A McKinsey report, published on September 13, 2023, highlights a substantial market opportunity within India’s automobile parts industry focusing on component circularity. This opportunity is estimated to range from US$ 3.8-5 billion by FY30, focusing on three core themes: material recirculation, circular product design, and repair, care, and refurbishment services.
The report, titled ‘Mobility 360 degree-Sustainability for Competitiveness,’ was unveiled at the 63rd annual meeting of the Automotive Component Manufacturers Association of India (ACMA). It underscores that material circularity has the potential to significantly benefit companies, leading to increased profits of 10-20%, reduced costs by 5-10%, decreased reliance on virgin materials by 20-40%, and a substantial reduction in carbon emissions by 50-70%.
Another report by the World Economic Forum and Accenture emphasizes that adopting a circular economy model in automobile manufacturing could cut the industry’s lifecycle carbon emissions by up to 75% by 2030.
The McKinsey report identifies several challenges that need to be addressed to promote material circularity in India. These challenges include unorganized recycling practices, high costs, low recovery rates for e-waste and reusable components, fluctuating demand for recycled products, and the presence of difficult-to-recycle elements. However, the report suggests that these barriers can be overcome over time through supportive regulatory measures, policy support (such as the Vehicle Scrappage Policy, 2022), improved recycling economics, and advancements in recycling technology.
Circularity not only fosters collaboration and competition among companies but also enhances local resource availability and mitigates supply-chain risks. The growing global and Indian emphasis on sustainability is reflected in the report, with over 180 Indian companies adopting decarbonization goals as part of the Science Based Targets initiative.
The ACMA’s survey of Indian auto suppliers aligns with these themes, as respondents highlighted the significance of new business opportunities, sustainability qualification-led growth, and sustainability-driven cost reduction as relevant aspects in the automotive sector.
