With the cost of motoring rising faster than inflation and vehicle prices—both new and used—continuing to climb, consumers are increasingly turning to finance when purchasing their next car. At the same time, ongoing financial pressures mean customers are more inclined to shop around for the best possible deal. Acquiring new customers is already a challenge,
The last few years has seen the accelerator pressed firmly down when it comes to encouraging sustainability within the automotive sector.
A report by the Society of Motor Manufacturers and Traders shows how the amount of renewable energy generated on production sites is rising, as is the use of green energy tariffs. Combined with other methods of energy conservation, such measures are leading to a reduced carbon footprint from the sector.
Other examples include a reduction in industry waste going to landfill, plus a rise in the amount of material that is being recycled.
However, such measures are just the tip of the iceberg. Let us examine some of the other key patterns that are emerging when it comes to sustainability in the automotive industry.
Why is sustainability important in the automotive industry?
There are many reasons why we have seen a push towards a much more sustainable way of working in recent years.
The automotive industry has historically been a significant contributor to environmental degradation, primarily through greenhouse gas emissions, air pollution, and resource depletion. However, thanks to high profile spokespeople and – especially in today’s digital age, influencers generating intense media and public scrutiny, the tables are turning.
By adopting sustainable practices, such as reducing emissions, using alternative fuels, and minimizing waste, including when it comes to the manufacture and usage of auto finance software, the industry can mitigate its environmental impact and help address climate change and air quality issues.
Regulatory pressures are also having an effect. Governments worldwide are implementing stricter regulations and emission standards to address environmental concerns and combat climate change. Automakers must comply with these regulations to avoid penalties and maintain market access. Embracing sustainability initiatives allows companies to meet regulatory requirements while demonstrating their commitment to environmental responsibility.
Consumer demand is also becoming an important factor as they increasingly shift to more sustainable products, practices, and auto finance solutions. Many consumers prioritize environmental and social considerations when making purchasing decisions, including the choice of vehicles and how they will pay for them. Manufacturers, together with those who work in auto finance, who prioritize sustainability can attract environmentally conscious consumers and gain a competitive advantage in the market.
However, despite changes happening, the global automotive industry is vast – in fact, it is one of the largest and most significant sectors in the world economy, worth over $3.5 trillion USD annually.
For a monolith such as this, change does not always happen easily. Let us focus on some key sustainability challenges.
Transition to Electric Vehicles
While electric vehicles offer significant environmental benefits, including zero exhaust emissions, widespread adoption poses challenges such as high upfront costs, limited charging infrastructure, and range anxiety.
Additionally, the environmental impact of manufacturing EV batteries and sourcing critical materials like lithium and cobalt needs to be addressed.
Carbon emissions – even for electric vehicles
While electric vehicles produce zero exhaust emissions during operation, the manufacturing process still generates carbon emissions, primarily due to energy-intensive processes and the production of materials like steel and aluminium.
Reducing the carbon footprint of automotive manufacturing requires improving energy efficiency, using renewable energy sources, and adopting low-carbon production techniques.
Supply Chain Sustainability
The automotive supply chain is complex and global, involving numerous suppliers and raw materials sourced from diverse regions. Ensuring transparency, ethical sourcing, and responsible environmental practices throughout the supply chain present significant challenges, particularly regarding the extraction of raw materials like rare earth metals and minerals.
End-of-Life Vehicle Management
Managing end-of-life vehicles presents challenges related to recycling, reuse, and disposal of automotive components and materials. Developing efficient and environmentally friendly methods for dismantling, recycling, and repurposing end-of-life vehicles is essential for reducing waste and maximizing resource recovery.
Conclusion
The automotive industry of today operates in a much more sustainable manner than it did even a few years ago.
However, there is still some way to go. This is not because of a lack of willingness for the industry to change, rather it is much more because change will take time, largely because of the sheer size of the global sector. There are so many multiple components that need to adopt a completely new infrastructure and working manner that it is far from being an overnight process.
However, the overall industry, including automotive finance as well as manufacturing, has certainly shifted up a gear. Let us all work together to put it into top gear as soon as we possibly can.