Remanufacturing or simply ‘reman’ – the process of taking used auto parts and rebuilding them to OEM specifications – offers consumers an affordable alternative for replacement parts without sacrificing quality or performance. In addition to its economic benefits, the reman process is an environmentally-friendly solution as it saves both resources and energy.
Despite the apparent benefits, auto parts remanufacturing is facing its own set of challenges, including the following:
Increasing parts quality – OEMs continuously advance their vehicles’ performance and fuel efficiency, in addition to meeting stricter regulatory requirements such as emissions, safety, and noise standards. As a result, the quality of engine and powertrain parts has improved substantially. The enhanced life-span of these higher quality products can reduce the demand for reman services as fewer replacements are required over a vehicle’s life.
Parts proliferation – The phenomenon of parts proliferation – where automakers create minor variations of the same part across vehicle platforms – continues to be an ongoing challenge for the reman industry. This trend makes inventory management more difficult as reman players must anticipate demand across an increasing number of parts and determine which are worthy of occupying costly shelf space. Furthermore, as components move from being purely mechanical to mechatronic, technological requirements and remanufacturing costs have steadily increased, negatively impacting profitability.
Labor-intensity – While the automotive OEMs and their suppliers continue to expand automated processes in manufacturing and assembly, the reman industry remains highly labor-intensive. Its ability to incorporate automated processes in the disassembly of parts is constrained by the unpredictability of wear-and-tear characteristics of used parts. Therefore, it requires manual intervention for manipulations and improvisation.
While the industry can expect some tailwinds from record sales of new vehicles in recent years, a new major challenge is already on the horizon. The accelerating shift toward electric powertrains represents a significant turning point for remanufacturers. According to CALSTART, seventy percent of an electric vehicle’s components may be different from gasoline-powered vehicles. Combustion engines and parts, transmissions, starters, and alternators, which generate the majority of revenue for the reman industry today, will eventually fade away as we transition to a world of electric powertrains.
Electrified vehicle (xEV) sales are projected to surpass ICE vehicle sales by 2030 reshuffling the components relevant to the reman industry
Global Vehicle Sales
BEV: Battery Electric Vehicle (EV) - pure electric vehicle which use only battery power to propel the electric motor
HEV: Hybrid EV - uses the combined efforts of both a gasoline engine and a battery-powered electric motor to propel the vehicle; battery power is generated onboard
MHEV: Mild Hybrid EV - uses an electric motor and a smaller battery to help boost the gas engine’s output
PHEV: Plug-in Hybrid EV - a higher-capacity hybrid vehicle that requires a charging station to fully charge the battery
Vehicle electrification will fundamentally change the reman industry presenting both opportunities and challenges
The advent of a new auto parts ecosystem for the electrified powertrain will result in significant changes across the reman industry. The main components of electric vehicles, including electric motors and Lithium-ion batteries (LiB), will require new remanufacturing tools, methodologies, and processes as compared to traditional ICE components.
While a full adoption of electric vehicles is still years in the future, consumers’ acceptance of hybrid vehicles is already in full swing. Since hybrid vehicles are based on the same technological principles as BEVs, the future demand for EV reman services is already being created. This trend represents an attractive business opportunity as hybrid vehicles incorporate a complex assembly system and therefore allow reman operators to realize higher margins while still offering a lower-cost alternative to outright replacement.