Circularity in Automotive
Circularity has existed in the European Automotive industry in the form of parts remanufacturing, repair & refurbishment, EOL dismantling, and used car refurbishment, among others. However, the historically limited focus of major auto players resulted in a large and thriving unorganized or independent ecosystem. Over the past decades, certain major players ventured into this space, attempting to capture value organically (e.g., OEM’s Approved Used Car programs) or inorganically (e.g., Stellantis’ acquisition of Aramis). Yet, the maturity of most large auto players in circularity remains limited so far.
As the industry gears up for a paradigm shift to an electrified future, we believe that the stage is set for a new era in sustainable automotive manufacturing, one that reimagines the entire lifecycle of vehicles. Several tailwinds are accelerating this transition, including revamped circularity regulation (e.g., for ELVs & batteries), stringent emission targets, an erosion of traditional value pools (i.e., EV’s impact on aftersales), and a growing imperative for resilient European supply chains.
A transformation of such scale would require investments, reimagined business models (B2B vs. B2C), partnerships, new org. capabilities, etc. As with all transitions, there are likely to be winners and losers. Those that move rapidly to develop scalable circular ecosystems, and those that will remain dependent on others’ ecosystems at exorbitant cost to comply with regulations and to weather supply chain crises. Today, fortune favors large OEM incumbents with their large retail networks, access to a large car parc, scalable reverse logistics infrastructure, etc. However, only time will tell which player has the foresight, innovativeness, and agility to create and capture maximum value.
In this publication, we delve into the dynamics of circularity and the potential white spaces of opportunity for auto players, posing key questions about the future auto landscape and winning business models. This is part of a broader initiative by Monitor Deloitte to address this exciting, evolving topic of circularity in the automotive industry, as part of its sustainable transformation. To find out more about these topics, please contact us or visit our website.
