How Automotive Brands Can Embrace Sustainability Through Remanufacturing

The automotive industry’s annual production of 80 million vehicles contributes to over 10% of the world’s carbon dioxide emissions¹. Rising environmental concerns have brought focus to the current practices of the automobile industry, but sustainability goals are reshaping its future. As global demand for mobility grows by 70% by 2030², the automotive industry faces a critical challenge: how to meet this demand while reducing carbon emissions by 50%. Among the strategies available, remanufacturing stands out as a solution that aligns sustainability with profitability.

Experts project that the global market for remanufactured automotive parts will grow from $53.8 billion in 2020 to $96.4 billion by 2027³, at a CAGR of 8.7%. Automotive brands can turn to remanufacturing to support sustainability initiatives, provide cost-effective solutions to customers, and boost profit margins.

The Role of Remanufacturing in Sustainable Automotive Practices

The Circular Cars Initiative⁴, part of the World Economic Forum, connects stakeholders from the global automotive industry. The initiative's overarching goal is minimizing total automotive lifecycle emissions in line with the Paris Agreement’s net-zero target. While efforts have widely focused on electrifying vehicles, it’s clear that further actions are required to achieve net zero.

Accenture identified “increasing the lifetime of the vehicle and its components⁵” as a transformation pathway to achieving a circular economy. Circular economy measures include vehicle sharing, smart charging, remanufacturing, repurposing and recycling to lower life cycle environmental footprints and costs.

Remanufacturing results in significant beneficial environmental impacts, including:

• Energy Conservation: Uses only 15% of the energy⁶ required to produce new parts, saving millions of barrels of oil or comparable forms of energy.
• Raw Material Conservation: Reuses over 85% of raw materials⁷ used in the original part, saving millions of tons of raw materials like iron, aluminum and copper annually.
• Air Pollution Reduction: Reducing waste minimizes greenhouse gas emissions⁸ from decomposition in landfills and through incineration.

Though it’s clear that sustainable practices have a positive impact on the environment, guidelines and key performance indicators for such practices vary by geography. To move the initiative forward, it’s time for brands to explore remanufacturing for its additional economic and operational benefits.

Economic and Operational Benefits of Remanufacturing

Remanufacturing leads to increased profit margins for automotive brands. The cost of remanufacturing existing cores is 40% to 64% lower⁹ than manufacturing new parts. Cost savings result from reduced raw material and energy usage and an effective remanufacturing software system. A high consumer demand for affordable, environmentally friendly alternatives to new parts also contributes to a higher profit margin. 

A high demand for raw materials harms the environment and makes the materials more difficult and expensive to source. Remanufacturing plays a role in boosting automotive brands’ supply chain resilience. Efficient core management, aided by remanufacturing software solutions, ensures brands can maintain consistent parts availability and steady operations. 

Remanufactured parts meet or exceed the standards of newly manufactured parts at a fraction of the production cost. Automotive brands can price these parts competitively based on market demand while benefiting from a healthy profit margin. Customers will see value in purchasing quality parts at a fraction of the price, resulting in greater customer loyalty.

Offering remanufactured parts enables automotive brands to establish themselves as sustainability leaders while realizing operational and economic benefits and improving their environmental impact. To fully capitalize on these benefits, automotive brands must ensure that remanufacturing operations are efficient, scalable, and consistent, which is a challenge that digital solutions are uniquely equipped to address.

Efficient Remanufacturing Through Digital Enablement

Digital enablement increases efficiency in the remanufacturing process by streamlining operations and enhancing quality assurance, allowing automotive brands to benefit from a better return on investment.

• Streamlined Operations: Digitizing the remanufacturing processes reduces errors and shortens turnaround times. Digital solutions offer real-time tracking for complete visibility of core components, raw materials and inventory. A quality system to track core returns is essential for an economical remanufacturing process.
• Quality Assurance: Standardized workflows and interactive checklists ensure consistent quality across operations and reduce the potential for human error. Gaining complete oversight and control with real-time monitoring for issue identification and resolution results in faster product completion time.

Remanufacturing software solutions, such as HCL Aftermarket Cloud Remanufacturing, digitally enable the remanufacturing process for automotive brands through six key capabilities.

• Core Management: Comprehensive visibility into status, location, core condition, cost and price, including qualifying cores.
• Material Management: Sourcing of cost-effective and quality materials with low lead times.
• Planning and Process: Optimize remanufacturing with proper planning of parts, production, resources and tools aligned with industry best practices.
• Intelligent Salvage: Intelligent allocation of salvaged parts based on the age of remanufactured engines.
• Lead Time Monitoring: Interactive dashboards for real-time monitoring and issue identification.
• Workshop Management: Effective tracking of bays, technicians and special tools to improve utilization and outsourcing to vendors.

Automotive brands should view remanufacturing as a strategic initiative that benefits the brand, customer and environment. Position your brand as a sustainability leader. Contact the HCLSoftware Aftermarket Cloud team for digital enablement of sustainability practices. Leverage the software to gain a competitive advantage by reducing emissions and increasing profit margins while meeting consumer demand for sustainable solutions.

Sources:

1. https://www.weforum.org/stories/2024/05/how-to-navigate-sustainability-in-the-automotive-industry/
2. https://www.accenture.com/us-en/services/automotive/industry-sustainability
3. https://www.rematec.com/news/industry-players-and-markets/remanufacturing-boosts-the-aftermarket-in-the-us
4. https://www.weforum.org/projects/the-circular-cars-initiative/
5. https://www.weforum.org/publications/raising-ambitions-a-new-roadmap-for-the-automotive-circular-economy/
6. https://www.gbreman.com/post/remanufacturing-the-sustainable-manufacturing
7. https://www.gbreman.com/post/remanufacturing-the-sustainable-manufacturing
8. https://www.gbreman.com/post/remanufacturing-the-sustainable-manufacturing
9. https://www.sciencedirect.com/science/article/abs/pii/S0360835221002126