Nature Positive Role of the Automotive Sector China Deep dive

Executive summary In total, 65% of China’s overall gross domestic product (GDP) is at risk due to nature loss. However, there is hope – China has committed to pursuing ecological civilization and green development. To achieve these goals and contribute to a nature-positive future, urgent action from businesses across all sectors in China is imperative. The Chinese automotive industry is experiencing a profound transformation driven by technological advancements, policy support and a heightened focus on sustainability. China has emerged as the largest automotive manufacturing hub globally, leading in both production and exports. The electric vehicle (EV) market is experiencing rapid growth, with EV penetration in China projected to reach 90% by 2030. As the industry matures, Chinese companies are increasingly looking to expand globally, despite unfamiliar market dynamics and more stringent regulatory requirements. The industry’s growth has substantial implications for global automotive markets and environmental sustainability. The impacts and dependencies of the Chinese automotive sector on nature span the entire value chain. The industry heavily relies on key materials with a high dependency on imports, making efficiency and recycling crucial for a resilient value chain. Midstream and downstream activities, including materials processing, production of parts and use of vehicles, all contribute to the overall impact on nature. This report delves into the automotive industry’s impacts and dependencies on nature in China, how industrial activities amplify such impacts and how the sector in China has been addressing these challenges. Four major challenges have been identified: –The industry’s growth has heightened its impact and dependency on environmental assets and ecosystem services, particularly due to the intensified demand for critical minerals like lithium and nickel. –Limited focus on land use assessment and protection poses risks. The industry’s reliance on raw materials is pushing operations upstream, potentially leading to increased land use pressure due to intensified extraction activities. –While EVs are an important part of cleaner transport, their production process is often carbon-intense. Decarbonization requires cross-industry collaboration and significant investment, including reducing the power grid’s carbon intensity. –Improved water stewardship and innovation are needed for water-saving and recycling technologies during the extraction and industrial processes, given that the industry’s growth will increase water use. By 2030, nature-positive transitions in China can unlock $1.9 trillion worth of annual business opportunities, accounting for close to 20% of the total global opportunities, with the automotive industry alone capturing $161 billion. These opportunities call for business actions and policy support to be realized. China’s automotive industry, in particular, is positioned to lead this change through strategic actions and investments. The report includes five priority actions and case studies for China’s automotive sector to contribute to a nature-positive future: avoiding and reducing impacts from operations and materials, transforming product offerings, conserving and restoring nature, and driving cross-sector collaboration. Many of these actions have already been proven to be effective within the market.China’s automotive sector leads globally in production and exports- it should likewise lead in a sectoral nature-positive transition. Nature Positive: Role of the Automotive Sector – China Deep-dive 6