Automotive companies can create value potential from circularity by taking a new perspective in their business case in order to optimize the full vehicle life cycle across the value chain. Costs and revenues of circularity initiatives are often spread between value chain players and are interdependent with other initiatives. For example, sourcing of recycled materials depends on vehicle recycling, which in turn is impacted by design choices. By accounting for these interdependencies and finding new revenue mechanisms (e.g. with “as-a-service” models), companies can drastically improve the circularity business case.
For example, modular vehicle design is a cost in production, but enables profits 1.5-4x its costs in repair, as well as 2-5x in end-of-life recycling and material processing. Cost improvements in advanced recycling technologies, vehicle end-of-life treatment and material processing could generate drastically higher revenues than in today’s models and reduce sourcing costs for low carbon materials. And once a value chain is circular, many business cases, including “as-a-service”, repair or remanufacturing, generally benefit from improved vehicle mileage and the alignment of initiatives. The marginal value created through circular solutions outweighs the potential revenue loss from vehicle sales as the industry shifts to a higher vehicle utilization model.