- Aasavari Joshi
Scaling Circularity in the Automotive Industry Could Reduce Emissions by Two Thirds
According to a recent estimate by Bain & Company, increased circularity in the use of materials by the European automobile industry may cut emissions related to the materials used in production per car by 60% by 2040. The Bain & Company report states that a circularity revolution in the industry may be brought about by a combination of recycling, better material utilization, reuse and remanufacturing of components, and scaling up new mobility business models.
Circularity is expected to be crucial in lowering lifetime emissions, especially as mobility now makes up 30% of total world emissions. European automakers currently lead the world in circularity with a rate of 40%, partly due to strict EU regulations. However, according to Bain & Company's research "Reuse, Remanufacturing, Recycling, and Robocabs: Circularity in the Automotive Industry", the emphasis is changing to ensure circularity is built into the initial design phase of cars.
Automotive manufacturers have been slow to embrace circular business models so far despite the economic and environmental benefits. A recent Accenture research estimates that switching to a circular value chain may raise profitability by 1.5 times and generate revenues 15-20 times the car sale price. Less than 25 per cent of the materials currently used in European automobile manufacturing are recycled, according to the Bain & Company analysis.
According to Bain & Company, by 2040, the industry's use of recycled materials in production could increase by more than double (from 23% to 59%), resulting in a 60% reduction in sector emissions compared to the use of "virgin materials". New automobiles manufactured in 2040 may also be 97% recyclable, up from 78% currently. While this is happening, a six-fold increase in recycled parts usage in auto repairs, from 2% in 2020 to 12% by 2040, could also guarantee better circularity in a vehicle's lifetime. Employing engines that have been remanufactured or reused could cut emissions by 85%. Like any significant challenge, addressing it alone represents a challenge for businesses.
As a result, cross-sector cooperation will be crucial to future levels of circularity, according to Harry Morrison, a partner in Bain & Company's Sustainability & Responsibility practice. Morrison cites The Global Battery Alliance as an example of how company leaders are already strengthening their manufacturing ecosystems with a clear understanding of where to collaborate and compete. More than 120 public and commercial organizations joined forces through the network "to develop a sustainable battery value chain". He says that automotive companies that are leading the way toward increased circularity are good at three things. They analyze the current value chain to find areas where circular flows could be improved. They integrate today's and tomorrow's viewpoints to find new opportunities and they scale the ecosystem for success.