Understanding Revenue Streams for Car Manufacturers through External Corporate Climate Initiatives of Fleet : A Strategic Analysis

Abstract

The urgency for sustainable transportation solutions is increasingly evident as stakeholder pressure and regulatory demands intensify. The automotive industry, a major contributor to global CO2 emissions, is vital in aligning corporate practices with the Paris Agreement’s goals to limit global warming. Given the significant environmental impact of vehicles and the potential to eliminate fossil fuel dependency through electrification, the automotive sector is pivotal in the transition to sustainable practices. Corporate fleets, in particular, are essential drivers of this transition, as they represent a large portion of vehicle sales and substantially influence market trends. Identifying new revenue streams is critical to secure sustainable financial performance while integrating Corporate Climate Initiatives (CCIs) in an evolving and complex landscape. This study aims to understand how new revenue streams can be identified by looking at the correlation of customer engagement with CCIs which is concluded in the following research question: How can revenue streams for car manufacturers be understood by studying external corporate climate initiatives of fleet customers? To investigate this, a case study was conducted where Sweden’s largest car manufacturing company, Volvo Cars served as the research object. This study examines the relationship between Volvo Cars’ revenue streams and its fleet customers’ corporate climate initiatives (CCIs), aiming to understand how external CCIs influence purchasing decisions. The external CCIs examined include Electric Vehicles policies, EcoVadis, Science Based Targets initiative (SBTi), ISO14001, and CDP. A mixed-method approach was used, combining quantitative analysis of fleet customer sales data with qualitative interviews with key representatives from Volvo Cars. The assessment concentrated on the top 30 global fleet customers and their engagement with external CCIs. The findings underscore the influence of external CCIs on these customers’ vehicle acquisition decisions. The results demonstrate a significant correlation between CCI adoption and increased vehicle purchases from Volvo Cars. Notably, customers with Science Based Targets initiative (SBTi) Near-Term targets exhibited up to a 155% increase in vehicle acquisitions after publishing their SBTi targets. This indicates that CCIs can drive the transition towards electrified corporate fleets, enhancing revenue streams for electric car manufacturers. This correlation suggests that car manufacturers should rethink their business models to integrate sustainability practices effectively. By engaging in CCIs and providing comprehensive sustainability reporting, Volvo Cars can better align with its customers’ sustainability goals, potentially increasing revenue streams and competitive advantage.