Nature Positive Role of the Automotive Sector China Deep dive

Finding 3: Decarbonization of EVs requires collaboration. While the EV sector promotes less carbon-intensive, cleaner transport in China, the increase in EV production also leads to higher emissions during manufacturing, which should not be overlooked. Achieving decarbonization goals for automotive raw materials will necessitate cross-industry collaboration and significant capital investment (which should be prioritized). Additionally, the carbon intensity of the power grid greatly influences the overall GHG emissions throughout the vehicle’s life cycle. Finding 4: Improved water stewardship and innovation are needed The growth of the automotive industry will continue to increase industrial water use. It is crucial to consistently promote the adoption of water-saving and water-recycling technologies, especially in processes like cooling and cleaning during power generation and chemical cracking. This is particularly important for existing manufacturing operations in northern and western China, where projected water stress is much higher, making redistribution and north-to-south migration conceivable.55 2.1 Level of industrial activity in China In China, industrial activities are concentrated in midstream and downstream segments such as components production, vehicle manufacturing and car sales and use (see Table 4). With the growing demand for EVs, sourcing key upstream raw materials has become essential for supply chain integration and cost and risk management. Evaluation based on the comprehensive activity level of raw material industries. TABLE 4 Notes: The upstream, midstream and downstream data is accounted for by China’s raw material production, intermediate product production and end consumption, and, in the case of steel, iron ore production, crude steel production and steel consumption. Activity level: The percentage of global production and consumption of a material that occurs in China – higher proportions indicate greater industrial activity in China’s material industry chain; Upstream activity: The percentage of a material’s main components produced in China – for example, China mines 10.3% of the world’s iron ore for steel production; Midstream activity: The percentage of the material produced in China – for example, China accounts for 73.8% of global battery production; Downstream activity: The percentage of the material consumed in China – for example, China consumes over 56% of the world’s tyres. Source: The National Bureau of Statistics of China; International Aluminium Institute (IAI); World Steel; EVtank; Energy Institute; China Association of Automobile Manufacturers.Material archetypesMaterial nameActivity levelGlobal share consumed by China’s automotive industryChina’s share of global activity in each value chain segment Upstream Midstream Downstream Iron and steel Steel material High 12% 10.3% 53.9% 50.8% Aluminium Aluminium materialHigh 10% 23.3% 58.8% 57.5% Power battery Lithium, nickel Very high 92%18.3% 4.4%73.8% 59.4% Tyres Rubber High 70% 6.1% 54.0% 56.0% Interior Plastics, leather, textiles, etc.Mid Notes56/ 43.0% 31.0% With the growing demand for EVs, sourcing key upstream raw materials has become essential for supply chain integration and cost and risk management. Nature Positive: Role of the Automotive Sector – China Deep-dive 20