to meet the exponential demand growth for EVs, while addressing the urgent need to act on air pollution and climate change.

Auto manufacturers have announced over $150 billion in investments to achieve collective production targets of more than 13 million EVs annually around 2025, according to the ICCT, though much more could be in the pipeline.

Earlier this year, German automaker Volkswagen accelerated plans to electrify its fleet, committing to launch 70 fully electric models by 2028, up from an earlier pledge to sell 50 by 2025. VW also set long-term ambitions to make the entire company CO2-neutral by 2050, including its factories, offices and cars.

The Daimler announcement brings forward this date by 11 years, demonstrating new leadership for the sector.

Back in March at the Geneva Motor Show, Audi underlined the direction of travel for the industry by showcasing only EVs at the event. The German luxury automaker unveiled four new fully electric models, four plug-in hybrids, but didn’t bring a single car that relies solely on the internal combustion engine to the show.

While last year, Swedish car manufacturer Volvo committed to phase out pure gasoline cars after 2019, focusing on electric or hybrid models only. And Volvo’s Chinese owner Geely committed that 90% of the brand’s sales would come from new energy vehicles by 2020.

With this growing ambition and action, we can also expect vehicle manufacturers to increasingly question the tactics of their trade bodies that delay rather than support their progress. If the companies have ambitions that far outstrip those of their industry representatives, then they are no longer serving the strategic interests of their members.

Demand drivers

One of the key reasons automakers are gearing up for the zero-carbon transport future is that demand for EVs is growing rapidly, both from commercial and corporate customers.

In the first quarter of this year, new EV sales in Europe exceeded 100,000 for the first time (125,400), while the number sold in China – the world’s largest car market – reached 254,000, a 118% increase year-on-year.

Meanwhile, companies are demonstrating their commitment to EVs through EV100 – a global business initiative designed to fast-track the uptake of electric vehicles and infrastructure, launched by The Climate Group. To date, 39 companies have joined EV100, including the world’s leading auto leasing company LeasePlan and the global logistics company Deutsche Post DHL Group.

They recognise that EVs are increasingly cost competitive and can achieve ranges that rival many traditional cars. As LeasePlan’s 2019 EV Readiness Index shows, driving an EV is now a truly viable option in an increasing number of European countries.

Policy is stepping up

Globally, the policy landscape is increasingly backing the rapid rollout of EVs as a vital tool for reducing urban pollution, spurred by a wave of litigation and increasing citizen demands for healthy air.

Several European countries have already embraced EVs as a core solution to these problems, as well as a key driver of growth. The UK, France, Norway and Sweden have all committed to phasing out petrol and diesel-powered light passenger vehicles completely by the end of the 2030s.

India has a stated aim to have every vehicle sold in the country powered by electricity by 2030 and China has increasing sales quotas for EVs – starting at 10% for 2019. In the EU, new limits on carbon dioxide emissions will take effect from 2021, and increase in 2025 and 2030.

Meanwhile 26 cities, states, and businesses unveiled plans last year to deploy zero emission vehicle fleets, with the #ZEVChallenge, led by The Climate Group, C40 Cities and the Under2 Coalition.

And just this month, a new Ultra Low Emission Zone is being introduced in London, to reduce harmful emissions from traffic and improve air quality, by charging motorists for using polluting vehicles.

Clear ambitious policies like these are vital to ensure the rapid and orderly transition to the zero-carbon transport of the future.

Källenius highlighted the importance of clear policy direction not only in the transition to EVs, but also for developing the required charging infrastructure and renewable electricity capacity to power the vehicles.

“The transformation to a sustainable mobility of the future will only succeed if the auto industry, energy suppliers and policy makers are working hand in hand. Carbon-neutral energy and a comprehensive infrastructure are indispensable for this system change,” Källenius said. “And we are open to a discussion on effective CO 2 pricing as well as incentives for low/no carbon technology – preferably on a global scale.”

Together, these policy moves, coupled with the demand signals from consumers, improving technology with reducing costs and strong supply signals from companies such as Daimler, are helping to accelerate the rapid transition to the zero-carbon transport system in the 2030s.

This is exactly the kind of systems disruption needed to deliver the goals of the Paris Agreement. Companies and countries that fail to match this ambition by setting a clear date for zero-carbon mobility in the 2030s will be the losers in this inevitable transition.

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