JAPANESE AUTOMOTIVE COMPANIES TAKE THE LEAD IN NEW CDP AUTO LEAGUE AS MOST PREPARED FOR STRICTER REGULATION
An innovative approach to investor research from CDP highlights which of the world’s largest auto companies are best positioned to benefit from regulatory change and those that will struggle without adapting their business models. The international not-for-profit organization holds the largest collection of corporate environmental data.
In ‘No room for passengers: are auto manufacturers reducing emissions quickly enough?’- CDP’s sector research ranks auto manufacturers in a league table (see end) based on a number of different emissions-related metrics. Taken in aggregate, these metrics could have a material impact on a company’s earnings in a global auto market where emissions regulation is tightening. Fleet emissions regulation now covers more than 80% of global auto sales.
This research focuses on the regulation in the EU, US and China with the ranked companies, which responded to CDP’s questionnaire, accounting for around 83%[1] of the global auto market by sales volume.
These rankings are not intended to identify definitive winners and losers for investment purposes, but rather to indicate strategic advantage in an industry where there is a significant regulatory impact on all major auto markets.
The key findings include:
- Japanese companies rank highly with Nissan topping the league, Toyota in second place and Mazda in fourth. French company Renault is in third place. These companies rank highly due to leadership in fleet emissions reduction and advanced vehicles which include battery electric vehicles (BEVs), plug-in hybrid electric vehicles (PHEVs) and fuel cell vehicles;
- General Motors and FCA risk significant penalties in both the EU and US potentially equating to US$1.7bn (33% of EBIT) and US$574m (15% of EBIT) respectively. Ford is also at risk of a penalty in the US of US$889m (or 16% of EBIT)[2];
- Scope 1&2 emissions (the manufacturers’ own emissions) account for around only 3% of auto manufacturers’ total emissions while Scope 3, which includes fleet emissions, account for 75%.
Paul Dickinson, executive chairman of CDP says: “Whilst there is much debate about the implications of the current low oil price, this report shows that as regulation tightens some companies risk high financial penalties. These companies’ shares are held in the portfolios of the world’s largest institutional investors and the way they approach regulation and invest in future technologies will affect financial performance.
Our new research can better inform investment decisions and enable investors to engage with companies. CDP believes that the right regulation can enable change for the better. The top ranking auto firms are investing in greater engine efficiency and exciting new electric and hybrid vehicle ranges which will increase sales, help meet emissions targets and create cleaner air for us all.”
Please find the full release including the super-league table at the link below:
[1] Derived from Bloomberg data but adjusted by assigning total sales made by Chinese joint ventures (JVs) to their respective non-Chinese OEM partner.
[2]The potential penalties facing OEMs at risk of missing their targets are CDP estimates. They do not take into account any credits available to OEMs to assist the transition of their fleets to meet regulatory targets. It is as yet unclear if and when these penalties will be imposed in full. The penalties are for illustrative purposes only.
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