investment viewpoints
VW shifts to electric vehicles in the race to net zero
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Putting emissions on ice
Transportation is the third-highest producer of C02 emissions, accounting for almost a quarter of emissions globally2. Especially when downstream scope 3 emissions are taken into account, it is a hard-to-abate sector where real decarbonisation is needed to make the net-zero transition happen.
It is therefore essential that the sector features what we call ‘ice cubes’: transition leaders whose genuine progress on emissions reduction is helping to cool the economy.
Mass adoption of electric vehicles (EVs) is critical in reducing emissions and air pollution, which has resulted in the UK, Canada, France and India officially banning the production of new diesel and gas cars in the years to come. Other mass car-producing nations – such as the US, China and Japan – are looking into doing the same3.
As a result, EV manufacturing is accelerating and more household marques are on the road to an electric future. This shift has investment implications: car manufacturers who are gearing their business models towards cleaner cars should overtake those who are unable or unwilling to change and will inevitably incur transitional risks, as consumers tur away from fossil-fuel-based cars and regulators and markets request the disclosure of downstream scope 3 emissions.
We believe Volkswagen (VW)4 is on the inside track, due to measures it is taking to reduce transitional business risks. From the nadir of ‘dieselgate’, VW has overhauled its operations to substantiate its rebranding as an auto manufacturer journeying towards a carbon-neutral future.
How is VW achieving real decarbonisation, why do we believe it is on the road to net zero, and why do we judge it to be an ‘ice cube’ whose emissions-reduction progress will help cool the economy?
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