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Portrait of author Mark Perkins
Mark Perkins

Business Development Director

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Balancing sustainability and profitability in automotive manufacturing

By Mark Perkins on January 16, 2025

The automotive industry is in a period of significant transformation as the rise of electric vehicles (EVs) accelerates its transition towards a more sustainable future.

However, although EV sales in the UK hit their highest-ever level in 2024, this milestone masks a complex set of challenges for the sector. Dealing with sustainability pressures, workforce limitations, evolving consumer behaviors and supply chain disruptions, many automotive manufacturers find themselves in uncharted territory in their quest to remain both competitive and sustainable.

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EVs are on the up, but there’s more to consider

Despite EV adoption increasing in the UK, the overall automotive market remains in a difficult position compared to years gone by. Total vehicle demand is still yet to recover to the levels seen before the COVID-19 pandemic, reflecting a changed world with more economic pressures and different consumer preferences.

While increased EV sales drives important progress towards sustainability goals, it currently doesn’t do enough to offset the decline in overall sales. This imbalance intensifies financial strain, forcing manufacturers to shift gear and pivot their strategies.

To add to this complexity, businesses are being held accountable to government-mandated sustainability targets. Failing to meet these targets would carry significant penalties, pushing manufacturers to innovate while managing tighter profit margins. Achieving this balance between profitability and sustainability requires new ways of thinking and operating.

Economic pressures and workforce implications

Reduced overall demand for vehicles triggers economic pressures beyond financial metrics, with an impact on workforce and labor. With fewer cars being sold, manufacturers face tough decisions around staffing and operational capacities, with redundancies sadly often unavoidable. This emphasizes the need for businesses to take proactive steps to sustain jobs and achieve growth.

Additionally, the rise of second-hand car markets demonstrates a continued shift in consumer behavior. As more people steer away from purchasing brand new vehicles, manufacturers need to adapt their strategies to remain relevant. Strategies around flexible pricing, extended warranties or alternative leasing models are some examples of approaches that some are taking.

A car being manufactured in a factory

Dealing with supply chain disruption

Supply chain challenges continue to give automotive manufacturers sleepless nights. Sourcing materials like lithium and cobalt — materials essential for EV batteries — is becoming increasingly competitive and costly. Disruptions in global logistics adds further delays and expense, with a knock-on effect that ripples through production schedules, inventory management and the ability to meet consumer demand and achieve sales targets.

Tackling these challenges will require innovation and adaptability, with artificial intelligence (AI) set to play a crucial role in the near future. By leveraging supply chain data, manufacturers can use AI to identify inefficiencies, predict potential bottlenecks and optimize logistics.

AI: Driving the future of automotive

With the above challenges considered, AI solutions are rapidly becoming a key component of modern automotive manufacturing. Areas like machine learning optimizations and agentic AI are being used across a number of use cases to empower manufacturers to overcome these hurdles. For example, AI can help manufacturers to:

  • Optimize production: AI can balance production levels with fluctuating demand, minimizing wastage and reducing excess inventory
  • Enhance material sourcing: AI can identify the most cost-effective and sustainable material suppliers, reducing the impact of scarce resources
  • Streamline logistics: AI algorithms can improve processes in areas like route planning and inventory distribution, reducing costs and delivery times

For example, Peak is currently working with a leading global automotive manufacturer that is leveraging AI to improve its overall operational performance. By enhancing supply chain modeling and improving last-mile delivery efficiency, AI is empowering this business to operate more effectively in a challenging market.

By leveraging supply chain data, manufacturers can use AI to identify inefficiencies, predict potential bottlenecks and optimize logistics.

Mark Perkins

Business Development Director at Peak

A new era for automotive manufacturing

Sustainability can no longer be treated as a nice-to-have; it’s a cornerstone of all modern automotive strategies. However, in pursuit of sustainability businesses must face up to the economic realities. Balancing these priorities involves leveraging technology to reduce costs, improve efficiency and minimize environmental impact.

This new era of EVs and a more sustainable automotive sector brings with it an opportunity for the sector to redefine itself. Success will require a blend of innovation, resilience and adaptability, with investment in AI and digital transformation to streamline operations of the utmost importance.

By embracing new strategies, the industry can overcome its current challenges and position itself for long-term growth — navigating the complexities of today’s market and accelerating towards a brighter, more sustainable future.

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