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Executive Summary

In the past, the success of automobile manufacturers was largely measured by the sales of new cars. However, the topic of mobility has changed significantly in recent years. Owning your vehicle is increasingly taking a back seat, especially for young people. Furthermore, during the financial crisis and the decreasing sales of new vehicles, it became clear that the aftersales market generates stable profits. The aftersales market also makes a significant contribution to the sustainable success of the automotive industry.

Spare parts are a vital component for every Original Equipment Manufacturer (OEM). The constant observation of buyer behavior and the resulting derivation of new offers in the spare parts segment is required. With the end of the statutory warranty period and the grace period on the part of the automobile manufacturer, the number of price sensitive customers increases massively. Therefore, a constant adjustment to market needs is essential to maintain customer retention for this age segment in the automotive industry.

In addition to the already known new parts, which are identical to the parts installed in serial production, some OEM, Original Equipment Suppliers (OES) and the independent spare parts market are increasingly offering remanufactured parts. These parts are formerly defective components given a second life using a standardized remanufacturing process to meet the exact requirements as a newly produced part.

Mechanical components, such as starters, alternators, engines and electrical parts (e.g.  head units) are currently being processed. Remanufacturing is considerably cheaper than producing new parts, but also adds value to the ecological perspective by saving raw materials and energy.

The industry is determined by the three key players OEM, OES, and independent remanufacturer. Some OEMs, such as Mercedes Benz and Renault, have an in-house remanufacturing program. Particularly self-made components are given a second life in these programs. OES like Bosch remanufacture parts for many of their customers to whom they supply new parts, but they are also active in selling directly to independents and own workshops. The independent remanufacturers are often only involved in remanufacturing and do not produce new parts. Their customers can be both independent workshops and large OEMs.

Due to the increasing environmental awareness and the sustainability promises made by many key players, the automotive industry is receiving more attention than ever. Also remanufacturing is facing a major change in opportunities and risks due to increasing electrification.

What is remanufacturing?

Remanufacturing is the reprocessing of defect products. The part is brought back to the original quality standard of a new one. Complete disassembly of all components is necessary to check them and the assemblies. All reusable parts are then cleaned and subjected to strict quality control. Wear parts, such as ball bearings, are replaced by new ones in order to guarantee the quality requirements placed on the remaining parts. Contrary to popular belief, remanufactured parts are not inferior or of poorer quality. They must meet the same quality and requirements as new parts. Remanufacturing can also lead to a technological upgrade of a component by replacing defect components with further developed individual ones. Furthermore, after the remanufacturing, each individual part is tested, unlike in serial production, in which usually only random samples are taken. However, not all parts are suitable for remanufacturing, the right parts are selected according to various criteria.

The essential requirement for a favorable decision is whether remanufacturing is technically possible and how high the costs of remanufacturing the part are. If the costs are only slightly lower or even higher than the purchase price of a new part, it often makes no economic sense to include the part in the reman portfolio.

It is also necessary that the demand for the components is high enough. If certain product-specific batch sizes are not achieved, remanufacturing can often not be presented economically since the effort for technical approval and implementation would be greater than the benefit. In this case, a 1-1 repair solution should be preferred. Learn more about 1-1 Repair

Remanufacturing a driver of sustainability

The society’s focus is shifting more and more towards the topic of sustainability. Young people in particular attach great importance to the subject of sustainability, often without precisely knowing that it includes more than just conserving the nature and environment. Sustainability can manifest itself in several factors. In this context, the pillars of the economy, ecology, and socio-cultural are crucial.

Economy: A revenue of around 8.7 billion Euro is generated annually in Germany. A large part of this is accounted for by the aviation and automotive industries. Germany is currently the leading sales force in almost all sectors in Europe, and some experts predict enormous growth to over 40 billion Euro by 2030 in the European market.¹

Ecology: Remanufacturing makes it possible to reuse a large number of valuable components, which can save up to 90% of material compared to a new part. The energy required for treatment is also up to 90% lower.²

Socio-cultural: The processing of parts can only be automated to a very small extent since humans‘ final inspection and quality control must be carried out. Currently, about 43,000 employees are employed in the remanufacturing industry in Germany, of which about 10,000 are in the automotive sector.³

Remanufacturing in detail

The path from the defective component to the remanufactured part involves a combination of logistics and production processes.

Theoretically, the remanufacturing process begins at a dealer or a workshop where a customer decides to buy a remanufactured part. The defective part removed from the vehicle, also known as the core, is packaged, and sent to the logistic center or directly to the reprocessing location.

First, the cores are identified by their part number or type and recorded into the systems, followed by a rough quality check to determine whether the core is suitable for remanufacturing or not. For example, generators that have suffered fire damage or turbochargers with broken housings cannot be remanufactured.

In the next step, the cores are dismantled, which usually involves 100% dismantling down to the last seal and screw to ensure that all components are checked or replaced.

Then all components that can be reused are cleaned using specific processes. Housings are often blasted to remove dirt and oil residues, while more sensitive and electronic components are cleaned more gently. Wear parts that are not suitable for repair, such as ball bearings, seals and snap rings, are recycled after dismantling. When the components have been cleaned, the parts are inspected. There are also product-specific test procedures for this, ranging from simple measurement to the x-ray of parts (e.g. caliper). The limit samples defined by the manufacturer, through which consistent quality can be ensured, are crucial for reuse.

Once the reusable components have been identified, they can be processed; this also involves component-specific processes such as fine boring or honing crankcases or smooth milling of rotors in a generator. In this process step, all values ​​are precisely defined by the processor to guarantee the highest quality.

After the processing of the components has been completed, the assembly of the remaining parts can begin. For this purpose, in addition to the parts just mentioned, new parts, especially wear parts, are also used. When assembling the parts, identical requirements are made and systematically recorded to produce new parts. The production lines are often identical to serial production, and in some cases, they are assembled alternately.

Finally, the remanufactured parts have to pass an End-of-line (EOL) test, which for gearboxes, for example, consists of noise, leakage, and a function test. It is crucial here that the new part’s reference values are achieved to guarantee the quality promise „as good as new.“ In contrast to the production of new parts, in which these tests are often carried out on a random basis, all remanufactured products must pass the EOL test to receive approval.

After successfully completing the EOL test, the parts are labeled following legal regulations and packaged in the same way as new parts.

The packaged parts are then brought to the dealers and workshops by the forward logistics of the manufacturers. This closes the parts cycle again through the decision of a customer to buy a remanufactured part.

Benifits of remanufacturing

The reconditioning of parts has many advantages for the OEM, OES, and independent remanufacturers. The benefits for OEMs will be examined and explained more in detail below. Some of the advantages can also be transferred to the OES and independent remanufacturers. By establishing a reman portfolio in aftersales, four main benefits can be generated:

Ensure competitive pricing: By remanufacturing parts, it is possible to generate a more attractive offer for the customer. In particular, owners of older vehicles with expired warranty and goodwill are very price sensitive. Due to the growing supply on the free market and the easy price comparison online, branches and dealers are struggling with competition. However, customers can be won back, and market shares increased through a fair value remanufacturing offer.

Create CO₂ savings: The remanufacturing of vehicle components generates significant ecological advantages. A good example is a remanufactured starter in which up to 3kg material (88%) and up to 9kg CO₂-emissions (53%) can be saved compared to the production of a new part.⁴ The effects can be seen even more clearly with larger and more valuable components. According to ZF Saarbrücken’s own information, up to 90% of material and energy are saved when processing automatic transmissions.⁵

Ensure parts supply: The increasing electrification and shorter development cycles are accelerating the constant further development and increases of efficiency in the automotive industry. However, this also increases the risk of supply shortage. It occurs frequently that suppliers are no longer able to meet their supply obligations shortly after the end of serial production. In this case, there is a lot of effort for a new development procedure or even vehicle buybacks. By remanufacturing parts, it is possible to ensure the secure supply long after serial production and thus minimize risks.

Reduce production cost: As mentioned in the introduction, it is possible to realize considerable cost savings by remanufacturing vehicle parts. Especially after the serial production has been phased out and resulted significantly lower volumes, the replacement prices for the OEMs rise massively. Remanufacturing makes it possible to keep costs constant or even reduce them.  It is possible to reduce the procurement costs by up to 70% compared to a new part, increasing the margins or creating scope for reducing the customer price.

Current market situation

The remanufacturing of components has been present for a long time, especially for mechanical vehicle parts such as starters, alternators and transmissions. It is particularly well established among serial suppliers and OEMs with in-house mechanical parts. For example, the ZF Saarbrücken Group has been processing transmissions and related components at global locations for many years.⁶ Bosch, as a worldwide supplier to the automotive industry, is also active on the open market for OEMs as a remanufacturer as well as with its own aftersales division and workshop network.⁷

In addition to the large corporations, which have also started remanufacturing, primarily driven by their activity in the production of new parts. At the same time independent remanufacturers have been able to establish themselves on the market and significantly increased their market share in recent years. In contrast to serial suppliers, these do not have all of the original components that have to be replaced during remanufacturing and the series-related specifications for the EOL test. However, independent remanufacturers develop their own specifications through so-called reengineering. Several original new parts are used to generate reference values ​​for noise development and performance measurement. These values ​​are then used as benchmarking for the remanufactured parts to ensure that the same quality standards are met.

While OEMs have so far preferred to work with the serial suppliers due to the existing original parts and specifications, independent remanufacturers can convince them more and more of cooperation with steadily increasing quality and reducing manufacturing costs. Due to the steadily growing range of high-quality parts from independent workshops or online platforms means that OEMs have to use attractive offers to attract customers in the older vehicle segments.

Overall, there is a consolidation of the free market. It is becoming more difficult for small remanufacturing companies to compete with large companies such as Borg Automotive. In addition to the usual effect of the economy of scales, the issue of core procurement is particularly critical for independent remanufacturers. It is made significantly easier by a larger network of dealers and online shops. The increasing number of control units, meanwhile also for mechanical components, demands higher investments in the field of ​​EOL tests and equipment. Because of the vehicle-specific coding, special software solutions and test equipment are often required, which only pay for themselves in large quantities. These quantities often cannot be reached by smaller remanufacturer and therefore, they have to cooperate with bigger companies or be integrated into them.

The future of remanufacturing

Due to advancing global warming and limited resources, the matter will continue to gain importance in the future. The fact that this development also has an enormous impact on the automotive industry can currently be seen mainly through the focus on hybrid and electric vehicles. However, the topic of sustainability does not end with the production and use of vehicles with alternative drive technologies. Instead, the entire lifecycle should be considered.

Active promotion of the topic must therefore also be supported by the legislation. Currently, no remanufacturing created material and CO₂ savings are included in automotive manufacturers carbon footprint calculation. Monetary subsidies for the ecological effects would make the remanufacturing business model much more attractive for OEMs and also create business cases that are not economical due to the pure reduction in manufacturing costs into positive territory. Currently, it is a positive side effect for most OEMs and OES if spare parts are ecologically sustainable, but decisions are usually made purely based on economic indicators.

Another success driver for the growth of the industry is that owning a vehicle is taking a back seat for many people. This development can be recognized by the increasing number of car sharing providers. Cooperation between the provider and the processing industry is advised for two reasons. On the one hand, a high return rate of cores can be achieved through contractual framework conditions. On the other hand, savings potential can be realized for both parties through the volume.

Finally, the impact of the increasing proportion of vehicles with alternative drive technologies on the reman branch will be discussed; this will have a massive effect on remanufacturing for the following reasons. Many of the classic reman components such as starters, alternators, injectors, and turbochargers can no longer be found in purely electric vehicles. On the one hand, this will significantly reduce the need for these products over the next 50 years. On the other hand, remanufacturing can play a crucial role in long-term supply. Even in the event of a ban on the sale of internal combustion engines, there still will be a large car park with these parts. Due to the decreasing demand for serial production, the costs of manufacturing new parts will increase and will probably be completely discontinued after a certain point. This offers the industry an excellent opportunity to ensure the security of supply in a cost-effective and long-term manner. Furthermore, the entire industry is currently working on technically feasible and economical preparation concepts for typical e-vehicle components such as power electronics, starter-alternators, and batteries. The first reports of success have already been made by Vitesco Technologies, the drive train division of Continental, that has set up a research and development center for electronic vehicle components in Tianjin, China.⁸ ZF is also working on future solutions for reprocessing hybrid transmissions to ensure that not only the vehicle but also the spare parts are ecologically sustainable in the future.⁹

In summary, it can be said that strong growth in remanufacturing in the automotive industry is to be assumed. The main drivers are the growing awareness of ecological sustainability in the population and the resulting increasing requirements by the legislature, as well as electric driving, which represents a certain risk but much greater opportunities.

^1,3VDI Report: Zirkuläre Wertschöpfung 12/21
^2,5,6,9ZF Homepage 2021
⁴VDI Report: Ressourceneffizienz durch Remanufacturing – Industrielle Aufarbeitung von Altteilen 2018
⁷Bosch Homepage 2021
⁸Vitesco Homepage 2021

Executive Summary

In the past, the success of car manufacturers was measured largely by the sales of new cars. However, the topic of „mobility“ has changed significantly in recent years and owning one’s own vehicle is increasingly moving into the background, especially for young people. Furthermore, during the financial crisis and the accompanying decline in new vehicle sales, it became apparent that the aftersales market generates stable profits and thus makes a major contribution to the sustained success of the automotive industry.

Spare parts are an important component for every Original Equipment Manufacturer (OEM) and it is necessary to constantly monitor buyer behavior and derive new offers in the spare parts segment from this. With the expiration of the legal warranty period and the goodwill period on the part of the automobile manufacturer, the number of price-sensitive customers increases massively. Constant adaptation to market needs to maintain customer retention is therefore essential for the automotive industry in this age segment.

The reman offering (remanufacturing of defective components) of OEMs, which is already established in some cases, is a first step toward expanding the portfolio. The focus here is particularly on mechanical components that fail due to wear and are very price intensive.

However, due to the increasing number of electronic components in vehicles, it is essential to take a closer look at the topic of component repair. High acquisition costs for control units (ABS, window regulator module, etc.) often induce the end customer to purchase used components or to resort to replicas from the Far East to ensure the continued mobility of the vehicle. Particularly in the case of a safety-relevant component, this step is associated with a high risk for the customer and is not recommended at any time. In the event of an accident, this circumstance can even lead to a loss of reputation for the OEM.

A repair certified by the OEM offers the possibility of repairing components removed from the vehicle at the series supplier / selected specialist and then reinstalling them for the end customer. The advantages for a customer are mainly a cost saving of about 50% due to the lower purchase price and unnecessary coding, as well as an additional warranty of two years on the repair work performed.

In addition to the benefits for the end customer, the issues of security of supply and CO2 savings are playing an increasingly important role for OEMs. Due to discontinuations of components (chips, relays or capacitors) or insolvencies of the original equipment suppliers (OES), spare parts backlogs at the end customers are increasing. These supply bottlenecks can lead to vehicle downtimes, which automotive manufacturers need to avoid. Particularly in order to ensure long-term customer loyalty. This customer loyalty can be further strengthened by a conscious and sustainable approach. This is reflected in the OEMs‘ claim to be a CO2-neutral company in the future.

The future expansion of repair into a platform business offers a sustainable and value-creating interaction between OEM and repair service provider and can make a significant contribution to achieving the targeted goals in aftersales.

What is a 1-1 repair?

The existing range of spare parts for older vehicles in aftersales is largely manageable. New parts are often still the only solution option in the event of a defect. With the introduction of cheaper remanufactured parts, the retention of end customers of older vehicles to visit an authorized workshop has increased. However, the Reman portfolio currently primarily targets classic mechanical components such as turbochargers, transmissions, or starters/generators.

With the increasing electrification as well as networking of vehicles, there is a huge portfolio of electronic components. This gap to a new part can now be closed by repairing components in line with their current value. The 1-1 repair makes it possible to have the component removed from the customer’s vehicle repaired by a series supplier and/or selected specialist and then reinstalled in the vehicle. This cost-effective solution is particularly interesting for the vehicle segment II+ (4 years and older), since the price of a new original part in most cases exceeds the value of the vehicle and thus replacement is not worthwhile for the customer.

Acceptance by the end customer is crucial to the success of this offering. This acceptance is created primarily through the pricing of the repair solution. A saving of up to 33% of the costs compared to a replacement part is possible if this is available. This can be realized primarily through the component-specific repair of a component, savings in coding costs and eliminated storage costs. The general warranty of two years on the repair work carried out gives the customer the security of being able to turn to the dealership if problems arise.

In order to counteract the migration of customers to the independent aftermarket (IAM), component repair is a target-oriented extension to support the expansion of an OEM’s aftersales portfolio. At the same time, component repair can also cushion supply bottlenecks but not completely prevent them.

Repair process in detail

A repair of electronic components requires a specific diagnosis of the cause of the fault. To this end, the implementation of the repairable fault codes at the authorized repair shops is an important criterion, so that the possibility of a repair is already pointed out during the diagnosis.

The development of a standardized procedure for the repair of components is usually implemented by a repair service provider and secured and documented by the OEM by means of process acceptance.

To ensure the functionality of the component after the repair, in some cases an additional transmission of further vehicle components to the repair store is required. Examples include the radio remote control and the control unit for the immobilizer.

The component sent in by the authorized dealer to a certified repair service provider is subjected to a second fault diagnosis at the start of the repair. In this step, in addition to the fault code determined by the authorized workshop, a more detailed damage picture can be determined.

Following the analysis, the test technician repairs the detected defect using defined work steps. The repair is carried out in compliance with the soldering guidelines (IPC-7711C/7721C DE) applicable in the automotive sector for work on electronic components. All necessary repair steps and the components to be replaced are clearly defined and quality assured. The newly soldered-in components must meet the specifications of the series specification book or a separate release from the OEM.

To ensure the complete functionality of the repaired component, a so-called end-of-line (EOL) test is necessary. This is based on the requirements for a new part and ensures the fault-free function of the component. By comparing the parameters of a new part with those of the repaired component, OEM-approved quality can be achieved.

Advantages of the 1-1 repair

In addition to the benefits for the end customer, the advantages for the repair service provider and dealer also play an important role in realizing the acceptance and expansion of the offer. In the following, the advantages for the OEM are examined and explained in more detail. Four essential elements can be derived by implementing a repair solution in the OEM’s aftersales business.

Competitive products: By repairing various high-priced vehicle components in line with their current value, it is possible to offer competitive products on the open market.

CO2 savings: In contrast to the production of new parts, the repair of components enables not only costs but also CO2 emissions to be reduced. More than 50% of kilograms of CO2 equivalents can be saved per repaired component.

Ensuring parts supply: The effects of part discontinuations and supply shortages can be mitigated by 1-1 repair. Here it is possible to avoid expenditures for component redevelopment (redesign) and storage costs.

Customer loyalty: An attractive product portfolio offers OEMs the possibility of retaining customers for longer and generating potential cross-selling effects.

The security of supply of components has played an increasingly important role for automotive manufacturers in recent years. The increasing shortage of semiconductors for the automotive sector poses a major challenge to all OEMs. The main reasons for this are the increasing technical equipment of vehicles, the growing pressure to innovate and the rising prices of components (chips, relays or capacitors) due to a shortage of these on the world market. The Corona pandemic reinforces this effect and shows the extent of the lack of alternatives. With no quick fix in sight, repair can play an important role in securing supply and getting older vehicles back on the road.

Expanding the repair solution into a platform business creates the possibility of an overarching level for selling services of all kinds. Expanding this sales concept makes it possible to shape the future of aftersales for yourself.

Current market situation

Repairing valuable components not only makes economic sense, but also conserves resources. More and more companies are discovering the field of repair, which was completely unknown a few years ago, for themselves. The right use of pricing and marketing measures is necessary to win back customers and to limit the purchases of untested used parts via Ebay or the like.

Predominantly independent repair service providers (e.g. Glaubitz GmbH & Co. KG as well as ACtronics GmbH) and some OES (Robert Bosch GmbH and Continental AG) have specialized in the repair of individual vehicle components in recent years. The range of services offered by automotive manufacturers is still limited and is expected to increase over the next few years.

The repair of electronic components from various vehicle manufacturers is the main business of independent repair service providers. Their product portfolio often includes the repair of control units, instrument clusters and modules. The environment of these service providers has nothing to do with the term „backyard workshop“. Rather, the equipment of the stores includes professional clean rooms, testing equipment and special tools that fully meet the requirements of automotive manufacturers. Specially developed end-of-line tests as well as measuring equipment safeguard the repair and provide an insight into the vast know-how of the individual companies. The high requirements in the field of component repair are also reflected in the service providers‘ certifications (ISO and DIN).

As one of the largest OES, Bosch has already established a repair offering for some of its own products. A major advantage in the repair solution is the use of synergies from already established reman processes. The high know-how of manufacturing processes in series, methods to open a glued housing or features about original components (relay, capacitor, etc.) are important aspects for the implementation of the repair.

In the meantime, well-known premium car manufacturers are also venturing into the very extensive field of repair. Most of these OEMs are now establishing the repair of components in their aftersales program in addition to the existing spare parts business with new parts and the reman parts that have been known for some years. Since 1-1 repair is still in its infancy at the automotive manufacturers and the necessary system-side and logistical adjustments cannot be made overnight, a non-negligible degree of adaptation is required.

Outlook for the future

In addition to the repair of electronic and mechanical components, 1-1 repair also offers automobile manufacturers the opportunity to implement new repair concepts. Various remanufacturing projects are conceivable and are described below.

Establishing a platform business to expand the product portfolio is not only future-oriented, but also an important instrument for increasing customer loyalty of a vehicle brand. This business model deals with the reciprocal relationship between repair service providers and the OEM and the goal of complete transparency in repair solution offerings. The following features characterize the platform solution concept:

• Value-added interaction between non-company providers and the vehicle manufacturer offers the possibility of rapid identification of the cause of the fault and its elimination.
• Creation of an infrastructure for the ordering/handling process and monetary flows after repair completion.
• Creation of network effects through a conventional business extension of the supplier logic.

The goal of such an aftersales solution is the continuous expansion of repair concepts and the empowerment of new suppliers. Intelligent algorithms use the broad data base to create an optimal matching of platform participants. Repair is performed outside the platform by a variety of service providers.

A platform becomes more attractive the more participants it can have. An infrastructure that has already been created can thus be easily scaled. This approach allows network effects to emerge. The refinancing of costs for the OEM is based on the exponential growth of the aftersales portfolios.

The success of a new solution is always dependent on customer acceptance. The advantages listed are promising and, with the right use of pricing and marketing measures, form an important new product line for shaping the aftersales of the future.

With the continuing caution by politicians (and perhaps a greater degree of luck on all sides), the Covid 19 pandemic may be entering a late stage for now. Whether the crisis will return to haunt us within the next twelve months, no one can predict with any degree of certainty. What is clear, however, is that the crisis will usher in a new world – one that will be very different to that before the end of 2019.

What does this mean for remanufacturing?

Remanufacturing is an unusual industry. In fact, it’s one of the few manufacturing industries anywhere that combines protection of the environment, preservation of precious resources, support for local employment and affordable prices for essential consumer products – four key challenges of the modern world. In view of the significant environmental benefits associated with remanufacturing, it is clear that reman and its role within society deserve high levels of support and attention.

Fortunately, in some respects, remanufacturing is less exposed to the negative consequences of the pandemic than many other industrial sectors. Important sectors such as the automotive industries, the travel and transport sectors, hotels, restaurant and entertainment with their hundreds of thousands of employees, and exhibition organisers world-wide are all among those that face real challenges. Travelling to China for industrial shows, for example, will certainly become less attractive in an era when cross-border interaction faces greater scrutiny and practical difficulties.

One reason why remanufacturers may yet escape the worst consequences of the corona crisis is linked to the industry’s countercyclical nature. A common observation holds that financial downturns  in manufacturing to position remanufacturing as an attractive alternative to new. When motorists buy fewer new cars they keep their current vehicles longer and, therefore, opt for remanufactured parts which provide more affordable but also often better options.

This may or may not be crucial factor in how remanufacturing emerges from the current crisis, but it will help.

As a senior executive in a major remanufacturing organization recently put it:
“It’s not that remanufacturing benefits from the corona crisis. Far from it. Many businesses have been suffering considerably and a number may go out of business altogether. But remanufacturing has always shown strong resilience to economic and financial upheavals, and the downturn triggered by the crisis has given many businesses an opportunity to reappraise their business models and take stock. Despite everything I’m confident that most of the remanufacturing industry will come out on the other side in a solid position.”

A fellow executive from a different company adds:
“Let’s not forget that for many years, remanufacturers have made a living from providing solutions to problems, frequently complex technical ones. The lockdown will not have made any difference to this. By contrast, I believe that many reman companies have used recent months to analyse their options going forward. Forced by unfortunate circumstances, they will have spent time considering if and how their operations can further rationalized, how customer relations can be fine-tuned and see whether their current approach may be extended into new areas.”

Others point towards customer relations/marketing/promotion as one significant area likely to see lasting change. Certainly, a number of remanufacturers have spent the past two months considering how best to strengthen ties to customers. One remanufacturer notes: “I believe that in the longer term, this will turn out to benefit our relations with our customers. While we have been looking at how to optimize the way we work together, new cooperative ideas emerge as we get to know each other even better.”

No one in the industry is complacent about the situation. A common view is that there are hard lessons to be learned and new ways of working looked to be looked at. As one executive puts it: “In significant respects remanufacturing combines innovation and tradition. While the industry rose out of a need to preserve existing products, its future is linked to its ability to innovate, and to create increasingly technical solutions to new problems.”

This could be said to express remanufacturing in a nutshell.

One huge impact of the crisis can be expected to be on the reman industry’s ability to promote itself and represent its achievements, products and methods – both internally and to the outside world. This is shown through thus years cancellation of multiple exhibitions, seminars, conferences and trade summits. Having cancelled scheduled events in Europe, USA and Asia, the organizers, i.e remanufacturing associations and trade bodies, have been forced to postpone a series of webinars stretching into the end of the year.

Examples include the Remanufacturing Council’s annual World Remanufacturing Conference in Rochester, New York in September, which will now take the form of a webinar, and MERA, the Association for Sustainable Manufacturing, that converted its spring conference in April into a webinar and is considering doing the same for its Autumn event in September. Likewise, the World Reman Summit planned for early March in Milan, which became the epicenter for the Corona crisis in Europe, was cancelled and, as of now, is rescheduled for the autumn.

On a larger scale, Automechanika in Frankfurt, the world’s largest aftermarket exhibition, and a string of other Automechanika events outside Europe, have been postponed to 2021.

Altogether, remanufacturing together with its hundreds of thousands of employees, leaders and executives and customers, are experiencing unprecedented disruption by the corona crisis.

That’s the bad news; the good news is, that reman is an industry with an excellent record of recovering from downturns and turning challenges into opportunities. It may not look like that right now. But there is little, maybe no reason to despair. Like reman recovers valuable products to the benefit of our societies, it will also know how to recover from the troubles that are hitting the world economy.

“All that glitters is not gold.”

William Shakespeare (1564–1616).

On the other hand, not everything that looks dreary, grubby or dirty is valueless.

Most motorists have passed scrapyards piled-high with car wrecks. It is here broken, rusty, old or obsolete vehicles come to die. It is the final stop for automotive or heavy-duty vehicles with up to a million or two miles behind them; the last resting place for vehicles that cost their owners tens of thousands of dollars to buy, run and service over the vehicle’s lifetime.

Yet, unknown to many is that rusty, oily, dirty and worn out parts from such vehicles –  “cores” – retain considerable value. In fact, selecting, buying and selling cores for remanufacturing constitutes much of what is important in an environmentally conscious world. Preserving natural resources, reducing material consumption, and extending the lifetimes of products all relate to the efficient handling of cores.

To simplify: without cores there would be no remanufacturing. And without remanufacturing, much of the circular economy would be a wholly different and less realistic proposition. Cores are the lifeblood of remanufacturing. They deserve to be treated with care.

The value of rusty parts

So, there are good reasons to highlight the value of these rusty, dirty or worn out parts. Here are some of them:

• Materials savings
• Parts affordability
• Waste reduction
• Carbon emissions
• Energy savings
• Savings in transport costs
• Benefits to local employment

Remanufacturing cores is no simple matter. Behind the scenes, giving a component a second, third, or even a fourth life, through remanufacturing is a demanding exercise that requires in-depth knowledge, advanced technical skills, patience and care. It is hardly surprising that the average age of employees in remanufacturing companies is often well above that of many other manufacturing industries.

People and skills

As one owner of a remanufacturing company puts it: “We try to look after our people well. Their skills are not widely available. We find that once they begin working here, they stay for a long time. We’ve seen examples of a son following a father into the business – even sons of sons.”

To understand the skills required to assess cores for remanufacturing, simply imagine how they look from the outset: covered in layers of rust, grime, oil, marked by dents and scratches. Is the part good enough for remanufacturing or should it be recycled or even sent to landfill? Is there an immediate demand for the part? What model is it and what year was it made?

Increasingly, these questions can be answered through intelligent data management systems. Yet, even advanced databases are only as good as their input. Developing and continuously updating intelligent IT solutions takes in-depth expertise and not only in respect of physical attributes but also in terms of supply and demand of cores and finished remanufactured products.

Considering the often divided responsibilities from core broker to remanufacturer and OEM or OES an end-to-end IT solution remain quite rare.

Expertise

What this really boils down to is the potential for combining the technical expertise offered by the remanufacturing industry and active core management designed to ensure the right supply of quality products through highly automatized IT solutions.

Converting a seemingly worn out, obsolete component to something “as good as new and sometimes better“ is no easy journey. “Better” in this case being the remanufacturer’s skills in incorporating more recent technological advances/upgrades into the original designs.

Understandably, some would claim that remanufacturing is small industrial miracle. It is certainly a step along the way towards a healthier environment for everybody.

So whereas most people just see the remanufactured component as a shining reborn product of equivalent quality and with same warranty as when new, it is more than worth remembering where it comes from. Look after the cores and they will look after you.

Twenty years ago, the writer of these lines took up the position of editor of a magazine dedicated to remanufacturing. “Dedicated to what?” was my initial question when the idea first came up. By and large, remanufacturing turned out to be about converting rusty car parts to new components sold at a sizable discount to motorists – sometimes at half the price of new and usually coming with the same warranties as “new”. A real bargain in those days.

However, as someone coming from the newspaper industry, it did not require much insight to realise that “reman”, the industry jargon for remanufacturing, was about more than obsolete spare parts. In fact, “reman” provided important answers to the growing concerns of the age: global warming, CO2 emissions, and the preservation of earths dwindling resources and much more.

These are all issues that today drive global interest in “the circular economy.”

Somewhat surprising to me at the time, remanufacturers did not see it that way. In fact, when suggesting that the green wave provided new opportunities for remanufacturing, the response would generally be like: “For our customers, only one thing counts. Price!”

Top of the agenda

What a difference a decade makes. Although there is still important work to do, today, “circularity” – encompassing remanufacturing – today occupies a position near the top of the global agenda. Take the World Economic Forum in Davos, where world leaders mostly agree on the importance of sustainability. Take China, where the government is steadily moving forward on “reman.” Look at how some of the world’s largest industrial companies emphasise remanufacturing’s environmental benefits. See how the media focus on sustainability issues across the world.

And, perhaps as important as any other recent development, listen to what Ursula von der Leyen, the new president of the European Commission, told the European Parliament ahead of her confirmation last month. Describing the circular economy as Europe’s „future economic model“ she set out a five-year action plan focusing on sustainable resources, “especially in resource-intensive and high impact sectors such as textiles and construction” and „measures to reduce plastic waste.“ The stated goal is to dedicate  at least 50% of the European Investment Bank’s funds  to “green and sustainable” financing by 2025.

“We will invest record amounts in cutting-edge research and innovation, using the full flexibility of the next EU budget to focus on the areas with the greatest potential,” she said about the ambition to make Europe “a world leader in circular economy and clean technologies.”

Concurrently the United Nation’s Environmental Panel (UNEP) is working to promote a broader understanding of the importance of sustainability among its member countries Not always in full view of the public, these efforts and many others are now supported by companies, academic institutions, public bodies, and governments. Once described as “a sleeping giant,” reman has indeed woken up.

CO2 savings

No less importantly, in terms of environmental impact, remanufacturing uses fewer material resources than new products. In turn, this reduces the need for landfill deposits, a huge advance. As reman does not require new material extraction, manufacturing processes and assembly, it saves energy, thus reducing CO2 emissions.

As pointed out in a pioneering new book edited by Dr. Nabil Nasr of the Golisano Institute for Sustainability in Rochester, New York, a further crucial advantage of remanufacturing lies in how it handles hazardous materials. Otherwise many of these would end up in forests and landfill. Reman means that instead such materials can be reused and put back on the market.

“Remanufacturing thus creates significant environmental benefits by avoiding direct CO2 emissions and diverting large number of products away from landfill – remanufactured products typically contain up to 80 percent of their material content,” the book “Remanufacturing in the Circular Economy” emphasises.

Benefits

Meanwhile, a recent academic study, “European Remanufacturing Impacts”, concludes that the environmental benefits generated by reman amount to 8.3. million metric tons of CO2 savings and 2,3 million metric tons of avoided landfill material. Distributed across the industrial sectors Aerospace, Automotive, EEE, Furniture, Heavy Duty and Off Road Equipment, Machinery, Medical Equipment and Rail, the figures thus draw a dramatic picture. One that underlines how remanufacturing (originally described by Professor Rolf Steinhilper of Germany’s University of Bayreuth as “the Ultimate form of Recycling,”) is a key component in the battle for the environment.

A number of the globes’s largest manufacturers have long since reached the same conclusion.

Bosch, the world’s leading automotive component supplier, has for several years been promoting its remanufacturing offer under its xChange program, which contributes considerably to the group’s sustainability effort. Bosch describes the program like this: “The remanufacturing system of used Bosch vehicle technology not only saves materials and energy, its (accumulated environment benefits) is the equivalent of those coming from 55 football pitches full of solar panels!”

Commercial & Passenger vehicles OEMs position

Another of Germany’s industrial giants, Daimler, boasts a similar commitment to remanufacturing – as does BMW in Munich and VW in Wolfsburg.

In a conversation with its in-house magazine Andreas Jörg, Head of Daimler’s After Sales and Value Parts at Daimler, recently emphasized the company’s contribution to the conservation of resources saying:

“By reprocessing and reusing materials, we make our contribution to an environmentally friendly lifecycle. Our aim is to avoid waste and the unnecessary consumption of raw materials and energy wherever possible. This is why we carry parts such as engines and transmissions over into a second lifecycle. In future this will also be important for HV batteries. The more we succeed in reusing components, the fewer resources we will consume during the entire process. “

Andreas Jörg refers to an illustrative lifecycle assessment study undertaken by Germany’s independent certification institute, TÜV. When measuring one remanufactured G281 truck transmission, TÜV concluded that remanufacturing one G281 unit resulted in savings of 445 kg of carbon dioxide and 7300 megajoules of energy compared with production of a new unit.

By comparison it would take eleven trees ten years to convert the CO2 saved by remanufacturing!

Caterpillar

In the US another global giant, Caterpillar, has over many years turned itself into the world’s largest supplier of remanufactured components. Caterpillar processes more than two million units per year – recycling in excess of 100 million pounds of remanufactured products annually. To illustrate the sustainability of remanufacturing Caterpillar claims, for instance, that compaed to “new” a remanufactured cylinder head creates 61 per cent less greenhouse gasses, 93 per cent less water consumption, saves 86 per cent energy and up to 99 material use. Moreover, reman, according to Caterpillar, takes up 99 per cent less space in landfills.

The next step

Emphasizing at one and the same time, the challenges and opportunities for the environment, “Remanufacturing in the Circular Economy” sums up the situation in this way:

In today’s increasingly globalized and growing industrial economy, traditional linear models of production and consumption, are insufficient. They allow the materials, components, and value of products to be lost from the industrial system, most notably at the end of life. As a result, these production models require continuously high levels of resource input and production activity to avoid negative environmental impacts – emissions, waste generation, and water consumption.

Quoting the Ellen MacArthur Foundation, the authors declare:

“It is becoming increasingly clear that take­make­use­dispose models of industrial production are incompatible with the sustainable development to which global communities aspire.”

Hard to argue with.

Today, the facts, the science, the environmental, societal and industrial benefits are there for all to see. Going forward, it’s all about who takes on the next step – and when and how.

For years, there has been a gap between theory and practice in remanufacturing in China, one of the world’s largest economies and its largest and most rapidly expanding automotive market.

The “theory” in this case is the Chinese government’s oft stated commitment to remanufacturing against “practice”, i.e. how “reman” is playing out in the markets, through import and trade restrictions and by varying interpretations of laws and regulations by different governmental bodies and even local authorities.

For years this has been a source of much confusion – and frustration – for foreign remanufacturers. Now, however, there are signs of a new willingness to ease past restrictions on the use of and trade with remanufactured goods.

It’s part of the Chinese leaderships increasing desire to shift towards a more sustainable growth pattern, deal more efficiently with the country’s environmental problems and meet the world’s demands for doing so. Together these factors may well make 2020 the most important year in the history of remanufacturing in China.

What, then, are these signs?

One particularly significant development is a remanufacturing law that China’s State Council passed in June 2019. The so-called ‘Administrative Measures for Recycle of End-of-Life Motor Vehicles’ removes some of the last legal impediments to the development of reman in China, potentially transforming the industry into an investment hotspot.

Important New Law

The law stipulates for the first time that used car parts – engines, steering wheels, gearboxes, front/rear axles, and chassis – can now be sold to remanufacturers.

Prior to the introduction of the new law, old components had to be disposed of as scrap and delivered straight to smelters. The old regulations – aimed at eliminating the illegal vehicle assembly business – had stunted growth of the reman industry for decades.

For Chinese remanufacturing, the consequences of this are wide-ranging.  With the law in effect, China’s vehicle recycling industry can now link up with remanufacturing businesses, spurring the development of the industry. Moreover, the new law also requires recycled products used for remanufacturing to adhere to rigorous standards, with code identification, traceability, and certificates of origin “in order to preserve product quality.”

In the mid-term, this ought to ensure a higher understanding and, therefore, awareness for the benefits of remanufacturing among Chinese consumers, which include millions of motorists and transport businesses. According to China’s state media, with the new remanufacturing law ‘the potential of the industry is vast.’

Gap between China and Developed Countries

This was aptly summarised by one leading official earlier in the year. “‘In China, remanufacturing has had a fine beginning. But we must clearly recognise that remanufacturing in China is still at an exploratory stage and there is still a large gap between China and developed countries“, Ma Rong, a former Chief of the Environment and Resources Bureau at the government’s hugely influential National Development and Reform Commission told a conference of remanufacturers.

Mr. Ma Rong also pointed to factors impeding the development of remanufacturing in China:

• As a new concept, remanufacturing has not been recognised by most people in China
• Remanufacturing in China is still in an exploratory stage. It is not a fully-fledged industry and its technological and management level is still quite low.
• Today’s laws and regulations still restrict the growth of remanufacturing.
• Technical standards, supervisory bodies and market mechanisms are still lacking.

Earlier in the year another ranking official, Tao Juncheng, a senior official in China’s Ministry of Commerce, detailed further advances for the reman industry when emphasising that the new law will resolve existing barriers to the remanufacturing of car engines, promote the circular economy in China, and promote the management of disassembly and recycling of scrapped car engines.

495 Million Cars

According to a state-run think tank, China’s car ownership will peak at 495 million in 2035. Similarly, in a 2019 report by McKinsey & Company, China’s car market will grow 10%-15% annually from 2019 to 2035, peaking at 440 million vehicles in 2035.

Such figures highlight the potentially enormous opportunities for remanufacturing under the changing regulations.

As a leading observer of China’s internal development, Professor Nicholas Stern of London School of Economics and a former chief economist and vice-president of The World Bank, pointed out in a recent report:  “China’s transformation has seen it rise from lower income to upper middle income status in just under four decades’. The signs of this are clearly visible to anyone who’s visited China’s large cities in recent years – many of which boast 10-20 million inhabitants.

Of even greater note, as Professor Stern points out, is that the next stage in China’s economic development will be characterised by a fundamental shift in China’s policies. „After 30 years of high speed economic growth, the next stage will be all about well-being, quality and sustainability.“

Next 5 Year Plan

This is no empty prediction. In October 2020, China will reveal its next 5 year plan – its fourteenth – thus setting China’s course for a good part of the next decade. Although still under preparation, key elements are already clear –  and they point towards a further support for the circular economy and sustainability.

At the centre of the plan is a commitment to a zero-carbon economy within a time frame of 30-50 years – perhaps not as ambitious as the figures under the Paris Agreement but certainly a major advance from only a few years ago.

Overall the plan is to move China from its current export and investment-led economy to a consumer-led growth pattern. This requires greater efficiency in labour and productivity as well as resources. Concurrently, Chinese consumers can be expected to switch their traditional focus on price to “quality.”

Benefits from Changes Underway in China.

The EU-China Summit, scheduled for September 2020 in Leipzig, will see both sides trying to reach agreement on shared climate goals. ‘Climate change and biodiversity are at the heart of our common multilateral agenda,” French president Emmanuel Macron said during a joint press conference with President Xi Jinping earlier this year.

A further important agenda item in Leipzig will be the signing a long-awaited EU-China bilateral investment agreement. After extensive negotiations, experts suspect that Beijing may offer concessions on issues that have irritated European governments and businesses for years: market access, intellectual property protection, and room for European businesses to bid for Chinese government tenders. Strict demands for Chinese partners‘ share of joint ventures with foreign companies may also be relaxed.

The knock-on effect for the remanufacturing sector could be significant: clearer laws and regulations at home, a new focus on sustainable growth, and a more open trade and investment climate point to greater opportunities for both Chinese and Western remanufacturers.

Whichever market prediction turns out to be the more accurate, one thing is clear. China is set on a course towards further sustainability, further environmental advances – and laying the groundwork for more remanufacturing.