As the automotive industry faces rising costs, stricter carbon goals, and tougher global competition, carmakers are under growing pressure to adapt. One priority is becoming essential: circularity. A new Roland Berger report, Circularity in the Automotive Industry: Four Imperatives for OEMs, warns that overlooking circular strategies could be a costly mistake. Rather than treating circularity as a side sustainability effort, OEMs should see it as a core business strategy, one that can open new revenue streams, strengthen supply chain resilience, and help meet tightening regulatory and ESG demands.
The reasoning is simple: with rising material costs, carbon taxes, and increasing consumer scrutiny, recovering, reusing, and remanufacturing materials isn’t just good for the environment, it’s good for business. However, making circularity work in practice takes clear planning, scale, and collaboration.
The four imperatives for OEMs are as follows:
-
Strengthen the Foundations: Optimize Remanufactured Parts
Circularity is hardly new to the automotive sector. For decades, OEMs have engaged in remanufacturing—particularly of internal combustion engine (ICE) components. Yet these programmes remain under-optimized: core collection is inconsistent, product development is slow, and marketing strategies are outdated.
According to Roland Berger, targeted investment in forecasting, engineering, logistics, and pricing could unleash significant untapped potential. A revitalized remanufacturing operation can expand into new customer segments, improve margins, and provide the operational muscle needed to scale other circular activities later on.
In practice, this means rethinking the traditional “make-or-buy” model, continuing to leverage Tier 1 suppliers where they add value, while building in-house capability for strategic product lines. Remanufacturing isn’t merely a sustainability badge; it’s a profit-engine in waiting.
-
Push the Boundaries: Expand into Reuse and Repair
As Europe’s car parc ages and hybrid and ICE vehicles dominate for longer, demand for affordable parts is surging. Independent aftermarket players are capturing a larger share of the repair market, while electronic components are emerging as a new frontier for remanufacturing and repair.
Consumers, insurers, and fleet operators are driving a shift toward refurbished, repaired, and reused parts, typically 20–50% cheaper than new equivalents. OEMs with strong reman foundations are well placed to capture this growth, expanding their aftersales portfolios into reuse and repair offerings.
However, scale in this area depends on partnerships. OEMs must build structured ecosystems with dismantlers for parts collection, distribution platforms for resale, and repair networks for efficient processing. Those that can orchestrate these partnerships effectively will secure both market share and customer loyalty.
-
Enter New Territory Cautiously: Build Material Loops
Circularity doesn’t stop at components. The revised EU End-of-Life Vehicle (ELV) Directive and Extended Producer Responsibility (EPR) requirements are pushing OEMs to take accountability for vehicle recycling and the use of recycled content, particularly in plastics and metals.
But venturing into material loops introduces new challenges. Unlike component remanufacturing, material recycling is distant from core OEM operations and carries higher risk. Roland Berger advises a selective approach: focus on materials with regulatory relevance, sound economic logic, and strong integration potential within existing supply chains.
Once again, partnerships are key. Collaborating with dismantlers, shredders, and recyclers—not only within automotive but across sectors, will be essential to achieving the economies of scale needed for profitability.
-
Prepare for the Future: Battery Recycling at Scale
Perhaps the most strategically urgent imperative lies in battery recycling. As EU regulations mandate increasing levels of recycled content in new batteries, access to secondary cobalt, lithium, and nickel becomes critical.
Yet, the evolving landscape of EV adoption, battery chemistries, and recycling technologies makes this a high-risk domain. The report recommends risk-sharing coalitions across recyclers, battery manufacturers, and technology providers, along with the rapid establishment of cost-efficient battery collection systems. Supporting the build-out of European battery shredding and refining capacity will be pivotal to achieving closed-loop systems and securing long-term supply stability.
The Operational Challenge of Circularity
Ultimately, circularity will succeed or fail on operational execution. The report highlights three enablers:
- Collection: Reverse logistics and intelligent take-back schemes, supported by AI-driven routing and inventory management.
- Standardization: Common protocols for testing, interfaces, and data to reduce complexity and enable scale.
- Partnership Management: Active, evolving collaboration across the value chain, with shared incentives and adaptable governance.
Circularity, in short, is not an ESG add-on, it’s an operational transformation. Those OEMs who integrate circular practices into their business DNA, supported by agile partnerships and standardized systems, will be best positioned to lead in a resource-scarce, regulation-driven, and margin-tight future.
Download the full Roland Berger report: Circularity in the Automotive Industry: Four Imperatives for OEMs
