BMW accelerates into the circular economy
The luxury automaker is using circular practices to cut out costs and emissions from its manufacturing processes.
The German luxury automaker BMW has long been known for its manufacturing prowess. But as manufacturing and heavy industry come under fire for their high emissions and lack of transparency, many companies are looking to take action. The long-time carmaker is no different — and many of its techniques are actually circular economy practices, from recycled materials to product design to business model innovation.
I had the chance to visit the company's European headquarters and find out more about where transportation meets the circular economy. I sat down with Jury Witchnig, head of sustainability strategy for products and production in Munich, for an interview.
This interview is part two of Pete May's two-part interview with Jury Witschnig. Find the first part here. This interview has been edited for length and clarity.
Pete May: So, I want to shift now to talk a little bit about waste and plastics and circular economy. How BMW is defining circular economy?
Jury Witschnig: Circular economy, in general, is a very broad definition from recycling to designing for second use to avoiding buying and using products. So, if we talk about the production of our products, we mainly define circular economy as, where is the source of materials? Are they primary or secondary materials? And what is the recycling process for the materials at end of life? Can they be recycled? So it's a narrow definition of circular economy.
If we talk about our products, we have a larger definition, to say, "Yes, we have a definition of the product today." But the next step is second use, such as with batteries. We can have a first use in the car and a second use outside of the car of the battery before you recycle it. Essentially, be a part of the sharing economy, which is also part of the circular economy.
May: Are there any examples or any particular plants where you think BMW has been a particular innovator in circular economy?
Witschnig: One example is metal coils for our car frames. On the one hand, you can recycle a material like aluminum, which has a large market. But the interesting discussion is, can we make a direct contract with our supplier to produce the frames directly from our material to the same quality of material again, so there's no downcycling?
In one plant, we’ve created a closed loop. We have a direct contract with our supplier. He gets back the direct steel from us, and produces the same quality of steel. It takes less energy to produce the steel this way, and we both can save money. And we want to make it a larger project.
Another example is the market for remanufacturing parts of the car. This is a really interesting market — it’s about how to take the materials and modules out of a car before they’re scrapped. The market is actually currently very small. We built a company, Encory, to work on that.In one plant, we’ve created a closed loop. We have a direct contract with our supplier.
It's a joint venture with ALBA, a German recycling company. And the difficulty of that is not the process of recycling; it’s in the logistics, how to get back the car. We produce more than 2 million cars a year in 30 places worldwide. But more than 2 million people every year have different cars, and you have to get them back to recycle them. This is a difficult process which might make it a little more difficult to get the real recycling or remanufacturing of these cars.
May: We’ve heard about that from other companies — the challenge of the last quarter of the loop.
Witschnig: Exactly. The problem is not the recycling process. The problem is the logistics, and the cost of the logistics.
And there we think future platforms like Encory can join together with other companies to get materials or parts out of a product and reuse them.
And the last step is to use recycled plastic as a resource. We have actually different cars where we have 20-25 percent of recycled plastics inside the car, but we want to increase it. Also, to ask, what is our part of that? The first question is the cost. Recycled plastic can be cheaper under certain circumstances. And the other thing is to ask, can we design the car differently to make the materials easier to get out? Or, can we change processes to get materials back to the remanufacturer so they can make, once again, different plastics out of that?
May: I want to shift topics here to the topics of your products and EVs. BMW has announced you're going to have 25 new EVs by 2023. You are not the first in this space. Others have gone earlier and faster. Now you have this new aggressive target. What was the turning point in the portfolio in thinking about this shift towards a much more aggressive portfolio in terms of EV offerings?
Witschnig: Going back a few years, we were the first in the market with electric vehicles, launching the i3 in 2013. This was a purpose-built car, designed from scratch as an electric vehicle. And it was a huge change in the industry. And we struggled with key questions like battery size and range. Other companies started — like Tesla, like Volkswagen, with their own products, and BMW waited on the development of the battery. We needed to show the benefit for the customer.
And this took time. Not only making purpose-built cars; we wanted to have a platform where customers at the end of the day are responsible and can choose what kind of drivetrain they want: combustion engine, hybrid, or battery electric vehicle. There must be a minimum or range. And we had to wait for technical development to say, "This is our promise to the customer, the best promise we can give at BMW." We needed this time to develop the right cars. And now these cars are coming. This year, we have a different development of the i3 with the larger battery. We are coming out this year with the Mini, the x3.
So, different cars are coming, every year more and more cars, so you can choose in the future from any line a pure electric vehicle. But today, already you can choose a hybrid electric vehicle.We believe that now is the right time for the customer to use the electric vehicle as it is built to be used.
So, it's a question between customer, technical developments and infrastructure. We believe that now is the right time for the customer to use the electric vehicle as it is built to be used. We are still the largest manufacturer in the premium market. We have many more vehicles sold in the last year, electrified vehicles, than any other premium auto maker. So, maybe we are not that loud but we have more products.
May: And the automotive sector is a unique one in that it's a longer product cycle.
Witschnig: To develop a new car you need about six years. And if changing the architecture of a car takes much more time.
May: My last question is, what does the future look like? Give us a sense of what the future holds in sustainability for BMW in terms of your targets and what you're going to try to achieve for your customers.
Witschnig: We are re-developing our strategy and we have more focus — we still have many internal efficiency targets, but we are also focusing now on the answers we got when we asked stakeholders: "What are you looking to us for?" And first of all, we want to see what the future is for climate-neutral mobility.
The second is materials. What is the future of circular economy for BMW? It's a global challenge but also a business challenge. The third is the other question of transparency — in sourcing materials, being able to say where they are coming from, how they are built, and the social and environmental aspects in purchasing materials.
And the fourth is to say, what is the future of mobility itself? Cities are changing. People are changing their mindsets. The technical possibilities are changing with digitalization.
May: And the millennial consumer has a different sensibility about cars.
Witschnig: They expect the possibility to use, but maybe they don't want to buy. So, we have to make them an offer. In the future, we have our four targets, and we see those four challenges for us as the future challenges, to say, "Yes, there will be climate-neutral mobility over the whole life cycle. It will be coming."
Editor's note: Pete May is the president of GreenBiz.