Circularity in the Automotive Industry

Key insights

Rising societal awareness and regulatory demands, such as the EU End-of-Life Vehicles Directive, are putting significant pressure on the automotive industry. This directive, set to take effect in 2026, mandates the use of recycled materials in new vehicle production, compelling OEMs to explore innovative solutions to secure feedstock amidst limited raw material availability.

Circular economy business models offer a promising solution, fostering resilient supply chains and establishing OEMs as early market movers. Deloitte's calculations indicate potential margins of 5-15% from vehicle recycling and 15-20% from remanufacturing parts. As the market landscape evolves, OEMs must navigate a complex ecosystem in which external players such as recyclers and chemical companies will dominate. They must decide whether to actively shape these ecosystems or play a subordinate role as clients seeking recycled feedstock. Forming strategic partnerships with industry experts can provide OEMs with access to valuable knowledge and infrastructure, enabling them to meet regulatory demands and capitalize on new business opportunities. The article outlines four future scenarios, emphasizing the importance of targeted investments and strategic service portfolios.

By establishing strategic partnerships, setting up coherent digital infrastructures and installing steering committees, OEMs can position themselves strategically for long-term success.

In conclusion, adopting circular economy business models from an early stage offers significant potential for achieving first-mover advantage. As this is often outside the scope of automotive core businesses, success ultimately hinges on forming the right alliances.

Download the full article here to explore the comprehensive strategies and insights that will empower OEMs to lead the way in the circular economy revolution.