Circular economy: from cradle-to-grave, to cradle-to-cradle.

If we look to the automotive sector current situation, the least we can say is that we have quite a few challenges laying ahead.

We are the industry with the highest decarbonation targets: 100% in 2035, in just over 10 years from now.

We are facing new regulations, that are often not enough coordinated and strategic, such as the Euro7 proposal, whilst we are putting all our efforts in the shift to electric. Just think about the fact that in Europe, OEMs are investing 250 billion euros in this transition. But we must be supported by a common and concerted European industrial strategy if we want to compete with countries such as United States or China, whose politics are heavily supporting this transition.

The resources required to produce electric vehicles, especially the batteries that power them, are rare and expensive, on top of having a high environmental impact. The car industry already draws significant share from natural resources, and this is only set to increase. Take for instance nickel, lithium, or cobalt. Our consumption of these materials will grow by x8, x7 and x5 respectively by 2030 compared to 2021. Going forward, automotive share out of global consumption is expected to be 70% for lithium, more than 50% for cobalt and 40% for nickel.  

As Europeans, we do not control the EV value chain. In the last decade, someone thought that Europe could live with just a service industry, and we witnessed the relocation of essential links of the electric vehicle value chain to the East, especially heavy and chemical industry. This way, we find ourselves now with little to no control on this value chain, depending on countries such as China. According to our calculation, in 2023 in Europe we will still cover only 5% of it, which is not enough.  

To face these challenges, we must take advantage of every possible opportunity. One of the greatest opportunities that we must seize to put Europe in a leading position in this revolution is indeed circular economy.

Circular economy could help us better control our materials supply, reduce drastically our environmental impact and the cost of production of batteries and vehicles, improve the residual value, and consequently reduce the cost for our clients. And it also represents a great profit pool. 

Circular economy to reduce our environmental impact

When we think about ways to reduce our environmental impact, we must not think of products solely based on their usage, but rather place them in a larger perspective that I like to call “cradle-to-grave”. We must consider the process in its entirety, from the extraction and refinement of raw materials, down to the scrappage of the vehicle and its parts. 

 I want to focus on this final phase here – the end-of-life phase of the vehicles. If we change the way we think about this step, we can first maximise the value from old batteries, parts, and materials, by re-using and repairing them, thus extending their lifetime. Secondly, when that’s not possible, we can create closed loops able to re-introduce raw materials back into the value chain, we can make a significant step towards achieving what we may refer to as the “cradle-to-cradle” approach, where the end of life of a product can give birth to new ones. This is also beneficial for us and the environment as it reduces drastically our logistic from extraction to production and assembly, and the related emissions, by allowing us to do local, national, or regional on a European scale.

As of writing, 85% of a vehicle can be recycled. Yet the share of recycled materials inputs in new vehicles is still under 30%. With almost 11 million vehicles reaching their end of life yearly in Europe, in an ideal world where we could recover all recyclable materials, this would represent an equivalent of enough steel for 8 million vehicles, and enough plastic and copper for 5 million units. 

The circular economy is an important tool for all automotive companies seeking to mitigate environmental impact, reduce their carbon impact, make better use of the value chain, and open-up new business opportunities and paths to financial sustainability.

Does circular economy make sense for businesses?

There is plenty of potential nestled within the circular economy for the automotive industry to tap into. To take a deeper dive into it, a recent report by the World Economic Forum reveals how automotive manufacturers can take advantage of new value pools beyond the scope of current business models, taking action on environmental challenges without sacrificing financial sustainability.

 The true value potential of a circular economy can be harnessed only if companies adopt a new business perspective – optimizing the full vehicle life cycle throughout the value chain. Using circularity offers manufacturers an opportunity to improve profitability about 1.5 times across the value chain, including mobility services and battery second life applications, and to tap revenues per vehicle 15-20 times its original sale value. Circularity also increases the overall profit per vehicle over its life cycle up to approximately 15-fold.

These numbers clearly speak for themselves. Plenty of automotive companies already engage with green materials and initiatives such as car sharing and subscriptions. But these efforts must be expanded further, in particular recycled materials incorporation, battery recycling, parts reuse & remanufacturing. 

Additionally, as companies we have an ethical responsibility towards the society around us, and circular economy also provides great benefits on this behalf. First, it helps creating new jobs. Committing to a circular economy approach means contributing to the consolidation and strength of a European sector that generates income and, of course, creates jobs. Secondly, it can improve affordability for the final client, as finding alternative ways of procuring finite resources also makes it possible to further scale up our production and, in the long term, can have a positive impact on our customers' pockets.

However, achieving a circular value chain requires companies to start working together, with an eco-systemic and horizontal approach. For instance, to do battery recycling an OEM needs someone able to source end-of-life batteries throughout Europe, someone able to handle and dismantle dangerous waste, someone mastering the refining techno bricks with a good level of purity and so on. 

The role of recycled batteries in the search for a circular economy

Out of all the materials that can be recycled, EV batteries play a key part in the effective running of a circular economy. As this piece in the Financial Times details, entire industries are springing up to help vehicle manufacturers and large retailers dispose of their batteries by breaking them down and recycling them into a renewed supply of metals, which can then be used to produce new electric vehicles.

In 2019, the World Economic Forum predicted that the arrival of a circular battery value chain could open up the path for 30% of the emissions cuts needed to meet the targets set in the Paris agreement, as well as give birth to as many as 10 million secure and equitable jobs worldwide by 2030.

 As with any niche industry, there are doubts that battery production and recycling can be scaled up quickly enough to satisfy the growing demand for clean energy technologies. Fuelling this scepticism is the fact that battery production needs cobalt, the transportation of which is highly susceptible to supply chain disruptions, which were laid bare during the pandemic. However, the increasing practice of urban mining has emerged from these challenges – though this also needs to be brought to scale. In 2030, Europe will still control only 5% of the upstream value chain, driven by mining and the manufacturing of Cathode Active Material (CAM) and its precursor product, known as PCAM.

The true impact of battery recycling will be felt when the industry simply recycles more electric vehicle batteries. The roadblock here is that these batteries hold an average lifespan of 15 years, meaning that the first wave of batteries will not reach their end point for some time. In the meanwhile, we will be able to recycle great volumes of production scraps, and this longer timeline, however, may be enough time for technologies to develop and for the industry to catch up. 

The Future is NEUTRAL

All-in-all, circular economy has proven benefits for companies and environment. It is the key to a green and sustainable global economy, while offering innovative new value pools to tap into.

 At Renault Group we went straight into action to make major headway in the circular economy transformation with The Future Is Neutral, the first 360° circular economy enterprise in the automotive world. With this company, we want to help the European automotive industry become neutral in its impact on natural resources, providing a one stop shop with solutions for recycled materials integration in production, vehicles’ life extension and end-of-life safe and compliant dismantling.

I’m proud to say that we are on the way. With THE FUTURE IS NEUTRAL we have already recycled:

• + 14 million tons of steel, worth 1 year industry equivalent of steel consumption by car industry in Europe
• +12,000 tons of plastic and copper, that could supply 12 months of productions needs of plastics for the Renault Megane E-Tech
• Around 1 million catalysts of platinoids, covering Dacia production needs in France, Germany, Spain, Italy and UK.

To do this, we decided to create a unique set up of active assets, partnering up with great companies that are already profitable in the business. Since day one, we are working with:

• GAIA, Pioneer in automotive closed loops, recycling bumpers, catalysts & harnesses to recover plastics, platinoids & copper, and now installed in Renault Group ReFactory in Flins.
• Boone Comenor Metalimpex, global leader in metallic production scrap recycling, especially focusing on stamping sheet scrap from automotive production lines globally.
• Indra, leading player in France in the dismantling field, managing a network of 400 dismantling sites dismantling more than 400,000 units on yearly

We have set ourselves the objective of working with the best players the industry has to offer to better cover the value chain, and the next big step will come soon with the creation of a new entity fully dedicated to battery recycling with some of the best partners in the field. The aim is to go from 50% value chain coverage today up to 90% in 2030, starting from the supply of raw materials to a vehicle’s production, to offering affordable and sustainable circular economy parts at the usage phase, down to disposing of end-of-life vehicles responsibly. The Future is Neutral business could represent 2,3 billion euros of revenues in 2030 with 10% margin rate, coming from 750 million euros two years ago.

 And in the meanwhile, with our ReKnow University and the ReFactory Campus in Flins, we have started training our employees to be ready to tackle this and other new businesses arising from the new value chains on our industry. But this will be the topic of a next article 😉