Li Ke’aobo: on BMW’s Sustainability Strategy

Originally published in Chinese on April 29, 2021 by the Car Prophet official WeChat accountas part of a larger piece titled “BMW’s Automotive Carbon Economy Declaration—Sustainability is at the Core of Everything BMW Says and Does.” Translated and abridged by ACCEPT.

Source: https://mp.weixin.qq.com/s/ft32rgP_Ks3zCBD_6E8NlQ

Car Prophet Speaks with Li Ke’aobo, Executive Deputy Director of the Academic Center for Chinese Economic Practice and Thinking at Tsinghua University

Car Prophet: Why did BMW merge its sustainability report with its earnings report?

Li Ke’aobo: The topics of sustainability and carbon neutrality are of great concern to auto companies around the world, and it is likely that soon, all auto companies will combine their detailed sustainability planning with corporate finance. BMW is the first to combine its financial report with its sustainability report, partly because the BMW Group's sustainable development strategy was conceived relatively early, and partly because the company is alert and responsive to the European carbon emissions regulations.

Car Prophet: Why does BMW's sustainability strategy frequently mention the keyword “profit?”

Li Ke’aobo: For a company, if something is not profitable, the business logic is unsustainable. Profit is also the basis for all R&D investment and the key to the development or successful transformation of a company. The future of electric vehicles must be completely left to the judgment of the market rather than relying on government subsidies and capital markets. Today, global car companies are increasingly motivated to produce electric vehicles, in large part because the cost of making electric vehicles is decreasing under the premise of growing scale. We predict that in the future, the cost of electric cars will fall below that of fuel cars.

Car Prophet: Previously, you suggested that every country facing carbon neutralization would overdraw GDP to some extent. How significant is the economic impact of sustainable development?

Li Ke’aobo: In general, there is pressure in the short-term and opportunity in the long-term. In the short-term, companies will erode some of their profits for sustainable development and carbon-neutral transformation, but in the long-term, there will be hundreds of trillions of dollars of investment coming in, and at the same time, the future costs for companies that resist transformation will definitely increase. On the other hand, from an economic point of view, carbon credits, green bonds, and green loans will emerge, lowering the cost of corporate financing.

Car Prophet: What aspects of achieving carbon neutrality should auto companies pay special attention to?

Li Ke’aobo: Carbon neutrality is something that cannot be achieved without the involvement of multiple players through efforts on both the production end and the recycling end. For the auto companies themselves, although sustainable designs result in carbon reduction on the user end, the carbon footprint of the production side, the recycling side, and upstream and downstream enterprises cannot be ignored. This process requires unified management of the entire auto company. In addition, we also need to focus on recyclability, as this will be an important way for car companies to decarbonize in the future.

In the early stage of carbon-neutral development, increasing the proportion of clean energy usage is the key window for technological breakthroughs. At present, this means making energy cleaner and simultaneously implementing large-scale electrification on the user end. In the future, we can promote the formalization of carbon credits and carbon markets to incorporate the cost of carbon usage into the price of commodities.

Car Prophet: What impact will carbon neutrality have on the automotive economy?

Li Ke’aobo: Firstly, in the process of pursuing carbon neutrality, the auto industry will experience a comprehensive integration of new energy sources and smart features. That is to say, the quest for carbon neutrality will usher in the era of new energy and product intelligence, making the auto industry more environmentally friendly and more efficient for urban movement. This will require many leading and complementary policies as well as preemptive measures to help the automotive community—including companies, consumers, and workers—to make the transition.