Navigating the Transition: Unpacking Nonlinear Dynamics of Vehicle Production and Decarbonizing Global Transport

ABSTRACT The reduction of carbon dioxide emissions from the transport sector is central to global climate commitments and the achievement of the sustainable development goals, particularly SDG 9 industry innovation and infrastructure, SDG 11 sustainable cities and communities, and SDG 13 climate action. This study examines how changes in motor and electric vehicle production affect transport‐related CO 2 emissions through nonlinear efficiency channels across 24 major vehicle‐producing countries from 2010 to 2022. Gross fixed capital formation, globalization, urbanization, renewable energy consumption, and energy intensity are included as control variables. The analysis employs second‐generation panel econometric techniques, specifically nonlinear cross‐sectionally augmented ARDL models, to capture both short‐ and long‐run dynamics while accounting for cross‐country dependence and heterogeneity. The results reveal a U‐shaped relationship between conventional motor vehicle production and transport emissions. Emissions decline at lower production levels due to efficiency gains but rise again as scale effects dominate. Electric vehicle production also follows a U‐shaped pattern. Emissions initially increase during early production stages because of energy‐intensive manufacturing processes, but decline at higher production levels as learning effects, economies of scale, and greater reliance on renewable energy emerge. The findings suggest that transport decarbonization strategies should go beyond promoting electric vehicle production alone. Effective policies must integrate renewable electricity expansion, energy efficiency improvements, and targeted investment frameworks within vehicle manufacturing systems. Such coordinated approaches are essential to ensure that vehicle electrification delivers sustained emission reductions and supports progress toward SDG 9, SDG 11, and SDG 13.