How tech innovations are enabling a circular automotive economy

The auto sector is undergoing a huge transformation. Drastic changes are taking place in the way automobiles are designed and manufactured, how they are sold and serviced, the experience of driving, and even how they are managed during their end of life.

At the heart of this transformation is the power of digital technologies. A key driver of these changes is an increased focus on sustainability due to global warming and the need to reduce carbon emissions.  Added to this, the COVID-19 pandemic also impacted global supply chains, forcing companies to rethink their material sourcing and supply chain strategies.

In response to these circumstances, major economies across the world are emphasizing the mindful use of resources and imposing stringent environmental norms and regulations aimed at creating a carbon-neutral, sustainable economy. It is pertinent that the automotive industry, one of the major contributors of CO₂ emissions, transitions away from a linear economy to embrace a more sustainable, circular one.

Let’s first understand the basic differences between a linear and a circular economy:

The path to circularity, however, is not a straightforward approach, and the industry faces numerous challenges:

• The lack of a common framework and systematic approach to circularity within the automotive ecosystem
• Limited value chain collaborations
• The unavailability of real-time product data and information systems
• A lack of awareness and access to latest technologies
• Issues with scaling and adopting the latest technologies
• Poorly drafted regulatory policies that fail to economically incentivize companies keen to invest in greener and sustainable technologies
• Management challenges in finding newer and innovative business models to adapt to meet future mobility demands

The auto industry’s approach toward circularity

To address challenges of circularity and provide a sustained and systematic approach to the automotive circular economic initiatives, the World Economic Forum (WEF) and the World Business Council for sustainable Development (WBCSD) jointly formed the Circular Cars Initiative (CCI) in 2020

A first-of-its-kind industry initiative comprising of over 60 member companies from the automotive value chain (auto OEMs, suppliers, and research institutions), the CCI is working toward establishing global standards and frameworks to address the challenges and opportunities of a circular economy.

Several CCI member companies and other automakers have proactively stepped up their efforts to develop auto industry circularity:

• Renault’s RE-Factory in Flins, France, is Europe’s first factory based on circular economic principles. The company aims to achieve a negative carbon balance by 2030 at this site in line with Europe’s ambitious zero impact by 2050.
• Ford has a near-term objective to use 20% of recycled or renewable plastics in its future vehicles by 2025. At the heart of this is a closed-loop recycling system the company has established at some of its manufacturing facilities. Ford is also working with BASF on turning plastic waste into secondary raw materials and with HP on reusing waste powder from 3D printers for injection molded parts.
• Toyota in Europe has been working on the recycling, reuse, and recovery of various vehicle components (including batteries) and in some cases has even achieved 96 to 97% reuse and recovery rates.
• The Volkswagen Group is increasingly making use of secondary materials and has established closed material loops in order to decrease its CO₂ footprint.
• Stellantis recently acquired a majority stake in Stimcar, a company specializing in the reconditioning of used vehicles, and aims to strengthen its circular economy initiatives.

Leveraging the power of technology to accelerate circularity

The journey to a circular economy will require stringent yet intelligent monitoring and control of the entire automotive value chain. Vehicle design and manufacturing operations will need to include a greater emphasis on sourcing materials using carbon-neutral processes; the reduction of waste at every stage of the product lifecycle; recycling at an affordable cost and through eco-friendly methods; and remanufacturing, reuse, and reconditioning practices.

Leveraging the power of software and digital technologies can put these achievements in reach. From digitally assisted designs to software-defined vehicles, from SMART manufacturing to connected supply chains and eCommerce, from production to scrappage, digital technologies can redefine the entire automotive value chain and drive the next phase of transformation.

A number of transformative technologies can help automotive brands accomplish these circularity goals and objectives.

Other strategic factors having significant influence on circularity

Partnerships

We’ve seen how technology is critical for a circular economy. With the rising trend of the “softwarization” of automotive systems and the digitization of the value chain, partnerships  with technology providers and technology enablers are becoming more and more significant.

Technology partners can support automakers in

• Providing much-needed technical expertise and product/platform know-how.
• Addressing challenges with adoption and implementation.
• Agility and the quick scalability of operations.
• Creating technology awareness and training across the organization.

A connected ecosystem

A tightly integrated value chain with seamless communication flows is essential to achieve maximum levels of circularity.

Leveraging technology, automakers can create a fool-proof collaborative working environment for all downstream and upstream players within their value chain systems. With such an ecosystem, automakers will be able to

• Track and trace data from “source to scrap.”
• Eliminate or repair any weak links within the value chain.
• Measure the progress of circular initiatives.

Innovative business models

Unlike the take-make-dispose approach of a linear economy, the circular economy works on the reduce-reuse-recycle principle. By following this method, auto companies can redefine their business models and strategies to capitalize on the opportunities arising out of a circular economy. Also, given the enormous amount of data being produced today, companies can adopt new business models to monetize their data and more effectively meet consumer demands.

Some early adopters of circularity are offering new customer-focused services using innovative business models:

• Vehicle-on-demand services
• Mobility as a service
• Component as a service (typically seen in connected vehicle applications today)
• On-demand manufacturing (for low-volume parts and some 3D printing applications)
• Pay-per-use models (EV charging, connectivity services, etc.)
• Vehicle-to-grid (a new innovative idea of incentivizing EV users to feed excess electricity back to the grid)

The economic and environmental benefits of circularity

At a macro-economic level, a circular economy provides several benefits:

• An increase in revenues is achieved, aided by substantial savings in material and production costs.
• Newer avenues for innovation and technology interventions are developed.
• Recycling, reuse, and remanufacturing require highly skilled resources, and this creates newer employment opportunities across the auto value chain.
• With the help of technology, automakers can better understand and predict consumer behavior and market demand, allowing them to optimize the cost of raw materials, production, inventory management, etc.

It also offers a series of valuable environmental benefits:

• A reduction in lifecycle carbon emissions per passenger kilometer
• A minimal use of natural resources or raw materials
• An increased focus on utilizing renewable energy sources to power vehicles, manufacturing facilities, and so on

Building circular economies: Wipro’s commitment to sustainability

Over the last two years, the automotive industry has begun relying more heavily on tech platforms to stay resilient and maintain connections with customers. As manufacturers, dealers, and business partners transition to a more circular economic strategy, technology will continue to play a crucial role in achieving the established sustainability goals and helping answer the challenges of adopting new strategies. By bringing together the tech platforms covered earlier and a reduce-reuse-recycle approach, auto brands can prepare for future needs, and Wipro can provide the expertise to help companies transition to circular business models.

The Wipro brand is an embodiment of customer-centric excellence, the drive for sustainability, and outstanding corporate citizenship. Since our founding, Wipro is driven by purpose — purpose fuels our business, and the business fuels our purpose.

We are a founding member of ”Transform to Net Zero” and are dedicated to attaining the goal of zero planetary carbon emissions. Wipro has also committed to reducing its greenhouse gas emissions to zero by 2040 and by 55% by 2030, and we are a member of the Dow Jones Sustainability World Index (DJSI World) for the 12th year in a row. With our tech and industry-specific expertise, we can help automotive enterprises adopt circular economic practices that result in benefits for stakeholders, communities, and the health of the environment.

Sandeep S Prasad

Strategy Consultant, iDEAS ER&D

Sandeep is a strategy consultant with the iDEAS-ER&D group at Wipro and helps define key ER&D strategic initiatives and their operationalization. He has a keen interest in the automotive domain and closely follows the technological developments in this industry segment. Earlier in his career, Sandeep has led business development activities for auto OEMs and Tier1s.

Sandeep holds a degree in mechanical engineering and an MBA in Marketing & Operations.