In the automotive industry, we need more focus on the circular economy

If you follow the press releases and annual and sustainability reports of leading German automakers and suppliers, you might think that the automotive industry in this country is one of the pioneers when it comes to sustainability. However, a recent study by the Capgemini Research Institute shows that companies have made little progress in this area.

For example, the average volume of investment in sustainability initiatives has fallen
from 1.24 percent as a proportion of sales in 2019 to 1.11 percent in 2022. In an international comparison, however, Germany is still doing quite well. Globally, investments in sustainability have been reduced from 1.22 percent of sales in 2019 to currently 0.85 percent.

The study also records a downward trend in the implementation of circular economy initiatives although this area is seen as the core issue by companies in the automotive industry worldwide for achieving long-term climate targets. Only 63 percentv of the German companies surveyed say they have a circular economy strategy and only 54 percent currently adhere to the principles of the circular economy throughout their value chain. However, Germany is also above the international average on this issue.

Despite all the demands for more, we are also seeing promising efforts on the part of customers and major players in the automotive industry, particularly in terms of the circular economy. At the beginning of the year, for example, Stellantis expanded its involvement in the recycling of used vehicles with the acquisition of Stimcar. In addition, in October the group announced the establishment of a dedicated business unit for the circular economy which is expected to generate sales of more than two billion euros by 2030.

The focus of the new business unit is to „extend the service life of vehicles and spare parts as much as possible and return materials and end-of-life vehicles to the production cycle.“ A corresponding 360° business model has been developed for the new business unit, based on four strategies.

Stellantis – 4R-Strategy

In addition to Stellantis, Renault is also focusing on the industrial processing of used vehicles with its „Re-Factory“ concept and is also placing the circular economy at the center of its sustainability goals. At the Flin production site in northern France, plant facilities and processes have been realigned accordingly since 2020. The focus here is on the entire life cycle of the vehicle and, similar to Stellantis, is based on four central pillars.

Renault – 4 Pillars

Furthermore, the Renault Group recently established the company „The Future is NEUTRAL“ which brings together all the knowledge in the field of the circular economy and is intended to offer closed-loop solutions for every phase of a vehicle’s life cycle. Of particular interest here is the recycling of end-of-life vehicles. Until now, the valuable material from end-of-life vehicles has largely been recovered for other industries.

However, the goal of The Future is NEUTRAL is now to recover the greatest possible amount of material from each vehicle and to achieve a much higher proportion of recycled automotive materials in the production of new vehicles per se (the car as a raw material). According to the Renault Group’s October 2022 press release, it will be the first company to operate across the entire value chain of the automotive circular economy, targeting all players in the automotive world outside the Renault Group.

The automotive industry is undergoing a turnaround that, to date, has been dominated by the shift to electric vehicles. However, achieving the Paris climate targets also requires a stronger commitment to the circular economy. We are observing initial approaches here, but are calling for more, especially since the circular economy also offers opportunities to set oneself apart from the competition and to additionally save costs.

Norman Pirngruber, Market Intelligence Senior Expert

Sources: