According to the World Economic Forum (WEF), the automotive industry is “dramatically overshooting its estimated carbon and resource budgets.” Automotive manufacturing is a major contributor to a global industry that requires the extraction and processing of more than 100 billion tons of materials every single year, which causes 90% of biodiversity loss and water stress, and about 70% of the world’s carbon dioxide emissions. 

Moving from a linear to a circular economy will reduce this burden on the planet’s resources, minimize waste, and give the most pioneering manufacturers a competitive advantage. The WEF predicts that circular economy will yield up to USD 4.5 trillion in economic benefits by 2030.  

However, to benefit from the circular economy, automotive manufacturers need to get ahead of the curve on future regulations, sustainability goals, and customer expectations.  

The circular economy replaces the traditional extract-create-dispose linear economy with a regenerative model, built around recycling and re-use of natural resources. By maximizing the lifetime of finite resources, it reduces consumption and waste. This is particularly relevant for the automotive industry as it moves to replace the internal combustion engine vehicle (ICEV) with battery electric vehicle (BEV). 

As the International Energy Agency (IEA) notes, BEVs require more than six times the mineral inputs of ICEVs. Considering the need to electrify the world’s existing stock of
1.3 billion ICEVs by 2050, with the total global vehicle stock projected to grow to 2.2 billion by 2050, such resource requirements are neither sustainable, nor any longer bearable.  

But the imperative to move to a circular economy is not exclusively an environmental one. Global supply chain challenges have created shortages in semiconductors, leading to sales losses of more than 30% for automotive manufacturers.  

Further pressure is approaching in the form of EU regulation. Brussels is set to impose minimum material recovery rates for battery raw materials such as nickel, lithium, cobalt, and copper in 2025, with increasing mandatory minimum levels taking effect in 2030 and 2035. According to the Nickle Institute, “Any company placing batteries on the EU market will have to comply with the manifold requirements in the regulation, independent of whether they operate in Europe or elsewhere in the world. All players will have to ensure that their upstream processes in mining and refining the materials, chemical processing, conversion into cells as well as assembling the batteries comply with the targets and requirements set by the legislation.” 

Manufacturers should not wait to implement circularity. The circular economy offers a means of gaining a significant competitive edge in a market where nearly two thirds of customers are willing to pay more for sustainable products. 

The time to kick off your journey towards circular economy is now. Buckle up. It may be a bumpy ride.  

By offering traceability through data transparency, digital transformation will provide the means to achieve true sustainability in automotive manufacturing. However, to achieve actual business value and leverage digital solutions in the best way, some key imperatives must be considered.  

1. Creating full transparency over your vehicle’s lifecycle  

Assets like the digital product passport, as introduced by the European Commission’s European Green Deal and Circular Economy Action Plan, will be essential tools for developing resource-efficient and environmentally friendly products in the future. These product passports will need to incorporate a wealth of data about how a product is built, used, and maintained, and how it may be altered throughout the different phases of a circular car’s lifecycle.  

Automotive manufactures must collect data from every aspect of the value chain to create data maps and a connected digital ecosystem. This will give manufacturers and other stakeholders a fully transparent view of emissions, resource use, and sustainability. 

Creating full transparency and traceability throughout the vehicle lifecycle with, for example, a digital vehicle twin will be vital in not only complying with regulations but also in reaching carbon net zero and in enabling new business models. To get there, organizations must capture digital twins for both their vehicles and the respective components and parts materials. This will help functions within an organization to extract the relevant data needed for R&D, compliance, procurement, and strategy to maximize the individual impact and make well-informed decisions.  

2. Innovating new and profitable ways to recover strategic materials 

The industry needs to find new ways of securing primary materials so that demand can be balanced, and materials are readily available. Shortages of semiconductors, magnesium, and wire harnesses have been exacerbated by recent challenges in the global supply chain, and they serve to highlight the difficulties that exist in guaranteeing the quality, security, and reliability of strategic materials.  

The way to overcome future shortages of strategic materials is to act within an ecosystem. Partnerships with downstream players, such as dismantlers, recyclers, or shredders, can help to secure components and materials for product manufacturing by increasing the ratio of secondary materials. If automotive players work together within their ecosystem, they can create digital solutions that enable efficient dismantling and recycling processes.  

Digitalization and automation have the power to transform the dismantling stage to enable product lifecycle extensions, as well as innovative strategies for remanufacturing, repurposing, or recycling. In short, these actions will help create closed loops of components and materials manageable on digital marketplaces, thus embodying the very idea of a circular economy.  

3. Identifying and implementing circular business models 

Companies need to evaluate both the opportunities and dangers of transforming into new business models. While circularity can help automotive players tap into new business, changing the mechanics and performance KPIs of revenue generation has its pitfalls and can often meet resistance within an organization. For that reason, automotive manufacturers must carefully design their transformation to circularity. 

The design must consider the entire lifecycle of the vehicle to identify new perspectives on value which requires increased transparency. Innovating your business model requires defining future customer profiles in detail as well as respective monetization details. In a next step, businesses need to evaluate what aspects within the business ecosystem can move towards a circular business model. New revenue streams might arise through extending the vehicle lifecycle, by building networks in platform models, or from “as-a-Service” (aaS) models to increase the usage of a single product. Extended vehicle lifetimes, for example, can help drive different perspectives across an organization. Assessing the effect of circularity actions on existing business models can help identify new opportunities to create value for customers across the automotive ecosystem. Partnering with organizations that offer access to existing circular business models and aaS models can be a good starting point when it comes to analyzing which new business opportunities make sense for customers. Automotive players can then prioritize use cases and define a respective roadmap.  

As an example of what’s possible, Chinese automobile manufacturer NIO has already pioneered the battery-as-a-service model through battery swapping. Under this model, customers don’t own the battery but pay for electricity and battery use either on a pay-as-you-go basis or by subscription. This means that increased battery range – by itself environmentally undesirable and more costly – is no longer an issue and opens the market for more economical and environmentally friendly BEVs.  

4. Leveraging Design-for-Circularity for products 

There is little doubt that a combination of future regulations and customer expectations will steer companies in the direction of secondary material quotas. This can only be achieved by reassessing existing product design and architecture.  

Original Equipment Manufacturers (OEM) must analyze the impact and footprint of a vehicle along the entire product lifecycle to gauge the current circularity of their products, components, and materials. Such an analysis of product lifecycles can help manufacturers formulate a product vision, value proposition, detailed product circularity requirements and future product concepts. 

By implementing a modular architecture for vehicles, manufacturers can enable efficient maintenance and dismantling processes encompassing reuse, remanufacturing, or recycling, all of which are prerequisites for a truly circular approach. The dismantling of components and the separation of materials – for example, from wire harnesses and interconnectors – will be facilitated by standardizing material compositions, which is likely to deliver higher quality secondary materials. 

It is worth remembering at this stage that innovations in product design and architecture have an impact across entire organizations, so senior management must lead the process for it to be successful. This leadership includes providing close support for changes in skill sets and job descriptions. Outside of an organization, these innovations also impact the whole lifecycle and, therefore, require cross-stakeholder partnerships with all partners and suppliers within the ecosystem. 

From what we have seen, circularity has the power and potential to deliver enhanced resilience and represents the key to a sustainability success story within the automotive industry. 

A circular model can provide value chain resilience and offer protection against the sort of supply chain dangers that have hit the industry so hard. Increased resilience will enable organizations to mitigate operational risk and business interruption by designing new strategies for sourcing material resources and components. Keeping recycled resources within the automotive ecosystem frees manufacturers from resource dependency and shields operations from the inevitable future scarcity of raw materials. 

The circular vehicle approach can deliver competitive advantages too. First movers will take a pioneering role in automotive manufacturing and will be in a position of thought leadership when it comes to use cases and business models in the automotive ecosystem. They will be more successful in attracting and retaining forward-thinking talent, and their improved sustainability will help to attract investment. Furthermore, circularity will allow manufacturers to develop new circular business models, access new markets, and diversify customer segments. 

A circular approach allows for a sustainable business set-up putting first movers ahead of the curve when it comes to future regulations around emissions and material use. Slow movers risk non-compliance and potential fines. 

It can also drive concrete business target setting and performance while giving OEMs the ability to leverage long-term visions to steer and monitor the relative success of circularity models in different business functions and regions. 

OEMs, suppliers, and ecosystem players need to make strategic choices to mitigate future obligations and disruptions. But they are well advised to take full advantage of the immediate and long-term benefits of transitioning towards a circular economy that digitalization can unlock.  

The goal is to close the end-to-end loop and maximize the full business potential of reusing materials and components, and to minimize industry’s impact on the planet. But to mitigate the risk, effort, and cost involved in something that has a deep impact on every aspect of a company’s operations, OEMs can kick off their transition to circularity by focusing on specific components or materials and building upwards from there. 

Right now, external momentum and stakeholder requirements are dictating the future of the automotive industry. Players still can shape their position in the race towards a sustainable future. A holistic circularity mindset is key to taking a proactive and progressive role and maximize societal and business value.  

Now is certainly not the time to apply the brakes.  

Additive Manufacturing and 3D printing are key enablers for more sustainable production, supply chains and services. In fact, the global additive manufacturing market is projected to grow by almost 24 percent between 2023 and 2025, and the market for 3D printing is expected to almost triple in size between 2020 and 2026. With everything from airplane parts to hearing aids created through additive manufacturing, it is clear that this technology is special and has the potential to dramatically impact business practices and address sustainability demands. 

Before looking more closely into how additive manufacturing is driving a more sustainable tomorrow, it is good to take a step back and examine current manufacturing challenges. At the core of the need for improvement is that customers want everything faster and with more flexibility in quantity, which puts a strain on traditional development, production, and distribution channels. Meanwhile, the business leaders need to balance that demand with a clear need for sustainable practices and processes. In general, taking care of resources, providing greater efficiencies throughout the entire supply chain, and developing a more circular economy are all things the manufacturing sector must pull together to achieve sustainability success.  

In addition, the new CO2 certification process in Europe puts additional pressure on manufacturers and supply chains. Paying for CO2 emissions clearly changes the cost-change paradigm. Producing emissions while manufacturing as well as shipping a product around the globe will become an expensive game. Tackling this issue will require a radical rethinking of the whole value chain.  

To dramatically overhaul the value chain, address customer demand, and reach sustainability goals, manufacturers must undergo a digital transformation. Connecting the real and the digital world provides manufacturers with the data and insights needed to make well-informed decisions on how to optimize processes and increase efficiencies.  

Digitalization offers multiple opportunities to gain a competitive advantage by improving product design, factories, supply chains, and after-sales services (spare parts) with digital twin solutions. By mimicking the product or whole supply chain in the digital world, manufacturers can simulate, test, and predict scenarios in real-time while optimizing production processes and operations. Digitalization creates the necessary transparency for better decision making through access to data. Consequently, digitalization is the foundation of many of the sustainable manufacturing processes that are already in use today – everything from low-energy robotics to modern additive manufacturing methods. 

Additive manufacturing is known to be a technology which is “digital by nature,” meaning that the process itself would not work without digital technology connected to it. At the process level, 3D printing has the power to alter production, supply chain, and post-sales support practices throughout the manufacturing sector.  

The sustainable importance of additive manufacturing is more obvious in some areas than others. Here are a few known benefits of this technology: 

1. Improving Resource Efficiency During Production Processes 

A key advantage of 3D printing can be experienced during production. Digital methods save natural resources through more efficient processes. The parts 3D printers produce are close to their final intended shape. Barely any material needs to be removed in contrast to grinding or milling production methods.  

The accuracy of today’s digital printing methods means that products are made right the first time with little need for rejections or modifications post-production. Since there are no molds or other tools required in 3D printing (compared to on-demand technology), the requested order size is made without any overproduction, waste, or additional storage costs. 

Overall, resource efficiencies are ensured thanks to a combination of simulated printing processes before production runs, optimized print pathway automation, and the potential to use digital warehousing techniques to validate which parts are – or will be – most in-demand.  

2. Saving Emissions By Reducing Supply Chain Lengths 

Supply chain length reduction means establishing a less costly and greener supply chain. Additive manufacturing enables the creation of parts and products closer to the end consumer and could even allow for printing in customers' homes. By decoupling manufacturers from global logistical operators, it also helps to make supply chains more resilient and less susceptible to international or weather events, as well as reducing the carbon footprint. The lower supply chain costs of additive manufacturing might even outweigh the higher costs in the location of production. Emissions associated with road haulage and international shipping will be vastly reduced. Localized 3D printing hubs will be able to bundle several production runs to make transportation to end users even more efficient and sustainable. 

Another key to additive manufacturing’s sustainability capabilities is that it produces fewer parts than traditional manufacturing. The thumb rule is that if a conventionally manufactured component consists of 100 parts, the same additively manufactured component can potentially consist of only 10 parts or even less. This shortens the value chain extremely including the complete energy consumption.  

Think of it this way – fewer parts and production steps require less logistical expertise to move goods around the world. Additionally, fewer machines need less space / storage, less resources, and in the end less energy.  

3. Enabling Smart Repairs and Upcycling Options 

The after-sales aspects of additive manufacturing should not be overlooked when considering sustainability. For one thing, additive manufacturing technologies such as cold spraying or laser melting can help to lengthen product lifecycles by reproducing worn-out parts or even worn-down sections of them. For example: With a local 3D printing service, customers can obtain the necessary part and replace it, thereby extending the product's lifespan, even improving the part’s performance, or enabling new features. Maintenance services can be strongly optimized, as parts can be produced whenever and wherever needed, making the process way more effective, saving a maximum of time. 

To enable this process, manufacturers need to have the relevant files available in a digital warehouse that allows end users to select the part(s) needed and print them directly. Since customers can access the parts in real-time, there is no need for warehousing of spare parts.

Most of us can understand how additive manufacturing drives sustainability by improving resource efficiency during production or how it can save emissions by limiting the length of the supply chain. But there is one area where additive manufacturing boosts sustainability that may not be as obvious – the product design and its performance when it comes to energy.  

3D product design can improve energy efficiency of products like no other technology can, not just in production but over the course of its lifecycle. Manufacturers may be surprised how easily 3D printers produce complex structures. This not only saves material resources, but it also saves the energy used to generate the material. With additive manufacturing it is also possible to produce significantly lighter products. Less weight means lower fuel consumption and lower distribution costs. 

The biggest energy savings are achieved through flow-optimized design and maximization of thermal energy absorption capability. This means that, simply by optimizing parts of the bigger product slightly through complex geometries only additive manufacturing is capable to produce, it might already improve its energy efficiency significantly.  

For example, with an aerodynamic part in a turbine produced through additive manufacturing you can manufacture near-shape cooling channels right below the part surface. With the increased efficiency in cooling the turbine can run at a high temperature creating lowering energy costs over its entire lifespan. In this situation, additive manufacturing optimized not only the part but the entire product, in this case the turbine.  

But additive manufacturing can even increase sustainability and energy efficiency for already sustainable technologies. Take the electric motor, for instance: by printing components more precisely, the effectiveness of the engine can grow even more – to new heights.  

A word of caution - leaders should not apply additive technology just to say they can. The technology needs to serve the business needs, solve problems, and entail significant benefits for production processes.  

Here are a few things to keep in mind for successful additive manufacturing: 

It’s not all about technology. While additive manufacturing can dramatically change a manufacturing business’ level of sustainability, it is not all about technology. In fact, the confidence and support of the people in your organization can make or break your success. Leaders are encouraged to remember that there is a human component regarding changes that will be inevitable when moving from legacy production methods to more sustainable 3D printing processes. Good change management programs are essential. 

Optimize and design new part(s) first…based on business purpose and then print the optimized version for actual value. There is no point in copying the initial traditionally produced part. In fact, doing so, might even be more expensive. Instead, the value of additive manufacturing lies in using the right simulation tools like digital twins and Artificial Intelligence to achieve application-optimized geometries and printing them very precisely.  

Invest in the infrastructure. Manufacturing enterprises must invest in the necessary infrastructure to benefit from additive manufacturing processes and the greater sustainability they can generate. Some businesses will inevitably decide to purchase 3D printers and the associated digitalization tools that go with them. However, it is also extremely convenient for manufacturers to outsource 3D printing requirements at a lower cost due to shared resources. Sharing the resources of an expert in additive manufacturing with other organizations means even more sustainable outcomes can be achieved because fewer resources need to be retained in-house for printing products, parts, and prototypes. In some cases, depending on the individual situation (location, ecosystem, and customers), there will be no need for a factory in the first place. 

Shape business strategy around sustainable goals and scale accordingly. Senior managers and executives must reassess corporate strategies if they are to find the success of additive manufacturing. Furthermore, meeting the demands of customers will require the adoption of services in a portfolio more closely aligned to 3D printed solutions. Producing 3D printed product designs is the first step, but manufacturers also need to consider material choices carefully because that will directly impact future sustainability and distribution.  

Additive manufacturing successes and advocates have reframed the story from “the technology reducing machines in production” to focusing on its potential to expand manufacturing opportunities. It may become a competitive advantage for some manufacturers. It may change the rulebook for production. It may be the answer for radically improving your business strategy. It could be the critical action your business needs to address the societal imperative to deliver a more sustainable future. What’s stopping you from finding out?