Challenges faced by automobile industry

The important environmental worries in the 21st century are: air pollution (and its causes to human
health, depletion of ozone layer and global warming), shortage of freshwater, land availability and
raw material. The effects on organizations might be gigantic as it was declared by the World
Resources Institute’s report - Tomorrow’s Market: Global Trends and Their Implications for Business
(WRI, 2002).

According to the United Nations, the World’s population is predicted to reach 9 billion people in
2050, it is because of growth of population in developing nations (United Nations, 2007). As rising
economies repeat the historical development patterns of the industrialised nations, rising vehicle
ownership and air travel will give huge impacts on material utilization, land use, contamination,
greenhouse gas emissions, and oil demand (WRI, 2002).

For the automobile sector, environmental pollution can result from plant emissions, however it is
mainly on car engine emissions. Depending on the rate of consumption of developed and rising
economies, crude material accessibility and energy security will hugely be affected. “The
development in car production and usage has been a basic factor in the rises of usage of numerous
resources, especially metals. Given an estimation that China will deliver over 6 million automobile
units in 2005, it is predicted that there will be IAMOT 2008 Proceedings critical increments in
imports of metals. The fast and constant development of China’s vehicle population has also brought
great difficulties to China’s energy resource security.” (Zhao, 2004). Actually, the creation of vehicles
in China exceed more than 5 millions in 2005 and more than 7 millions in 2006 (OICA, 2007) and
unrefined petroleum prices hits US$ 100-a-barrel (Financial Times, 2008).

As between the automobile industry and land use, two big consequences emerge: traffic control
and final disposal of end-of-life vehicles. Space for streets and car parks are needed to avoid
congestion and improve mobility. As a reaction to the new environment concerns, traffic control
through alternative types of aggregate transportation and stricter regulation on vehicle use in urban
areas might affect clients and consumers’ behaviour, along these lines, decreasing the opportunities
for the automobile producers of making profits. In addition, traffic control will likewise take place as
an attempt of avoiding car accidents that growing occur in urban areas and on the motorways.

Last, but not least, organizations will need to include product recovery as a new activity in their
operations function. As land turns out to scarce and the vehicle fleets increases, accessibility of
landfill sites will diminish and, subsequently, the expenses of final disposal for end-of-life vehicles
will more likely to increase.

A typical fact among global companies is the exchange of their manufacturing plants from developed
to developing nations in order to get to new markets, low labour costs, and also a less strict
environmental guidelines routine. Be that as it may, as soon as the new destination meets the basic
needs of its society, environmental security turns into a worry. Thus, lenient regulation becomes
stricter. Consequently, in some case of the automobile industry, new destinations like China and
India are already suffering pressure accept the Kyoto Protocol decisions and save water, therefore
utilizing cleaner processes, by 2012. This makes the risk or impact on the industry in just 5 years’
time. Furthermore, the probability of adopting such measures is high. Notwithstanding, behind the
results of this threat there are opportunities for reduction of cost due to the fact that pollution
means waste.

Concerning raw material shortages, new innovation, car designs and recycling processes make this a
medium-term threat. Additionally, the discovery and utilization of new materials such as aluminium,
magnesium, plastics and renewable fibres lessen the probability of a shortage of materials (Zah,
Hischier, Leão and Braun, 2006; Tharumarajah and Kooltun, 2006). The IAMOT 2008 Proceedings
weights for waste reduction will positively impact the availability of raw materials.

In outline, the seriousness of this threat might be low in the business. A big threat for the sector may
be energy intensity and oil reliance. Individuals that are leaving the line of poverty will start
devouring product and services. The automotive industry will compete among different needs of
World society for the utilization of energy when the World populace will presumably be 8 billions
people in 2025. With no radical change on the energy matrix of the automotive sector, demand of oil
is very likely to surpass supply. In spite of the fact that, technologies related to the utilization of
biofuels, hydrogen and power modules are already being developed.

Vehicle use is by far receiving most consideration due to its large consumption of fossil fuels, and
therefore emission of greenhouse gases. Actually, the current internal combustion engines have low
effectiveness and are the target of numerous policies, e.g., California zero-emission fleet and the
Brussels’ strategy to turn Europe into a low-carbon economy. For instance, the second plans to
restrain the carbon dioxide emissions to 130 grams for each kilometre by 2012 (Guardian, 2007).
Those policies are already on course and as the normal car emissions in Europe are as yet higher
than 160 grams per kilometre (Guardian, 2007), engine emissions control in all repects likely and
serious threat for the automobile industry. Green vehicle development is at its early stages to create
an environmentally-friendly market and some researchers have found that environmental issues still
play a minimal role for customers (Lane and Potter, 2006).

Congestion taxes are likewise among of the proposed answers to reduce air pollution in urban areas
and stimulate citizens to use public transportation. These measures have been taken in some urban
cities like London, and similar programmes are used in Singapore, Sao Paulo and Mexico City. The
speculation of this strategy is still controversial and might be applied only on the most overly
populated cities. In addition, the automobile culture is very strong, and for the most part, as the car
ownership is related with status other than its purpose of personal mobility, the effect on sales
might be low and customers will keep on purchasing cars for travel and other different reasons
beyond daily needs such as going to work.

Landfill deficiencies will create pressures on car manufacturers to take responsibility for their
products after use. Final disposal of scrapped vehicles will turn into a clear issue as the fleet
increases and, in addition, a more expensive action as landfill sites will become scarcer. The recovery
of end-of-life cars will require new abilities and capabilities from companies, not just from gathering
the scrap, but also to exploit valuable parts from the vehicle. Also, new plans of action are already in
course to exchange ownership, and subsequently responsibility, from the client to the manufacturer.
In spite of implementation of such policies worldwide is most likely not happening in the following 5
years, this is a possible risk with a high impact because of its complexity for industry to collect,
separate, recycle and find a correct destination for end-of-life cars.
 It may turn out to be evident that the automobile companies would require radical changes in their
production framework to adapt with those environmental threats; nonetheless, Orsato and Wells
(2007) clarify that because carmakers are bolted into three technological paradigms (all-steel car
bodies, internal combustion engines, and multi-purpose vehicles), which tends to support
incremental upgrades. Moreover, the current economic and political interdependency between this
industry and different sectors (for example oil industry) makes radical IAMOT 2008 Proceedings
changes towards higher levels of environmental performance more difficult due to its complexity
and extension.

Lastly, the proposed situation here give a general point of view on how automakers could be harmed
due to environmental regulation, lack of competitiveness, change of social culture, and shortage of
production inputs. For sure, unique industry can perceive differently each threat, and furthermore,
have diverse abilities and competences to respond to their implications
References

1. Zah, R., Hischier, R., Leao, A and Braun, I (2007). CurauáCuraua fibers in the automobile industry e
a sustainability assessment. Journal of Cleaner Production, In Press, Corrected Proof (The
Automobile Industry & Sustainability), 1-9 15 (11-12), 1032-1040.

2. Zhao, J. (2004). Can the environment survive the Chinese craze for automobiles? In: the 20th
Annual Mansfield Conference Proceedings: plunging into the sea: the complex face of globalization
in China, April 18 and 20. Missoula: The University of Montana; 2004.

3. Wells, P. and Orsato, R. (2005). Redesigning the Industrial Ecology of the Automobile,. Journal of
Industrial Ecology, 9(3), pp 15-30.