Other strategic factors having significant influence on circularity
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