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Every year, the automobile industry produces more greenhouse gas emissions than the entire European Union. Even advances being made in electromobility will not be enough to achieve a neutral energy balance. Instead, the automotive ecosystem needs a complete cyclical process for materials and components. That would reduce carbon emissions by up to 75 percent by 2030, and simultaneously free OEMs from competitive disputes over raw materials.
In October, the proportion of new passenger vehicle registrations in Germany represented by electric vehicles was 17 percent. Volkswagen is counting on a figure of around 80 percent for the year 2030. But a lot more needs to be done on the way to climate-neutrality.
“For reasons of cost, but also based on traditional thinking patterns, corporate customers are not greatly prepared to pay their suppliers extra for sustainability,” says economist and social scientist Professor Matthias Fifka, who is jointly responsible for the sustainability strategy of NürnbergMesse and a corresponding study, whose results will be released at the next EUROGUSS, scheduled for 8-10 June 2022. “The purchasing departments, which traditionally operate on a price basis, play a major role in this regard. The buck therefore stops with the supplier: Corporate customers are not prepared to pay substantially more for a cast part, but still demand adherence to sustainability standards. Observing such standards costs money, and the supplier has to pay it.”
Consulting firm Deloitte has published its survey on this subject, Nachhaltigkeit in der deutschen Automobilindustrie. Wie reagieren OEMs und Zulieferer 2021 auf den Megatrend Sustainability? [Sustainability in the German automobile industry: How do OEMs and suppliers respond to the megatrend of sustainability in 2021?], which says that “Only 51 percent of those surveyed consider suppliers in addition to their own company in their sustainability initiatives. And only 40 percent can demonstrate a comprehensive, end-to-end approach that includes both the upstream and downstream supply chain, with regard to recycling, for example.
The circular economy model is almost obligatory for a sector that’s responsible for about one-fifth of total global carbon emissions – about 20 percent of this can be attributed to the production phase alone – and consumes massive amounts of resources, including a quarter of the world’s aluminium and about 15 percent of its steel.
Franz-Josef Wöstmann, Head of the Casting Technology and Lightweight Construction Department, Fraunhofer IFAM, calls for a sustainability index. Scores on such an index would be higher depending on how efficiently a car can be constructed from an earlier vehicle, and its assessment would go much further than the current carbon index. “A sustainability index must also specify other points, such as the reduction in raw material consumption, reduced energy use, reduced workload, and a reduction in infrastructure consumption. The index would take account not only of the material, but also of future component design from the perspective of disassembly, and the extent to which the individual components can be reused.”
At last year’s World Economic Forum (WEF), the need for more sustainable solutions led to the creation of the Circular Cars Initiative. The initiative, which includes material suppliers, fleet operators, manufacturers, recyclers and data platforms, concentrates on three main areas: materials, managed by McKinsey; business models, led by Accenture Strategy; and policy-making, jointly managed by WEF and SYSTEMIQ.
Among the initial results of the Initiative is the report published in January, Raising Ambitions: A new roadmap for the automotive circular economy, by Accenture, the WEF and the World Business Council for Sustainable Development. According to the report, the introduction of circular economy practices, combined with the transition to electromobility in the automobile industry, has the potential to reduce carbon emissions by up to 75 percent by 2030.
According to the report, a circular economy in the automotive ecosystem can be created via four key paths: achieving zero emissions throughout the entire lifecycle of a vehicle; resource recovery and closed-loop recycling; extending the service life of vehicles and their components; and efficient vehicle use.
Wöstmann thinks it through further: “I can imagine that, in several years, raw materials and the energy needed to exploit and process them will become scarce or qualify as strategic resources. Raw materials will become restricted at that point. In this scenario, the number of vehicles automakers were allowed to manufacture would be limited to the number they had taken back. That would give us a forced circular process. In this regard I think it would be more practical to get involved in this theme in good time and develop it into a business model at an early stage.”
BMW displays “circular” EV
At the last IAA Mobility motor show, the BMW i Vision Circular concept study showed how a car made from 100-percent recycled and sustainable materials could look in 2040. EVs must be the embodiment of the resource-friendly circular economy, keeping their environmental footprint as small as possible and thus ensuring a positive carbon balance.
Currently, BMW’s vehicles contain almost 30 percent recycled and reused materials on average. The company says that this value will gradually be increased to 50 percent, based on the “Secondary First” approach. The aim is to concentrate on the principles of the circular economy and the use of secondary materials. That will significantly improve the vehicles’ carbon footprint, in the supply chain in particular.
Germany must be a trail-blazer for the digital product passport
“But that will only work if the major automakers work together with suppliers and each other,” Wöstmann considers. “The circular process implies, by its very nature, that the materials in circulation are known. This is where digitalization comes into play. By labelling components appropriately and tracing them, automakers will know at all times which material they have in circulation, and in which quantities, so they can feed it back into their production process again later. That way, their own product becomes a source of raw materials, making them less dependent on primary raw materials and price fluctuations.”
Recently, the industry-level foundation “KlimaWirtschaft” called for a uniform system in the form of a digital product passport for cars and other vehicles, in response to growing regulations on product and supply chain management. The passport would function at a national and EU level, making it possible for recyclers to separate the materials used by type at the time of disassembly, to process them and make them available to manufacturers again for use in new products. “The new German government should set itself the goal of making Germany a trail-blazer in the development of a digital product passport,” says Sabine Nallinger, the foundation’s chair. “An office will ultimately have to be created to take charge of this activity.”
Averting a commodity war
The circular economy also offers a major opportunity in terms of managing the raw materials. “Putting it diplomatically, there are competitive disputes – realistically, an economic war – regarding raw materials,” asserts Wöstmann. A comprehensive circular process would free OEMs from this competition. They can maintain control, because they will no longer be selling their own fleet of vehicles, the materials they produce, but will retain them within their own cycle. All they will sell in future is the right of use, the intrinsic function of the product.”
“Efficient recycling can reduce international dependency,” comments Dr Sarah Fluchs, environmental economist at German economic institute Institut der deutschen Wirtschaft (IW), in a new study. Although global supplies of raw materials – lithium, cobalt and nickel – are currently sufficient to cover needs, in many cases they are concentrated in high-risk countries. With high rates of return and collection, the study suggests the industry could cover about a quarter of its own requirements for the likes of cobalt and nickel via recycling by 2040.