What is a circular car?
A circular car refers to a theoretical vehicle that has maximised materials efficiency. Such a vehicle produces zero materials waste and zero pollution during manufacture, usage, and disposal.
Realistically, cars may never be fully circular, but the industry can significantly increase its degree of circularity.
As another recent report from WEF¹ states, building a sustainable ecosystem for circular materials will require investment in clean materials supply chains, building market demand for these materials, and designing vehicles so that their materials can be easily disassembled, sorted, and reused at end of life.
As the report adds, the development of a more sustainable and circular automotive economy highlights many research questions for OEMs, suppliers, and policymakers alike.
- How can end-of-life disposal responsibility for producers or initial buyers be used to promote circularity?
- How can modular construction be encouraged?
- What are the critical regulatory requirements regarding design for disassembly?
- How big an opportunity is remanufacturing?
- What data standards and regimes are necessary to trace material origins?
- How can the supply of clean electricity and hydrogen be accelerated?
- What role can tax and fees play in disincentivising production of emissions-intensive materials and products?
- Where should new regulatory standards be applied to decarbonise materials?
Market and policy barriers
There remain significant market and policy barriers which hinder the uptake of circular processes
There remain significant market and policy barriers which hinder the uptake of circular processes, products, and services. As the WEF report² says, policy action is insufficiently addressing these market failures, while simultaneously creating counter-productive incentives.
In terms of market-related barriers, it cites issues such as prevailing consumer habits and use patterns; traditional business models which focus on selling cars as a product rather than as a service; financial and performance metrics and competitive dynamics, which incentivise the development and production of larger, heavier, and more powerful vehicles.
Policy-related barriers include regulatory CO2 performance metrics which only cover tailpipe emissions and fail to take a life-cycle perspective; end-of-life legislation which focuses on recycling but lacks specific quality requirements; transparent data on material composition of vehicles; taxation systems which do not reflect externalities in market prices; and poor understanding of the social implications of the circular transition of the automotive industry.
The report calls on EU policymakers to act in three key areas. Firstly, by creating cross-cutting market enablers, such as consistent metrics that take a life-cycle perspective in regulations. Secondly, by reshaping economic incentives so that tax changes or carbon market mechanisms can account for negative externalities, by compensating for market price differences between ‘green’ products and less green products. And thirdly, by harmonising and strengthening measures that reflect the systemic dynamics of automotive circularity.
Collaboration across the value chain of the automotive industry will be crucial to the ultimate success of circularity. For instance, another WEF report³ says we could begin to see the rise of ‘orchestrator’ organisations, which establish a direction and common framework for stakeholders along the value chain, by assisting in the development of standards and regulations.
Many OEMs are already responding to these developments by increasing horizontal integration along their value chains, while broader initiatives such as Catena-X are taking hold. This group of around 100 companies from the sector is laying the foundations for an end-to-end vehicle data infrastructure, potentially improving a range of circularity activities.