Circularity in the Automotive Industry
OEMs’ path to greater transparency and less complexity
In today's rapidly evolving automotive landscape, original equipment manufacturers (OEMs) are turning to circularity to solve an increasing number of structural problems, including resource shortages, regulatory compliance issues and failing profits. This transformation requires OEMs to address two interdependent issues: First, how to generate revenue from new business models. Second, which changes to their product lifecycle and supply chain to prioritise circularity. These challenges demand new, cross-functional solutions that span the entire product lifecycle.
Closing the Plastics Gap: Why OEMs must act now to embrace circularity
By 2038, OEMs will be required to use a minimum of 25% recycled plastic in their new vehicle models, equating to 1.4 billion kilograms of recycled plastic per year. However, current forecasts indicate that only 800 million kilograms of suitable recyclates will beavailable, revealing a critical supply gap.
This regulatory shift presents a dual challenge and a strategic opportunity for OEMs. In order to meet evolving compliance demands, OEMs must navigate long vehicle development cycles (typically around 48 months) and align cross-functional teams, including those responsible for design, sourcing, production, and end-of-life management. The complexity of plastics, given their diverse applications and recyclability, further intensifies the need for the early integration of circularity measures.
Deloitte’s Circularity Strategic Navigator enables OEMs to model circularity strategies, simulate regulatory scenario and optimise cost-benefit trade-offs. The tool provides for transparency across departments, supports real-time decision-making, and helps to build resilient supply chains.
To succeed, OEMs must act now by focusing on three strategic levers:
- Invest in ecosystem partnerships to ensure a consistent supply of high-quality recyclates and establish closed-loop systems.
- Set up cross-functional task forces to incorporate circularity into vehicle development from an early stage.
- Develop scenario-based strategies that use quantitative data to adapt to regulatory uncertainty.
Those OEMs that embrace circularity today will lead the transition to sustainable mobility tomorrow. Please feel free to contact us at any time if you have any questions about our Circularity Strategic Navigator Tool.
Our tool: The Circularity Strategic Navigator ‘s added value
The Circularity Strategic Navigator enables automotive OEMs to adapt quickly to evolving regulations by assessing measures while taking into account material availability and ongoing initiatives. It provides transparency across departments and lifecycle stages.
Clients benefit from:
- Simplified functional/ user-specific data templates and data entry
- Clear data structures and existing tool infrastructure
- Expertise in evaluating interdependencies and optimising recycled content allocation
- A scalable and adaptable solution that does not require foundational concept development
- Real-time scenario simulations and adjustments with clear visualisation through Power BI dashboards
- Pre-integrated public data and regulations for efficient scenario analysis
The Navigator is a valuable tool for clients in the automotive industry. Deloitte can accelerate strategic circularity decisions in a dynamic environment, enabling companies to implement the right circularity initiatives.
Methodology
Circularity Strategic Navigator: The calculations and insights are based on a proprietary decision-making model developed by Deloitte Germany. The Circularity Strategic Navigator increases transparency around internal circularity measures and their contribution to recycled material quotas. It identifies interdependencies and group-related actions, visualising their impact on key performance indicators to ensure that operational efforts and overarching sustainability goals are strategically aligned and can be integrated into corporate reporting systems.
Expert interviews: To complement the quantitative modelling, semi-structured expert interviews were conducted with professionals from across the European automotive value chain. These interviews were recorded, transcribed, and systematically analysed using qualitative coding techniques. Recurring themes and insights were synthesised and integrated into the study to enrich the quantitative findings with real-world perspectives and strategic foresight.
Nadja Gläser
