For most recreational-vehicle buyers and owners, connecting with nature in some capacity is important. This urge to experience the great outdoors has contributed to the growth of the RV sector over the past several years; for instance, it helped drive growth of almost 50 percent in the global travel trailer and camper market between 2015 and 2020.1
RVs include models designed for the road (motor homes and caravans), for the sea (personal watercraft and recreational boats), and for the snow (snowmobiles). Given the role that the environment plays in the operation and enjoyment of these vehicles, many companies are looking to integrate the embrace and protection of nature into their brands. Customers have shown that they are willing to pay a higher price for more eco-friendly RVs, such as electric four-wheelers or boats, and some trailblazing companies have moved toward producing these alternatives.
Yet the industry faces a major challenge: most RVs, even the electrified ones, are still manufactured using emissions-intensive materials such as aluminum, plastic, and fiberglass. And for a range of reasons, including their typically smaller size, RV manufacturers can find it challenging to reduce emissions in their supply chains. Those that do so have an opportunity to secure a product portfolio that ensures long-term viability in an industry with annual revenues of about $90 billion.
Key materials used to manufacture RVs have high emissions intensity
Recreational vehicles are typically classified in three categories: road RVs, sea RVs, and snow RVs. Exhibit 1 shows examples within these categories, as well as the key materials that are currently used to manufacture each vehicle. For the RV industry, the processes and inputs used to make materials such as aluminum, steel, fiberglass, batteries, and plastics result in substantial greenhouse-gas (GHG) emissions.
Aluminum
Aluminum is widely used in recreational vehicles because of its strength-to-weight properties, and it has replaced many steel elements in recent decades. Its production, however, is highly GHG-emissions intensive, especially when it uses electricity from coal-fired plants. But some decarbonization options already exist, including recycled aluminum, renewable power in production, and new production technologies such as the use of inert anodes. These solutions can lower emissions when coupling green electricity with either current production technologies or a combination of several newer technologies. H2 calcination, for example, uses hydrogen instead of natural gas in the calcination process.
RV manufacturers must overcome three main challenges to address the high emissions caused by aluminum production. First, their size: RV manufacturers are typically small or medium-size companies. In Europe, for instance, the annual revenue of most RV companies is between €200 million and €550 million.2 RV manufacturers’ small size can make it hard for them to exercise influence over the amount of lower-emissions materials they can receive from suppliers. Second, when RV manufacturers use suppliers to produce components and subassemblies, they may not have full transparency into the supply routes for the aluminum, especially when it is purchased from traders on the open market. Last, some applications require specific alloy contents, and recycled materials with the appropriate purity grade can be challenging for manufacturers to find.
RV manufacturers can overcome these challenges by working closely with suppliers. They can move sourcing to suppliers in lower-emitting power grids with a higher share of renewable energy sources or move sourcing to suppliers that are using green power purchase agreements (PPAs) and that use production technologies with lower emissions. By simply requesting more recycled aluminum in specifications, companies can also increase their share of recycled aluminum from a supplier, lowering emissions significantly. In 2022 alone, using recycled aluminum would allow manufacturers to reduce carbon in their aluminum parts by up to 90 percent compared with using virgin aluminum, according to McKinsey analysis. However, this route also depends on supply and demand: getting the right materials, at a reasonable cost, at the right time.
Fiberglass
Fiberglass composite is often used in RV applications because it is lightweight. Producing fiberglass composite results in slightly lower GHG emissions than aluminum, but the process has fewer straightforward decarbonization solutions. Due to its complex chemical production process and the length of its supply chain, end manufacturers have little opportunity to intervene. For example, there is no clear path to switch to a smelter using green electricity. Moreover, fiberglass is mostly nonrecyclable and often ends up in landfills. As a result, there is no near-term potential to leverage secondary material with a lower carbon footprint.
To reduce emissions from fiberglass production, R&D departments could focus on design and process shifts to reduce the overall need for fiberglass in RV production. Shifting from an open-molding process to a closed-molding process—resin-transfer molding or infusion molding, for example—can help avoid waste and reduce demand because these more exact processes make better-quality products with less scrap.
Additionally, making design changes to use more recyclable materials for select parts will help reduce the need for fiberglass. Manufacturers can use alternative composites such as thermoplastics. These plastics are smaller by volume and less of a challenge to produce, meaning they also have lower GHG emissions.
Batteries
Batteries are likely to account for a growing share of the upstream emissions from RV manufacturing because batteries increasingly power these vehicles. But lithium-ion batteries can cause high CO2 emissions and are often difficult for manufacturers to decarbonize, especially when they use graphite, lithium, and nickel or cobalt in the electrodes. RV manufacturers might also find it difficult to secure sufficient sourcing because of competing demand in automotive and energy storage.
Sourcing environmentally friendly batteries requires close cooperation with green-battery suppliers. Companies could also move battery sourcing to suppliers in lower-emitting power grids or to those that use green PPAs or other sources of low-carbon electricity. They can also partner with suppliers that develop lower-emissions production technologies, such as dry cathode coating, or suppliers (such as green mining operators) that source low-carbon raw materials along the supply chain.
To compete successfully for these high-demand green materials, RV manufacturers can develop strategic partnerships with larger battery buyers that have common interests or even corporate ties. For example, automotive OEMs have greater negotiating power with suppliers. The RV industry could see a supply gap by 2025, so moving quickly is important as demand increases and supply remains limited.
How RV manufacturers are addressing the decarbonization challenge
Traditionally, three decarbonization approaches compete to address downstream Scope 3 emissions—those produced when consumers use a product—in the RV sector (Exhibit 2). The first approach is improving the use of internal-combustion engines (ICEs) to increase efficiency and help reduce emissions in the short term. Second, RV manufacturers can shift to hybrid fuel cell electric vehicles (FCEVs) and battery electric vehicles (BEVs) where applicable. The third option is to leverage biofuels and synthetic fuels for use cases in which electrification or fuel cells are not suitable.
The technology chosen will likely vary across segments depending on many different factors, such as range requirements, power and energy profiles (for instance, whether quick acceleration or longer range is needed), charging infrastructure requirements and availability, and the total cost of ownership. For example, snowmobiles might be harder to electrify using batteries due to weight concerns, while personal watercraft (especially rentals) are likely easier to electrify because of greater charging opportunities and localized use.
Several leading RV players have set ambitious decarbonization goals for the next three decades. In addition to engine manufacturers setting targets inspired by the automotive industry, companies specializing in road RVs have centered their goals on science-based targets aimed at reducing or limiting GHG emissions. Sea and snow specialists, for their part, have set long-term decarbonization targets and introduced new green products, such as battery-powered electric watercraft and snowmobiles.
One large Asian OEM implemented a reporting system that gathers suppliers’ CO2 emissions and decarbonization targets as well as other environmental data, such as water consumption. It uses these data to evaluate suppliers on their decarbonization efforts. It also engages directly with suppliers and assists in decarbonizing production processes by using data analytics tools. Last, it shares its Scope 3 emissions information with investors through its participation in a supply chain program operated by CDP Worldwide, a nonprofit that runs a global system for environmental-impact disclosure.
Building greater, greener value is an opportunity for the RV sector
Decarbonization presents an opportunity to meet growing expectations from multiple stakeholders—customers, employees, investors, and regulators. Early action can give manufacturers an advantage and increases resilience ahead of potential regulatory changes, such as carbon taxes and carbon border-adjustment mechanisms, Securities and Exchange Commission (SEC) disclosures, and outright bans on sales of vehicles with ICEs. Several regions around the globe have announced plans for such bans within the next few decades. While these policies will mostly affect downstream emissions, implementing or strengthening broader carbon-pricing policies (emissions trading systems, for example) will encourage companies to further decarbonize their entire value chains.
Shifting from high-emission to low-emission materials comes at a cost. But even today there is some evidence that customers who buy or rent RVs may be willing to pay the price. In a survey of recreational-boat purchasers, between 60 and 73 percent of respondents said they would be likely to opt for a more expensive, electric option over an ICE vehicle (Exhibit 3). For manufacturers, early action to decarbonize can cater to changing customer demands and motivate employees. As companies discover this increased willingness to pay for green products, they are hiring talent to secure future innovation. Among other advantages, being ahead of competitors in terms of hiring and design innovation can help ensure long-term funding viability, thereby reducing the cost of capital.
Achieving zero-carbon products is typically a multiyear journey that involves attention and commitment from every part of an organization. The first steps in that journey are to establish a baseline and align on decarbonization targets. In some cases, goals should follow the standards of the Science Based Targets initiative (SBTi), which has become the gold standard for setting emissions targets across industries. Companies should then publicly announce these goals. Going forward, sustainability leaders could work with teams to develop clear, measurable KPIs that are linked to department and individual decarbonization performance. Leaders and teams could also adapt tools and processes to include decarbonization and sustainability principles. Creating a sustainability office that reports directly to the CEO could strengthen internal decision making, while top managers could look to industry-level consortiums to lead decarbonization through partnerships with suppliers.
The love of nature is a powerful motivation for customers to buy an RV. Tapping into that passion by using more sustainable materials in RV production can be a winning opportunity for manufacturers. The challenges are considerable, given that RV companies depend on a broad range of suppliers. But careful choices and persistence are likely to pay off amid mounting pressure throughout the supply chain to reduce emissions intensity.
