European auto industry grapples with sustainability and competitiveness

Implementing circular economy principles within the automotive sector is a major challenge, but also represents a huge opportunity. Staying competitive with more successful electric vehicle brands (mainly in China) will be a major part of meeting sustainability goals.

Due to rising regulatory demands, resource constraints, and growing consumer expectations for sustainability, the automotive industry is under increasing pressure to adopt a circular economy model. That is the takeaway from a report by Eurogroup Consulting, which explored the issue in great detail.

The current linear models followed by car makers and significant parts of the oil industry generate huge amounts of waste and emissions. For instance, around 25 million tons of waste per year is linked to end-of-life vehicles.

Europe lags behind

China is currently the world leader in electric vehicle (EV) sales. In fact, Europe has been seriously left behind in recent years, only barely keeping up with internal combustion engine (ICE) vehicle sales. Now, European OEMs are trying to find new revenue models that will keep them competitive in global markets.

There are number of factors making it difficult for European car makers to keep up, like strict new regulations from the European Union and higher production costs. Europe also has to grapple with a lack of resources like copper, nickel, and other rare materials. EU rules on CO2 emissions are an additional handicap for the industry.

From linear to circular model

European manufacturing industries – and especially vehicle manufacturers – have been making a significant shift toward net-zero, circular, and sustainable value chains, propelled by the European Green Deal. Part of that shift has been a push to increase EV production and build more charging infrastructure.

A number of solutions could help Europe get back on the right course. In the short term, the report advocates for stronger alignment of regulations and the introduction of incentives like tax breaks and subsidies to encourage the adoption of circular practices.

Medium-term strategies include standardizing components for easier disassembly, promoting modular designs, and fostering greater collaboration among suppliers across the value chain to drive innovation in circular economy solutions. Longer-term solutions could include using technologies like blockchain for better lifecycle traceability.

A circular model would also require greater collaboration between OEMs, Tier 1 suppliers, and public authorities. Other tangible changes could include increasing the use of renewable and recycled materials, developing standardized components, advocating for supportive regulations, and more incentives from governments.

As things are going now, 60% of all vehicles on the road in Europe in 2040 will be internal combustion engine vehicles. Big changes will need to be made in the automotive industry for the EU to ultimately meet some of the ambitious goals it has set for itself, like the Paris Agreement.