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<\/a><\/p>\nExhibit 1 \u2013 Impact of Climate Change on the Auto Industry [2]<\/em><\/p>\n Changing Customer Preferences<\/em>: Due to increases in fuel prices, the type of cars being purchased is expected to change dramatically, that will, in turn, affect manufacturing. Although we are currently seeing lower oil-prices inflating demand, on a longer time scale, manufacturers are seeing reductions in sales of SUVs and fuel-intensive vehicles (Ford F150, Hummers etc.) [3]. Consequently, sales of smaller cars and light vehicles are expected to increase. In addition, a growing trend towards electric and hybrid cars is further proof that a manufacturer\u2019s portfolio in twenty years will look radically different.<\/p>\n Government Regulation: <\/em>Since CO2 emissions move in tandem with fuel consumption, governments globally are developing stricter regulations on automotive manufacturing [4]. Auto companies, meanwhile, are finding it tougher to adapt to these standards. For example, in 2016 itself, three reputed global auto manufacturers (Volkswagen, Mitsubishi, Suzuki) admitted to wrong-doing while trying to \u201cgame\u201d government-set emission regulations [5] [6]. The implication of this dissonance is twofold. One, the bar on quality of manufacturing will become much higher \u2013 it is of paramount importance that all car models meet each of the individual countries\u2019 regulations. Two, auto manufacturers must engage more with Government to earn their trust so they can, together, develop standards that are both impactful and realistic.<\/p>\n Innovation: <\/em>Innovation will transform the sector over the next few years. In 1997, Toyota\u2019s Prius was the first mass-produced hybrid car, marking the first major shift in energy technology. Since then, Nissan\u2019s Leaf and Tesla\u2019s Model S began the movement towards electric plug-in vehicles. McKinsey believes climate-change related regulation will be one of the key drivers towards adoption of electric cars [7]. This step-shift in engine technology increases the necessity for auto manufacturers to invest deeply in R&D to adapt to changing times.<\/p>\n It is evident that auto companies face a burden in adapting to climate change. This burden is substantial – investors have warned the industry it must accelerate its readiness for climate-change and take specific actions (put climate change specialists on their boards, engage better with policy-makers, and invest more heavily in low-emission cars etc.) [8].<\/p>\n Given this context, GM has been making fundamental shifts along the following themes to ensure it is prepared to succeed in a world affected by climate change:<\/p>\n Public Commitment<\/em>: Mary Barra, CEO of GM, was one of the 7 Auto CEOs that united to publicly vow to tackle climate change [9]. This is an unprecedented step that has large implications \u2013 if the top manufacturers are committing to the cause, the rest of the industry will follow.<\/p>\n Energy Efficient Operations<\/em>: In the short-term, GM announced that it has saved $73 mn in 2016 through energy-efficient activities and operations [10]. In the long-term, GM declared that it has committed itself to using 100 percent renewable energy by 2050 across its 350 facilities in 39 countries. By 2050, wind, solar and landfill gas will be GM\u2019s main source of energy [11].<\/p>\n New Technology<\/em>: GM is investing heavily in new technology to prepare for a world with electric and hybrid cars. GM\u2019s new Chevy Bolt (2016 release) is expected to be a strong competitor to Tesla\u2019s cars. In 2014, GM invested ~ $500 mn in next-generation electrification [12]. In addition, GM\u2019s bet on ride-sharing through its investment in Lyft also shows its commitment to preparing for the next wave of technology upgradation in the automotive space.<\/p>\n That said, GM can continue in its push in its efforts in climate change adaptation. A few additional ideas are listed below:<\/p>\n Financing for Electric Cars<\/em>: When SUVs sales slowed, GM offered financing options for customers to buy SUVs. A similar initiative for electric cars can be impactful.<\/p>\n Discontinuing fuel-inefficient lines<\/em>: Although gas-guzzlers are profitable and loyal customers exist, GM could lead the transition by discontinuing its fuel-inefficient carbon-intensive product lines.<\/p>\n Supplier Focus – Quality to Environment<\/em>: Auto OEMS have tremendous leverage in demanding behavioural changes in component suppliers. If the last few decades involved forcing suppliers to enhance quality, GM could enforce rigorous environmental standards on\u00a0the massive auto component market.<\/p>\n [790 words]<\/p>\n References<\/em><\/p>\n [1] General Motors Annual Report, 2015\u00a0https:\/\/www.gm.com\/content\/dam\/gm\/en_us\/english\/Group4\/InvestorsPDFDocuments\/2015AnnualReport.pdf<\/p>\n [2] “How Climate Change could affect corporate valuations”, McKinsey & Company<\/em>, 2008\u00a0http:\/\/www.mckinsey.com\/business-functions\/strategy-and-corporate-finance\/our-insights\/how-climate-change-could-affect-corporate-valuations<\/a><\/p>\n [3] “Rising Gas Prices Might Kill the Once-Might SUV”, Wired<\/em>, 2008\u00a0https:\/\/www.wired.com\/2008\/06\/rising-gas-pric\/<\/a><\/p>\n [4] “New Automobile Regulations”, Access Magazine<\/em>, 2012\u00a0http:\/\/www.accessmagazine.org\/articles\/fall-2012\/new-automobile-regulations\/<\/a><\/p>\n [5] “Emissions Scandal Latest”, Top Gear<\/em>, 2016\u00a0http:\/\/www.topgear.com\/car-news\/insider\/emissions-scandal-latest-mitsubishi-president-steps-down-suzuki-involved<\/a><\/p>\n [6] “Volkswagen Reaches Deal in US over Emissions Scandal”, The\u00a0New York Times<\/em>, 2016 \u00a0http:\/\/www.nytimes.com\/2016\/04\/22\/business\/international\/volkswagen-emissions-settlement.html?_r=0<\/a><\/p>\n [7] “Disruptive Trends that will transform the Auto industry”, McKinsey & Company<\/em>, 2016\u00a0http:\/\/www.mckinsey.com\/industries\/high-tech\/our-insights\/disruptive-trends-that-will-transform-the-auto-industry<\/a><\/p>\n [8] “Investors warn car companies over climate change”, The Guardian<\/em>, 2016\u00a0https:\/\/www.theguardian.com\/environment\/2016\/oct\/12\/investors-warn-car-industry-over-climate-change<\/a><\/p>\n [9] “Auto Industry CEOs Unite in Rare Vow\u00a0to Tackle Climate Change”, Forbes<\/em>, 2015\u00a0http:\/\/www.forbes.com\/sites\/joannmuller\/2015\/12\/14\/auto-industry-ceos-unite-in-rare-vow-to-tackle-climate-change\/#7a2301ec2f15<\/a><\/p>\n [10] “Energy Efficient Initiatives Save General Motors $73 million during 2016”, General Motors<\/em>, 2016\u00a0http:\/\/gmauthority.com\/blog\/2016\/10\/energy-efficient-initiatives-save-general-motors-73-million-during-2016\/<\/a><\/p>\n
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