Automobile manufacturers continue to make headlines as they prepare for a future without fossil fuels by expanding their EV production capacity and improving renewable energy infrastructure in the communities where they operate. However, this time we see significant investments to go alongside their latest major announcements.
Automobile companies are pushing environmental investments in recent weeks on our ESG Safeguard platform. During our analysis in our latest Webinar this week, we highlighted Amazon for environmental investments and noticed that many of the firms mentioned alongside it were companies entering the electric vehicle space.
Earlier this week, Toyota (7203:JP) announced it will build a massive $1.29B electric vehicle battery plant in North Carolina. This marks a big change as Toyota has long been opposed to electric vehicles, opting for hydrogen and hybrid solutions until now. In the past Toyota has had some success with hydrogen for public transportation in Japan in conjunction with the Japanese government, but at this point, hydrogen feasibility for anything smaller than utility-scale vehicles has largely been abandoned by most major companies. Toyota also formed a partnership with Chinese auto manufacturer BYD, with the goal of bringing an EV to market by 2022 that will sell for roughly $30,000. These moves mark Toyota’s entrance into an increasingly competitive EV market.
This week Volkswagen (VOW3:DE) invested in a 100 GWh wind farm in Sweden. The wind farm is the largest renewables project in their portfolio now. The company has twenty more renewables projects planned in Europe through 2025 that will provide a whopping seven terawatt-hours of energy. Manufacturing is just one component of VW’s strategy, and the company knows widespread adoption of electric vehicles will require a major infrastructure overhaul as well.
Volkswagen also signed a three-year, $2B loan agreement to fund their carbon transition with the interest rate linked to their performance on emissions reductions. This is the first loan of its kind signed by Volkswagen, and brings real accountability to the company when it comes to reaching their climate targets. Our analysis shows that this was a voluntary measure, furthering the assessment that Volkswagen is in it for the long haul. The company committed to unseating Tesla in the EV market, and at the very least, to defend their home-market in Europe from Tesla.
Not to be outdone, Nissan (7201:JP) announced plans last week for a new solar farm expansion at their Sunderland manufacturing site in the UK. The development will begin this month and is set to complete as early as May 2022. As a side note, this marks a commitment by Nissan to retain operations in the UK following Brexit. The production facility for the popular Nissan Leaf has been using renewable energy on-site for 15 years. This latest expansion is for increasing battery production, specifically. Nissan has committed to have 23 EV models available worldwide by 2030.
The transition to electric vehicles has not been easy, and there is still a long road ahead. Unseating fossil fuels as the primary source of energy in transportation is taking massive capital outlays from large companies. These investments reflect that it is not only about the production of a new form of vehicle, but also the revamp of the infrastructure that has long been geared towards fossil fuels.
Over the past year, the analysis generated by our ESG Safeguard platform reflects an increasing market consensus as many different industries have embraced renewables: from capital goods, to vehicle manufacturers, to major energy and utility companies. Great progress has been made, and from the continued expenditures we are seeing from large corporations, the changes are just getting started.
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This communication does not represent investment advice. Transcript text provided by FACTSET and S&P Global Market Intelligence.
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