How Can the Automotive Industry Excel in Decarbonisation?
The automotive industry is rapidly evolving in response to tightening regulations, consumer pressure and urgent climate goals.
Sustainability and decarbonisation have become strategic priorities, driving innovation across electrification, materials, manufacturing and digital transformation.
According to PwC, automakers are redesigning products and processes to minimise environmental impact while moving towards carbon neutrality.
Electrification and hybridisation
According to AutoLeap, an auto repair shop management software, major original equipment manufacturers (OEMs) are expanding EV lineups and investing in battery technologies that deliver longer ranges, faster charging and improved recyclability.
Plug-in hybrid (PHEV) and hybrid electric vehicles (HEV) continue to play a transitional role, especially in regions where full electrification is not yet feasible.
As outlined by Dentons, a multinational law firm, hybrids are a practical solution for reducing emissions while infrastructure catches up.
Circular economy and sustainable materials
The adoption of circular economy principles is gathering pace.
Deloitte highlights increased use of recycled aluminium, bio-based plastics and eco-friendly interiors across the sector.
According to Research and Markets, a market research store, OEMs are now embedding circularity into vehicle design and end-of-life strategies like recycling, remanufacturing and material recovery are becoming standard.
“The potential for decarbonisation in industrial manufacturing is enormous,” says Martijn Karrenbeld, Global Market Sector Director, Industrial Manufacturing at Arcadis.
“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.”
Green manufacturing and renewable energy
Green manufacturing is another priority.
According to the European Automotive Decarbonisation and Sustainability Summit 2025, manufacturers are integrating solar, wind and other renewable sources into their operations, while modernising equipment for greater energy efficiency.
PwC notes that this transformation extends across global supply chains, where data transparency and energy use monitoring are key areas of focus.
Regulatory and market drivers
Strict regulations are accelerating the shift.
The environmental NGO Transport & Environment reports that the EU’s 2025 target of 93.6g of CO₂ per kilometre for new cars is driving a surge in EV development.
Similar legislation in other regions is creating global momentum, according to Dentons.
Circular economy and reporting mandates
Deloitte explains that upcoming EU directives are mandating the use of recycled content in car manufacturing, particularly for batteries.
These rules also introduce quotas for secondary raw materials and enforce design-for-reuse strategies.
On the corporate side, Deloitte notes that the EU’s Corporate Sustainability Reporting Directive (CSRD), effective from 2025, requires automakers to provide detailed disclosures on sustainability performance, adding further pressure to align operations with climate goals.
Measurable progress
Deloitte reports that European automakers have cut emissions from operations by 20% since 2021, despite an increase in production volumes.
Globally, the automotive industry is targeting a 90% reduction in emissions by 2050 as part of broader net zero commitments.
Battery electric vehicles (BEVs) are expected to make up 20–24% of the EU’s new car sales in 2025, according to Transport & Environment, with sales likely to grow further as infrastructure expands and affordability improves.
The future of automotive decarbonisation
Despite this momentum, key challenges remain.
Deloitte identifies cost barriers to adopting clean technologies, regional policy inconsistencies, limited access to renewable energy and raw materials and the complexity of decarbonising global supply chains.
Meeting climate targets will require stronger partnerships across the automotive ecosystem, including suppliers, technology providers and policymakers.
As PwC notes, alignment across all stakeholders is essential to building resilient and sustainable mobility systems.
The industry is at a turning point.
According to Deloitte and PwC, the next phase of sustainability in automotive will be defined by scale, accelerating the roll-out of electric vehicles, embedding circular design at every stage and building transparent, low-carbon supply chains.
