The Circular Economy Applied to the Automotive Industry

July 24, 2013

The dependence of the automotive industry upon raw materials and certain precious metals is a major obstacle and presents highly strategic challenges for supply management. With 60% of the global supply going into car manufacturing, the automotive industry is the top consumer of lead in the world and according to some studies, these reserves will run out in 2030.1 Besides the shortages and supply challenges of the metals, rare or not, the rise in global demand for raw materials has created extraordinary price increases. For the automotive industry, these added costs are going up by several million euros year on year.

Being able to anticipate any shortages and securing supply are the primary concerns for the manufacturers, and this is consequently why technological solutions are being developed to limit current dependence on earth metals. Equally, the geopolitical issues around raw materials are being integrated at EU level – and one of the other policies in discussion is towards recycling. 12 million vehicles are taken off the roads every year in the European Union, which amounts to millions of tonnes of what actually constitutes a valuable resource.2 The utilisation of this secondary resource, investing in recycling technologies and increasing the use of recycled material has been found to provide a promising outlook.

Gearbox

Choisy-le-Roi in detail

Remanufacturing and reconditioning involves the ‘putting back’ of a part or a product in as close to its original state and characteristics as possible. On an indicative basis, in the United States of America, the sector employs 350,000 people whereas for Europe, this figure is only 35,000 for an equivalent fleet of automobiles.

The production of remanufactured automobiles parts began in 1949 in Choisy-le-Roi, since then, the factory has been steadily diversifying its output: injection pumps (1989), gearboxes (2003), injectors (2010) and turbocompressors (2013). Today, 325 employees work on the site – manufacturing on demand, ensuring the engineering and production of six types of mechanisms. The remanufactured parts are exclusively for the repairing of vehicles currently in-use.

The parts destined for remanufacturing, called ’scraps’, which can be used in 90% of cars in our range, are dropped-off to vehicles in-use /owned. By using reverse logistics of distribution of spare parts, the scraps are collected by the commercial network.

- Laurent Claude, Business Developer Renault Environnement

The damaged parts (scraps) from vehicles currently in use are being collected through the commercial reverse logistic network.
The damaged parts (scraps) from vehicles currently in use are being collected through the commercial reverse logistic network.

Multiple advantages

Other than being 30-50% less expensive, the remanufactured parts have the same guarantee and are submitted to the same quality control tests as new parts. It is also the only available way in which to create a part which has otherwise been discontinued.

By prolonging the life of the vehicles, retaining value and saving on energy whilst reducing waste, the factory in Choisy has created a comprehensive circular model. Moreover, this activity involved a skilled workforce and creates jobs locally: in order to be economically interesting, remanufacturing has to be performed within the market in which vehicles are used (shipping engines abroad to be worked on would negate the savings).

The offering of a standard exchange as well as offering new parts is a sound commercial argument, because it allows a repair with a part which is relative to the life-span of the repaired vehicle at an affordable price – which is also relative to the residual value of the car. On this basis, the standard exchange offer prolongs the length of usage for vehicles. It avoids ‘writing them off’ – when the cost to repair is more than their market value.”

- Laurent Claude

Choisy-le-roi

Savings on every level

Finally, economies which rely on energy consumption and raw materials are losing out to the potential of this process which bears huge potential. On a global scale, the energy saved as a result of remanufacturing could be equivalent to the amount of electricity produced by eight nuclear power stations.3 At Choisy-le-Roi, the figures speak for themselves. The savings from the production of a remanufactured part compared to a new part are as follows:

80% less energy
88% less water
92% less chemical products
70% less waster production

In terms of raw materials, the Choisy-de-Roi factory does not send any waste to landfill:

43% of the carcasses are re-usable4
48% are recycled in the company’s foundries to produce new parts
The remaining 9% is valorised in treatment centres meaning the entire process is waste-free.

Despite the time and investment needed, this process remains profitable for the manufacturer. It allows them to increase their sales of parts for exchange through offering the product at a lower price; it creates loyalty with clients in the brand’s network and facilitates the longevity of the exchange parts, at controlled costs, even for discontinued products / mechanisms.

- Laurent Claude

Choisy-le-roi-worker

Looking ahead

Mechanical parts are generally made with the view to be repaired, but it is possible to go further in research to improve materials and parts. Studies are being undertaken with the engineering sector to find the future of mechanical parts to improve the design, with a view to make disassembly easier and to increase the recyclability of materials. Other studies are delving into a revision of acceptance criteria and the interchangeability of components. It is still too early to evaluate the benefits / profits of these different initiatives, but the research is heading in the right direction showing it as a very promising market. For the automotive remanufacturing market alone, the figures will reach 104.8 million dollars by 2015.

According to the CLEPA (European Association of Automotive Suppliers), the remanufacturing market in Europe is estimated at between 8 and 10 billions Euros.

The Choisy-le-Roi factory in numbers

Choisy-le-roi-building

325 employees

The production of spare parts at Choisy-le-Roi produces a turnover of 100 million euros

Parts remanufactured in 2012:
Cars: 14,681
Gearboxes: 21,241
Injection pumps: 32,691
Injectors / nozzles: 151,325
Cylinder heads: 3,540

1 U.S. Geological Survey (USGS).

2 According to European regulations (End of Life Vehicle Directive), vehicles must be recycled to 85% from 2015.

3 International Federation of Remanufacturers and Engine Rebuilders.

4 72% of the mass of a gearbox and 37% of the mass of a motor (iron, steel, aluminium).