Why Automotive Manufacturers can Drive Decarbonisation

Automotive manufacturers are transforming to meet rising regulatory demands, evolving consumer expectations and international climate targets. 

For senior industry executives, this means embedding sustainability and decarbonisation into the core of product and process strategy.

In particular, manufacturers are shifting focus across electrification, materials, production methods and digital integration. 

According to recent data from PwC, original equipment manufacturers (OEMs) are redesigning both vehicles and their manufacturing systems to lower environmental impact and progress towards carbon neutrality.

Electrification and hybrid strategies take centre stage

AutoLeap, an auto repair shop management platform, reports that OEMs are investing heavily in battery technologies to improve energy density, reduce charge times and increase recyclability. 

In particular, electrification is moving quickly, with major manufacturers expanding electric vehicle (EV) portfolio.

Plug-in hybrid electric vehicles (PHEVs) and hybrid electric vehicles (HEVs) remain essential for markets where infrastructure or energy supply cannot yet support full battery electric vehicle (BEV) adoption. 

Dentons, a multinational law firm, has outlined how hybrids offer a practical path to lower emissions during this transitional phase.

The shift is not limited to passenger cars. Manufacturing leaders are applying electrification and hybridisation principles across commercial and industrial vehicle segments, adapting assembly processes and supplier integration models to support battery systems and modular vehicle platforms.

Circular design and low-impact materials enter production lines

Circular economy thinking is gaining traction within vehicle development and end-of-life planning. 

For example, Deloitte identifies the increasing use of recycled aluminium, bio-based polymers and interiors built from environmentally friendly materials.

OEMs are embedding recyclability and material recovery into product design. According to Research and Markets, strategies now standard across the industry include remanufacturing components and recovering raw materials for reuse. These changes influence sourcing decisions and reshape the role of Tier 1 and Tier 2 suppliers.

Sustainability targets require that each manufacturing stage delivers measurable gains. 

Martijn Karrenbeld, Global Market Sector Director, Industrial Manufacturing at Arcadis, says: “The potential for decarbonisation in industrial manufacturing is enormous. It is a major global consumer of energy and contributor of carbon, so every sustainability gain we make really matters.

“Wherever you are on your decarbonisation journey and whatever your motivation, maturity or measure, we’re keen to understand how we can work together to make a planet-positive difference.”

These shifts are not limited to physical products. Executives are revisiting legacy processes, upgrading enterprise resource planning (ERP) systems and implementing life cycle assessment tools to track material efficiency and carbon output at every production stage.

Manufacturing operations embrace renewable integration

Green manufacturing is now a core strategy. At the European Automotive Decarbonisation and Sustainability Summit 2025, OEMs reported using solar, wind and other renewables to power production facilities, while also modernising equipment to cut energy consumption.

PwC highlights that these operational changes are not isolated. Global supply chains are under review, with data transparency and energy monitoring at the heart of sustainability efforts. 

Procurement teams are under growing pressure to source from low-carbon suppliers and to certify environmental performance across all tiers.

Much of this change is being driven by an evolving regulatory landscape. 

The environmental non-governmental organisation Transport & Environment notes that the EU’s 2025 target of 93.6g of CO₂ per kilometre for new vehicles is directly accelerating EV development. Dentons observes similar pressure across other markets, adding that regulatory alignment remains uneven.

Meanwhile, Deloitte points to European Union directives that mandate recycled content in vehicle production, especially in battery manufacturing. These rules introduce quotas for secondary raw materials and promote design-for-reuse strategies throughout the product lifecycle.

On the reporting front, Deloitte explains that the Corporate Sustainability Reporting Directive (CSRD), taking effect in 2025, will compel manufacturers to provide detailed metrics on emissions, resource use and environmental impact. These requirements will raise compliance complexity but also offer a consistent benchmark for decarbonisation progress.

Scaling action across supply chains and reporting systems

Deloitte states that since 2021, European automakers have reduced operational emissions by 20%, even as production volumes have grown. Globally, the sector is aiming for a 90% emissions cut by 2050 as part of broader net zero commitments.

Transport & Environment forecasts that battery electric vehicles will account for 20–24% of EU new car sales in 2025. As infrastructure builds out and EVs become more cost-competitive, this figure is expected to rise.

Still, Deloitte flags ongoing challenges. These include the cost of transitioning to clean technologies, uneven regulatory frameworks, limited availability of renewable energy and key raw materials, and the difficulty of managing global, multi-tiered supply chains.

Progress depends on partnerships across the automotive ecosystem. PwC argues that supply chain alignment and cross-sector collaboration are vital to building low-carbon, transparent manufacturing systems capable of delivering sustainable mobility.

As both PwC and Deloitte state, the sector’s next chapter will focus on scaling progress—accelerating EV rollout, embedding circular design at every stage and establishing robust low-carbon supply chains.