5. Creating circularity unlocks twin sustainability advantages
The business can obtain important environmental and financial good points by adopting round practices, comparable to utilizing recycled supplies and enhancing product longevity. With world materials consumption hovering and the usage of secondary supplies declining, the EU’s Inexperienced Deal emphasizes the necessity to shift from a linear economic system to a round one. Nonetheless, the complexity and energy concerned current important challenges for the business.
International consumption of supplies and sources continues to rise quickly. Over the previous six years, the worldwide economic system has consumed nearly as a lot materials because it did all through your complete twentieth century. Alarmingly, the usage of secondary supplies fell to 7.2% in 2023, down from 9.1% in 2018.38 This underscores the pressing must align with the EU’s Inexperienced Deal imaginative and prescient, which goals to decouple financial progress from useful resource consumption by shifting from a linear “take-make-waste” mannequin to a round economic system.
A round method provides advantages for the atmosphere and the automotive business. The main focus is on decreasing environmental impacts by means of enhancing product sturdiness, reuse, refurbishing, and recycling. The EU’s inexperienced transition hinges on entry to important uncooked supplies, notably for the automotive business, which faces important provide dangers for supplies like lithium for batteries or platinum for gas cells.39 Whereas this poses a threat to the broader EU inexperienced transition, it additionally impacts particular person corporations. In the long run, companies can reap advantages from adopting a round economic system mannequin. A current Deloitte survey of 128 provide chain managers from German corporations revealed that two-thirds consider that round approaches can mitigate provide dangers for important uncooked supplies and create new enterprise alternatives.40
The business has made progress in enhancing manufacturing effectivity, notably in decreasing power and water utilization primarily based on knowledge from firm stories. Nonetheless, the problem that is still is decoupling the business’s manufacturing from its reliance on virgin supplies—one of the crucial difficult duties the business faces. The constructing blocks of a round automotive worth chain embrace:
Closing the fabric loopTransitioning to renewable and secondary uncooked supplies (these obtained from recycling)Extending the lifespan of autos and their parts and enhancing manufacturing useful resource effectivity
Lowering virgin materials use is complicated. Autos demand substantial materials enter, with the common automotive registered within the EU in 2023 requiring 1.5 tons, a determine that continues to rise.41 The automotive sector accounts for 10% of the EU’s plastic consumption42 and practically 20% of metal demand.43 As well as, autos use supplies derived from 60 completely different uncooked supplies.44 As electrification will increase, the demand for important uncooked supplies will develop considerably.
OEMs have begun incorporating recycled and renewable supplies, however reporting stays inconsistent. Mercedes-Benz, for instance, stories that 184 parts of the EQE mannequin, weighing 78.3 kilograms, are made out of recycled plastics and renewable uncooked supplies.45 Renault Group, in the meantime, used 25 kilograms of recycled plastics per car in 2023 (representing 12% of whole plastics used) and famous a excessive share of recycled metal in manufacturing.46
Metal recycling is extra superior than plastics recycling, with 40% of metal produced by means of reprocessing scrap and 85% of end-of-life metal being recovered for recycling within the EU.47 Producers like Volvo Group report that about 50% of their wrought iron comes from recycled metallic and 97% of forged iron is sourced from recycled iron.48
The push for elevated plastic recycling is a important regulatory focus. The revision of the Finish-of-Life Autos Regulation units circularity necessities for car design and administration, together with targets for minimal plastic content material by 2030. It anticipates related quotas for different supplies, comparable to aluminum and uncommon supplies utilized in electrical drivetrains.
Electrified autos add one other layer of complexity to round technique, notably in growing round worth chains for batteries. Corporations like Mercedes-Benz and Volkswagen are piloting battery recycling services,49 whereas Volvo Vehicles is engaged on a undertaking that repurposes batteries from their plug-in hybrid autos as stationary power storage, performing as “quick balancers” for the electrical energy grid.50
A important regulatory framework for the business is the EU Battery Regulation,51 which units minimal recycling charges, efficiency requirements for recycling applied sciences, and quotas for secondary inputs. The regulation mandates bold recycled content material targets for important uncooked supplies utilized in EV batteries, beginning in 2031. By 2036, batteries should comprise minimal shares of recycled contents for cobalt (26%), lithium (12%), and nickel (12%). To help these targets, the regulation introduces transparency necessities such because the Battery Passport—required from 2027—which is able to present detailed info on battery composition to help repairers, remanufacturers, second-life operators, and recyclers.
Whereas quotas place strain on the automotive gamers, they provide a transparent indication of future demand for particular round financial actions vital to develop a viable recycling business. Nonetheless, important uncertainties stay, difficult the change to round manufacturing. For instance, the market faces uncertainties concerning the tempo of EV adoption and the ensuing availability of batteries for recycling, diffusion of cell chemistries, and availability of recycling applied sciences. Moreover, the steadiness for policymakers is to create viable recycling market situations that don’t curtail incentives for reusing batteries for different purposes. In the meantime, automotive corporations face the complicated activity of making new ecosystems to handle round battery worth chains.
