Tough questions about EV trends: CHEP explores the impact of transport electrification on the automotive supply chain and asks if batteries are the only path to sustainability.
PARIS, March 2023. – Global leader in reusable packaging solutions, CHEP, has published the second in a series of Supply Chain Trend reports: 6 TRENDS as we transition to a sustainable automotive industry.
Road transport accounts for over 10% of global greenhouse gas emissions, as highlighted at COP26 where over 30 countries, six major vehicle manufacturers and other actors committed to all new car and van sales to be zero emission by 2040 globally, and 2035 in leading markets.1 With electric vehicles (EVs) containing less – and different – parts to combustion engine vehicles, CHEP’s latest report looks at the organization of new battery supply chains and its impact on carmakers.
This electrification ramp-up also equates to 2 billion EVs on the road by 2050 for the world to hit net zero (Source: International Energy Agency). As a consequence, the question is not only where batteries will be made, but if they can be manufactured and transported sustainably.
“A sustainable automotive supply chain – just like the vehicles it manufactures – is not just about electrification. It is a combination of many parts,” says Jan Krukau, Finance Director CHEP Automotive Europe & North America.
CHEP’s report examines the juxtaposition of promoting transport electrification whilst ensuring a sustainable transition by highlighting six key trends:
1 China is currently ahead of the game – According to the CHEP report, “all roads lead to China” regarding vehicle electrification. With four of the ten largest battery producers headquartered in China, it is currently at the epicenter of EV lithium-ion battery production, with four of the ten largest battery manufacturers headquartered there.
2 European and American OEMs are turning to nearshoring and importing – As margins get tighter, there is a movement of European and North American OEMs to outsource to cheaper locations, including offshoring to cheaper locations. There is a rise in nearshoring for non-battery related components.
3 Doubts are emerging when it comes to meeting electrification targets – EV vehicle sales represented 7.8 million vehicles in 2022, representing 10 percent of new car sales. While the International Energy Agency (IEA) says we will need about 2 billion EVs to be on the road by 050 for the planet to hit net zero, we could be facing lithium shortages by 2025. “How feasible are these electrification targets?” the CHEP report asks.
4 A broader vision of sustainability is opening up – CHEP reminds readers that there is a “social” component of ESG goals, and that the current path to automotive sustainability must be considered. For example, the report notes, Ford announced in Auguest 2022 that it would shed 3,000 jobs from its global workforce. The Economic Policy Institute suggested in a report in
September 2021 that the US could shed a total 75,000auto jobs by 2030 if electric cars rise to just 50% ofvdomestic sales. In Europe, another study exploring the same issue determined that electrification in automotive could eliminate 275,000 jobs in that market by 2040.
5 Low-carbon innovation is being developed in existing fuel powered vehicles – Under the radar, technologies are being developed such as near carbon neutral fuels and exhaust aftertreatmennt systems. “These investments may be less visible, but they are also shaping the supply chain of tomorrow and represent an important part of our net-zero transportation future,” CHEP notes.
6 Packaging and logistics solutions are being revisited – CHEP stresses that sustainability in automotive is about transitioning to less carbon intensive supply chains while respecting the people and livelihoods that have built the current supply chain. A sustainable supply chain must embrace sustainable sourcing of raw materials as well as downstream transportation of aftermarket parts.
“Our pooling concept has never been more important as we push towards 100% EVs on our roads. Sustainable transport is simply a myth if its manufacture relies on a carbon intensive supply chain,” notes Murray Gilder, VP CHEP Automotive.
Pioneering circularity in the supply chain since its beginnings, CHEP has been leading the way with its ‘share-and-reuse’ pooling model of pallets and containers that eliminate wasteful one-way packaging. CHEP develops not only pooled packaging solutions, but offers clients transport optimisation services built on four pillars: plant network optimisation, transport orchestrations, multi-modal services, and transport collaboration.