Driving Circular Automotive Transformation: The next generation

Last time out, we explored how the automotive sector is starting to embrace greater circularity in the essential drive towards a net-zero economy. While there has been some useful progress made, in pockets, there is a now a stronger need to develop more transformative models for a circular industry. The question is, who will lead the circular automotive transformation? And what form will that transformation take? In this second and final article in this series, we will explore two very different future-oriented models for circular automotive transformation: one centrally controlled, the other based on a more distributed ecosystem approach. Who will be the winners in this essential quest?

Who will lead the circular transformation?

Groupe Renault is looking ambitious – having established The Future is Neutral, its new circular economy enterprise – aiming to drive resource neutrality for the whole sector, towards becoming “the European leader in the circular economy for cars by 2030.”

While the ultimate destination points towards fully circular vehicles, their initial focus is on battery reuse and recycling, along with harnessing used cars as a source of raw materials for manufacturing new vehicles, and not just for Renault, but for the whole industry.

CEO Jean-Philippe Bahuaud explains: “In the automotive sector, the first under-exploited resource is the car itself, which is made up of more than 85% of metals and plastics. This new entity aims to push the automotive industry towards resource neutrality, extracting from each vehicle the largest possible amount of material needed to manufacture a new model.”

A worthy ambition. It will be interesting to see if TFiN’s focus includes much emphasis on enabling greater circularity within the existing stock of vehicles, or whether its model is more about providing re-used and recycled resources towards the manufacture of new vehicles.

Either way, Groupe Renault appears to be building its own value chain, working through a range of subsidiaries, including Gaia (batteries), Indra (recycling end-of-life vehicles) and Boone Comenor (recycling services), as well as their Refactory in Flins, located around 40km from Paris.

It will be interesting to see if Groupe Renault seeks to build, control and own a vertically-integrated circular value chain, or whether it could be open to collaborate and contribute towards a wider, more organic and distributed circular automotive ecosystem.

The next generation

While a complete shift towards a fully circular ecosystem can present challenges for incumbents, this is where the market disruptors start to excel; unencumbered by historical baggage or any legacy business expectations, they can engage in bold thinking, and even bolder action.

REvolve is a new company, driving circular economy in the automotive sector.  With a focus on green (reused and refurbished) vehicle parts, their aim is to inspire and accelerate societal behaviour towards a circular economy for the benefit of current and future generations.

Richard Brennan, REvolve’s Managing Director, shares his vision towards an authentic industry transformation: “The vehicle salvage and recycling industry has always been circular by nature, but hasn’t yet fully developed its true potential. So, now – with the need for radical reductions in carbon emissions – we’re aiming to disrupt and redefine the market. We want to be seen as a market-leading catalyst for low carbon and circular change.”

REvolve is working on creating an entirely new industry infrastructure, built on circular value chain innovation and enabled by a digital platform, providing an effective interface between customers and supply markets, configured to drive a more sustainable customer experience, radically improved sustainability impacts, along with a circular transformation in the automotive industry.

Brennan, elaborates further: “REvolve is like an ‘Amazon’ for vehicle parts, only without the excess consumption and waste. We want to provide the more affordable and sustainable alternative to OEM parts: high quality, accredited parts, from certified suppliers. And, we’re aiming to deliver this at scale, initially across UK and Ireland, but also expanding into mainland Europe.”

REvolve also appears to be making serious inroads on the closed-loop challenge.

Looping the loop

Revolve is pushing the boundaries for improved circularity – maximising total carbon and sustainability savings –  by driving extended lifecycle management of vehicle parts through multiple useful lives, ensuring they stay in the loop, with new return infrastructure.

Richard Brennan: “We have the solution now to keep parts in the loop for multiple useful lives. We’ve developed our system to capture and manage product, sustainability and lifecycle management data for each part. We’re raising the bar for the whole industry!”

REvolve and its salvage network partners are already able to harvest between 20 and 45% (by weight) of an end-of-life vehicle for reused and refurbished parts, minimising the quantity of downcycled resources. They are now striving for 50% plus reuse, but this will also require ‘demand’ to step up to the plate. Both the manufacturing and aftersales sides of the industry will also need to rise to this technical and commercial challenge.

The progressive players at Polestar have realised that striving to create a truly climate-neutral car, without resorting to offsetting, will require in-depth work with every part of the supply chain – including the procurement of low-emission components that incorporate reused materials and critical minerals. As we’ve already considered in Part 1, presently, the industry tends to emphasise the use of downcycled resources over remanufactured and reused parts.

A great deal more is certainly possible in terms of the application of reused and refurbished parts on the existing stock of vehicles. REvolve is already installing an average of 80 percent reused and refurbished parts on its Garda Fleet Contract in Ireland. This level of reuse demonstrates what is possible to support bodyshops, garages and repair centres in developing more circular, customer-centric and affordable solutions, enabling even more circular repairs and reduction in embodied emissions.

And that’s a key point: this new model is not only about improved environmental impacts, there are multiple benefits for customers and other stakeholders, too.

On insurance repairs, for example, the customer experiences a faster, more affordable and lower carbon solution. Green parts are 30% cheaper than OEM parts, and – in the era of global supply chain disruptions – they tend to be more readily available. It is not uncommon for new parts on BMW 3 Series cars to be expensive and in short supply. Some parts seem not to be available at all, including doors for Mercedes Sprinter vans, Renault Kango vans and Dacia Dusters. For other parts, there is a very long lead time: it can take between four and six weeks to receive many body panels and mechanical parts. REvolve is aiming to ensure reused and refurbished parts can be available within 48 hours.

The faster repair solution also drives other benefits. The average industry key-to-key time for vehicle repairs is believed to be around seven to ten days. REvolve has set a goal of five days, saving between two and five days of time. This reduction in time not only means more satisfied customers, it also enables lower total claims handling costs, including savings on courtesy cars of around €30 per day on each claim.

Technology enabled

A key enabler in this whole process is REvolve’s customised technology platform, REvolve O.S. As Philip Mackessy, their Technology Director describes, “This, market-changing technology has been built by Ireland’s leading automotive systems company to deliver previously unattainable levels of visibility, efficiency and other business benefits – including reduced costs and shorter repair timelines, while also generating audited, measurable carbon savings for our clients.”

The technology platform also enables customers to check availability and reserve green parts. An important critical success factor underpinning this guarantee is REvolve’s commitment towards high-quality relationships with its network of salvage companies, including better payment terms than they might experience with other customers.

This model is one of the most interesting I’ve yet seen in this sector. The folks at REvolve appear to have Intuitively understood the need for multi-level perspectives in driving a circular economy transformation:

• Developing a value proposition that is focused on maximising circular parts, guaranteeing availability of quality items, with a system grounded in operational excellence with lean processes, enabling reduced repair durations, and so on.
• Driving strategic market change, towards greater vehicle circularity – through a radical shift in quantities of parts for reuse, refurbishment and remanufacturing: optimising what can be keep in-the-loop, and managing these across multiple product lifecycles.
• Then also designing for systemic change — building a platform-enabled industry ecosystem, to drive and help accelerate a wider structural change in the automotive sector.

And they seem to mean it. Richard Brennan shares an important perspective on their ultimate motivations: “This is not just about jumping on the sustainability bandwagon – as some will inevitably do – it’s more about seizing the real opportunity for transforming the sector. Otherwise, we won’t realise a sustainable planet.”

Great expectations

There is no doubt that the necessary low-carbon and circular transformation is already underway in the automotive industry. And, let’s be honest, this has to happen if the industry is going to make its necessary contribution towards its near and long-term net-zero targets. We all need to have great expectations for this highly impactful sector.

The key question is, what shape will the industry take?

Will the future model be centralised, driven by a few big companies, seeking to control the full circular value chain, or will a more organic, distributed platform economy become the dominant ecosystem? Can these different models co-exist, side-by-side? These are quite different approaches, with quite different underpinning philosophies.

Whichever route emerges, we can be sure of one thing: No single actor can do all the heavy lifting on their own; this level of transformation needs genuine collaboration, right through the value chain.

Polestar’s Pehrson explains that his team realised very early on that “collaboration is needed way beyond normal business-to-business relationships” for a project like Polestar 0, which is striving to achieve what has never been done before.

REvolve’s Richard Brennan is inclined to agree, “We can’t do this on our own: we need salvage companies, body shops, government, industry bodies and OEMs to come together. REvolve is a catalyst, but it requires new, deeper levels of collaboration, trust and sharing between all industry players.”

The industry is now at an important crossroads: We can carry on with incremental improvements and hope that everything works out fine — or, we can seize the moment, and maximise the circular opportunity and explore new models for more responsible growth.

The business case for change is certainly compelling — not least with continued jobs and prosperity at stake, let alone the benefit of maintaining a liveable planet.

Yet, we are still in the very early stages of this essential transformation. This short exploration of future models for a circular automotive sector is just the start of an ongoing conversation. We really need to bring all industry stakeholders together, and leverage all available resources, as part of a coordinated strategy to achieve a new direction for this industry. A collaborative summit, perhaps?

Richard Brennan shares a call to action: “If you share our vision and you’re in a position of responsibility, with a passion to make change happen, and you wish to be part of the drive towards the circular economy, we welcome a conversation.”

The REvolve door appears to be open for enlightened influencers. It really will be fascinating to see what happens next. Can the industry come together and collaborate for circular transformation? Have we got what it takes for real change? Only time will tell. But, at this point in time, we cannot fail to stay tuned and stay engaged.

Takeaways:

1. The circular economy is essential for enabling effective automotive net-zero plans, saving up to 50% in embodied emissions.
2. It’s time to reimagine the automotive industry, going way beyond downcycling towards a truly circular value chain, delivering net-zero and wider sustainability and commercial benefits.
3. A brave new world, with new visions for a circular industry are emerging – involving centrally controlled value chains vs. more organic and distributed ecosystems.
4. Industry leaders like Groupe Renault are developing new, centrally-controlled value chains for enhanced circularity and use of recycled content.
5. The strategic need takes us way beyond downcycling – maximising reuse, refurbishment and remanufacturing – towards 50% reuse and beyond.
6. REvolve is a next-generation player, driving multi-level industry transformation, higher levels of re-use and operational excellence.
7. Technology platforms can enable the development of a new industry ecosystem, generating greater visibility, efficiency and positive customer and sustainability impacts, along with total parts lifecycle management.
8. Call to action: No single actor can drive industry transformation, independently – the whole industry now needs to come together to drive concerted change.

Mike Townsend is founder and chief executive of Earthshine Group and the author of The Quiet Revolution.