Auto Industry: Emissions vs. Economics

Replacing internal-combustion engines with hybrids and electric vehicles (EV) has been a key trend for auto-industry stakeholders focused on decarbonization. Often forgotten in the discourse around electrification, however, are the critical implications of this major change for carmakers beyond emissions reductions, including its impacts on corporate strategy and fundamentals, such as profits.

It may therefore make sense for investors looking to identify leaders and laggards in the auto industry, to look further than pure CO2 reductions or even company-declared EV targets and to focus more on company-specific exposures to markets, technologies and on how companies are managing the tradeoff between emissions and economics.

In this report, we assess those external drivers and the pace of the auto industry’s transition in key markets, including a look at government policy support and remaining technological barriers.

EVs remained a loss-making technology for a majority of players in 2023

Subset (n=7) based on largest by 2022 sales volume of pure electric vehicle manufacturing companies within the MSCI ACWI Index (as of June 30, 2024) that disclose EV volumes and EBIT for EV operations as well as Ford which discloses both EV volumes and EBIT (Ford Model E). Included Ford Blue (ICE) division to illustrate comparison between ICE and EV operation profitability within same company. Data as of May 31, 2024. Source: Company disclosures