Auto Parts

Auto Parts

Companies in the Auto Parts industry supply motor vehicle parts and accessories to original equipment manufacturers (OEM). Auto parts companies typically specialize in the manufacturing and assembly of certain parts or accessories, such as engine exhaust systems, alternative drivetrains, hybrid systems, catalytic converters, aluminum wheels (rims), tires, rearview mirrors, and onboard electrical and electronic equipment. Although the larger automotive industry includes several tiers of suppliers that provide parts and raw materials used to assemble motor vehicles, the scope of SASB’s Auto Parts industry includes only Tier 1 suppliers that supply parts directly to OEMs. The scope of the industry excludes captive suppliers, such as engine and stamping facilities, that are owned and operated by OEMs. Similarity, it excludes Tier 2 suppliers, which provide inputs for the Auto Parts industry.

‍

Source: SASB

The automotive sector is undergoing a transformation towards sustainability due to the increasing demand for mobility and the need to reduce CO2 emissions by at least 50% by 2030. The traditional assembly-line manufacturing process is resource-intensive and unsustainable. To address this, companies are implementing circular economy, battery recycling, biodegradable components, and sustainable processes in research, development, and manufacturing. Electromobility, shared mobility services, autonomous driving, and connected vehicles are driving sustainable investments in the industry. Employee training and cross-industry collaboration are also crucial in fostering change and increasing supply chain visibility.

‍

Industry Characteristics

• Traditional assembly-line manufacturing processes – many still in use today – use huge amounts of energy, metals, plastics, toxins, and manpower; all leaving behind a massive carbon footprint. Source: Forbes
• One report (Auto Environmental Guide - Greenpeace) estimated that the 86-million cars that were sold in just one year (2018) accounted for 9% of global greenhouse gas emissions. Source: Forbes
• Big and small players in the automotive industry are increasingly feeling the pressure to rethink the way they operate. They must reevaluate everything from the design and engineering stages, through the manufacturing and shipping processes, all the way to how vehicles operate, how they are serviced, and how they are dealt with at the end of the product lifecycle. Source: Forbes‍
• By 2030, global demand for mobility is set to increase by 70%. At the same time, the automotive sector must reduce carbon emissions by at least 50%. Source: Accenture

Sustainability Impact

• Climate change and carbon emissions - Car manufacturers are required by lawmakers to reduce their carbon emissions both during vehicle manufacture and the emissions of the vehicles themselves. In this context, the use of alternative powertrains such as fuel cells play an important role. Source: PwC
• Sustainability along the value chain - As natural resources become more and more scarce, sustainable value chains are becoming more and more important for the automotive industry. They are based on the principle of reusing and recycling resources. Car manufacturers and suppliers are considering how to implement innovative solutions such as a circular economy, battery recycling, biodegradable components and sustainable processes in research, development and manufacture. Source: PwC
• Digital responsibility - As self-driving and connected vehicles become more common, the focus will shift to issues such as unlocking digital value, data protection and data security. On the one hand, car manufacturers and suppliers have to define digital functionalities and technologies that are necessary in order to implement sustainable solutions. Source: PwC

Sustainability Investments to watch

• The transformation in the automotive industry is being driven by four main trends: electromobility, shared mobility services, autonomous driving and connected vehicles. The growing demand for electric cars and innovative mobility solutions shows how important the issue of sustainability has now become. Source: PwC
• Employees are being reskilled to acquire advanced technical skills, and line production operations are being replaced with modular production methods, where the car stays in one place, and specialized highly-skilled teams come to the car to work on it at different stages of the process. This has a positive impact on sustainable measures as it reduces the amount of space, energy, and workforce required in the manufacturing process. Source: Forbes
• Some key ways the industry is addressing these ongoing challenges is by encouraging more cross-industry collaboration, and using advanced technology to increase visibility across the supply chain. Supply chain visibility is imperative to future success. Networks of automotive OEMs and technology companies are coming together to address industry challenges such as supply chain issues, secure data transfer and management, electrification of the industry including vehicles and charging stations, battery lifecycle management, and sustainable business practices that lead to carbon footprint reductions. Source: Forbes
• (1) Plan for sustainability in the design and engineering stages by using relevant data to track, measure, and reduce emissions across the product lifecycle; (2) Use logistics processes that optimize loads to increase efficiency and decrease emissions and carbon footprint; (3) Operate assets and equipment in an energy-efficient manner that is safe for the environment and for the workforce. Source: Forbes
• WBCSD’s report puts forward the business case for a circular economy in the automotive industry. Circularity requires co-innovation, partnership and data transparency among automotive companies to align on a shared vision of industry-wide circularity and unlock new value pools. Source: WBCSD