Navigating the shift to electric vehicles and sustainable practices in the automotive industry
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Due to the growing eco consciousness of consumers, almost every industry sector is facing huge challenges in adapting to changing market demands. This is also very true for the automotive industry, which is currently undergoing one of the biggest transformations in its history - from cars with combustion engines, to electric mobility, and the overarching goal of decarbonisation.
The rise of electric vehicle manufacturers
Most of the traditional Original Equipment Manufacturers (OEMs), which have been producing combustion engine cars for decades, already have several electric vehicles in their portfolio. It seems that almost every month, a new manufacturer of electric vehicles appears on the market. Especially across Asia, the number of manufacturers of electric vehicles is growing fast and many of them intend to extend their businesses to the EU.
Commitment to the Paris Agreement
Many OEMs have committed themselves to the goals of the Paris Agreement, which aims to tackle climate change and its negative impacts by reducing CO2 emissions. In order to contribute, several long-established OEMs have pledged to focus on e-mobility in the future and to stop developing, and finally also stop selling, new combustion engine cars.
According to their plans, by the year 2030 no new combustion engine car models will be sold to the public anymore and the existing combustion engine car model lines will be phased out within the next couple of years. From 2035, there will also be a ban on the sale of new petrol and diesel cars in the EU, except for vehicles with combustion engines that use only climate-neutral fuel.
The success story of electric vehicles is illustrated by the enormous rise of the number of electric vehicles being sold worldwide. In 2022, almost 11 million electric vehicles were sold, which is an increase of approximately 55% in relation to 2021.
Green advertising and the Green Claims Directive
These developments are accompanied by another set of risks, such as the rise of environmental or green advertising. Obviously, the industry is interested in promoting the positive effects of their efforts to improve the sustainability of their products or operations. Environmental or green claims are statements that promote products as being “green”, “climate neutral”, “sustainable” or “CO2-neutral”. However, these terms are not legally defined at the moment.
There’s also a growing concern that consumers might be misled by manufacturers “greenwashing” their products or production processes. This can happen, for example, by misrepresenting environmental credentials, or by using false or misleading practices in relation to this.
Against this background, the EU Commission has proposed to introduce the Directive on substantiation and communication of explicit environmental claims (Green Claims Directive) (COM (2023) 166 final 2023/0085 COD (known as the “Green Claims Directive”). The Green Claims Directive will bring many important changes regarding environmental advertising and green claims. The overall aim is to provide consumers with better information on the environmental impact of their consumption, so that they can make better choices.
Substantiating green claims
The restrictions on using generic environmental claims like “eco-friendly”, “CO2-neutral” or “green” will have a very significant impact on the automotive industry, as it will for many other sectors too. In the future, the use of such claims will only be permissible if they can be substantiated by the advertiser. Under the Green Claim Directive’s framework, companies would need to substantiate environmental claims using life cycle assessment, communicate them accurately and holistically, and have them externally verified. So car manufacturers will need to be able to present reliable evidence to show why their products and productions processes are in fact “green” or “eco-friendly”, if they want to make use of these terms in advertisements.
The road ahead
There’s so much activity going on within the automotive sector when it comes to the decarbonisation of the industry. Many OEMs have set ambitious goals for this decade, whilst EU regulation is also becoming stricter in this area. OEMs need to have a clear decarbonisation strategy to make sure they avoid the legal pitfalls when advertising their efforts. With deep industry knowledge in this area, Bird & Bird’s international team of automotive experts can support businesses navigating the challenges and legal considerations of the transformation of the automotive sector.
