contact us
| |


The Circular Economy In The Automotive Sector: How Far Can We Introduce It?

Victanis Advisory Services GmbH
Subscribe to our blog
Any Questions?
Our team is here to help!

Since 2008, CO2 emissions from auto manufacturing fell by almost 24%, a significant drop that can be attributed to manufacturers’ success in decoupling carbon emissions from production growth by shifting to low-carbon and renewable sources of energy. Additionally, over the past decade, water consumed per car produced reduced by 31%, and this was achieved by employing recirculation technologies that promote re-use of water while also limiting consumption. Most importantly, car manufacturers have shifted focus to building cars with more features to make them safer, cleaner, and smarter; and the amount of waste produced per car fell by almost 14% in the same period.

While the automotive sector has demonstrated a strong commitment towards reducing the environmental impact of production and use of vehicles, there’s still more to be done to strike the required balance between economic and ecological issues. One of the solutions suggested to reduce impact on the environment is embracing the circular economy.

Environmental challenges

Sponsoring the circular economy in the automotive sector, makes it necessary to look at some of the environmental challenges:

  • Fight global warming – ensure a reduction of greenhouse emissions
  • Health - reduce emissions of particles that have an impact on health
  • Preservation of natural resources – reuse and optimize the use of natural resources

In order to meet these environmental challenges, car manufacturers need to revisit their production processes. Solutions that might pave way for a sustainable environmental strategy include embracing a model of production that relies on high-performance – and affordable - ecological processes.

Waste reduction

Production of cars involves heavy generation of waste and most of it ends in landfills. In the 1990s, manufacturers making parts and assembling vehicles across Asia and Europe were faced with new regulations, and costs of dumping were also increasing as landfill space became smaller. At the same time, auto companies based in North America began to adopt recycling as a method of waste reduction, and this also made economic sense as it was more cost effective than dumping and did not attract severe scrutiny from environmental watchdogs. Today, some of the most promising waste reduction methods car manufacturers can employ include remanufacturing/recycling while also investing in design for sustainability.


Often confused for recycling, remanufacturing entails the rebuilding of products to meet the specifications of the original finished product using repaired, reused, and new parts. The process includes the replacement or repair of worn out modules and components. It can be termed as a form of product recovery that seeks to restore the item to match the same qualities as a new product from the factory. The United States Environmental Protection Agency put in place the Comprehensive Procurement Guideline (CPG) program that sought to promote waste reduction through remanufacturing.

This could be implemented on a large scale in the manufacture of automotive parts as a part of effort to implement the circular economy and ensure efficiency through waste reduction. Many companies have adopted this strategy and achieved resource efficiency by remanufacturing different parts, including gear-boxes and engines. Remanufacturing has shown to lower energy consumption by as much as 80% if compared to making new parts, and the process requires 88% less water and releases about 90% less chemicals. Overall, this approach can reduce waste dumped by 70%.

Closed-loop recycling

This is a self-sufficient process that utilizes recyclable materials that can maintain their quality in the entire cycle. It is preferable because it makes it easy for manufacturers to recycle products back into themselves. One suggestion for closed-loop recycling is to encourage automakers to establish programs where they can proactively collect vehicles from end users and lower cost of recycling.

Although several companies run these programs, it is up to the customer to locate and contact the collection center, something that creates an inconvenience. Firms should come up with incentives for customers who return their end-of-life vehicles as this would encourage more people to hand in their old vehicles, whose life is estimated at 13 years of use. According to the World Economic Forum, closed-loop recycling reduces energy consumption by up to 75%, and this translates to cost saving, especially considering cost extraction of resources is not factored in the production of the new parts. This comes as a viable solution to the take-make-dispose economic model of today that targets available resources to support conditions for growth and stability.

Design for sustainability

Sustainable design can be defined as a concept of designing physical objects or services to be compliant with the requirements of ecological sustainability. To contribute to the circular economy, the automobile industry should adopt design principles that support this idea. In this concept, vehicles are designed to be sustainable across their entire lifecycle. Some of the ways this could be implemented include prolonging the in-use phase of the vehicles and ensuring they are customized for recyclability when their lifecycle lapses. Additionally, there is also effort within the automobile sector to design vehicles that reduce overall impact on the environment.

Limitations of the circular economy

While the benefits of embracing the circular economy are evident, there are several challenges the automotive sector should overcome.

One of them is the cost of recycling, which might be higher than cost extraction of resources due to the many processes required in refining the materials to meet the quality standards expected of the finished product. Also, setting up a recycling facility requires high upfront costs, and many would argue that recycled products are of lower quality, which then means employing intensive processes to meet quality and car safety considerations.

However, even with these drawbacks, there are many reasons the automobile sector should go for the circular economy. This economic model reduces energy consumption, decreases pollution, and encourages a general usage of ecobalances (environmental performance evaluations). The increasing consumer pressure and national ecological standards reinforcement (China, Europe …) will very likely lead to a gain in signification of ecobalances, consequently leading to a more integrated circular economy.

Yves Rommel

Subscribe to our blog

Receive every week our posts, news and insights delivered right to your inbox