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Driving Circular Automotive Transformation – Part 2: The next generation

In this second and final article in this series, Mike Townsend, CEO of Earthshine Group, 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?

 

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Mike Townsend

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’s been some useful progress made, in pockets, there is 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?

Circular leaders?

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: “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 providing re-used and recycled resources towards the manufacture of new vehicles, or whether its model is more about driving greater circularity within the existing stock of 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.

We can wonder 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.

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L-R Brendan Rafferty and Richard Brennan

REvolve is a new company – driving circular automotive – 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, therefore, 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.

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Richard Brennan elaborates further: “REvolve is like an ‘Amazon’ for vehicle parts, only without the excess consumption and waste. We want to provide a 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 explains: “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!”

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REvolve is already able to harvest 20-45 percent (by weight) of an end-of-life vehicle for reused and refurbished parts, minimising the quantity of downcycled resources. And, they are now striving for 50 percent plus harvesting for 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. More of this, another time.

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 percent cheaper than OEM parts.
  • And, in the era of global supply chain disruptions – they tend to be more readily available: REvolve aims for all reused and refurbished parts to be available within 48 hours.
  • Average industry key-to-key time for vehicle repairs is around seven to ten days: REvolve has set a goal of five days, saving between two and five days of time.
  • This means not only more satisfied customers, it also enables lower total claims handling costs, including savings on courtesy cars.

Technology enabled

Technology is a key enabler. As Philip Mackessy, REvolve’s Technology Director, explains:

“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.”

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Their 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 elsewhere.

One of the most interesting circular automotive models, I’ve yet seen – the folks at REvolve appear to have Intuitively understood the need for complete system change in driving a circular economy transformation.

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.”

Greater 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 greater 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,” striving to achieve what has never been done before.

REvolve’s Richard Brennan agrees: “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.

Yet, if we are to drive a truly authentic circular transformation, we really need all industry stakeholders to come 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.

Can the industry come together and collaborate for circular transformation? Have we got what it takes to deliver real change? Only time will tell. Yet, at this juncture, we cannot fail to stay tuned and stay engaged.

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

This is an abridged version of an article, originally published on edie.net

See Driving Circular Automotive Transformation – Part 1: A time to reimagine

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Owain Griffiths

Owain Griffiths

Head of Circular Economy at Volvo Cars

Owain joined Volvo Cars in June 2021 to lead Circular Economy in the Global Sustainability Team. The company has committed to being a circular business by 2040 and has financial, recycled content and CO2 based targets for 2025, all of which Owain is working across the company to make happen. Owain previously worked for circular economy consultancy Oakdene Hollins where he advised businesses on evidence led circular economy implementation. 

Turning into a circular business and the importance of vehicle reuse and recycling.

The presentation will cover the work Volvo Cars is doing to achieve 2025 but mainly focus on the transformational work towards 2040 and the business and value chain changes being considered. Attention will be paid to the way vehicles are being dealt with at the end of life and the complexities of closing material and component loops. Opportunities and challenges which Volvo Cars is facing will be presented including engagement with 3rd parties and increasing pressure from stakeholders.

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e2e Total Loss Vehicle Management [e2e] is the UK’s only salvage and automotive recycling network with nationwide, environmentally compliant sites delivering performance resilience and service reliability to the insurance and fleet markets.  The network’s online salvage auction www.salvagemarket.co.uk drives strong salvage resale values and faster sales.  e2e’s salvage clients have access to the network’s stocks of over 5 million quality graded, warranty assured reclaimed parts. 

The power of the network model means e2e has the ability to influence industry standards and is committed to continually raising the bar whilst redefining the role and perceived value of the salvage operator.  Network members adhere to robust service level agreements, against which they are audited, in order to ensure performance consistency and a market leading customer experience.  

The salvage and recycling operating environment is evolving rapidly, and e2e is anticipating, listening and responding to changing market needs.  Regulatory compliance, ESG, reclaimed parts, customer experience, EVs, new vehicle technologies, data and reputation risk are just some of many considerations linked to the procurement of salvage services.  e2e will drive further added value to clients and members through the adoption and application of emerging technologies, continuing to differentiate its proposition and position salvage services as a professional partnership. 

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